Getting Credit for Your Work
Carefully documenting previous military or civilian service can lead to an earlier retirement and a bigger benefit.
One of the worst feelings at a job is doing hard work and not getting credit for it. What’s even worse in the federal sector is not getting credit for previous military or civilian service when it comes time for retirement. But ultimately, it’s up to you to make sure you get the credit you deserve for the work you’ve done.
This week, I was conducting a mid-career retirement planning webinar and realized that many employees assume that because they listed prior service on their resume or job application, that the service has been “taken care of” in the calculation of their retirement benefit. There also was a lack of understanding of the difference this previous service could have on their reemployment.
Let’s look at a couple of examples that show the importance of following up on crediting prior service.
“John” served on active duty for two years before embarking on a civilian federal career. He is now 20 years into what he is planning to be a 30-year federal career, and he wants to know why it is important that he pay a military service credit deposit. (Such deposits are payments into the federal retirement system by employees to get retirement credit for prior service.)
In John’s case, he’ll turn 57 in 10 years, and he’ll have 30 years of civilian service by then. So what would he gain by paying a deposit for service that he really doesn’t need to become eligible for retirement? Thankfully, John asked this question during a recent retirement training class. I explained to him that a military service deposit would not only make his period of active duty creditable toward eligibility for Federal Employees Retirement System retirement, but it also would become creditable towards the computation of his retirement benefit.
John’s current salary is around $130,000. Two years of military service would add $2,600 per year to his future retirement benefit. After learning this, John was eager to know what he had to do to pay the deposit. I referred him to this Defense Finance and Accounting Service explanation.
“Jack” is an employee who was recently diagnosed with a serious illness and is using his sick leave and annual leave to take time off while he receives treatment. He only has about seven years of federal service, so he’s going to run out of leave and face being placed in leave without pay status.
However, in speaking with Jack, he casually mentioned another five years of federal service that he had in the late 1970s. After reviewing his personnel records, I noted he had never received credit for this service towards his service computation date for leave purposes. He showed me his SF-50 Notification of Personnel Action form from his appointment in 2016. It stated, “Service computation date may be amended upon verification of prior service.” Unfortunately, that never happened.
After a little research, I was able to locate the documentation of his prior service of a little over five years in a Senate office. In that position, he was covered under the old Civil Service Retirement System. As a result, I realized he should have been earning six hours of leave since he was hired in 2016. Correcting his leave service computation date will provide him with 156 additional hours of annual leave (26 pay periods x 3 years x 2 hours) that he can use while battling his illness. At Jack’s current salary rate of $130,700 a year, this lost leave is now worth almost $10,000 in additional salary.
Jack was treated as a new hire in 2016, with 4.4% deduction of his basic pay for retirement contributions. But because he had five years of prior creditable service, he should have been rehired under CSRS Offset coverage, with the opportunity to transfer to FERS with only 0.8% retirement contribution withholdings. He will choose FERS rather than CSRS Offset so he doesn’t have to forfeit the agency contributions to his Thrift Savings Plan account.
This will bring the Federal Erroneous Retirement Coverage Corrections Act into play. Under that law, Jack will be entitled to the difference between the 4.4% withholding and the 0.8%, dating back to 2016. In his first year of reemployment this would be a difference of $3,318 in excess retirement withholding. Now that more than seven years have passed, this amount will exceed $23,000. That will come in handy when Jack has to use leave without pay once his accrued leave runs out.
If Jack retires from federal service, his additional five years of congressional service is worth 5 x 2.5% (the formula for CSRS congressional service) x $120,000 (his approximate high-three average salary), or $15,000 in additional annual retirement income.
To count towards Jack’s retirement service computation date, this service only needs to be documented. To avoid a reduction to his future retirement benefit, it will be important to find out if he received a refund of his CSRS contributions when he separated from congressional service in 1984. Jack could make a redeposit of this refund to avoid the reduction. He’ll make that decision once his service has been documented and the immediate corrections have been made.
Ultimately, correcting Jack’s record will result in restoring almost $33,000 of lost income, and getting a more generous retirement benefit.
In both John and Jack's cases, the agencies where they work bear some blame for not following up with these employees to be sure that they were aware of the value of their prior service. But employees also bear the responsibility to make sure their records are up to date and that they make the appropriate decisions about paying service credit deposits.