How Military Deposits Work

Military deposits are essential for anyone who wishes to qualify for the federal retirement credit for military services that happened on or after 1957. It is also known as the post-56 military service as the HR members refer it.

What is a military service deposit? This is the payment that workers make to the civilian retirement fund to enable creditable military service to be applied to the retirement eligibility and in the annuity computations. All active duty military services are commendable for retirement and may be required to pay a deposit for them to receive retirement credit for it. They are given a 2years grace period from their first retirement coverage date to allow them to pay a military deposit in full without interest. After the two years are over, interest will accrue and will keep piling up annually until the deposit payment is made.

1957 is many years ago but the period is still honored. The military services rules on military deposits differ between the CSRS and the FERS, and the CSRS rules are a bit complex and confusing. There are also special rules for the retirees.

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The military deposits are made up of 7% and 3% of the CSRS and FERS respectively base pay plus interest. The rate of interest is determined depending on your interest accrual rate; the year when you entered on duty. The interest differs from year to year.

Any CSRS worker who entered into service after 10/1/82 is required to make a military deposit for their post-56 military service to be counted eligible for retirement and retirement computation. Any FERS worker should make military deposits for them to have their post-56 military service qualify for pension and retirement computation.

What about CSRS workers that were employed before 10/01/82?

If employed before 10/1/82 and has not made any deposits yet

The military time qualifies for CSRS retirement

The military time counts for CSRS retirement computation until the retiree is 62 years of age.

If the retiree qualifies for Social Security at 62, the military time will no longer be counted in the CSRS retirement computation. The retiree will not need to have applied for SS. The fact that they already qualify for it is enough to have their CSRS annuity reduced.

If the retiree does not qualify for Social Security at 62, the military time continues to count in the CSTS retirement computation even after the retiree is eligible for the SS after reaching 62 years.

Military service that previously computed an active duty military retirement will not be included in a civilian annuity except in a case where the military retired pay is waived. Also, if the military retirement was due to a combat-related disability, there will be an exception. Most of the active duty retirees do not leave their military retirement. Retirees that have retired from the reserves can deposit the active duty section of their retirement.

Most FERS workers that are not active duty retirees are expected to make military service deposit. The CSRS workers who are not active duty military retirees and that qualify for Social Security at 62 years are also expected to make the military deposits.