Rules for military service deposits under FERS to gain service credit toward federal retirement. Get military service credit by making a military deposit in the federal retirement system.
Understanding Military Service Deposit Rules for Service Credit
The Federal Employees Retirement System (FERS) offers a unique opportunity for those who have performed military service to enhance their retirement benefits through service credit. The choice ultimately boils down to whether these individuals want to collect both a military and FERS retirement benefit, or use their military time to count towards a larger FERS pension, but this entails waiving their military pay. If the FERS pension amount with military service included provides more income than the amount received from if military retirement pay and the FERS benefit had been kept separate, then making the deposit would most likely be the smart financial decision.
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Benefits of Buying Back Military Service Time
Buying back military service time offers numerous benefits for federal employees. By integrating military service with civilian service, employees can significantly increase their total service credit, leading to higher retirement benefits. Additionally, buying back military service time can provide greater flexibility in retirement planning, allowing employees to retire earlier or with a higher annuity. It is a valuable option for those who have served in the military and wish to maximize their retirement security.
Make the Military Deposit Early in Your Federal Career
After three years working in a civilian position under FERS, the amount due begins to collect interest. Therefore, making the deposit for your military service time early in your career as a civilian federal employee can end up saving you a large chunk of cash down the road. If you were to wait until retirement, let’s say after 23 years of service under FERS, then the military buyback that is due could be double the original amount, and that is without taking inflation into account. While the interest rate is set annually by the US Treasury, the 2024 rate was 3.75%. To illustrate the significance of an early military deposit, let’s assume there is a 3.75% rate across all 23 years of a federal career. With interest beginning to accumulate after 3 years contributing into FERS, the $10,000 would become $20,774 if made at retirement and not within those first three years of civilian service.
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What is a Military Service Deposit, How to Calculate a Military Deposit, and Eligibility
Understanding the Basics of Military Service Credit for FERS Retirement
A military service deposit is a payment made by federal employees to receive credit for their military service time under the FERS retirement system. This deposit allows individuals to count their active-duty military service towards federal service retirement benefits. The deposit amount is typically calculated based on a percentage of the military earnings during the service period. By making this deposit, federal employees can increase their total service credit, which directly impacts the calculation of their retirement annuity. The more years of service credit an employee has, the higher their retirement benefits will be. This is particularly beneficial for those who have performed post-1956 military service, as it allows them to integrate their military and civilian service seamlessly.
Service Computation: How to Calculate and Make a Military Deposit
Calculating a military service deposit involves determining the estimated earnings during military service and applying a specific percentage to these earnings. Federal employees can request their estimated military earnings from the Defense Finance and Accounting Service (DFAS) or the appropriate military finance center. Once the estimated earnings are obtained, the deposit amount is typically calculated as 3% of these earnings for FERS employees. It is crucial to ensure accuracy in this calculation to avoid overpayment or underpayment.
Try our FERS Retirement Calculator Tool to estimate your retirement income.
Eligibility Criteria for Buying Back Military Service Time
Federal employees who wish to buy back their military service time for civilian service credit must meet specific eligibility criteria. Generally, any active-duty military service performed before joining federal civilian service is eligible for buyback. However, the service must not have been used to qualify for military retired pay, except under certain conditions such as disability retirement. Understanding these eligibility criteria is crucial for employees considering a buyback of their military service time.
Knowledge is Confidence!
Retired Reservists – The “Double Dip” Buyback
Retired reservists have the potential to benefit from what is commonly referred to as “double-dipping” based on their military service time. Because the Reservist military pension is based on the point system, they can simultaneously receive their military retirement and civilian employment. Retired reservists can deposit based on active time served and have that time count towards FERS while keeping their military service points and pension intact.
Retired Service Members – Considerations Before Buying Back Your Military Time
Members retired from active duty military service have the most to consider. While they are able to buy back their military time, it also means that they will lose their military pension if they do. This decision cannot be taken lightly and requires various factors to be considered.
I. Survivor Benefit
Both the military and FERS pensions can select survivor benefits for your spouse. However, you cannot change the selection after it’s been made. If you did not elect survivorship with your military pension and would like a do-over, buying back your military time may be an option. You will continue to receive your military pension while working as a civilian. After you process your civilian retirement, the military pension will stop, and military time will be added to your FERS (Federal Employee’s Retirement System) or CSRS (Civil Service Retirement System) pension calculation.
II. Rank vs Grade
While everyone’s service record and pay are different, you may find that combining the two retirement pensions may net you a higher retirement income. This is especially clear if you retire from the military at a lower rank but have a high-grade level in civilian service. This is because the military pension is based on your military basic pay at a lower rank. If you are a grade 13, 14, or 15 employee, your base + locality pay may be much higher.
III. Other Military Benefits – VA, Tricare, etc.
It is a common misnomer that you will lose all military benefits if you buy back your military time. This is not true. The decision to buy back will have significant effects on your military pension. However, it does not affect your other benefits, such as VA Disability, Tricare, base access, and commissary. You will continue to receive VA Disability and all other benefits.
Process of Buying Back Military Time
How to Make a Deposit Payment for Military Service?
To make a deposit payment for military service, you must know how much it will cost. While the formula is based on your years of military service, base pay during service, deposit multiplier, and possible interest, it is not you who calculates it. Instead, you need to request the calculation made on your behalf. Once the amount has been calculated, you can decide if you will make the deposit in a lump sum, payment plans, or change your mind and not make a deposit. It is advisable to complete this process as early as possible to avoid interest charges on the deposit amount.
Important Note: You must complete the buyback process and fully pay before you leave federal civilian service. If you retire from civilian service before completion, any deposit made will be refunded, and service will not count.
The Defense Finance and Accounting Service (DFAS) is responsible for providing federal employees with their estimated military earnings, which are essential for calculating the deposit amount. Additionally, DFAS manages the financial transactions related to the deposit, ensuring that payments are accurately recorded and credited towards the employee’s retirement account.
Here’s how to start the process:
- Complete the RI 20-97 (Estimated Earning During Military Service Request Form)
- If you have served in multiple branches, you will need to complete one for each branch
- Attach your DD 214 (Certificate of Release or Discharge from Active Duty)
- You can request a copy of your DD 214 by sending in the SF 180 (Military Records Request Form)
- Or use their online system: NARA | e-Vetrecs . (archives.gov)
- After receiving the estimated earnings during military service, you will submit it to your agency to calculate the buyback amount
- for FERS, use SF 3108 (Application to Make Service Credit Payment)
- for CSRS, use SF 2803 (Application to Make Deposit or Redeposit)
- You will be contacted by mail on the deposit amount and payment options.
There are various aspects to your federal retirement, and military buyback has been a subject most military retirees avoid. They are told that buying back your time does not make sense, you will lose all your military benefits, or other misnomers. Remember that your federal retirement benefit is complex and one size certainly does not fit all.
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we are federal employee financial advisors with a focus on retirement planning. Learn more about our process designed for the career fed.
Preparing for federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars here! Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting here.
