Ask The Experts: Retirement

By Reg Jones

Military buyback

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Q. I retired in 2003 with 30 years of active Army service. I have been drawing full military retirement pay since then. I am now a GS employee with seven years of federal service. Can I still buy back my military time and combine the two for a federal retirement?

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Military buyback, bonus and taxes

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Q. I am interested about buying back my military time. However, I received a separation bonus from the military when I left. How is the buyback calculated in addition to my time in service? (Is it considered normal income?)

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Five-year rule

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Q. In the 2012 Federal Retirement Handbook, it states that if you meet the following age and service requirements — age 62 and five years — you are entitled to an immediate retirement benefit.

I will be 65 years old in May, so I already meet the first requirement. In June, I will have been a federal civilian employee for two years. However, I have 12.3 years of Air Force (1971 to 1984) service, and I plan to make the required deposit so the 12.3 years becomes part of my federal creditable service. Therefore, in June, I will have 14.3 years of creditable service. Does this mean I will be eligible to retire as soon as the Air Force years become part of my creditable service (since it’s more than five years)?

Said another way, is there a requirement that you need to be a federal civilian employee for five years before you are eligible to retire? I have not been able to find anything in FERS documents or government website that stipulates this requirement. All years are typically referred to as creditable service so that includes my Air Force time.

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Post-1956 deposit

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Q. The following statement was made in an answer to a question ask about post-1956 deposit: “You can’t get a refund of the deposit you made for your active-duty service. What’s done is done. If you retire at age 62 and aren’t eligible for a Social Security benefit at that time, you’ll never have to worry about losing those years and having your annuity recomputed.”

I will retire at age 60 and have paid in a post-1956 deposit. I am in CSRS and will have 41 years and eight months with the post-56 deposit (eight years, six months of military service). I have worked for 40 quarters and am eligible for Social Security (military service and work prior to the military). However, due to the windfall elimination provision, I do not plan to ask for Social Security benefits until I am 65 or older. Will my annuity be recomputed after I reach 62 even though I have no intention of requesting my Social Security benefit until 65 or 70? Can I expect some kind of reduction in my annuity? I understand my Social Security benefit will be reduced by two-thirds once I apply for it.

A. Because you made a deposit for your active-duty service, you’ll not only get credit for that time in your annuity computation but your CSRS annuity won’t be affected no matter when you apply for a Social Security benefit. However, as you noted, your Social Security benefit will be reduced because of the windfall elimination provision. That’s because you will be receiving an annuity from a retirement system where you didn’t pay Social Security taxes and have fewer than 30 years of substantial earnings under Social Security.

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Military buyback

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Q. I am buying back my active-duty military service time to be applied to my federal retirement annuity amount. What factors determine the 3 percent rate for the military deposit? In other words, how is 3 percent derived as opposed to some other percentage?

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Leave without pay and creditable service

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Q. As of January, I had 36 years of creditable federal service for retirement. This is based on a federal retirement benefits estimate I received from a company contracted by my agency to provide this service. I was on leave without pay while in a master’s degree program from June 23, 1984, to June 7, 1986. The company providing the benefits estimate counted all of this time as creditable for retirement. Is this correct, or would I only be allowed credit for a maximum of six months during each of the three calendar years covered by the leave without pay?

Secondly, I am in the CSRS Offset retirement program. Can I pay into my retirement program for the LWOP period, similar to what I was allowed to do for my military time? If so, where do I start? I am not in CSRS Offset because of the LWOP period but for a period between Aug. 23, 1988, and June 30, 1994, during which I taught two years at a University and completed a Ph.D. in my current field.

A. Periods of LWOP that are less than six months in a calendar year are considered to be creditable service and no deposit is required to get credit for it. LWOP that exceeds six months in a calendar year isn’t creditable service for any purpose, and you can’t make a deposit to get credit for it.

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Leave without pay vs. LWOP-US

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Q. I am a dual status technician GS employee in the Air National Guard. I’m trying to figure out if a three-month activation on Title 10 active duty for which I go leave without pay from my technician job will require me to make a military deposit to credit that tour after completion? Does such a short tour fall under the LWOP six-month rule and therefore doesn’t require any payment? Our agency has been calculating deposits to cover less than six-month tours in the past, but I’m curious if that’s necessary.

A. Your agency is correct. You won’t be taking LWOP. You’ll be taking LWOP-US, which means that you must make a deposit to get credit for that time.

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Military buyback

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Q. I receive military retirement pay for 21 years of service in the Air Force. I started working as a federal civilian employee (GS 9 step 1) two months ago. I have not bought back my military time. I am 41. If I continue to work as a federal civilian for another 20 years and buy back my military service, which would give me 40 years total, does my combined retirement/annuity add up to more than if I wouldn’t buy back my military time, keeping my separate military retirement check and my separate FERS annuity check?

A. You are asking me to do your homework. I can’t do that. What I can tell you is the formula for calculating a FERS annuity: .01 x your highest three consecutive years of average basic pay x your years and full months of service. That period of service can either be pure FERS or FERS plus active-duty military service for which you’ve made a deposit. If you make a deposit for your active-duty military service, you’ll have to waive your military retired pay when you retire from your civilian job.

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Military buyback and RIF before vesting

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Q. I am a career conditional employee with 1½ years total civilian service time who is eligible to buy back my military time. Due to the current budget constraints, I fear that I could be subject to a reduction in force. If I buy back my time and am RIF’d prior to completing my five years of civilian service that are required to be vested in FERS, what happens to my military deposit?

A. You’ll have a choice to make. You can either ask to have that money refunded to you or you can leave it in the fund. If you ask for a refund and later return to government service, you can always redeposit the money.

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Military buyback

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Q. I am a FERS employee, and I’m considering buying back my service time. I retired as a sergeant first class after 20 years in the Army. I am 45 years old and have five years of federal time as of this year. When would be the best time to buy back my military time toward federal retirement, and how much will it cost me to do so if I want to retire at 56.6 years old?

A. The sooner you make the deposit the better. The longer you wait, the greater amount of interest you’ll have to pay. While I can’t tell you how much the deposit would be, I can tell you how to find out. First, fill out a copy of OPM Form RI 20-97, Estimated Earnings During Military Service, and mail it to your military finance center along with a copy of your DD-214, Report of Discharge or Transfer. The finance center will send the form back to you with the estimated earnings. Take that, a copy of your DD 214, and a Standard Form 3108, Application to Make Deposit or Redeposit, to your local payroll office. They’ll figure out what you owe, including interest. Note: The forms are available from your personnel office or for download at www.opm.gov, click on Forms.

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Service computation date

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Q. My husband entered military service June 14, 1988, and has 24 years and 23 days of active-duty service, according to his DD 214. He retired as of Jan. 1, 2012. He worked as a Defense Department civilian from May 14, 2012, to Aug. 7, 2012. How much time does he get added to his service computation date for his 24 years of military service?

A. He won’t receive any credit toward his service computation date unless he makes a deposit to the civilian retirement system. The deposit would be a small percentage of his basic pay while on active duty. His personnel office can tell him how to find out what he would owe. Then he can decide if he wants to do that.

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Military buyback

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Q. I served for 13 years and four months in the active-duty Air Force after graduating from a service academy. After taking a job in the airline industry, I continued serving in the Air Force Reserve for another 10 years. I turned 60 in March and started drawing reserve retirement pay in April. I am considering employment as a Federal Aviation Association air safety inspector when I retire from my airline job, perhaps this year.

I’ve been told by a friend at the FAA that all of my active-duty time plus my time at the service academy will count toward federal retirement if I buy back some military time. He was not sure how long I’d have to work for the FAA at a minimum to be “fully vested” for federal retirement, but he thought that it could be as few as three years (13 active + 4 service academy + 3 for a total of 20). Also, based on some of the Q&As here, it sounds as though I may have to stop my reserve retirement pay and perhaps pay back any that I’ve received to start federal employment.

Can you explain this and clear up any misunderstandings that I may have?

A. If you go to work for the federal government, you could make a deposit to the civilian retirement system and get credit for all of your military service academy and active-duty time. Because you are receiving reserve retired pay, you wouldn’t have to waive that pay when you retired from your civilian job.

For service before Jan. 1, 1999, the deposit equals 3 percent of your basic military pay (not allowances or differentials). For periods of service during 1999, the deposit is 3.24 percent. For periods of service in 2000, 3.4 percent. For any periods of service after 2000, it’s 3 percent.

To be vested in the civilian retirement system, you would have to have five years of actual civilian service. Once you had that, the active-duty service for which you made a deposit would be creditable for retirement. Your annuity would be calculated using the following formula: .011 x your highest three consecutive years of average basic pay x your years and full months of creditable service (actual and active-duty service for which you made a deposit). The first multiplier would be .011 instead of .01 because you’d be at least age 60 and have at least 20 years of service.

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Special retirement supplement

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Q. In May, I will have 20 years under FERS with 10 years of military service included. I have bought back my military time. Will I be eligible for the special retirement supplement?

A. With 30 years of service, you could retire at your minimum retirement age.  MRAs range from 55 to 57 depending on your year of birth. If you retire on an immediate annuity before age 62, you’d be entitled to the special retirement supplement. However, the SRS would be based solely on your years of actual FERS service. Active-duty service for which you’ve made a deposit wouldn’t be  included in that computation.

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FERS firefighter retirement

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Q. I am a federal firefighter and a FERS employee. In 2022, I will have 21 years of creditable service and four years of bought-back active military time and be 48 years old.

1. Will I be able to retire under the provisions of 25 years of service at any age?

2. Will I receive the special category retirement percentages (1.7 x high-3 x creditable service, etc.)?

3. Will I receive the special retirement supplement until 62?

4. Will I not be able to withdraw any Thrift Savings Plan annuities until 62?

A. Reg: 1. No, you won’t be able to retire. Only actual service as a firefighter — not active duty for which you’ve made a deposit — counts toward the 25-year requirement.

2. When you are eligible for retirement and do so, your annuity would be computed using the special category percentage for the first 20 years; the remaining time would be computed using the standard multiplier.

3. When you retire, you would receive the special retirement supplement, regardless of your age, until you reach age 62.

Mike: 4. You will have access to your TSP assets, for withdrawal or to purchase an annuity, as soon as you retire.

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High-3

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Q. I have just returned to federal civil service after being away for 4½ years. I have made a lump-sum deposit for those 4½ years. If I retire tomorrow, how will my high-3 salary be calculated? Would it reflect the salary tables for 2008 to 2012 — the years I was away — or would my actual salary from 2004 to 2007 be used?

A. Your high-3 would be based on the average of the highest three consecutive years of basic pay you actually received, not what you would have received if you’d been at work.

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Military buyback

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Q. I was active-duty Navy (1980-84), then active Coast Guard (1991-2000). I received a tentative offer for employment with Army a few weeks ago (I’ve been a contractor since 2000). All required documents are submitted. Now I wait.

How do I buy my 13 years active duty into FERS? Can I use my existing 401(k) to pay this? How much would it cost me?

I also found out that, as of Jan. 1, the deduction for retirement went up to 3.1 percent. I guess a tentative offer before Dec. 31 doesn’t count for hired, so my pay is decreased. Adding on an increase in the cost of living (D.C. area), increase of health care coverage, retirement, Thrift Savings Plan, Social Security and decrease from my current salary, there’s not much of a paycheck left. What are the benefits of government employment? Any idea why Fort Belvoir does not have a cost-of-living adjustment?

A. Yes, you will be able to make a deposit to get credit for either or both your periods of active-duty service. When you are hired, your personnel office can explain how you do that and what it would cost. While you can use any source of money to make the deposit, I don’t know what the tax consequences of using your 401(k) would be.

The fact that you were made an offer of employment before the change in retirement deductions went into affect won’t change the fact that you’ll be required to pay the higher amount.

Your question about COLAs and Fort Belvoir makes no sense. Employees don’t receive COLAs, only retirees. And whatever COLAs one retiree gets are applied to the annuities of all eligible retirees. On the other hand, if you are referring to annual pay increases, these have been frozen for all employees for the past few years.

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Special retirement supplement

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Q. I would like to retire this year. I will be 56 in September with 34 years of creditable service — 28 under FERS and six years of military time that I bought back. Will I be eligible for the special retirement supplement, along with a FERS retirement? Or will I have to work for two more years under FERS to get the SRS?

A. Because you will have reached your minimum retirement age, you’ll be entitled to receive the special retirement supplement when you retire. However, the SRS will be based solely on the years you were covered by FERS. The active-duty service for which you made a deposit will not be included in that computation.

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Military buyback

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Q. I am a FERS employee considering buying back my service time. I retired after 23 years in the Army. I’m 49 years old and have five years of federal time as of 2013. Would it be in my best interest to buy back my military time and put it toward federal retirement? What would be the impact?

A. Here’s the upside. If you make a deposit to get credit for your active-duty service, you’d have 28 years of creditable service. If you retired at your minimum retirement age (56), you’d have 35 years of service and your annuity would be 35 percent of your highest three consecutive years of average basic pay. You’d also be entitled to the special retirement supplement, which approximates the amount of Social Security benefit you earned during those 12 years while you were a FERS employee.

Here’s the downside. To get credit for those years of active-duty service, you’d have to waive your military retired pay before you retire.

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Annuity reductions

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Q. My wife is a CSRS Postal Service employee with four years of military time and will retire in February with 36 years total. She did not pay back her military time. She was told by the post office that Social Security would deduct the money from her check when she reaches 62.

1. My wife does not plan on trying to collect Social Security at age 62, so will they still lower her retirement check?

2. I was told during a civil service retirement seminar that if she waited until age 68, she could go back to work and earn Social Security credits without a reduction to her CSRS postal retirement check. Is this true?

3. I will soon be a CSRS retiree (Jan. 3). I paid my military buyback. If I go back to work and earn enough for Social Security and I were to die, would my wife’s retirement check be reduced if she applied for my Social Security benefits?

A. 1. Because your wife is eligible for a Social Security benefit, at age 62 her annuity would be automatically recomputed to eliminate those four years, unless she makes a deposit to get credit for that time before she retires. Note: Unless your wife has 30 years of substantial earnings under Social Security, her Social Security benefit will be affected by the windfall elimination provision. The WEP will reduce but not eliminate that benefit.

2. Yes. Anyone who reaches full retirement age can earn as much as they want without it affecting their Social Security benefit.

3. If you become eligible for a Social Security benefit, that benefit would be affected by the WEP. Any Social Security spousal benefit to which either of you would be entitled would be affected by the government pension offset provision. The GPO would reduce that benefit by $2 for every $3 you receive in your CSRS annuities.

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Military buyback

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Q. Can I buy back my reserve schooling and my summer camps that are active duty on my chronicle statement?

On SF 50 block 31, if I buy back three years of my active duty from my reserves and I started in 2005 for the civilian federal government, is it supposed to be counted from 2002?

It’s now 2012. Does it mean I have 10 years of federal time?

I retired out of the Army Reserve with 20 years. Out of those 20 years, I have two DD-214s — one for basic and Advanced Individual Training and one for Afghanistan service. Both of them add up to one year and 10 months. If you add all of my annual training and schooling that is active duty, it comes to more than three years. I have bought back one year and 10 months. They don’t issue a DD-214 for 90 days or less, I was told.

A. Instead of trying to answer your questions one by one, I’m going to provide you with a short course on how you can get retirement credit for active-duty service.

While you received credit for your active-duty service in determining your annual leave accrual rate, as a FERS employee, you may only get credit for periods of active-duty service for retirement purposes if you make a deposit to the Civil Service Retirement and Disability Fund. The deposit equals 3 percent for periods of active-duty service prior to Jan. 1, 1999, and after Dec. 31, 2000. For periods of service during 1999, the deposit equals 3.25 percent, and for periods in 2000, 3.4 percent.

No credit is given for annual active duty for training unless it was performed before you became a federal civilian employee.

To find out how much active-duty service you have that can be credited for retirement purposes, fill out a copy of Form RI 20-97 and mail it to your military finance center along with any DD-214s or other evidence of active duty. When you find out what those periods were and the earnings you received, take it to your payroll office along with a copy of Standard Form 3108 and copies of your DD 2142, etc., and ask for an estimate of the deposit required. If you decide to make a deposit, they’ll tell you how to do that, either in a lump sum or regular payments. Note the RI and SF forms can be downloaded at www.opm.gov/forms.

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