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Federal Employees News Digest : May 20, 2013
May 20, 2013 Vol. 62, No. 42 8 Visit us on the Internet at www.FederalDaily.com M any federal employees served in the uniformed services before entering federal service. There are also employees who currently serve in the uniformed services and who take military leave when they go on active duty. These employees are eligible to make a mili- tary deposit to "buy back" their military service time. This first of two columns on military deposits discusses the purpose of a military deposit and its cost. Both CSRS and FERS employees who served or are serving in the uniformed services are eligible to make military deposits. In so doing, they will receive credit for both retirement eligibility and for the computation of their CSRS or FERS annuities. By making a full military deposit, an employee will add more years to his or her civilian service, thereby possibly allowing the employee to retire earlier. The additional years also will result in a larger CSRS or FERS annuity. There are some employees with prior military service who may not owe a deposit and will still get full credit for retirement eligibility and in their annuity computation. Whether an employee owes a military service deposit will depend on: (1) which retirement systems -- CSRS or FERS -- they are covered by; (2) when they entered federal service -- before Oct. 1, 1982, or after Sept. 30, 1982; (3) if covered by CSRS, whether they currently have 40 or more credits of Social Security, or will have 40 credits of Social Security at the later of age 62 or when they retire; and (4) for an employee who is a military retiree for active duty, whether the employee is willing to waive military retirement pay. Honorable active service in the uniformed services in the follow- ing branches is recognized as military service for CSRS or FERS purposes: (1) Army; (2) Navy; (3) Air Force; (4) Marine Corps; (5) Coast Guard; (6) Regular Corps of the Public Health Service of the United States; and (7) as a commissioned officer of the National Oceanic and Atmospheric Administration. Other types of military service potentially creditable as military service include: (1) military academy attendance at the U.S. Military Academy, U.S. Air Force Academy, U.S Naval Academy or the U.S. Coast Guard Academy; (2) Naval Reserve Officers Training Corps service when ordered to active duty or training duty as members of the Army Reserve; and (3) National Guard service if the employee was called or drafted into the actual military service of the United States. Active military service is defined as duty in the U.S. armed forces performed on a full-time basis with military pay and allowances. For employees serving in the various reserve components listed above, a military deposit may be made for active duty time only. A period of military service may be credited for CSRS or FERS retirement eligibility and in the CSRS or FERS annuity computa- tion if the following conditions are met: (1) the military service was performed before the date of the separation from federal service; and (2) the military service is not included in the military retirement pay for active duty unless the retirement pay is a result of a service-related disability incurred in combat or under provisions of 10 United States Code 1223. Note that both CSRS and FERS employees who are eligible for or currently receiving reserve retirement pay are not required to waive their reserve retirement pay in order to make a military deposit for any active duty time he or she was credited in the earning of the reserve retirement pay. Amount of the Military Deposit After a period of military service that interrupted federal service, or within a short period upon enter- ing federal service for a period of military service that preceded federal service, an employee should consider paying the military deposit within three years of reem- ployment or upon entering federal service. The amount owed for a deposit will be equal to: (1) 7 percent of the employee's military base pay for CSRS employees; and (2) 3 percent of the employee's mili- tary base pay for FERS employees. Note that no interest is charged for the deposit if the deposit is made in full within the first three years of reemploy- ment or employment. The table on this page summarizes the inter- est rates by year since 1985. CSRS employ- ees hired before Oct. 1, 1982, had an inter- est-free grace period until Oct. 1, 1985. An employee who uses military leave or annu- al leave for the period of separation will not owe a military service deposit. There is a two-year, interest-free grace period when hired (or after discharge from the military if the mili- tary service interrupted federal civilian service) after which interest is accrued daily and compounded annually at the variable interest rates shown in the table. Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in Silver Spring, MD. He is also a registered representative with FSC Securities Corporation, branch address: 833 Bromley St. - Suite A, Silver Spring, MD 20902. Phone: (301) 681-1652. Securities offered through FSC Securities Corporation,member FINRA/SIPC. EZ Accounting and Financial Services and FSC are independent companies. Informed Investor Eligible employees should make military deposits: Part I Interest Rates -- Military Service Deposits Year Interest Rate (%) Year Interest Rate (%) 1985 13.00 2000 5.875 1986 11.125 2001 6.375 1987 9.00 2002 5.50 1988 8.357 2003 5.00 1989 9.125 2004 3.875 1990 8.75 2005 4.375 1991 8.625 2006 4.125 1992 8.125 2007 4.875 1993 7.125 2008 4.75 1994 6.25 2009 3.875 1995 7.00 2010 3.875 1996 6.875 2011 2.75 1997 6.875 2012 2.25 1998 6.75 2013 1.625 1999 5.75
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May 27, 2013