A military service deposit lets you count your post-1956 active duty military service toward your FERS retirement. You pay your agency a percentage of your military basic pay, generally 3%, plus interest if you wait too long. Once the deposit is paid in full, those military years count toward your annuity. If you leave federal service without paying it, you lose that option.
On Veterans Day, thank you for your service. Here is how to make sure your federal retirement reflects it.
What the military service deposit does
Under the Federal Employees Retirement System (FERS), your basic annuity depends on your years of creditable service and your high-3 average salary. Military service performed after 1956 does not count toward your FERS annuity unless you make a deposit, according to the Office of Personnel Management (OPM).
Each year of service generally adds 1% of your high-3 to your annual annuity. If you retire at 62 or older with at least 20 years of service, each year adds 1.1%. Adding military years can increase your annuity for the rest of your life, and it can also help you reach retirement eligibility sooner.
How much the deposit costs
OPM's service credit page lists the FERS deposit rates:
- Service through December 31, 1998: 3% of military basic pay.
- Service in 1999: 3.25% of military basic pay.
- Service in 2000: 3.4% of military basic pay.
- Service from January 1, 2001 on: 3% of military basic pay.
Here is a simple, hypothetical example. If your military basic pay for a period after 2001 totaled $60,000, the deposit before interest would be 3% of that, or $1,800. Your agency will calculate your real amount from official records.
If part of your annuity falls under CSRS
If you transferred from the Civil Service Retirement System (CSRS), military service before the transfer follows CSRS rules, and the CSRS deposit is 7% of military basic pay. If you were first hired on or after October 1, 1982, you receive no CSRS credit for post-1956 military service unless you make the deposit.
Watch the interest clock
Timing matters. Under the federal rule at 5 CFR 842.307:
- Interest starts on the second anniversary of the date you were first covered by FERS.
- Interest compounds each year on the unpaid balance.
- No interest is charged if you finish paying before the end of the year after interest begins.
In practice, that means you have about three years from your FERS start date to pay without interest. If you have been in federal service longer, interest is likely already building, so it is worth acting soon.
Your agency should notify you
OPM's Benefits Administration Letter 23-105 requires agencies to notify newly hired employees about their eligibility to make a military deposit within 90 days of their entry on duty date. The notice should explain how to request military earnings, how the deposit is calculated, payment options and who to contact.
If you were hired before that requirement or never saw the notice, ask your human resources or benefits office about it.
How to make the deposit
The process goes through your employing agency, not OPM directly:
- 01Request your military earnings. Use form RI 20-97 to request estimated earnings from your military branch, or gather official pay records.
- 02Find your DD Form 214. It shows your dates of active duty service.
- 03Apply with your agency. Your benefits office will help you complete the application.
- 04Review the computation. The agency calculates the amount due, including any interest.
- 05Choose how to pay. You can pay in a lump sum or in installments, often through payroll deduction. Agencies do not have to accept installments under $50.
- 06Keep your records. Save the final statement showing the deposit is paid in full.
If your service was under USERRA
If you were called to active duty while working for the government and your service is covered by the Uniformed Services Employment and Reemployment Rights Act (USERRA), OPM says the deposit may be calculated on your military earnings or, if it is less, on the retirement deductions you would have paid on your civilian salary for the same period.
Rules to keep in mind
Pay in full before you separate
The deposit must be completed before you leave federal service. For each separate period of military service, the full amount must be paid. A partial payment for a period does not give you partial credit for that period.
Running out of time is not an excuse
OPM has told agencies that not having enough time to pay is not considered an administrative error. If you are close to retirement with a balance, ask your agency about paying it off faster.
Military retired pay
If you receive military retired pay, special rules apply. In many cases you must waive that retired pay for the service to count toward FERS, though there are exceptions. Talk with your benefits office before you decide.
Survivors have a limited option
If an eligible employee dies before completing the deposit, a survivor may pay it in one lump sum before OPM finishes processing the survivor annuity application.
Is the deposit worth it?
For many veterans, yes. The deposit is a one-time cost based on military pay, while the added annuity is based on your civilian high-3 and is paid for life. Still, the answer depends on your situation, including how long you plan to work, whether you receive military retired pay and your other retirement income.
Add the military deposit to your retirement plan alongside your TSP, Social Security and health benefits. Our Federal Retirement Blueprint walks through each piece, and our 10 steps can help you get organized. If retirement is near, see what to expect from the OPM digital retirement application.
Common mistakes to avoid
- Assuming the service counts automatically. Post-1956 active duty does not count toward your FERS annuity until the deposit is paid.
- Waiting until retirement paperwork. By then, interest may have built up for years, and time to pay may be short.
- Paying part of a period. A deposit for a distinct period of service is not considered made unless the full amount for that period is paid.
- Losing your records. Keep your DD Form 214, earnings statement and final paid-in-full statement together with your retirement papers.
A Veterans Day checklist
- Confirm whether you served on active duty after 1956.
- Ask your benefits office whether you have a deposit on file.
- Check whether it is paid in full for every period of service.
- Find your FERS start date and see whether interest is accruing.
- If you receive military retired pay, ask how it affects your options.
- Set a plan to finish paying well before your retirement date.
Frequently asked questions
What is a military service deposit?
It is a payment that lets you count post-1956 active duty military service toward your FERS retirement. Without it, that service does not count in your annuity.
How much is the FERS military deposit?
It is generally 3% of your military basic pay, with 3.25% for 1999 service and 3.4% for 2000 service, plus any interest.
When does interest start?
Interest starts on the second anniversary of your FERS coverage, but none is charged if you pay in full before the end of the following year.
Can I pay the deposit after I retire?
Generally no. The deposit must be paid before you separate from federal service.
Who do I contact to start?
Contact your agency's human resources or benefits office. They set up the deposit account and calculate the amount due.
