Q. My husband was in the Naval Reserve from June 1971 to June 1976. He was not called to active duty, although I believe the two weeks of training every year and six months of boot camp/school may be classified as active duty. If that’s correct, he had about 36 weeks of active duty subject to buyback. For his six years in the reserve, he was paid a grand total of $2,165.45, according to military records he has in his file.
He was under CSRS but had a brief break in service in 1987 and came back into the federal government as a CSRS Offset employee. He retired from the Department of Energy in 2005 as a GS-14, with about 30½ years offset credit plus a year of sick leave. As he was requested to do, in July 2005, he paid $576.49 to the Defense Finance and Accounting Service to pay his military service deposit computation. He has the letter instructing him where to send the check, as well as the endorsed and canceled check.
He turned 62 in December 2011 and has received notice that his annuity will be reduced by $509.36, an amount that should now come from Social Security upon his application for those benefits. This was expected as part of the Offset retirement system.
What is unexpected is the Office of Personnel Management telling him his annuity will be reduced by an additional $609 a month because he has not made a deposit for his military service. They don’t have a record of the amount paid to the Defense Department in 2005. He was in the reserve, so there was little active-duty time. He bought that time. Even if he hadn’t bought the military time, how can a $609-a-month reduction for the rest of his life possibly be logical for 36 weeks of active duty.
Of course, he will follow the appeal process and send documentation of what OPM doesn’t seem to have regarding his military service. But I’m wondering if you can offer an opinion as to how $2,165.45 in Naval Reserve compensation translates into a $609 monthly reduction in a federal annuity for the rest of his life? Is there any scenario where the math on this situation makes any sense, or is there some major human or computer error we must address?
A. If an employee receives credit for any periods of active duty service on or after Jan. 1, 1956, he would need to make a deposit for that time. Otherwise, if he retired before age 62 and was eligible for a Social Security benefit at age 62 (or when he retired, if it was after reaching age 62) any periods of active duty service for which he got credit would be eliminated and his annuity recomputed downward. That deposit would be based on the basic pay he received for that active-duty service, including accrued interest. Prior to Jan. 1, 1984, the interest rate was 3 percent; thereafter, a variable interest rate was charged. When you see the interest rates that were charged you’ll see how even a small owed deposit can mushroom into a large one: 1985 – 13%, 1986 – 11.125%, 1987 – 9%, 1988 – 8.375%, 1989 – 9.125%, 1990 – 8.75%, 1991 – 8.625%, 1992 – 8.125%, 1993 – 7.125%, 1994 – 7%, 1996 – 6.875%, 1997 – 6.875%, 1998 – 6.75%, 1999 – 5.75%, 2000 – 5.875%, 2001 – 6.375%, 2002 – 5.5%, 2003 – 5%, 2004 – 3.875%, 2005 – 4.375%, 2006 – 4.125%, 2007 – 4.875%, 2008 – 4.75%, 2009 – 3.875%, 2010 – 3.125%, 2011 – 2.75%.
