Deposits and Credits

By Tammy Flanagan

June 20, 2008

Do you like surprises? A birthday party, bouquet of flowers, maybe even a visit from a long-lost friend -- all of these can be pleasant surprises. But when it comes to retirement, surprises are to be avoided. To do so, it's important to understand two concepts that are uniquely important to federal retirement: deposits and service credits.

Defining Terms

Let's first identify some key terms:

Where Credit Is Due

During a recent conversation with an agency benefits specialist, I learned she was undertaking a project to review the service history of each of the agency's employees to determine if they had any unpaid civilian or military service deposits. The idea was to inform the employees of the situation as early as possible to avoid any unexpected retirement surprises. This specialist knows that it is often in an employee's best interest to pay a deposit to maximize their retirement benefits. But many employees do not become aware of an unpaid service credit deposit until they begin to inquire about retirement. This often means that the employee will be faced with a bill that includes interest for the years that the deposit was unpaid. These deposits can be tens of thousands of dollars, since the interest may have been accruing for 30 years or more. Why don't employees know about these payments? There are several reasons:

I've covered the subject of service credits, deposits and computation dates in several of my early columns. For more information, be sure to check them out:

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.


By Tammy Flanagan

June 20, 2008

http://www.govexec.com/pay-benefits/retirement-planning/2008/06/deposits-and-credits/27109/