Does Military Service Count Towards Federal Retirement? The Straight Dope, From a Guy Who’s Seen It All

Yes, indeed! Military service can and often does count towards federal retirement, but it’s not a simple, one-size-fits-all situation. Understanding the nuances and specific rules is crucial for maximizing your benefits and ensuring a smooth transition from your uniform to a well-deserved federal retirement.

Understanding the Basics: Creditable Service and the Buy-Back Option

The key concept to grasp is creditable service. This refers to the periods of your career that are recognized when calculating your federal retirement annuity. Military service can be considered creditable service, but usually only if you take specific steps, namely, the military service “buy-back.”

What is the Military Service “Buy-Back”?

Think of it as purchasing your military service time for retirement purposes. To do this, you must make a deposit to the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). This deposit essentially covers the employee’s share of contributions that would have been deducted during your military service had you been a federal employee at the time.

The amount of the deposit is generally a percentage of your military basic pay. For service performed before January 1, 1999, the deposit is usually 7% of your basic pay. For service after that date, the percentage varies depending on the retirement system (FERS or CSRS). It’s critical to contact your agency’s HR department or the Office of Personnel Management (OPM) for precise calculations.

When Should You Buy-Back Your Military Time?

Generally, sooner is better. While there is no strict deadline for making the deposit, waiting too long can cost you. Interest accrues on the deposit if it’s made more than two years after you become a federal employee. That interest can significantly increase the total amount you need to pay.

Differentiating Between CSRS and FERS

Your federal retirement system – either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS) – will influence how your military service is credited. Understanding which system you fall under is paramount.

• CSRS: This system generally applies to federal employees hired before January 1, 1984. If you are under CSRS, your military service is generally creditable if you make the required deposit. Without the deposit, your military service may still be creditable for determining your eligibility for retirement, but it won’t be included in the calculation of your annuity.

• FERS: This system covers most federal employees hired on or after January 1, 1984. Under FERS, your military service is generally not creditable toward your retirement annuity unless you make the deposit. There are exceptions, however.

Specific Scenarios and Exceptions

While the “buy-back” is generally required for creditable service, there are some exceptions.

• Military Retirement Pay: If you are receiving military retirement pay, your military service may not be fully creditable for federal retirement. This is known as the “double dipping” rule. However, there are waivers and exceptions to this rule. For instance, if your military retirement pay is based on a disability incurred in the line of duty or is awarded under Chapter 67 of Title 10 (Reserve Component retirement at age 60), it may not affect the crediting of your military service.

• Post-1956 Military Service and Social Security: If you performed military service after 1956, your earnings are already subject to Social Security taxes. Because of this, there may be an offset to your Social Security benefits when you retire from federal service, but this is typically small and not a reason to forego buying back your time.

• Active Duty for Training (ADT): ADT may or may not be creditable. Generally, it’s not unless it’s followed by active duty for more than 180 days.

Proving Your Military Service: Form DD-214

To verify your military service, you’ll need to provide a copy of your DD-214, Certificate of Release or Discharge from Active Duty. This document provides key information about your periods of service, dates of entry and separation, and character of service. Keep your DD-214 safe and accessible. If you don’t have it, you can request it from the National Archives.

Planning for Your Federal Retirement: Don’t Wait!

Start planning your federal retirement early. Contact your agency’s Human Resources department to get detailed information about your specific situation. They can help you calculate the cost of buying back your military service, estimate your potential retirement annuity, and answer any questions you may have.

Frequently Asked Questions (FAQs)

1. I’m a veteran. Does that automatically mean my military service counts toward my federal retirement?

No, being a veteran alone does not automatically guarantee that your military service counts toward federal retirement. You generally need to complete the “buy-back” process by making a deposit to CSRS or FERS.

2. How do I initiate the military service deposit (“buy-back”) process?

Contact your agency’s HR department. They will provide you with the necessary forms and instructions, including how to calculate the deposit amount. You’ll likely need to provide your DD-214.

3. What if I don’t have my DD-214? How can I get a copy?

You can request a copy of your DD-214 from the National Archives. Their website provides detailed instructions on how to submit a request.

4. Can I make partial payments towards my military service deposit?

Yes, you can generally make payments towards your military service deposit. However, interest will continue to accrue on the unpaid balance if the full deposit is not made within two years of becoming a federal employee.

5. I am receiving military retired pay. Can I still get credit for my military service in my federal retirement?

It depends on the reason for your military retirement pay. If it’s based on disability incurred in the line of duty or awarded under Chapter 67 of Title 10, it may not affect your federal retirement benefits. Consult with a retirement specialist to determine your specific situation.

6. What if I served in the National Guard or Reserves? Does that time count?

Time spent on active duty for training (ADT) may be creditable, but generally only if it’s followed by active duty for more than 180 days. Active duty for other reasons is typically creditable, subject to the buy-back requirements.

7. How does buying back my military time affect my Social Security benefits?

There may be a small reduction in your Social Security benefits due to the Windfall Elimination Provision (WEP) if you worked in the military after 1956. However, this is typically not significant and should not deter you from buying back your military time to increase your federal retirement benefits.

8. Is the military service deposit tax-deductible?

No, the military service deposit is not tax-deductible. However, your federal retirement annuity is taxed as ordinary income when you receive it.

9. What happens if I leave federal service before retiring? Do I get my military service deposit back?

Yes, if you leave federal service before retiring and have made a military service deposit, you can apply for a refund of the deposit. However, you’ll lose the creditable service towards retirement.

10. How does my age affect the value of buying back my military time?

Generally, the younger you are when you buy back your military time, the more beneficial it is. This is because you have more years of federal service ahead of you to accrue additional benefits based on that creditable service.

11. My spouse also served in the military and is now a federal employee. Are there any special considerations for couples with military service?

Both you and your spouse must individually buy back your military time to receive credit toward your respective federal retirement annuities. There are no specific “couples” provisions regarding the military service deposit.

12. Where can I find more detailed information about military service credit for federal retirement?

The Office of Personnel Management (OPM) website (www.opm.gov) is the official source for information about federal retirement. Consult your agency’s HR department for personalized guidance. You can also seek advice from a qualified financial advisor specializing in federal retirement benefits.

Final Thoughts

Navigating the world of federal retirement and military service credit can seem daunting, but understanding the rules and seeking expert guidance is key. Don’t procrastinate! Start planning early, gather your documents, and take the necessary steps to ensure you receive the full benefits you’ve earned. Your future self will thank you for it.