- Deposit service can count toward retirement eligibility even if unpaid, but it may not be included in your annuity computation depending on when the service was performed
- The October 1, 1982 and January 1, 1989 dates are critical cutoffs that determine how deposits and redeposits affect your retirement calculation
- Always request two annuity estimates from your HR specialist, one with deposits paid and one without, to understand the financial impact before making a decision
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For FERS employees who also have a CSRS component in their service history, the rules around deposits and redeposits can be complex. Understanding these rules is essential because they directly affect both your eligibility to retire and the amount of your annuity. The distinction between eligibility credit and annuity computation credit is one of the most important concepts in this area, and the date your service was performed plays a decisive role in determining how your benefits are calculated.
Unpaid CSRS Deposits for FERS Employees
For FERS employees who have a CSRS component, meaning they were once vested under CSRS but later elected FERS, deposit service can be credited for retirement eligibility regardless of whether the deposit is paid. This is a critical distinction. Eligibility means the time counts toward meeting the age and service requirements for retirement. It does not automatically mean that the time will be factored into the annuity computation.
The date the service was performed determines how it is treated. If the service occurred before October 1, 1982, it is fully credited, but the CSRS component of the annuity will be reduced by 10% of the deposit due. If the service was performed on or after October 1, 1982, and the deposit remains unpaid, that service cannot be used in the computation of the CSRS component annuity at all. Your HR specialist should flag this distinction when assisting with your retirement application.
Calculating the CSRS Deposit
The deposit for the CSRS portion of a FERS annuity is calculated under CSRS rules. It represents the amount the employee would have paid had they been covered by CSRS during the period of service. For service performed before October 1, 1982, the interest rate on the deposit is 3%. For service performed on or after October 1, 1982, through 1984, the interest rate shifts to a variable rate that fluctuates over time.
Unpaid FERS Deposits
Under FERS, deposit service is only credited for both eligibility and annuity computation if two conditions are met: the service was performed prior to January 1, 1989, and the deposit plus interest has been paid. FERS deposits are calculated at 1.3% of basic pay plus interest, compared to the 3% rate under CSRS. To make a FERS deposit, employees use the SF-3108, which is the application to make service credit payments under FERS.
Before committing to deposit payments, it is strongly recommended to request an annuity estimate from the specialist assisting with your retirement claim. Ask for two estimates: one showing the annuity with the deposit paid, and one without. Comparing these two figures will reveal whether the financial benefit justifies making the payments. Deposits can be made in $50 increments and are paid directly to OPM using the SF-3108.
Reductions for Unpaid Service Redeposits
Redeposits come into play when an employee leaves federal service, receives a refund of their retirement contributions, and later returns to federal employment. The refunded service can be credited for retirement eligibility regardless of whether the redeposit is made, but the effect on the annuity computation depends on when the refunded service ended.
If the refunded service ended before March 1, 1991, the service is fully credited, but the CSRS component annuity is reduced by an actuarial factor. An actuarial factor is essentially an alternative payment arrangement that breaks a large lump-sum obligation into smaller monthly payments over time. If the refunded service ended on or after March 1, 1991, and the redeposit is not made, that service cannot be used in the CSRS component annuity computation.
FERS Refunded Service
For FERS-specific refunded service, the employee who took a refund at separation may make a redeposit of the refund amount plus interest. Once the redeposit is completed, the service becomes creditable for both retirement eligibility and annuity computation. If the redeposit is not made, the service counts only toward eligibility, and the annuity will be reduced accordingly.
The CSRS component redeposit equals the original refund plus interest, with a 3% rate for service prior to February 1982 and a variable rate for service on or after September 30, 1982. For FERS employees who took a refund for prior CSRS-covered service of less than five years, the deposit rate is 1.3% of pay plus interest at a variable rate. The automatic FERS redeposit is calculated as the refund plus interest at a variable rate, and all payments are made using the SF-3108 form submitted directly to OPM.
Working With Your HR Specialist
Before submitting any forms to OPM, pass them through the specialist assisting you with your retirement application for an accuracy review. An audit process is in place, and any mistakes on submitted forms will reflect on the agency. Having the agency review the form before it goes out is a best practice that protects both you and your organization. As with deposits, always request two annuity estimates, one with redeposits paid and one without, so you can make an informed decision about whether the financial benefit of repayment is worth pursuing.
