Information about military deposits for FERS and CSRS employees.
What is a Military Deposit?
For federal employees who are contributing to either FERS or CSRS retirement systems, they can potentially include military service that will add creditable hours to their civilian retirement calculation, which will ultimately provide a bigger monthly check when retired. To include this service, however, a deposit usually has to be made into the civilian retirement fund. The important aspect to remember about these deposits is that they have to be paid in full by the employee before retirement. Or, if applying for survivor benefits, the surviving beneficiary of a FERS or CSRS annuity can make the deposit before their survivorship application is finalized.
Creditable Military Service
As for what military service could add value to a federal pension, there are two types that are easy to determine. The first is based on the date and probably doesn’t apply to too many active feds these days. If the time in the military was before January 1, 1957, it is considered creditable service without making any deposit. The second type that’s easy to determine revolves around how one was discharged from the military. If discharged dishonorably, by clemency, in a neutral or uncharacterized manner, or were dismissed by an officer, then the service cannot count toward a FERS or CSRS retirement. Special allowances, such as flight pay or combat pay, also don’t count toward a civilian pension in any situation.
For (Most) CSRS Employees
For CSRS employees who were hired by the federal government before October 1, 1982, the deposit must be made for the military service to be credited. For these members of the federal workforce, not making a deposit can be costly. Known as the “catch 62,” if these employees are eligible for a social security benefit at age 62 or older, and no deposit has been made for military time, then roughly 2% is subtracted from their CSRS annuity for each year of military service. The same rules apply for FERS employees who have a CSRS component of five years or more.
If applying for a CSRS pension, then the deposit is equal to 7% of the military base pay earned… plus interest. (There are two exceptions: service in the year 1999 is equal to 7.25% and service in 2000 is 7.4%.) The first two years in which a deposit has not been made is not subject to interest, but after that, the interest owed is determined by the US Treasury’s annual variable rate.
Military Deposits Under FERS
For all other employees, including CSRS employees hired on or after October 1, 1982, then a deposit must be paid. When applying for a FERS pension, the deposit is equal to 3%. There’s also interest owed, same as with CSRS, including the two-year grace period. The 1999 and 2000 exceptions also apply, equating to 3.25% and 3.4% respectively.
Making a Deposit
Note that this article only provides an overview of military service deposits for FERS and CSRS retirements. There are more complicated details and situations that don’t apply to the vast majority.
Generally, to make a deposit, follow these steps:
- Request military earnings. Complete the “RI 20-97” form (click here), send it to the appropriate pay center. The military payroll office will return the form with the employee’s estimated earnings from military service. (Note: this can take several months.)
- Submit returned “RI 20-97” to the current employing agency’s benefits specialist, who will calculate the deposit owed. At this point, one can generally determine if making the deposit will be worth it or not.
- Make the deposit. By filling out SF 2803 (CSRS) or SF 3108 (FERS), a fed can make the required payment either through a paper check (keep a copy with your records!) or payroll deductions. The employee’s current benefits specialist will submit the application to “IBC payroll.”
- Updated SCD (Service Computation Date). The military office will send a letter confirming the deposit status. (Again- keep for your records! Very important!) The federal employee should then give a copy of this letter to their HR department. The end result should be an adjusted SCD, which will reflect the added military service for the employee’s retirement calculation.
Because this process can take several months, and the deposit must be made fully before retirement, it is best to consider making a military deposit at least a year or two before the actual retirement date.
Need help? Talk with a Charted Federal Employee Benefits Consultant (ChFEBC℠) today.
Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
