Author: Vanessa Craddock, Federal Benefits Specialist
In an unprecedented year of early separations, if you lost your job tomorrow, would you be eligible for an immediate retirement? Retirement eligibility is crucial to continuing benefits and insurance coverages for you and your family. However, you must meet specific age and service qualifications. While there is nothing you can do to adjust an age requirement if terminated early, there are steps you can take to help meet the service requirements. Consider making a service credit deposit.
Service credit deposits allow you to make payments through your Human Resources (HR) department to cover periods of service which normally would not count as creditable service for retirement.
There are three types of deposits you may pay to make sure your service is creditable:
1) civilian service deposits
2) civilian redeposits
3) military service deposits
A civilian service deposit covers periods of service where contributions were not automatically withheld. This is called non deduction service. A civilian redeposit covers periods of service where you have withdrawn retirement contributions while on a break from government service. A military service deposit covers periods of active duty military service you would like included with your CSRS or FERS service. When you pay any type of deposit, your total service increases. Not only can this make you eligible to retire, it increases the amount of the payments you will receive.
How much does it cost? It depends on how much service you are paying for, and whether you are CSRS or FERS. For CSRS, a civilian service deposit, redeposit, or military service deposit will be 7% of the amount that you earned for that period.
For FERS it differs. It is 1.3% of the amount earned for the “non deduction” period, but 3% of the amount earned in military pay plus interest. When it comes to redeposit service, it is the amount that was refunded to you, plus interest.
Even if you qualify for retirement without paying for your deposit service, wouldn’t it be nice to increase the amount of your retirement payments for the rest of your life?
On a down note, employees are sometimes amazed at the amount of interest added to their deposit or redeposit, and cannot see its worth. Consider this. What if you had a break in service and received a $500 refund of FERS contributions? The amount of redeposit with interest might now be $2,000. HR explains that your payment of $2,000 will increase your monthly pension by $150 a month for the rest of your life. Don’t you think the $2,000 investment is worth it?
To make a deposit, you complete your portion of the form SF 3108 (FERS) or SF 2803 (CSRS) and return to HR for them to submit to OPM. You will receive a response confirming the deposit amount and method you choose to pay. If you need the deposit paid to be retirement eligible, you want to pay it as soon as possible. If you are retirement eligible without paying the deposit, the form can be sent to OPM with the rest of your retirement paperwork. OPM will send a notice requesting your payment before they finalize your claim.
One final thought, for those who have reached Minimum Retirement Age (55-57), 10 years of creditable service is all you need to qualify for a voluntary retirement – 5 of which must be civilian service. If you were separated tomorrow, would a service credit deposit get you the service needed to retire?
*NOTE: FERS employees are unable to pay a civilian deposit for service beginning 1/1/89 or after. However, deposits may be paid for Military, Peace Corps and VISTA service regardless of the years of service. See www.opm.gov/csrsfershandbook (Chapters 21-23).
Ms. Craddock has been an instructor with NITP since the year 2000, presenting seminars on Federal Employee Benefits, Federal insurances, and Social Security/Medicare. She started her career with the Social Security Administration as a Social Insurance Claims Examiner before moving to the U.S. Office of Personnel Management. At OPM, she worked as a Certified Federal Benefits Specialist, trainer, course developer and manager, and supervisor of 20 employees for adjudicating retirement claims. She also provided briefings at many OPM Benefits Officers Conferences. After more than 25 years of experience in Federal Benefits Administration, she retired and now continues her work as an instructor, providing Federal benefits training nationwide.
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