Buying Back Military Time: A Complete Guide to Military Service Credit Deposits
Military veterans who join the federal government can buy back their active duty service time through a Military Service Credit Deposit, earning credit toward a FERS pension, faster leave accrual, and earlier retirement eligibility.
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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 Service | Amount of Deposit Due |
|---|---|
| Through 12/31/98 | 3% of military basic pay |
| 1/1/99 through 12/31/99 | 3.25% of military basic pay |
| 1/1/00 through 12/31/00 | 3.4% of military basic pay |
| 1/1/01 to the present | 3% of military basic pay |
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.
| Years | Percentage Rates |
|---|---|
| 2025 | 4.375% |
| 2024 | 3.750% |
| 2023 | 1.875% |
| 2022 | 1.375% |
| 2021 | 1.375% |
| 2020 | 2.250% |
| 2019 | 2.75% |
| 2018 | 2.125% |
| 2017 | 1.875% |
| 2016 | 2.0% |
| 2015 | 2.0% |
| 2014 | 1.625% |
| 2013 | 1.625% |
| 2012 | 2.25% |
| 2011 | 2.75% |
| 2010 | 3.125% |
| 2009 | 3.875% |
| 2008 | 4.75% |
| 2007 | 4.875% |
| 2006 | 4.125% |
| 2005 | 4.375% |
| 2004 | 3.875% |
| 2003 | 5% |
| 2002 | 5.5% |
| 2001 | 6.375% |
| 2000 | 5.875% |
| 1999 | 5.75% |
| 1998 | 6.75 % |
| 1997 | 6.875% |
| 1996 | 6.875% |
| 1995 | 7% |
| 1994 | 6.250% |
| 1993 | 7.125% |
| 1992 | 8.125% |
| 1991 | 8.625% |
| 1990 | 8.750% |
| 1989 | 9.125% |
| 1988 | 8.375% |
| 1987 | 9% |
| 1986 | 11.125% |
| 1985 | 13% |
| 1948-1984 | 3% |
| Before 1948 | 4% |
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.
Note: The process of gathering military earnings records and receiving a deposit calculation from OPM can take several months, sometimes up to six months or longer. Do not wait until close to retirement to begin the process.
Who Can Buy Back Their Military Time?
All non-retired military veterans can buy back their military service time through a Military Service Credit Deposit. You should consider buying back your military time even if you don’t think you will work for the federal government for a long time, you only need five years of federal service to qualify for a deferred annuity, which is a pension you can begin drawing at age 62. Even a small pension will be valuable in your retirement years.
Graduates from the Service Academies can also buy back their academy time. Since Service Academy cadets only earned a small stipend during their academy days, the cost to buy that time back is inconsequential compared to the long-term return in federal service time and annuity value.
Members of the Guard and Reserves are able to buy back their active duty time and work toward dual pensions, applying active duty time toward their FERS retirement while also working toward a separate Reserve or Guard retirement at age 60.
Federal law prohibits retired active duty military members from buying back their military time and adding it to their FERS pension, since they are already receiving compensation for their military retirement. Military retirees should still look into getting credit for their Service Computation Date for Leave, however.
Benefits of Buying Back Your Military Time
When you buy back your military service dates, you receive a day-for-day accrual of your time as an active duty service member. Every single day counts towards your FERS annuity pension plan, so the longer you served, the more valuable buying back your time will be.
The FERS pension is based on your years of service and the average of your highest three years of pay. For example, a veteran earning an average of $100,000 a year for their final three years of service with 20 years of creditable service would receive a $20,000 annual pension. With 25 years of service at the same pay rate, that increases to $25,000 per year. Like military retirement pay, the FERS pension plan is adjusted annually for COLA, so it increases in most years.
Who Should Buy Back Their Military Time?
Almost everyone who is eligible. There are only a few edge cases where it doesn’t make sense to buy back your time, but those instances are rare. In all cases, you should run the numbers to be sure, the deposit cost is typically far outweighed by the long-term pension and service computation date benefits.
If you are unsure whether buying back your time makes sense for your specific situation, speak with your agency’s HR benefits specialist or a fee-only financial planner familiar with federal employee benefits before making a decision.
