Refunded Contributions and Deposits for Non-Deduction Service

For FERS and CSRS - A glance at making deposits for temporary and military service, plus redeposits of refunded contributions.

When a federal employee is planning their retirement, it is important for them to remember that they might be able to get a bigger pension check if they had previous non-deduction service or if they had a previous stint of federal service where they took refunded contributions upon leaving. In order to receive the larger retirement income amount, however, a deposit (or ‘redeposit’) will need to be paid. In this article, we’ll look at what service is applicable and how it applies to both FERS and CSRS employees.

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First, let’s explore refunded contributions for those retiring under CSRS or FERS. This is for those who worked for the federal government, left, chose to take refunded contributions, and then returned to federal service. In some situations, these employees can redeposit theses refunded contributions to whichever retirement system. Remember that interest is applied to the contribution amounts, so the sooner these redeposits are made, the better.

CSRS and CSRS-Offset Redeposits

Who can make a redeposit to CSRS? - A current CSRS or CSRS-offset employee, a separated fed with a deferred CSRS pension, a spouse receiving CSRS survivor benefits, or an ex-spouse receiving a CSRS survivor’s pension.

For service conducted before March 1, 1991 – A deposit is not required. The prior service time is added to the employee’s CSRS retirement calculation and counts toward retirement eligibility. However, there is an “actuarial reduction” if no deposit is made.

For service conducted after February 28, 1991 – The deposit is required to count for a CSRS pension computation. With or without the deposit, the time will still be used to determine eligibility for retirement.

FERS Redeposits

For FERS employees who make a redeposit, it will be applicable to both their retirement calculation and retirement eligibility. This means not only could the FERS retirement income be a larger amount, but the employee might also be able to retire sooner than expected. However, if you left service and then returned to a federal job before October 28, 2009, redeposits are not allowed. You would have had to return to federal service after October 27, 2009.

Now, here’s a look at making deposits for service for which no FERS or CSRS contributions were made at the time, but could still be used to potentially boost one’s pension. This is non-deduction service and includes both temporary positions and time spent in the military.

FERS and CSRS: Temporary Service

Non-deduction, non-military service for which a deposit can be made usually includes:

- Peace Corps, VISTA (AmeriCorps) service
- High School Federal Work Study Program
- High School or College Summer Job or Internship
- USPS Seasonal (December)
- IRS Seasonal (January to April)

For CSRS, if the temporary service occurred before October 1, 1982, then no deposit is required for eligibility or computation purposes. But with no deposit, there could be a reduction applied to your pension of 6% to 7%. For service after September 30, 1982, a deposit is still not required for CSRS eligibility. A full deposit is required for the temporary service to be included in one’s CSRS annuity calculation. It will impact their high-3 average but not the service years component used.

For FERS, temporary service that is “bought back” counts towards both eligibility and the years of service component in a FERS retirement calculation (but not the high-3 salary). Some types of non-deduction service are not allowed for FERS annuitants:

Service that occurred before 12/31/1988
Non-creditable, non-FERS federal service
Time that was covered by a lump-sum payment from unused annual leave

Military Service

For a military deposit to be made, the federal employee must have left on honorable terms. Military service in this context basically means uniformed service and generally applies to time served in the Army, Navy, Air-Force, Marines, Coast Guard, the Reserve Corps of the Public Health Service, and commissioned officer service at the NOAA.

For FERS employees, military deposits can be used for retirement eligibility and in a FERS retirement calculation – for both the high-3 average and service years. Military deposits usually equal 3% of the military basic pay plus possible interest. For FERS, these deposits are not allowed if retirement pay was waived at the time or was already awarded due to a total disability during combat. A more in-depth look at military deposits can be found here.

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Until Next Time,

The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **