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Advice on how to prepare for life after government.

Payback Time

It's the end of a short week for most federal employees that began with Memorial Day, on which we remember our fallen soldiers. Some of you no doubt raised the American flag in front of your house, or tended to the grave of a family member who died in service to our country. I took part in the annual Ride to the Wall, also known as Rolling Thunder. The ride has taken place for the last 22 years in Washington, with a goal of bringing awareness to prisoners of war and those missing in action, and to help American veterans.

I'm not usually a motorcycle mama, but a small contingent from Western Pennsylvania that includes my sister-in-law have been coming for the past nine years, and our family provides a place to stay and a guided escort in and out of Washington in exchange for a ride on the back seat of a Harley.

In honor of our veterans this week, I thought I'd go back to my 2006 column on military service payback -- the payments employees make into their retirement funds to get credit for previous military service. The column attracted more than 60 comments -- a sure indication of both interest in the issue and confusion about it.

Here are answers to some of the questions posted to that column.

I was discharged from the Air Force in 1975. I started civil service in 1985 under the Federal Employees Retirement System. I now have 27 years of service, including my four years in the Air Force. Do I have to pay back my military time?

If you want to use your military service toward eligibility and computation of your FERS basic retirement benefit, then yes, you have to pay a deposit. This will give you four years of additional service toward meeting the requirement to be eligible to retire under FERS. It also will provide 1 percent (or 1.1 percent if you retire at 62 or later with at least 20 years of total federal service) of your high-three average salary for each year of active duty toward your basic retirement benefit. Your deposit will equal 3 percent of your basic pay while you served on active duty, plus interest that began to accrue on your second anniversary of federal service.

I retired from the Air Force in 1998 after 22 years. I entered the reserves and now am an Air Reserve technician. I was told if I buy back my military time and add the years to my civil service time that I would lose my retirement pay. Is there a regulation pertaining to this issue?

You have two different issues. You retired from the Air Force in 1988 and are receiving retired pay. In addition, you are working as an Air Reserve technician, which is treated as civilian federal service. If you want to combine your 22 years of active service with your civilian service to get a FERS basic retirement benefit, then you have to waive your retirement pay and pay a military service deposit. This would only make sense if your military retirement pay is significantly less than the value of 22 years of service in your FERS retirement.

I suggest you request two retirement estimates from your human resources office. The first one should be based only on your civilian service. The second should include all your service, both civilian and military. If the second estimate is significantly higher than the first after adding the amount of the estimate to your military retirement, then you might consider combining your two careers. If this looks like the best choice, you also shouldkeep in mind that there are differences in the survivor benefits and cost-of-living adjustments between the FERS retirement and the military benefit. The waiver of your military retirement is permanent, but doesn't occur until your FERS retirement begins. You would not lose any other veterans benefits such as TRICARE or commissary privileges.

Regarding your work as an Air Reserve technician, this is credited as civilian service under FERS (and the Civil Service Retirement System). See Chapter 20 of the CSRS and FERS Handbook for more information.

For CSRS military payback, is there a cap for Vietnam vets on the amount you have to pay back? A co-worker told me he thought it was $2,000 max, no matter how much you owe. Is this true?

This falls into the urban myth category. There is not a cap on the amount of military deposit. It is what it is, but it is usually one of the best returns on investment you can find, since you pay the deposit on your base pay while you served in the military and receive the credit toward your retirement at your high-three average salary.

It is unfair to an officer versus an enlisted person with the military payback system. To get the same number of years of military service credit costs more because of the higher pay of an officer. Additionally, the officer paid for a four-year and sometimes an additional two to three year degree while not receiving credit in retirement for those years in school.

Whoa! You pay the deposit based on your military base pay. This is the one time it pays to be enlisted. At other times, there were benefits to having status as an officer. Also, if you received your college degree at one of the service academies, then you would receive credit for your active duty while at the academy.

I retired from the Navy with 20 years' service. I will be starting a civil service job with the Defense Department and am looking into what the military payback option is for retirement and annual leave. Would I lose my military pension while still working, or do I just lose it when I retire? What do I need to do to find out my options?

You do not need to waive your military retirement to become a civilian federal employee. If you decide to include your military service with your civilian service when you retire, then you would have to make the decision to waive your retired pay. Here's some information from the Office of Personnel Management on these issues: Veterans Employment Information and Service Credit for Leave Rate Accrual and Retirement.

I was discharged (after four years) from the active-duty Air Force in 1956. I began my Federal Aviation Administration career in April 1997. My service computation date for annual leave is April 1993. Does this date count toward my federal retirement?

Military active duty performed prior to 1957 is creditable toward CSRS and FERS retirement without a military service deposit. This is because military service performed prior to 1957 was not covered by Social Security tax withholding. As long as your military service is documented in your official personnel folder it will be creditable for both leave accrual and retirement purposes.

My husband served for three and a half years in the military between 1965 and 1968. According to the Social Security updates he receives, he has only 32 Social Security credits. He is currently 63 years old. You say he doesn't have to pay the deposit for military service because he will retire after 62 and doesn't qualify for Social Security. But what happens if he works after he retires and eventually earns 40 or more Social Security credits? Will his pension still remain constant, or does he then lose military years from his pension?

If your husband is covered under CSRS and was hired prior to Oct. 1, 1982, then he does not need to pay his military service deposit. Additional information is available in Chapter 22 of the CSRS and FERS Handbook. I have been buying back my post-1956 military time since 2005 for $150 per month and will retire under CSRS sometime in the near future. Will I be able to claim a tax deduction for the interest I am paying? If so, how will it be done?

After you retire, OPM will provide you with an accounting of all your contributions that you've made to the retirement fund, including your military deposit and interest you paid. You will not have to pay taxes on this part of your retirement, since all these contributions already have been subject to tax. Here's an IRS publication that explains these rules. If you have other questions, you might find the answers in some of the other columns I've written about military service credit deposits. Here they are:

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.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on or on WFED AM 1500 in the Washington metro area.


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 and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement and 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

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