Combining Military Retirement with Civil Service Pay

Many military veterans are drawn to federal service in their post-military careers. This opportunity lets veterans keep serving their country, apply the valuable skills they gained in the military, and secure financial stability for themselves and their families. 

However, transitioning into and retiring from the civil sector requires new rules and knowledge. To maximize your benefits, understand how your civil service pension interacts with your military retirement pay.

Can I collect military retirement and civil service pay?

Yes, military retirees can work in civil service positions and receive both military retirement pay and a salary from their civil service job. Unlike some other retirement systems, you won’t have your military retirement pay offset or reduced when you start receiving civil service pay. You are entitled to full benefits from both sources.

The same rule applies to those who served in the Reserves or National Guard and receive points-based retirement pay. You can receive your military retirement pay and work in a civil service job, earning a separate salary.

The biggest benefit of this path is that, after a full military career, you can supplement your retirement pay with civil service income.

Federal compensation packages are excellent, including regular basic pay raises, a pension plan, health benefits, dental and vision insurance, and life insurance. Some agencies even help pay student loans and offer other incentives, such as flexible schedules and remote work options.

Complications arise when you decide how to handle your civil service retirement.

Civil Service Retirement and the Federal Employee Retirement System

If you begin a civil service career today, you’ll likely contribute to the Federal Employee Retirement System (FERS). FERS is separate from your military retirement and offers excellent benefits, including a pension, Social Security, and the Thrift Savings Plan (TSP).

FERS replaced the Civil Service Retirement System (CSRS) for employees who began their federal service after December 31, 1983. CSRS was a contributory retirement system that previously provided retirement, disability, and survivor benefits for most U.S. federal civil service employees and their families. When FERS came online, CSRS employees could switch to FERS.

Does military service count towards civil service retirement?

Yes, active military service can count toward your civil service retirement*, but you must follow specific steps and conditions to take full advantage of this opportunity.

To make your military service count toward civil service retirement, you can “buy back” your service by making a deposit into FERS for the time you served in the military. This payment credits your active-duty military service years toward your civil service retirement, increasing your FERS pension. Buying military service credits is a good option for many Veterans and military retirees, but not all. 

*Periods of inactive military service, including AT and IDT, are not eligible for military service credits in the FERS system.

Military Buy Back Rule for Federal Retirement

To initiate the buyback process, you must complete specific forms and provide documentation of your military service, such as your DD Form 214, to your civil service human resources department. They will calculate the cost of buying back your military time, which is generally a percentage of the base pay you received while in the military. 

The exact percentage varies depending on the dates of your military service:

Year of Military Service	Buy Back Deposit (% of military pay)
1957 – 1998	3%
1999	3.25%
2000	3.4%
2001 – present	3%

It’s important to note that there is a deadline for completing the buyback process to receive full credit without accruing interest. Typically, you have three years from the start of your civil service employment to make this payment. After this period, interest may accumulate, increasing the cost of buying back your military time. FERS employees must buy back military service credits before retiring from the FERS system.

Buying Back Your Military Service Backdates Your Service Computation Dates

In addition to increasing your FERS pension, your military service credits also backdate two important service computation dates:

1. Service Computation Date for Leave (SCD Leave): helps you to accrue annual leave more quickly than if you were starting your career without any service credits
   
2. Service Computation Date for Reduction in Force (SCD RIF): increases your seniority date if a Reduction in Force causes layoffs.

Annual Leave accrues at the following rates:

Years of Service	Annual Leave Accrued
0 to 3 years	4 hours per pay period
3 to 15 years	6 hours per pay period
More than 15 years	8 hours per pay period

Buying back your military service can raise your SCD Leave threshold or speed up your timeline to the next level.

Can I get FERS and Military Retirement?

You can’t use the same period of active military service for both military and federal retirement unless you qualify for one of the exceptions listed below. This is known as double-dipping.

In other words, if you opt for a buyback to count your military service toward your federal retirement, you can’t “double dip” by receiving a military pension for that same period of service.

You have two options when it comes to civil service retirement as a military retiree:

• Forfeit your military retirement pay and buy into the federal retirement plan
• Don’t buy back military service and start fresh with federal service with no credit for time served in the military

Retaining your military retirement means you start from year zero as a federal employee, begin building creditable civilian service toward federal retirement, and maintain your military pension.

Exceptions for Reserve Component and Certain Medical Retirees

Most military retirees are subject to the double-dipping policy and must waive their military pension to count their service toward FERS. However, some exceptions apply.

Military retirees may be granted an exception if they were awarded the retirement pay:

• Due to a service-connected disability either incurred in combat with an enemy of the United States or caused by an instrumentality of war and incurred in the line of duty during a period of war, or
• Under the provisions of Chapter 1223, Title 10, U.S.C., for those retiring from a reserve component of the Armed Forces.

In other words, traditional Guard and Reserve retirees, who typically receive retirement pay at age 60, are an exception and can count their active military service toward both military and FERS retirement.

Detailed information regarding creditable military service for retirement purposes is in the Federal Employees Retirement System Transfer Handbook on the Office of Personnel Management’s website.

National Guard or Reserve Retirement with FERS

Reserve Component (RC) members are eligible for three types of military retirement that can impact how their military retirement works with a FERS retirement:

1. Active-Duty Retirement: 20 years (or more) of active duty 
2. Reserve/Guard Retirement: 20 years (or more) of combined active duty and RC military service (pay can be collected at age 60)
3. Military Medical Retirement: due to a service-connected disability either incurred in combat with an enemy of the United States or caused by an instrumentality of war and incurred in the line of duty during a period of war.
   

In the first scenario, Active Guard Reserve (AGR) retirees receiving an active-duty pension can buy back their military time only by waiving their military retirement pay. This is rarely a good option.

The second and third scenarios allow the RC retiree to “double-dip” by buying back active military service and having it count toward both a military and FERS retirement. These are the two exceptions covered by federal law. This is a great deal in almost every situation.

Should I buy back my military service?

Buying military service credits allows veterans to increase their FERS pension and backdate their Service Computation Dates for Leave and Reduction in Force calculations. 

But it’s not always the best solution.

Let’s look at common situations veterans face when they join the civil service and FERS to help you understand the impact of buying back military service credits.

1. Non-retired military veterans: There is no downside to buying back military service credits for this group. 

2. Active-duty retiree: Active-duty retirees must forfeit their active-duty military pension to buy back their military service credits. This is rarely worth it. However, they can still file their DD Form-214 with their human resources department. They may be eligible to earn military service credits that will backdate their SCD Leave and SCD RIF dates if they had qualifying service in a campaign or expedition for which a campaign badge has been authorized. In this situation, qualifying deployments can provide powerful benefits years later.

3. Reserve Component retiree: RC members should almost always buy back their military service credits. In many cases, Guard and Reserve members will still be serving in the RC when they join the civil service. In that case, you should buy back your time immediately to increase your FERS pension, start accruing leave faster, and backdate your SCD RIF date.

4. Retirement due to a combat-related service-connected disability: These members should buy back their military service credits.

Reader Question About Buying Back Military Service Credits 

Let’s take a deeper look at how you can use your military service toward your civil service career with a real example from one of our readers.

The reader asks:

“I served 14 years of active duty and six years in the National Guard. I received my 20-year letter. I began working for the postal service and ‘bought back’ my 14 years of active duty towards my postal service retirement. For example, I have 12 years of actual time with the U.S. Postal Service but 26 years on the books due to the buy back option.

My question is, how does this affect my retirement through the National Guard when I reach age 60? Will I receive retirement pay for only my six years served in the National Guard or for the entire 20 years of military service?

I guess I am asking if it was ‘beneficial’ for me to buy back my military time. Do I lose the six years of National Guard time if I buy back my 14 years of active duty time? I am a little confused about what happens to the six years for National Guard time since the time spent in the Guard after the buy back would be less than 20 years.”

These are great questions on a very confusing issue.

Thankfully, I have great news! Your military service is eligible for dual credit because you qualify for a traditional National Guard retirement. You can’t use the same active-duty service to count toward both an active-duty military pension (vesting immediately after 20+ years of active-duty service) and a FERS pension.

However, your active military time can count toward both a Reserve Component pension and a FERS pension starting at age 60. You receive credit for your entire 20 years of military service and the 26 years you have in the books with the U.S. Postal Service. 

Buying back your military service was a great financial move. You not only maintained your military pension and boosted your FERS pension, but you also backdated your Service Computation Leave and RIF dates, helping you accrue annual leave faster and giving you more seniority in the event of a Reduction in Force.

In this case, you get to have your cake and eat it too!