Military Service: Is It ‘Creditable’ Toward Civilian Retirement?
by Ehren Clovis |
As a federal employee, you may be wondering if your active duty military service is “creditable” toward your civilian retirement. The answer is generally YES, but you probably need to take some action and pay some money to insure full credit for that service. It’s almost always money well spent, though, since the deposit amount is based on your low military pay, but the added benefit is based on your high-3 average salary. That creates an excellent return on investment!
Whether your active duty military service is creditable for retirement purposes depends on the following factors:
- whether your discharge was “honorable”;
- when the military service was performed;
- whether you are receiving military retired pay;
- when your civilian retirement coverage (Federal Employees Retirement System (FERS) or Civil Service Retirement System (CSRS) began, and
- whether you have paid a deposit to your retirement system for your military service.
For most current federal employees, active duty military service from which you have been honorably discharged is creditable for retirement purposes if you are not receiving retired military pay for that service — and if a deposit to the appropriate civilian retirement system has been completed. The following information will help ensure that you receive the maximum credit for your military service.
Active Duty Before January 1, 1957
Active duty military service performed before January 1, 1957, is fully creditable toward retirement from FERS and CSRS, if no military retired pay is being received. No special actions are required, and no deposit is necessary.
Active Duty On or After January 1, 1957 (“Post-56” Military Service)
With one exception, you must make a deposit to your FERS or CSRS account if you want “post-56” military service credited toward your civilian retirement. This deposit is required even for active duty military service performed while on leave from a civilian federal position. (See the next section: Military Reservists and National Guard Members Called to Active Duty)
Exception: If you were in a CSRS- covered position on or before October 1, 1982, your “post-56” military service is fully creditable toward your CSRS retirement without making a deposit, but only to a point. You will receive full credit for your military service without a deposit at least until age 62, if you retire before then.
However, at age 62 (or when you retire, if later), your situation will be reviewed:
- If you are eligible for Social Security, but did not make a deposit for your military service, that military service credit will be removed from your annuity computation, causing a reduction in your annuity. This reduction is permanent.
- If you are not eligible for Social Security, your annuity will not be reduced (even if you later become eligible for Social Security).
Military Reservists and National Guard Members Called to Active Duty
Have you ever been placed in a non-pay status (Leave Without Pay; Absent-US, etc.) from your civilian federal job to perform active duty military service? If so, you probably need to make a deposit to cover the time when you did not receive civilian pay, since these deposit requirements apply to that period of absence as well. In most cases of this type, though, you’ll be able to pay the lesser of the deposit due under regular military deposit rules or the amount you would have paid into your civilian retirement plan.
Your military service is generally not creditable if you are receiving retirement pay for that service. (Exception: Your military service may be creditable if your retired pay is based on a combat-incurred disability or on reserve service.)
You can, however, receive full credit for your military time if you:
- make the necessary deposits for that service, then
- waive your military retired pay at the time of your civilian retirement.
You need to carefully review what you must give up (your military retirement pay and possibly related benefits) and the added expense (cost of the military deposit) to find out if this is a good move for you financially.
Amount of Deposit
The amount of the deposit depends on your retirement system coverage: 3 percent of your military earnings if you are under FERS, and 7 percent of your military earnings is you are under CSRS. (The rates are slightly higher for military service in 1999 & 2000, to match the slightly higher civilian contribution rates during those years.)
Interest is added annually to these deposits, beginning three years after your first retirement-covered appointment or your return to civilian duty.
Making a Deposit
For your military service to count toward your retirement, the entire deposit (including interest) must be paid in full before you retire. The deposit may be paid in one lump sum, in biweekly payments by payroll deduction, or by any other method your payroll office may offer.
Contact your servicing personnel office of assistance with these deposits. General information about service credit for military service is available in the Office of Personnel Management’s VetGuide.
© 2013 Ehren Clovis. All rights reserved. This article may not be reproduced without express written consent from Ehren Clovis.