If you once worked for the federal government and were covered by CSRS then left for greener pastures, you may have taken a refund of your retirement contributions. Now if you’re back working for the government, you’re wondering if it would be a good idea to redeposit that money in order to boost the dollar value of your retirement annuity.
The first thing you’re going to have to do is find out how much you owe. To do that, you need to get an Application to Make Deposit or Redeposit from your personnel office or download it by going to www.opm.gov and clicking on the Federal Forms icon in the lower left-hand corner. For CSRS employees, the form number is SF 2803; for FERS employees trying to recapture former CSRS service, it’s SF 3108 (note: FERS service time for which a refund was paid can’t be recaptured). Fill it out and send it to OPM. The address is on the form.
Next, you need to know what your options are. If you don’t make the redeposit, you can still get credit for the time in determining your length of service. However, if that period of refunded service ended after September 30, 1990, you won’t get any credit in your annuity computation unless you pay the total amount you owe by the time you retire.
On the other hand, if that refunded service ended before October 1, 1990, you have a choice. You can either pay the deposit or you can have your annuity actuarially reduced when you retire based on your age and the amount of the redeposit you owe, plus interest.
If you are one of the lucky ones who fall in this category, it may be to your advantage to accept the actuarial reduction. Let’s say that your retirement deductions amounted to $10,000 when you took the refund. Now with the interest charges tacked on, you’re looking at a whopping $50,000 debt. As a 55-year old CSRS-covered employee, if your combined high-3 salary and years of service (including those refunded years) entitle you to a base annuity of $60,000, your actuarial reduction would be $236 a month. So, instead of getting $5,000 a month, you would be getting $4,764.
Just keep in mind that the older you are when you retire, the greater the reduction will be. Using those same numbers, if you were 62 years old, the reduction would be $280 a month. Also keep in mind that the interest amount just keeps on growing. Therefore, the farther away you are from retirement, the more you will owe if you delay making a redeposit.
Obviously, the question of whether or not to make a redeposit depends on the financial impact it will have on you. In order to make that assessment, you’ll need to go to your personnel office and have one of the benefits specialists run the numbers for you. They’ll base those calculations on your expected age at retirement and an estimate of how big a deposit you will owe when you retire. And, if you are eligible, they can also show you what the effects would be if you elected to have your annuity actuarially reduced.