The Civil Service Retirement System (CSRS), enacted in 1920, is a single defined-benefit system in which employees receive a monthly retirement payment calculated by the Office of Personnel Management (OPM). This benefit is based on an employee’s years of creditable service and high-three average salary at retirement.
This lesson is a preview from Graduate School USA's Federal Employee Benefits course.
What Is Creditable Service?
Creditable service includes all federal service used to determine both an employee’s eligibility to retire and the amount of service applied to the annuity computation. Below is a summary of the various types of creditable service recognized under CSRS.
Types of Creditable Service
- Covered service: Federal civilian service during which retirement deductions are withheld. Also known as contributory or paid service, all covered services are creditable for federal retirement purposes.
- Nondeduction service: Federal civilian service during which retirement deductions are not withheld, sometimes referred to as FICA service.
- Refunded service: Civilian service for which retirement contributions were initially withheld but later refunded to the employee after separation.
- Military service: Honorable active-duty service from the date of entry to discharge. In most cases, military service can be credited for retirement purposes.
Determining Creditable Service
Creditable service may be performed within the executive, legislative, or judicial branches of the federal government. Employees may also receive CSRS credit for District of Columbia government service performed prior to October 1, 1987.
To be creditable, federal employees must meet three tests of federal employment. The individual must be:
- Engaged in the performance of federal functions under the authority of Congress or an Executive Order
- Appointed or employed by a federal officer
- Working under the supervision and direction of a federal officer
Most appointments subject to CSRS coverage meet these tests. HR staff can find rulings on the credibility of specific types of civilian service in Chapter 20 of the CSRS and FERS Handbook for Personnel and Payroll Offices.
Covered Service Under CSRS
Covered service is federal civilian service during which retirement contributions are withheld. It is creditable toward retirement eligibility and can also be used in the computation of annuity benefits.
Refunded Service
Refunded service is a type of covered service in which retirement contributions were refunded to the employee after separation. It is always creditable for retirement eligibility, but is not always creditable in the computation of the annuity.
Employees with prior refunded service have two options:
- Option 1: Pay a redeposit for the refunded service.
- Option 2: Choose not to pay the redeposit, which will affect the annuity amount.
A redeposit consists of repaying the refunded retirement contributions plus interest. The Office of Personnel Management (OPM) receives all redeposits.
Interest Rates on CSRS Redeposits
The interest rate applied to a redeposit depends on when OPM received the application for the refund:
- If the application was received before October 1, 1982: Interest is generally 3%, compounded annually.
- If the application was received after September 30, 1982, Interest is 3% through December 31, 1984, with variable interest rates beginning January 1, 1985.
The U.S. Department of the Treasury establishes variable interest rates each year. These rates are published in OPM’s Benefits Administration Letters (BALs). A key factor in determining whether a CSRS redeposit should be paid is the date the refunded service period ended.
