Preparing for FERS Retirement: Making Deposits and Redeposits -Part II: Deposits for Military Service

Waiver of active-duty military retirement pay.

 In general, a FERS employee must waive military active-duty retirement pay in order to receive credit for military service for FERS retirement eligibility and FERS annuity computation purposes, with the following two exceptions: (1) The military retirement pay was awarded on account of a service-connected disability incurred in combat with an enemy of the United States; or (2) Under provisions of 10 United States Code (military reserve retirement pay under Chapter 1223 for members of the uniformed services reserves).

In the case of (2), a FERS employee currently (or will be receiving starting at age 60), military reserve retirement pay can make a deposit for active military reserve duty. In so doing, the FERS employee will get credit for FERS retirement eligibility and FERS annuity computation purposes. Most important, the military deposit will not take anything away from the amount of the military reserve retirement pay.

Amount of the FERS military deposit

To receive FERS credit for active-duty military service performed after December 31, 1956, a FERS employee must pay a deposit. The following table summarizes the amount of deposit due:

Military Deposit Information

If an employee makes and completes his or her full military deposit within three years of his or her initial hire date into federal service, then no interest will be charged. Interest charges begin on January 1,1989 or two years from the date that the employee was initially hired as a FERS employee. The following table summarizes the interest charges by year.

FERS Interest Rates by Year for Military Service Deposits

Depending on the number of an employee’s years of active-duty military service, an employee’s total basic pay and the interest owed, the amount owed on a  military deposit could be substantial. However, the benefits of making a full deposit can be substantial. The following three examples illustrate:

Example 1.  Charles is age 57 and is past his minimum retirement age of 56 years and eight months. He has 22 years of federal service under FERS and also has 10 years of prior military service for which he has not made a military deposit. If Charles makes a full deposit for his prior military service, then he will have a total of 32 years of creditable FERS service. Since Charles is past his MRA, he will be able to retire immediately from federal service because he will meet the minimum 30 years of creditable service requirement. Charles starting FERS gross annuity will be based on 32 years of service.

Example 2.  Janet, age 62, has 18 years of FESR service. She is eligible to retire immediately because she is age 62 and has at least five years of creditable FERS service. Janet has three years of prior active-duty military service in the Army Reserves. Janet started receiving her military reserve retirement pay when she became age 60. She was not told that she could make a military deposit for the three years of active duty in the Army Reserves. Without making a military deposit, Janet’s starting FERS annuity would be calculated as follows:

(18 years of service times 1%/year) times Janet’s high-three average salary

If Janet makes a full deposit for her three years of active-duty military service, then Janet’s starting FERS annuity will be computed as follows:

(21 years of service times 1.1%/year) times Janet’s high-three average salary In other words, in addition to the three years of creditable service used in computing her starting FERS annuity, Janet will be receiving a permanent 10 percent bonus in her FERS annuity. The accrual factor is increased to 1.1 percent from 1 percent because a FERS employee who retires at age 62 with between five and 19 years of service will have his or her starting FERS annuity calculated using the 1 percent accrual factor. A FERS employee who retires at age 62 with at least 20 years of service will have his or her starting FERS annuity calculated using the 1.1. percent accrual factor.

Example 3.  Hector entered federal service on January 4,2008 at the age of 43. Prior to entering federal service, Hector had three years of active-duty military service in the US Navy. As of January 4, 2025, Hector has 17 years of creditable FERS service. Hector inquired about his military deposit and was told by his Human Resources office that if he makes a full deposit, he will have 20 years of creditable FERS service. Once he completes his military deposit, Hector will be eligible for immediate retirement because he will have 20 years of service and is age 60.

Hector’s Human Resource Office informed him that he owes a total of $4,000 for his military deposit, determined as follows:

Total military base-pay over three years:                                            $30,000

Three percent of $30,000:                                                                         $900

Total interest owed equals:                                                                     $3,100

Amount of military deposit:                                      $900 + $3,100 = $4,000

Hector wants to know whether it makes financial sense for him to make a military deposit of $4,000. To answer this question, assume that Hector’s high-three average salary is $150,000. By adding three years of creditable service in the calculation of his FES annuity, Hector will permanently increase his FERS annuity by:

(3 years times 1%/year) x $150,000 = $4,500 per year

Hector will get his $4,000 deposit back after being retired for:

($4,000/$4,500) x 12 months = 10.67 months

In other words, Hector will get his deposit back after retiring from federal service in less than 11 months. If Hector is married and chooses to give a spousal survivor annuity, then the spousal survivor annuity will also include the $4,500 additional annuity amount.

Procedure for making a military deposit.

 A FERS employee with prior military service and who wishes to make a military deposit must contact his or her Personnel Office or Human Resources Office for a copy of Form RI 20-97 (Estimated Earnings During Military Service) and Form SF 3108 (Application to Make Service Payment). Both forms can be downloaded from www.opm.gov/forms.

The employee must complete Form RI 20-97. The employee’s Personnel Office or Human Resource Office should mail Form RI 20-97 to the appropriate military finance center together with a copy of the employee’s DD Form 214. The complete form or letter showing the estimated military earnings will be returned to the employee.

Upon receiving the estimated military earnings statement, the employee will need to take the following to the employee’s local payroll processing office to request an estimate of deposit required:

• SF 3108
• Military deposit worksheet
• Estimated Earnings Form or Letter
• DD Form 214

The employee’s payroll processing office will compute the amount of the military deposit owed including interest charges. The payroll processing office will arrange with the employee to make the military deposit in a lump-sum or on a schedule of regular payments. Any required deposits for military service must be made and completed before the employee separates for retirement.