Deposits to capture military service credit are made to your employing agency and generally must be received by your employing agency before retirement. Because of the processing time involved, it is wise to make the needed arrangements well before retirement. Allow at least three months to receive your military earnings records and the calculation of the needed deposit from the Defense Department; check with your agency regarding how long it needs record a payment as received—it could be several more months. Extensions of time are allowed only in limited cases of administrative error by the employing agency.
Military Service Credit Under CSRS/CSRS Offset
Under CSRS/CSRS Offset honorable active military service is generally creditable. However, most military retirees are barred from receiving credit toward a civilian annuity unless they waive their military retired pay. The military retired pay need not be waived if it is based on disability involving certain injuries incurred in wartime or if it is Chapter 67 (reservists’) retired pay. The appropriate military retired pay center can determine whether someone falls under one of these exceptions.
Beginning in 1957, military service became subject to Social Security, and treatment of military service under retirement depends on whether or not it was performed after December 31, 1956. A 1982 change in law also distinguished between pre-October 1, 1982 hires and those employees who first became subject to CSRS on or after that date.
Employees first hired in positions subject to CSRS after September 30, 1982 can receive credit for military service after 1956 only if they make a deposit covering this service.
Employees hired in positions subject to CSRS before October 1, 1982 can receive credit for military service after 1956 without making the deposit. However, credit for this service will be eliminated if the individual becomes eligible (or would become eligible upon proper application) for regular Social Security retirement benefits at age 62 unless a deposit for the service is made before retirement.
The amount of the deposit is 7 percent of the military basic pay for the period, plus interest. Interest is computed at the rate of 3 percent through 1984 and an annually variable rate beginning in 1985. Interest begins on October 1, 1985, or two years after the employee was first hired in a position subject to CSRS; whichever is later. However, because the method of computing the deposit calls for adding interest only at the end of the year after it begins, no interest is charged if the deposit has been paid in full within three years after first becoming subject to CSRS.
Service in the National Guard, except when ordered to active duty in the service of the United States, is generally not creditable. However, credit may be given for National Guard service followed by federal civilian reemployment that occurs after August 1, 1990, when both of the following conditions are met:
- the service must interrupt civilian service creditable under CSRS (or FERS) and be followed by reemployment in accordance with the appropriate chapter of the laws concerning veterans benefits; and
- it must be full-time (and not inactive duty), and performed by a member of the U.S. Army National Guard or U.S. Air National Guard, be under a specified law and the individual must be entitled to pay from the United States (or have waived pay from the United States) for the service.
The deposit for National Guard service that meets these criteria is limited to the amount that would have been deducted from pay for retirement if the individual had remained in the civilian service.
Note: Military academy service time also is creditable.
FERS Military Service Credit
Military service that would be creditable under CSRS/CSRS Offset as described above is creditable under FERS, except that all military service after 1956 must be covered by a deposit to receive credit. This applies even if an employee covered by FERS was first hired before October 1, 1982.
The amount of the deposit is 3 percent of the military basic pay for the period, plus interest. The deposit rate for qualifying National Guard service is limited to the amount that would have been deducted from pay had the person remained in his or her civilian position. Interest is computed at the same rate as applicable to CSRS deposits.
Interest for military service that will be credited under FERS rules begins two years after the effective date of an election to join FERS. As under CSRS, however, no interest will actually be charged if the deposit is completed within three years of the effective date of the election to join FERS.
Note: If an employee transferred to FERS from CSRS/CSRS Offset, how that military service will be credited depends on how much non-offset CSRS service he or she had on the effective date of the transfer. With fewer than five years of pure CSRS service, all pre-transfer military service will be credited under FERS rules. With five or more years of pure CSRS service, all military service accumulated before the transfer will be governed by CSRS rules. Any military service performed after a transfer to FERS will be credited under FERS rules.
Post-1956 Military Deposits (“Catch-62”)
Any employee wishing to receive credit for any post-1956 military service at retirement will need to make a deposit for that service. If that deposit was made before October 1, 1986 (or within two years of being hired if hired after that date), no interest will be charged. Thereafter, interest must be paid.
The net effect of not making a deposit for this military service is this: At age 62 the retiree’s annuity will be recomputed to eliminate those years if he or she becomes eligible for Social Security.
As a rule, all deposits for military service must be made to the employing agency before retirement. However, if entitled to a deferred annuity and separated from the government after September 8, 1982, the deposit may be made at any time before the retirement application is adjudicated by OPM.
Agencies will accept actual military pay vouchers for complete periods of military service to calculate the military deposit. If those records aren’t available, a certified estimate of military earnings from the appropriate branch of service will have to be obtained. Personnel offices have the form and instructions needed to obtain an estimate.