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Return to Article: Redepositing CSRS Refunds

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  I started Federal Employment under CSRS in May of 1977 and resigned in March of 1983. Withdrew @ $5600 in retirement money, and started back in federal service in May of 1984, under FERS. I looked into buying back the prior civil service in 2007 and was told, with interest, I would owe a little over $28,000. I was ALSO told by my HR person, that if I did NOT pay this back, I would not get ANY service credit for it. I'm about half way through buying it back and if I read this article correctly, I SHOULD get full credit for those 6.5 years, just a small monthly reduction. That's a HUGE DIFFERENCE than NO credit for 6.5 years (6.5% of my top 3 for life)!! Who am I to believe? I figured the buy back would pay for itself in about 5 years if my HR person is right. If Tammy is right, it'll take closer to 20 years to be cost effective. I can put my money to better use if it's the latter. How can I find out what's the straight scoop?

  Steve Posted August 4, 2009 6:19 PM
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  I'm so confused and this article only confused me more. I started working in December of 1979. In 1994 or thereabouts I left and took out my CSRS money. When I came back to work in 1995 I never repaid the amount I took out. I'm 62 and plan on working until I'm 70 if I can. I intended to pay back the amount I owe (somewhere in the vicinity of $63,000) but after reading this article I'm not sure that it's the best thing for me to do. I'm not a very good money person but I want to do what's best for me so that I CAN retire. Any help or suggestions that may clarify for me? Thanks.

  Mary Posted July 9, 2009 2:12 PM
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  I am 56 years old, with 37 yrs federal service, 2 of which were spent in the active duty navy.(1971-73) I have not repayed the 2 yrs. military service into the CSRS retirement fund. I was told years ago that it wouldn't effect my retirement unless i become eligible for a social security benefit, which is unlikely. Is this correct?? If the only retirement I will draw is CSRS, should I make the re-deposit??

  terry rich Posted May 15, 2009 2:36 PM
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  Can you discuss the tax consequences of repaying the deposit? I was told by OPM that I would have to take distribution of the funds, pay the penalty and interest, and then pay back the deposit with what was left.

  L Green Posted April 28, 2009 4:54 PM
• 69259
  

  I posted a comment here last week.... where is it? Why hasn't it been posted? These folks have questions that only Personnel should be answering. I had this same problem happen to me before figuring out I had to repay back over 17K otherwise it would come out of my annuity when I retire but taken until I die, not until it was paid back. Everyone here should have had my example to read but the comment was not posted, why?

  mkh-l Posted February 17, 2009 12:25 PM
• 69258
  

  I am CSRS. I plan to retire with 42 years of service (not counting my sick leave). Will my lump sum annual leave payment be reduced by the CSRS 7% contribution since I will be past the 41 years, 11 months contribution period?

  Loretta Scott Posted February 17, 2009 12:25 PM
• 61478
  

  IS there soemone I can actually have a conversation with about this, and not use email?

  Judy Posted October 23, 2008 12:50 PM
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  I'm confused. I made 43,663.00 (left the military in October 23,1981. Started working for the governmene in 1982. The 7% interest in 3.056.00. What interest rate do I pay? Please help me out. thanks.

  Monsie Posted August 6, 2008 1:34 PM
• 52800
  

  I worked 9 months prior to 1981 and quite to go to college full time. When I returned to the government my SCD was adjusted for the prior time worked. Am I correct to say that I don't need to do a redeposit and that I will not be penalized on my anuity.

  Barbara Posted June 20, 2008 12:03 PM
• 52749
  

  Originally I was in CSRS beginning my federal service in 1967. I married in 1970 and moved to another state, but was unable to get back on the Register, so withdrew my retirement from CSRS. I returned to federal service in 1971 and worked until my daughter was born. In Nov 1973 I again withdrew from CSRS retirement. We moved once again and I re-entered federal service in Dec 1984 but had to be in FERS. My question is - would it be in my best interest to redeposit funds into CSRS, if there is even the possibility that I can? I have tried to get information but have been unable to get any answers. A few years ago, I was told that I had some money in CSRS Offset, but have not received an explanation as to what it is. Any help will be greatly appreciated.

  Barbara Roodvoets Posted June 20, 2008 7:32 AM
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  i withdrew $27k csrs contributions in 1999. After 9 yrs i am reemployed with the fed govt. my age 51 yrs - plan to work 14 yrs or so will my personnel office explain the options of redeposit to me - all options and in my best interest? thanks

  susan Posted May 22, 2008 12:22 PM
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  When I returned to Federal Service in 12/73, I was given a service comp date of 12/69. I have not paid the redeposit of funds (approx. $1200 plus interest)that I withdrew when I resigned years earlier. According to my personnel office, if I don't pay the redeposit, my annuity will be approx. $27.00 less per month. I plan to retire in 2011. I have substantial sick and always carry over 240 hrs. of annual leave each year and want to know if there are any adjustments that can be made that can replace or cover the redeposit that I owe. I will be retiring under CSRS. I will meet the age and exceed the credible service time required.

  Thank you.

  Bernita Epps Posted February 26, 2008 11:03 AM
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  I hope it isn't too late to ask a question about this issue. My husband left the federal government after 20+ years of service. He withdrew his CSRS contribution at that time, which was prior to 10/1/1990. He then went to work in the private sector, where he has been covered under social security (he has about 20 years under ss). Does this mean that he may qualify for some pension even if he doesn't re-deposit? How does the social security offset affect that pension, if he does qualify? I am a current federal employee, covered under CSRS. I know that the Windfall Elimination Provision will negate any survivor benefit I might have had from his social security. If he qualifies and elects to get a federal pension with a survivor benefit, does that mean that I might be able to get some benefit from that if he pre-deceases me? This is really complicated! Thanks for any insight.

  Wendy Campbell Posted January 18, 2008 9:20 AM
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  Your article on CSRS re-deposits is very helpful, but you used two methods of calculating the reduction in your examples and I'm confused. When is the reduction based on the present value age factor and when is it based on 10 percent of the amount owed? My refunded service was from 1975-1982 and refund was received prior to 10/1982.

  Jim Reece Posted January 16, 2008 5:34 PM
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  My wife worked under CSRS from 1975 to 1981. She pulled her retirement when she left. When she returned to the Govt in 2000 she was put into FERS. Was that correct? Since she was a GS14 in 1981 and is now working as a part-time GS4 (that's not a typo), is it posible that paying back the money and interest makes sense?

  Barry Sparks Posted January 4, 2008 9:00 AM
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  Thanks to everyone who responded to my question. This not only explains why H&R Block said I could not make a deduction, but you also raised my glee factor with the anticipation of a little tax benefit from my pension.

  Tom Hilton Posted February 24, 2006 4:44 PM
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  If you check your leave and earnings statement you will find that your payments to the retirement fund are made with taxable dollars. Contributions to the TSP are made with pre-tax dollars. That's why part of your retirement annuity is tax free. They are returning your previously-taxed contributions.

  Scott D McLennan Posted February 19, 2006 11:28 AM
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  Interest paid on deposits is not tax deductible according to the tax laws. You will receive these previously taxed dollars back as tax-free portions of your retirement in the future, however.

  This is taken from IRS Publication 721 (to explain why you can't deduct the interest paid on military deposits):

  Your monthly annuity payment contains an amount on which you have previously paid income tax. This amount represents part of your contributions to the retirement plan.

  The cost of your annuity is the total of your contributions to the retirement plan. If you repaid contributions that you had withdrawn from the retirement plan earlier, or if you paid into the plan to receive full credit for service not subject to retirement deductions, the entire repayment, including any interest, is a part of your cost.

  You cannot claim an interest deduction for any interest payments. You cannot treat these payments as voluntary contributions; they are considered regular employee contributions.

  Tammy Flanagan Posted February 19, 2006 9:19 AM
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  In response to the prior post, yes, the redeposit is from funds that have already been taxed, but the "deduction" comes when you retire and begin receiving your annuity. These funds are added to the amounts deducted from your pay to arrive at one figure for total employee contributions. This is divided by a factor which represents your life expectancy, and that of your spouse if a survivor benefit is elected. This amount is considered a return of already taxed contribution and is excluded from your taxable retirement income. Your statement will show both figures.

  In my case, I deposited approximately $1,200 to cover my military pay and this was added to my total employee contributions, and under the simplified method, OPM used 410 (which represents the number of months of combined life expectancy) as the divisor which represented the combined ages of me and my spouse at the time of retirement. Approximately $2,400 of my annuity per year is tax free (tax already been paid). A portion of this represents a portion of the $1,200 re-deposited. Prior to 1984, the entire employee contribution, including the $1,200, would have been non taxable until all the contributions were recovered (as long as all contributions were recovered in three years). This was repealed and the exclusion for all employee contributions was pro-rated over annuitant's and survivor's life expectancy. In my case, 410 factor represents just over 34 years.

  GovExec.com reader Posted February 18, 2006 1:11 PM
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  Last year, I elected to make a redeposit to buy back over 14 years of creditable military service. As I was completing my tax return last week, it struck me that I should be able to deduct that contribution from my taxable income. My rationale was that normally such contributions are made with pre-tax money since they are for retirement purposes. However, H&R Block told me that my redeposit money was not deductible, though they provided no rationale for their advice. Although Block's advice seems wrong, I cannot find any information addressing the tax status of redeposits on the IRS or OPM websites. I welcome information that would provide closure on my lingering concern.

  Tom Hilton Posted February 17, 2006 10:48 AM