If you serve on active duty and later take a position with the federal civil service, you will have the opportunity to apply your military service toward the civil service's Federal Employees Retirement System (FERS). You will even have the opportunity to "buy back" your military service to further increase your benefits.
Each year of military service you buy back as a military service credit counts as a year toward your FERS pension. This gives you several major benefits. Your military service credits increase your creditable years of service under FERS, increase your retirement pension, give you more seniority, and increase the rate at which you accrue leave.
Let's take a look at how you can apply your military service toward FERS, see how the military service credit buyback program works, and discuss why this makes sense for many veterans.
First, a Disclaimer for Active-Duty Retirees
Before we dive in, we should note that federal law allows you to apply your active-duty service time toward both a Title 32 retirement from the inactive Guard or Reserves and the FERS retirement system if you buy back your military service credits. However, federal law prohibits members from applying the same military service toward both an active-duty retirement and FERS retirement.
However, there may be benefits for certain active duty retirees who later join the civil service.
Benefits Available to All Veterans -- Even if You Don't Buy Back Military Service Credits
All veterans may be eligible to receive certain benefits when they join the civil service. These include Veterans Preference Points and adjustments to your Service Computation Dates (SCD).
Because of this, all veterans should supply their DD Form 214 to their Human Resources (HR) office when they join the civil service.
Veterans Preference Points can help you earn preference toward being hired by the civil service. You must still apply, interview and be qualified for the job. But all things being equal, Veterans Preference Points can help you compared to someone who does not have military service.
FERS uses three Service Computation Dates (SCD), which are used to track the day you entered the civil service (SCD Civilian), your service date for leave accrual (SCD Leave), and your date for Reduction in Force seniority (SCD RIF).
Your military service won't change your SCD Civilian date. That is the actual date you entered into the civil service. But it may impact your SCD Leave date and your SCD RIF. These dates help you accrue leave more quickly and may give you more protection if there is a Reduction in Force.
As mentioned above, there are some restrictions for active-duty retirees who join the FERS system. Your civil service HR department can assist you with the details.
Buying Military Service Credits
Once you have registered your military service with your FERS HR office, you will have the option of buying back your military service time.
This is not a great option for most active-duty retirees as it will prevent you from receiving your military retirement pay. However, this is almost always a great option for those who are not retired from active duty.
Buying your military service credits is a straightforward process. You purchase military service credits at a rate of 3% of the pay you received while on active duty (with the exception of 1999 and 2000, which are slightly higher; more info).
Each year of military service you buy will be worth one year of civilian service under FERS. And remember, you can still use this time toward retirement from the Guard or Reserves.
The website GubMints.com has a comprehensive guide to buying back your service credits. You can also listen to a podcast about this topic on The Military Wallet. The article and podcast give a much more detailed analysis of how the buyback process works, as well as some real-world applications.
Benefits of Buying Back Your Military Service Credits
Buying your military service credits gives you additional creditable years of service toward your FERS retirement plan.
In other words, each year of service you buyback will increase your years of service within FERS. This increases your FERS pension and allows you to retire earlier.
Civil service employees must serve at least five years under the FERS system to be eligible for a FERS Delayed Retirement pension (those years must be served in the civil service in order to be eligible for any retirement benefits; any years you buy back are in addition to these five years). However, there are different requirements for earning an Immediate Retirement under FERS (these rules are based on your age, years of creditable service, and other factors. Learn more).
Each year of military service you buy back helps you reach your retirement eligibility more quickly.
As for your pension, you get the best of both worlds. You can buy back your military service based on 3% of your actual active-duty military pay for the time you served. This will generally be the lowest-paying years of your career since it includes your junior ranks.
Your FERS pension is based on the average of the high 3 of your civilian pay before retirement. These years will often be the highest-paying years for most people. In other words, you buy back your military time when your income was the lowest and receive your FERS pension based on the years when your income was at its peak.
Joining the civil service after leaving the military can be an excellent way to continue your service, earn a respectable living, and earn valuable benefits. And if you continue your service in the Guard or Reserves, you may be able to double-dip and earn retirement benefits for both Title 32 retirement and FERS retirement for the same period of active-duty service.
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