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Deposits and Redeposits of Retirement Money for FERS Employees

By John Grobe

Monday, April 28, 2008

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John Grobe is a retired federal employee with over 25 years of experience in federal human resources and President of Federal Career Experts, a training and consulting firm that specializes in federal employee retirement and career transition issues.

Recently we have run two articles on deposits and redeposits for civilian service for CSRS employees. Now it's time to discuss these two issues for FERS employees.

The rules are much simpler (and harsher) for FERS employees.

First, let's look at deposit service. That is service for which no retirement deductions have been taken.

It is usually temporary service and occurs early in one's career. In order for a FERS employee to be able to have this service count for their eligibility to retire and in the computation of their annuity, they must "buy the time" by making a deposit. The deposit consists of 1.3% of their earnings during the period of service plus interest, which is charged at a variable rate.

Only service that took place before 01/01/89 can be bought. If their temporary service was after that date, they're out of luck. There is an exception for Peace Corps and VISTA volunteer service; deposits may be made to cover that service, regardless of when it took place.

In most cases it will make sense to make a deposit for temporary service performed before 01/01/89. If you want to know how much a difference making a contribution makes, ask your HR folks to calculate the effect on your annuity if you do (or don't) make the deposit.

CSRS employees were allowed to redeposit money they had withdrawn from the retirement fund once they returned to service. FERS employees do not have that opportunity. If a FERS employee withdraws their contributions and subsequently returns to federal service, the time represented by the withdrawn contributions will not count for their eligibility to retire, or for the computation of their annuity. If a FERS employee had transferred from CSRS after having withdrawn their CSRS contributions, they would be able to redeposit the money under CSRS rules. (See the most recent article on CSRS redeposits here.)

 

© 2008 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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Readers' Comments

  • I also withdrew my retirement about $2000.00 when I left federal service in 1988. I had four years service at the time. I lost forty eight months and received $41.00 for each month I lost. I was not informed then and today cannot believe the extraordinary penalty for my uninformed decision. I must ...
    Posted: July 7, 2008 10:28 PM
  • I feel that FERS should have the option to redeposit money to their retirement same as CSRS had. When I left the government no one explained that I should leave my FERS alone. I was just sent a package with a lot of papers and told to sign where there were "X"s and return the package to headquar...
    Posted: July 7, 2008 8:44 AM
  • I worked 5 years between 89 and 94, quit then came back gov. in 99. I don't remember a payout and can-not find out through EBIS or any web sites whether I need to "pay back" any amount. Can I find this information on-line if I cashed it out when I quit? I'd rather pay it now then in 10 years. Th...
    Posted: June 20, 2008 8:47 AM

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