In my May 24 column, I laid out some of the rules that govern getting credit for military service in your civilian annuity. In this column, I’ll go over more of those rules.
To get credit for any period of military service, you need to deposit an amount that equals a percentage of your military basic pay to the Civil Service Retirement Fund. The amount of the deposit depends on when the military service occurred and whether you are covered by the Civil Service Retirement System or Federal Employees Retirement System.
For CSRS employees, the required deposit is 7.0 percent of your basic pay for service performed before Jan. 1, 1999, 7.25 percent during 1999, 7.4 percent during 2000 and 7.0 percent after Dec. 31, 2000. For FERS employees, the amounts are 3.0 percent for service before Jan. 1, 1999, 3.25 percent during 1999, 3.4 percent during 2000 and 3.0 percent after Dec. 31, 2000.
Regardless of the retirement system you are in, the deposit can be made over time in amounts as small as $50; the total amount due must be paid before you retire. If you have more than one period of military service, you have the option of making a deposit for any or all of those segments for which you want credit.
As a rule, deposits must be made to your employing agency.
You must pay interest on the deposit you owe after a two-year grace period following your first day being hired by the federal government. As a rule, interest isn’t posted until the end of a calendar year. As a result, if you complete your deposit before the end of the third year, you won’t be charged any interest.
The Treasury Department sets the interest rates. The rate for service from Jan. 1, 1948, through Dec. 31, 1984, is 3 percent. After that, the amount has been based on market rates, which vary widely by year. In 2010, it is 3.125 percent.
If you are called to active duty while employed as a fed, the two-year grace period applies to that new period of military service when you return to your civilian job.
To find out how much you would have to deposit to get credit for your military service, fill out form RI 20-97, Estimated Earnings During Military Service; attach a copy of your DD-214, Report of Transfer or Discharge, or its equivalent; and mail to the finance center for your branch of service. You can get a copy of form RI 20-97 from your personnel office or download a copy at www.opm.gov under “Find forms.”
If you don’t have documentation of your military service, fill out Standard Form 180, Request Pertaining to Military Records, which you can download at www.archives.gov, and send it to your branch of service. The service will provide you with a new DD-214 or its equivalent. Once you have that in hand, you can attach a copy to your completed RI 20-97 and mail it to the finance center for your branch of service.
Once you have a statement of your earnings while on active duty, you can fill out a copy of either Standard Form 2803 (CSRS) or 3108 (FERS), Application to Make Deposit or Redeposit, both of which are available in your personnel office or downloadable at www.opm.gov.
Take that form, the response you received from your military finance office, and a copy of your DD 214 or equivalent to your agency payroll office. The payroll office will determine how much you owe, plus accrued interest, if applicable.
The decision about whether to make a deposit for your military service is one you’ll have to make based on what you’ll get in return for your deposit. Simple arithmetic can help you estimate what you’d receive in increased annuity benefits over your lifetime versus what the money you owe could generate if invested.
I’ll help you get started on making that estimate. If you are a CSRS employee, your annuity would be increased by 2 percent for each year of military service you buy back; for FERS employees, it’s 1 percent. What that money would earn elsewhere in today’s environment is anyone’s guess.
