Paying Your Way to a Bigger Benefit

In the federal retirement world, few things raise more questions and cause more confusion than service credit deposits. These are payments employees can make to their retirement system to receive credit in their retirement benefit for creditable service (military or civilian) during which retirement deductions weren’t withheld from their pay, or were withheld and then refunded.

There are different rules for making such deposits depending on whether you’re covered under the Civil Service Retirement System or the Federal Employees Retirement System. 

Why make a service credit deposit? Because it can make a big difference in the retirement annuity check you get every month. The catch? The process can get complicated and take time.

Let’s look at a story that “Mike,” a civilian employee under CSRS, recently shared with me about making a military service credit deposit through his agency. (Deposits for civilian service are made to the Office of Personnel Management.)

Mike made a one-time military deposit of $26,000 that will result in an increase in his CSRS retirement of $19,850 per year. Most military deposits are not this large. Mike had a great deal of military service and had to pay interest that was due over the years of his civilian federal career.

It will take Mike a little over a year of receiving the military service credit in his retirement to recover his investment. Then he’ll continue to get nearly $20,000 added annually to his benefit for the rest of his life—with cost of living adjustments. 

The trick is that getting to that position requires some patience. It took Mike 13 weeks to go through the process of determining the proper amount of his deposit and starting to pay it through payroll allotment. 

Here’s how Mike describes his deposit timeline:

Step 1: Sent Form RI 20-97 ( to request my estimated earnings during military service) along with my DD Form 214 (military service discharge showing my beginning and ending dates of active duty) to the Military Finance Center to find out the estimated amount of basic pay I received while serving on active duty. It took about four weeks to get a response, and the time can vary depending on the workload at the finance center when your request is received. If you are nearing your retirement date, you can note this on the form along with your desire to have your request expedited.

Step 2: Sent my DD Form 214 along with the completed Form RI-20-97 and application to make a service credit payment (SF 3108 for FERS and SF 2803 for CSRS) to my retirement benefits office. (In some agencies this is your benefits center or consolidated personnel office.) This was to find out how much I would have to pay to complete my military service credit deposit. There was a backlog at this office and my request took six weeks to process. 

Step 3: The benefits office returned my paperwork to me and I forwarded it to my payroll office with a letter requesting that a biweekly allotment be taken from my pay to start paying my military service deposit. It took three weeks before the allotment was taken out of my paycheck. 

The next steps were taken so I could complete my deposit prior to my retirement, which is planned for Dec. 31, 2019:

Step 4: I had been paying $155 through a pay allotment on the military service deposit amount for about 18 months. I decided to take an age-based Thrift Savings Plan in-service withdrawal from my account to cover the balance I owed. Since this is not a loan, I had to allow for income taxes to be withheld from this payment. The total time to fill out the TSP age-related withdraw form, fax it to the TSP and have the funds in my bank account was three weeks.

Step 5: Used “Pay.gov” to transfer the funds from my bank to my payroll provider. This only took two days.

Step 6: Received a “paid-in-full letter” from payroll after the funds were transferred. This took five days.

Step 7: Requested to have this letter from payroll filed in my electronic Official Personnel Folder as proof of my paid-up military service deposit. It took three days for me to figure out the process to do this and see the scanned document appear in my eOPF.

Here are the lessons of Mike’s experience:

• Start the process early. (If you pay your military service deposit within three years of your beginning date of federal service, you will not be charged any interest.) It will take some time to get your payroll allotment started.
•  If you need to complete the deposit in less time, it’s helpful to have started the process with payroll deductions of at least $25, which will make it easier to simply pay off the balance so that you can continue the process of retirement.
• Employees who decide not to pay their military deposit in full before retiring or leaving government service can file a form and get what they’ve paid back.

Remember, your agency might have a slightly different process to complete your service credit deposit. Contact a retirement specialist at your agency who can provide instructions on how it works there.