Military Service Credit: How to Convert Your Military Time for Federal Jobs

According to federal data, over 30% of federal and civil service employees are military veterans. Continuing one’s career as a civilian government employee is a great way to continue serving our country while building toward a second retirement.

There are also some excellent benefits for veterans who wish to work for the federal government. Among them are Veteran’s Preference Points, which can help you land a job with the government. And, if you are willing to buy back your military time through a Military Service Credit Deposit, you can enjoy other benefits, such as increased leave accrual per pay period, faster vesting of your Thrift Savings Plan agency contributions, and the ability to retire earlier than you otherwise might without credit for your military service.

In today’s article, we will discuss buying back your military time, how to do it, and the benefits of doing so.

How the Federal Employee Retirement Systems (FERS) Works

The FERS retirement plan is like a three-legged stool, it has three distinct elements:

• The Federal Pension Plan. The pension is determined by multiplying your years of federal service by the average of your top three years of pay. Some retirees are eligible for early retirement and can earn their pension before age 60, usually offered during a Reduction in Force (RIF).
• Thrift Savings Plan. Federal employees receive an agency matching contribution to their TSP, up to a maximum of 5% of their pay.
• Social Security Benefits. Note that certain military members are eligible for increased Social Security Benefits depending on the dates which they served.

This system is designed to give retirees three sources of income to fund their retirement. Federal service employees are also eligible to earn a separate retirement from the Guard or Reserves without it affecting their FERS retirement benefits, this is not the case for active duty retirees.

Note: Some federal employees hired before 1987 may be covered under the older Civil Service Retirement System (CSRS) rather than FERS. The military buyback rules differ under CSRS, consult the OPM website or your HR office for CSRS-specific guidance.

What Is a Military Service Credit Deposit?

The FERS retirement system rewards those who have worked in federal service, including military veterans. But in order for your military time to count toward a FERS retirement, you need to give the civil service the information they need to account for your time served. And if you want your military time to count toward a FERS pension, you need to make a Military Service Credit Deposit. This is required since you would not have paid into the pension plan during those years of military service.

Understanding Federal Service Computation Dates

Federal Service Computation Dates are used to determine several aspects of your federal service benefits. There are three primary Service Computation Dates (SCD):

Service Computation Date – Civilian

Your SCD Civilian date you start your civil service job, almost always on a Monday at the start of a pay period.

This starts the date for your FERS life insurance benefit, a free benefit with an important change at the 10-year mark. The Thrift Savings Plan Computation Date is also important because at the three-year mark you are completely vested in the agency contributions made by the government into your TSP account.

Service Computation Date – Leave

The SCD Leave date determines how quickly you accrue leave. This is the date listed in the upper right corner of your civilian Leave and Earnings Statement (LES). If you have no military experience, this would be the same as your SCD Civilian Date.

Non-retired military veterans only need to turn in their DD-214 to their HR office to gain additional seniority as a federal employee. This is a one-to-one benefit and is valuable because you accrue leave more quickly once you have over three years of federal service.

Here’s how leave accrual works:

• Under 3 years of federal service: 4 hours of annual leave per two-week pay period

• Between 3 and 15 years: 6 hours per pay period

• Over 15 years: 8 hours (one full day) per pay period

This is an extremely valuable benefit, not just for the time off you accrue, but because you can sell your leave days when you leave federal service. Federal employees can carry up to 240 hours of leave across a calendar year, giving those leaving federal service the opportunity to sell up to 30 days of leave, which is the equivalent of an extra month’s pay.

Note: Military retirees can also apply to have some of their service count toward their SCD Leave date, but only the days which they served in a named campaign or in certain deployments.

Service Computation Date – Reduction in Force

Your SCD RIF date determines your seniority if there is a Reduction in Force. To receive this benefit, you have to buy back your time with a Military Service Credit Deposit.

The time you buy back can allow some members to retire at age 50 if they have 20 years of federal service and the government offers them a Voluntary Early Retirement. This is a full retirement, retirees can receive the Federal Employee Health Benefit at the regular employee charge, which is a significant advantage since early retirees do not have to pay COBRA health care costs.

If you buy back your time, your SCD RIF date will match your SCD Leave date.

How Much Does It Cost to Buy Back Your Military Time?

To buy back your military service time, you will need to write the government a check for 3% of the base military pay you earned while in the military, or have the amount withheld from your future paychecks. The exception is the period of 1999-2000, which has a slightly higher buyback rate.

If you buy back your military service credits within two years of joining the civil service, you will pay the rates in the table below. If you take longer, you will also pay a variable interest rate based on the year of service.

Deposit Rates by Period of Service

Dates of ServiceAmount of Deposit DueThrough 12/31/983% of military basic pay1/1/99 through 12/31/993.25% of military basic pay1/1/00 through 12/31/003.4% of military basic pay1/1/01 to the present3% of military basic payHow much it costs to buy back your military service. (Source).

Variable Interest Rates

The variable interest rates below are applied if you do not buy back your military service credits within the two-year grace period. FERS provides a two-year grace period before interest begins to accrue. However, because interest is applied annually at the end of the grace period, there is effectively a three-year interest-free window if the deposit is paid in full before the first interest accrual date.

YearsPercentage Rates20254.375%20243.750%20231.875%20221.375%20211.375%20202.250%20192.75%20182.125%20171.875%20162.0%20152.0%20141.625%20131.625%20122.25%20112.75%20103.125%20093.875%20084.75%20074.875%20064.125%20054.375%20043.875%20035%20025.5%20016.375%20005.875%19995.75%19986.75 %19976.875%19966.875%19957%19946.250%19937.125%19928.125%19918.625%19908.750%19899.125%19888.375%19879%198611.125%198513%1948-19843%Before 19484%(Source)

How to Apply for a Military Service Credit Deposit

Applying for a Military Service Credit Deposit requires some math, paperwork, and research, but it is worth every bit of time and effort you put into it.

Step 1: Gather your military earnings records

You will need copies of your DD-214 and any related pay stubs or Leave and Earnings Statements (LES). Having your LES records makes it easier to determine when you received pay raises from promotions and time-in-service increases, which affects the total deposit amount.

If you don’t have good records, The HR department can figure out your effective pay based on your DD-214 and historic pay tables. However, it is much easier to compute the figures yourself, both to make the HR department’s job easier and to ensure accuracy. No one has a greater interest than you in making sure the calculations are done correctly, so do your homework to ensure you don’t overpay or miss credit for any of your military time.

You can also request a copy of your military service records from either your branch of service’s records bureau or from the National Archives if they have already been sent there.

Step 2: Submit Form RI 20-97.

Complete Form RI 20-97 (Estimated Earnings During Military Service) and submit it to the appropriate military finance center along with a copy of your DD-214. This allows your military branch to provide an official estimate of your basic pay during your active duty service, an essential step in calculating your deposit amount.

Step 3: Complete Form SF 3108.

Once you receive your estimated earnings, complete Form SF 3108 (Application to Make Service Credit Payment) and submit it to your agency’s HR office. Your HR office will certify the form and forward it to OPM, which will calculate the total deposit amount owed and send you a bill with payment instructions.

Step 4: Make your payment.

Once you receive your bill from OPM, you can pay your deposit in full by writing a check or arrange for payroll deductions over the next couple of years. Keep a copy of your paid-in-full confirmation letter and provide a copy to your HR office, this letter serves as a verification of the service periods bought back and is essential documentation for your retirement record.

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