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CSRS employees were allowed to redeposit money they had withdrawn from the retirement fund once they returned to service.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a FERS employee withdraws their contributions and subsequently returns to federal service, the time represented by the withdrawn contributions will not count for their eligibility to retire, or for the computation of their annuity. If a FERS employee had transferred from CSRS after having withdrawn their CSRS contributions, they would be able to redeposit the money under CSRS rules.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