Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Crediting Volunteer Service

ARCHIVES
In last week's column, I noted that when it comes to figuring out just how much federal service you've accumulated for retirement purposes, not all service is treated the same.

This week, we'll look at one type of service: volunteer participation in the Peace Corps or VISTA programs. Next week, I'll tackle the somewhat trickier issue of work in what are known as nonappropriated fund instrumentalities.

In 1993, Congress passed a law changing the way Peace Corps and VISTA service can be used as credit towards retirement under the Civil Service Retirement System or the newer Federal Employees Retirement System. Even though the law is now more than a decade old, it still has left some employees questioning whether they are receiving the correct amount of credit for volunteer service.

Credit Rules

If a full-time volunteer or volunteer leader at the Peace Corps or VISTA later takes a federal civilian position, his or her volunteer service (except for training time) is creditable for retirement and survivors' benefit computations under CSRS.

Before 1993, an employee would have to pay a "deposit" to CSRS to credit such volunteer service, just as he or she would with other types of civilian service for which retirement deductions were not withheld -- such as temporary service and seasonal work. If the service was performed before Oct. 1, 1982, it would count regardless of the deposit, but the retirement would be reduced by 10 percent of the deposit amount. If the service was performed after Sept. 30, 1982, then the deposit would have to be paid to receive credit in computing CSRS retirement benefits. If the employee, a surviving spouse or child became entitled to Social Security benefits, the volunteer service would be excluded from the retirement computation (much the same way that post-1956 military service is treated).

Under the 1993 changes in the law, though, a deposit for Peace Corps or VISTA service now ensures that this service will count toward retirement even if you become eligible for Social Security benefits.

So, for example, suppose John made a deposit for two years of service as a Peace Corps volunteer from 1974 to 1976. When he retired at age 59, he received credit for this service. On June 15, 2006, he turned 62 and became eligible for Social Security benefits. Because the deposit was paid, he continues to receive credit for the two years of Peace Corps service. If the deposit had not been paid, John's annuity would have been recomputed to exclude credit for the Peace Corps service effective June 1, 1996.

Under FERS, full-time service that a Peace Corps or VISTA volunteer performed at any time prior to separation is creditable towards FERS basic retirement benefits only if a deposit has been made for the service. Credit is given for volunteer service (again, excluding training time) without regard to when the service was performed or the individual's eligibility for Social Security benefits. Paying Deposits

Under CSRS, the deposit for Peace Corps or VISTA service is equal to 7 percent of the stipend paid to the employee for each period of service as a volunteer.

Interest begins to accrue on deposits for volunteer service on Oct. 1, 1995, or two years after the date on which the individual first becomes a federal employee, whichever is later. There is a two-year interest-free grace period on Peace Corps/VISTA volunteer service deposits. After that, interest is accrued and compounded annually at the variable rate beginning on the date of the expiration of the two-year period. For employees first employed before Oct. 1, 1993, interest started accruing Oct. 1, 1995. The earliest possible interest posting for an unpaid deposit is Oct. 1, 1996. Like the deposit for post-1956 military service, interest on these deposits accrues and compounds annually on the employee's personal interest accrual date. Like other deposits for nondeduction service, deposits for Peace Corps/VISTA service must be paid to OPM following the procedures outlined on form SF-2803.

Individuals who have not separated from federal service, but who previously have made a service credit deposit for their volunteer service under the old rules, will be deemed to have made a deposit under the 1993 changes in the law.

Under FERS, the deposit is equal to 3 percent (in 1999, it was 3.25 percent and in 2000, it was 3.4 percent) of the stipend paid to the employee for each period of volunteer service. For both current and former employees, interest begins to accrue on deposits for volunteer service on Oct. 1, 1995, or two years after the date on which the individual first becomes an employee, whichever is later. As under CSRS, there is a two-year interest-free grace period on deposits and, afterward, interest is accrued and compounded annually at the variable rate beginning on the date of the expiration of the two-year period.

So, for example, suppose Jane was a Peace Corps volunteer from 1990 to 1994. Then she accepted a permanent position with the Army on April 1, 1996. Interest will not start accruing on her deposit until April 1, 1998. If the deposit is not paid in full by April 1, 1999, one year's interest will be added to the unpaid deposit.

Like other deposits for nondeduction service, those for Peace Corps or VISTA service must be paid to OPM following the procedures outlined in form SF-3108. Deposits that are refunded after FERS coverage began cannot be repaid.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at www.tammyflanagan.com and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement as well as the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on NITPInc.com.

FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

    Download
  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download
  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

    Download
  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.

    Download

When you download a report, your information may be shared with the underwriters of that document.