This is the second of three FEDZONE columns assisting FERS employees prepare for immediate retirement from federal service. With a new Presidential administration and a new Congress taking office in January 2025, there is much discussion on reducing the size of the federal workforce. Possible reductions-in-force (RIFs), discontinued service retirement and early retirements may be on the horizon.
To help employees understand and meet the minimum service requirements to allow them to retire, three FEDZONE columns are presented discussing deposits and redeposits. The first FEDZONE column discussed deposits for “non-deduction” (temporary and intermittent) service. This column presents deposits for active-duty military service.
Crediting military service under FERS
Honorable active-duty service in the uniformed service branches listed below is considered military service for FERS creditability and computation purposes:
Other service creditable as military service includes:
Active military service
Active military service is duty in the armed forces of the United States performed on a full-time basis with military pay and allowances. Active military service assumes that all of an individual’s time and efforts are at the disposal of the military authorities and that an individual disassociates himself of herself from the performance of civilian employment during the period of military service.
1
Waiver of active-duty military retirement pay.
In general, a FERS employee must waive military active-duty retirement pay in order to receive credit for military service for FERS retirement eligibility and FERS annuity computation purposes, with the following two exceptions: (1) The military retirement pay was awarded on account of a service-connected disability incurred in combat with an enemy of the United States; or (2) Under provisions of 10 United States Code (military reserve retirement pay under Chapter 1223 for members of the uniformed services reserves).
In the case of (2), a FERS employee currently (or will be receiving starting at age 60), military reserve retirement pay can make a deposit for active military reserve duty. In so doing, the FERS employee will get credit for FERS retirement eligibility and FERS annuity computation purposes. Most important, the military deposit will not take anything away from the amount of the military reserve retirement pay.
Amount of the FERS military deposit
To receive FERS credit for active-duty military service performed after December 31, 1956, a FERS employee must pay a deposit. The following table summarizes the amount of deposit due:
Military Deposit Information
If an employee makes and completes his or her full military deposit within three years of his or her initial hire date into federal service, then no interest will be charged. Interest charges begin on January 1,1989 or two years from the date that the employee was initially hired as a FERS employee. The following table summarizes the interest charges by year.
FERS Interest Rates by Year for Military Service Deposits
Depending on the number of an employee’s years of active-duty military service, an employee’s total basic pay and the interest owed, the amount owed on a military deposit could be substantial. However, the benefits of making a full deposit can be substantial. The following three examples illustrate:
Example 1. Charles is age 57 and is past his minimum retirement age of 56 years and eight months. He has 22 years of federal service under FERS and also has 10 years of prior military service for which he has not made a military deposit. If Charles makes a full deposit for his prior military service, then he will have a total of 32 years of creditable FERS service. Since Charles is past his MRA, he will be able to retire immediately from federal service because he will meet the minimum 30 years of creditable service requirement. Charles starting FERS gross annuity will be based on 32 years of service.
Example 2. Janet, age 62, has 18 years of FESR service. She is eligible to retire immediately because she is age 62 and has at least five years of creditable FERS service. Janet has three years of prior active-duty military service in the Army Reserves. Janet started receiving her military reserve retirement pay when she became age 60. She was not told that she could make a military deposit for the three years of active duty in the Army Reserves. Without making a military deposit, Janet’s starting FERS annuity would be calculated as follows:
(18 years of service times 1%/year) times Janet’s high-three average salary
If Janet makes a full deposit for her three years of active-duty military service, then Janet’s starting FERS annuity will be computed as follows:
(21 years of service times 1.1%/year) times Janet’s high-three average salary In other words, in addition to the three years of creditable service used in computing her starting FERS annuity, Janet will be receiving a permanent 10 percent bonus in her FERS annuity. The accrual factor is increased to 1.1 percent from 1 percent because a FERS employee who retires at age 62 with between five and 19 years of service will have his or her starting FERS annuity calculated using the 1 percent accrual factor. A FERS employee who retires at age 62 with at least 20 years of service will have his or her starting FERS annuity calculated using the 1.1. percent accrual factor.
Example 3. Hector entered federal service on January 4,2008 at the age of 43. Prior to entering federal service, Hector had three years of active-duty military service in the US Navy. As of January 4, 2025, Hector has 17 years of creditable FERS service. Hector inquired about his military deposit and was told by his Human Resources office that if he makes a full deposit, he will have 20 years of creditable FERS service. Once he completes his military deposit, Hector will be eligible for immediate retirement because he will have 20 years of service and is age 60.
Hector’s Human Resource Office informed him that he owes a total of $4,000 for his military deposit, determined as follows:
Total military base-pay over three years: $30,000
Three percent of $30,000: $900
Total interest owed equals: $3,100
Amount of military deposit: $900 + $3,100 = $4,000
Hector wants to know whether it makes financial sense for him to make a military deposit of $4,000. To answer this question, assume that Hector’s high-three average salary is $150,000. By adding three years of creditable service in the calculation of his FES annuity, Hector will permanently increase his FERS annuity by:
(3 years times 1%/year) x $150,000 = $4,500 per year
Hector will get his $4,000 deposit back after being retired for:
($4,000/$4,500) x 12 months = 10.67 months
In other words, Hector will get his deposit back after retiring from federal service in less than 11 months. If Hector is married and chooses to give a spousal survivor annuity, then the spousal survivor annuity will also include the $4,500 additional annuity amount.
Procedure for making a military deposit.
A FERS employee with prior military service and who wishes to make a military deposit must contact his or her Personnel Office or Human Resources Office for a copy of Form RI 20-97 (Estimated Earnings During Military Service) and Form SF 3108 (Application to Make Service Payment). Both forms can be downloaded from www.opm.gov/forms.
The employee must complete Form RI 20-97. The employee’s Personnel Office or Human Resource Office should mail Form RI 20-97 to the appropriate military finance center together with a copy of the employee’s DD Form 214. The complete form or letter showing the estimated military earnings will be returned to the employee.
Upon receiving the estimated military earnings statement, the employee will need to take the following to the employee’s local payroll processing office to request an estimate of deposit required:
The employee’s payroll processing office will compute the amount of the military deposit owed including interest charges. The payroll processing office will arrange with the employee to make the military deposit in a lump-sum or on a schedule of regular payments. Any required deposits for military service must be made and completed before the employee separates for retirement.
A former career Federal employee, Ed has published a staggering 1,200+ separate articles on Federal Benefits and Retirement!
Just “Google” his name, and you are likely to find a plethora of sites that contain his writings. Drawn to its mission to reach, teach
and serve Feds, Serving Those Who Serve is the only financial planning practice with which Ed has chosen to affiliate in over
20 years teaching. In addition to conducting Federal Benefits seminars for Serving Those Who Serve, you can find Ed’s
writings here on our blog in the FedZone, and on Fed-Soup, MyFederalRetirement, FederalNews Radio and NITP.
He is a member of the Maryland Society of Accountants, the National Association of Enrolled Agents, the International Society of Certified Employee Benefits Specialists, the Financial Planning Association, the National Association of Health Underwriters,
and the Society of Financial Service Professionals. Since 1999, Ed has taught many thousands of Federal employees about
their benefits, in person and at Federal agencies all over the country. Ed is a true national treasure.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street – Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
Checkbook’s FEHB comparison tool lets you easily compare 158 FEHB plans and helps instruct how Medicare Part B will integrate with your FEHB plan.
USE CODE “stwserve” FOR A 20% DISCOUNT for the Guide to Health Plans for Federal Employees
*Consumer’s Checkbook not sponsored or endorsed by Raymond James, and should in no way be considered an endorsement of, referral to, recommendation for, or offer to purchase any product or service from Raymond James or the Financial Advisors.
© 2024. All Rights Reserved.
15245 Shady Grove Rd Ste 240
Rockville MD 20850-3239
Phone 301-216-1111
Lee Sipe and Associates DBA Serving Those Who Serve.
2024 Forbes Best-in-State Wealth Management Teams
Best-In-StateWealth Management Teamsis based on an algorithm of qualitative criteria, mostly gained through telephone and in-person due diligence interviews, and quantitative data. This ranking is based upon the period from 3/31/2022 to 3/31/2023 and was released on 01/09/2024. Advisor teams that are considered must have one advisor with a minimum of seven years of experience, have been in existence as a team for at least one year, have at least 5 team members, and have been nominated by their firm. The algorithm weights factors like revenue trends, assets under management, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Out of approximately 10,100 team nominations, 4,100 advisor teams received the award based on thresholds. This ranking is not indicative of an advisor’s future performance, is not an endorsement, and may not be representative of individual clients’ experience. Neither Raymond James nor any of its Financial Advisors or RIA firms pay a fee in exchange for this award/rating. Compensation provided for using the rating. Raymond James is not affiliated with Forbes or Shook Research, LLC.
Please see https://www.forbes.com/lists/wealth-management-teams-best-in-state/ for more info.
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC, marketed as Serving Those Who Serve (STWS). Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Serving Those Who Serve (STWS) is separately owned and operated and not independently registered as a broker-dealer or investment adviser. Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Contact our office for information and availability.
Raymond James Legal Disclosures including Form CRS
Raymond James Privacy Policy
Check the background of this firm on FINRA’s BrokerCheck
Finra
SIPC
STWS is owned and operated by Daniel Sipe and Tom Lee (the “Financial Advisors”). The Financial Advisors are registered financial professionals of Raymond James Financial Services, Inc. (“RJFS”), a broker-dealer registered with the Securities and Exchange Commission (“SEC”), and Raymond James Financial Services Advisors, Inc. (“RJFSA”), an investment adviser registered with the SEC, (collectively, with their affiliates, “Raymond James”).
Mr. Zurndorfer does not pay compensation to or receive compensation from STWS in connection with Presentations hosted by Mr. Zurndorfer. However, Mr. Zurndorfer does provide similar educational presentations at certain Federal Retirement Benefits Seminars (“Seminars”) hosted by STWS, for which Mr. Zurndorfer receives compensation from STWS. All presentations, seminars, articles and videos are informational in nature and are not geared toward the circumstances or goals of any particular attendee; they are not intended to be, and should not be relied upon as, investment advice to anyone or a solicitation of Raymond James’ services.
Mr. Zurndorfer is not affiliated with Raymond James, and is not authorized to provide investment advice on behalf of Raymond James, to solicit or refer investors to Raymond James, or to act for or bind Raymond James. The presentations, seminars, articles, videos, Mr. Zurndorfer, and the educational information provided therein are not sponsored or endorsed by Raymond James, and should in no way be considered an endorsement of, referral to, recommendation for, or offer to purchase any product or service from Raymond James or the Financial Advisors.
Federal government agencies, including the SEC, do not endorse or sponsor particular securities, issuers, products, services, professional credentials, firms, or individuals. Neither Raymond James, the Financial Advisors, STWS, nor Mr. Zurndorfer are affiliated with, endorsed by, or authorized to speak on behalf of the U.S. Government, the Federal Employee Retirement System, or any other Federal Government-sponsored benefits programs or retirement plans, including the Thrift Savings Plan (collectively, “Federal Benefits Plans”).
Preparing for FERS Retirement: Making Deposits and Redeposits -Part II: Deposits for Military Service – Serving Those Who Serve
