Q. I was medically retired from the Air Force in May 1985. My entire Air Force retirement is tax free with a majority of it being paid in the form of a VA compensation payment. I entered the federal workforce in December 1985 under the FERS retirement plan. At the time, the military time deposit was explained. I was told that if I chose to make the deposit and combine my retirements, that in my situation, I would keep all of my VA compensation and all of my Air Force retirement. It was further explained that the law was explicit that no monies based on medical disability would be forfeited and that in my case all of the money received is based on a medical retirement therefore all monies were exempt. I am now much closer to retirement and would like to confirm this is still correct. If not, what is the correct answer? Also, based on this information, I opted to make the military deposit. If it is to my benefit not to combine, how do I get my deposit refunded?
A. You would only be able to keep your military retired pay if it was awarded on account of a service-connected disability either incurred in combat with an enemy of the United States or caused by an instrumentality of war and incurred in the line of duty during a period of war. Otherwise, you’d have to waive your military retired pay (but not your VA compensation) to get credit for it in determining your years of civilian service and used in your annuity computation. Your agency isn’t responsible for determining if you meet the criteria. The verification will have to come from your branch of service.
There are only two ways to get a refund of your retirement contributions: 1) If you leave government before being eligible to retire, you can receive a refund of all your contributions, thus voiding any entitlement to a civilian annuity, and 2) if you are required to waive your military retired pay and decide not to do so, you’ll get a refund of your active duty service deposit and your annuity will be computed solely on your years of civilian service.
