The Federal Employees Retirement System (FERS), created on January 1, 1987, is a modern three-tier retirement structure combining a pension, Social Security, and the Thrift Savings Plan (TSP). Understanding what types of federal service count toward retirement is essential for determining eligibility and benefit calculations.
This lesson is a preview from Graduate School USA's Federal Employee Benefits course.
Overview of the FERS Three-Tier System
Employees covered under FERS participate in three coordinated retirement programs:
- FERS Basic Benefit (a pension/annuity administered by OPM)
- Social Security (administered by the SSA)
- Thrift Savings Plan (TSP) (managed by the Federal Retirement Thrift Investment Board)
What Counts as Creditable Service Under FERS?
Certain definitions of creditable service are the same under FERS and CSRS. Creditable service includes any federal service used to determine:
- Eligibility to retire
- The service length used in computing the annuity
Rules differ between CSRS and FERS; FERS-specific differences are highlighted throughout this overview.
The Three Tests of Federal Employment
FERS service must meet all three statutory tests of federal employment. The individual must:
- Perform federal functions under the authority of Congress or an Executive Order
- Be appointed or employed by a federal officer
- Work under the supervision and direction of a federal officer
These tests apply to service within the executive, legislative, and judicial branches. Further guidance appears in Chapter 20 of the CSRS and FERS Handbook for Personnel and Payroll Offices.
Types of Creditable FERS Service
Employees may acquire FERS coverage automatically or through an election. The following types of federal service may be credited under FERS.
FERS Covered Service
Covered service is federal civilian service during which retirement deductions are withheld. It counts fully toward retirement eligibility and the FERS Basic Benefit computation.
FERS Nondeduction Service
Nondeduction service is federal civilian service performed without retirement contributions, typically temporary appointments of less than one year. FERS nondeduction service performed before January 1, 1989, may be credited if the employee pays a required deposit plus interest.
FERS Refunded Service
Initially, FERS law required individuals who took refunds of FERS retirement contributions to permanently lose credit for that service. However, Section 1904 of the National Defense Authorization Act for FY 2010 changed this rule.
Under Section 1904:
- Reemployed individuals may repay the refunded amount (plus interest) to reinstate credit for that service.
- If a redeposit is not made, the service is still creditable for retirement eligibility.
- If a redeposit is made, the service counts for both eligibility and annuity computation.
- Survivors may also make redeposits for the purpose of survivor annuities.
Section 1904 applies to all individuals employed under FERS on or after October 28, 2009, and to employees retiring on or after that date.
If a FERS employee took a refund for federal service before entering FERS:
- If they had fewer than 5 years of CSRS service → a FERS redeposit is required for annuity credit.
- If they had 5 or more years of CSRS service → a CSRS component applies, and CSRS rules govern that period.
Transfers to FERS With a CSRS Component
When a CSRS employee voluntarily transfers to FERS and has 5 or more years of non-offset CSRS civilian service at the time of transfer, the employee receives a CSRS component in their FERS annuity. CSRS rules continue to apply to that portion of service, including rules concerning:
- Nondeduction service
- Refunded service
- Military service earned prior to the transfer
Understanding FERS Nondeduction (Deposit) Service
Nondeduction service, sometimes called “deposit service," includes federal civilian service for which no FERS deductions were withheld. This type of service may include time under other federal retirement systems, such as:
- The Tennessee Valley Authority (TVA)
- The Foreign Service Retirement and Disability System (FSRDS)
Nondeduction service is creditable only if:
- It was performed before January 1, 1989
- A required deposit plus interest is paid
Failure to pay the deposit can affect retirement eligibility. Additional details for employees automatically covered by FERS are provided in OPM’s guidance.
