Civilian Deposits & Redeposits

I Two words that are not interchangeable

Federal HR uses "deposit" and "redeposit" as though the distinction were cosmetic. It is not. They cover different situations, follow different rules, and have entirely different cutoff dates.

One more category is worth naming here because people lump it in and it follows its own rules entirely: military service. Buying back active-duty time is a deposit, but at 3 percent of military basic earnings under FERS, with its own interest-free grace period and its own interaction with military retired pay. That topic is covered separately in Topic 15 on military buyback and in the Military Buyback Calculator. Everything below concerns civilian service only.

II The 1989 wall — what FERS will and will not sell you

This is the single most important paragraph in the article for anyone under FERS, so it gets said plainly: non-deduction civilian service performed on or after January 1, 1989 is not creditable under FERS and cannot be purchased.

That is not a deadline you missed. It is not a window that closed. There is no form, no payment, and no waiver that makes a 1994 temporary appointment count toward your FERS annuity. Congress built the wall into the statute, and it does not move.

The practical consequence catches a specific population off guard: people who entered federal service through a temporary or term appointment in the 1990s or 2000s, converted to a permanent position later, and assume the early years are recoverable because a colleague with pre-1989 temporary time bought hers back. Hers was creditable. Yours is not. The dividing line is the calendar, not the appointment type.

Narrow exceptions exist — certain service creditable under the Foreign Service Pension System, and service under the Federal Reserve Board's plan — but they are genuinely narrow and will not apply to most federal employees. If you think you might fall inside one, that is a question for your agency benefits specialist with your full SF-50 history in hand, not something to assume.

III FERS deposits — 1.3 percent plus interest

For creditable pre-1989 non-deduction service, the FERS deposit is generally 1.3 percent of the basic pay you earned during that period, plus interest. The 1.3 percent figure applies regardless of what rate would actually have been withheld had deductions been taken at the time — it is a statutory rate, not a reconstruction of your would-have-been contributions.

Interest is computed from the midpoint of each period of service, compounded annually, and charged until the deposit is paid in full or your annuity begins, whichever comes first. That midpoint rule matters: a three-year appointment from 1985 to 1988 starts accruing interest in mid-1986, not in 1988.

Peace Corps and VISTA volunteer service follows a variant of these rules and is worth mentioning because it is frequently overlooked. That service can be deposited regardless of when it was performed, provided it was followed by a period of creditable FERS-covered service, and it carries a two-year interest-free period before the variable rate begins accruing.

IV FERS redeposits — the window P.L. 111-84 opened

For the first two decades of the FERS program there was no such thing as a FERS redeposit. An employee who left federal service, took a refund of their FERS contributions, and later returned was barred by statute from repaying it. The service was gone — not expensive, not conditional, gone.

Section 1904 of the National Defense Authorization Act for Fiscal Year 2010, Public Law 111-84, enacted October 28, 2009, changed that. Employees who were on the FERS rolls on or after that date may redeposit previously refunded FERS deductions plus interest. Completing the redeposit restores the service for both retirement eligibility and annuity computation.

One trap inside the trap: if you had previously paid a military service deposit in full and then took a refund at separation, the refunded military deposit is folded into the FERS redeposit computation. OPM cannot calculate a separate redeposit for the military piece, and that military service is not creditable for either eligibility or computation until the full redeposit is paid. Veterans who bought back their time, later separated and cashed out, and then returned to federal service should assume the military credit went with the refund.

FERS employees who also hold a CSRS component in their service history have always been able to redeposit withdrawn CSRS contributions to recapture credit toward the CSRS portion of a mixed annuity. That path was never closed, and it follows the CSRS rules described in the next two sections rather than the FERS rules here.

V CSRS deposits — 7 percent and the October 1982 line

CSRS non-deduction service is purchased at 7 percent of the basic pay earned (7.5 percent for law enforcement officers and firefighters), plus interest. The consequential detail is not the rate but the date the service was performed.

Service before October 1, 1982. You receive credit in the annuity computation whether or not you pay. But if you do not pay, your annual annuity is permanently reduced by 10 percent of the deposit amount due at retirement, and any survivor annuity is reduced proportionately. Interest on this pre-1982 service accrues daily, compounds annually, and is charged at a flat 3 percent rather than the variable rate.

Service on or after October 1, 1982. Without the deposit, the service cannot be used in the annuity computation at all. There is no partial-credit consolation. Interest runs at 3 percent through December 31, 1984, then at the annual variable rate thereafter.

The 10 percent reduction on pre-1982 service is a genuinely unusual construct, and it produces a clean decision rule. A reduction of 10 percent of the amount owed, applied annually for life, means the unpaid deposit effectively costs you one tenth of its value every year. Against a payment that costs the full amount once, paying is correct for anyone expecting to live more than about ten years past retirement — which is nearly everyone.

VI CSRS redeposits — March 1991 and the actuarial option

Refunded CSRS service divides on March 1, 1991, and the two sides are treated very differently.

Service ending before March 1, 1991. You get credit for the service either way. You may pay the redeposit, or you may accept a permanent actuarial reduction to your annuity, computed from the amount owed including interest divided by a present-value factor for your age at retirement. OPM updates those factors periodically; the current set applies to annuities commencing on or after October 1, 2026. The actuarial reduction is not applied to your surviving spouse's annuity, which is a meaningful advantage of that route for married retirees. This option is not available to disability retirees.

Service ending on or after March 1, 1991. No choice. Without the redeposit, the service is excluded from the annuity computation.

If you started a redeposit but did not finish before OPM finalizes your retirement claim, the actuarial reduction is computed on the balance you still owe at that point, not on the original amount. Partial payments do reduce the eventual reduction. And under FERS rules, an incomplete redeposit is simply refunded to you rather than credited — a meaningful difference in how the two systems handle a half-finished payment.

VII How the interest actually works against you

Interest is the reason these bills surprise people, and understanding the mechanics is what makes the timing decision obvious.

The rate is variable, set annually by the Treasury Department, and equals the overall average yield to the retirement fund from its securities during the preceding fiscal year. A flat 3 percent applied through December 31, 1984. The variable structure began January 1, 1985.

Each year's outstanding balance is charged that year's rate and compounded annually, which is why a 1985-era account reflects four decades of accumulated rates rather than today's 4.25 percent applied once. It also explains the counterintuitive fact that the current rate being low is not much comfort — the damage was done in the 1980s and 1990s, and you are now paying compound interest on top of it.

Two mechanical details are worth knowing because they can save you money. Interest is charged through December 31 of the year before the year OPM issues your bill. And if you pay the bill in full by December 31 of the year it is issued, no additional interest is charged. Get the bill in January, pay it that year, and you skip a full year of compounding. Get the bill in November and let it sit until February, and you have added a year.

VIII Deposit Cost & Payback Calculator

Enter what you know. The tool estimates the principal, projects accumulated interest, computes the annual annuity increase the purchased service buys, and returns the payback period in years — the number that actually decides this.

IX When the purchase earns its money

The arithmetic is unusually clean for a federal benefits question. Purchased service increases your annuity by High-3 × years purchased × multiplier, every year, for life, with COLA. Divide the total cost by that annual increase and you have the payback period in years.

Four conditions make the purchase clearly favorable:

• Payback under five years. Given normal life expectancy after federal retirement, anything paying back in under five years is close to a free lunch. Most civilian deposits land here.
• The service pushes you across an eligibility threshold. If buying two years takes you from 18 to 20 years of creditable service and you will be 62 at separation, the purchase does not merely add annuity — it flips your multiplier from 1.0 to 1.1 percent across your entire career. That is a step change, not an increment. See Topic 11 on FERS accrual for the multiplier rules.
• You have a survivor to protect. The survivor annuity is 50 or 25 percent of a larger base, so the purchase buys benefit on two lives rather than one.
• You are CSRS with pre-1982 non-deduction service. The 10-percent-of-amount-due annual reduction makes non-payment cost a tenth of the balance every year, forever.

X When it does not

Buying back service is favorable often enough that most guidance treats it as automatic. It is not. Four situations argue against.

You will not stay long enough to retire from federal service. The purchase only pays out through an annuity. If you separate before vesting at five years, or leave for the private sector mid-career and take a refund, you have converted cash into a benefit you will not collect. The money is returned if you later request a refund, but you have surrendered the use of it in the interim for nothing.

The purchased service does not change your eligibility date and the payback runs long. A redeposit with decades of compounded interest against a small amount of service can produce a payback of fifteen or twenty years. At that horizon the comparison against simply investing the money is genuinely close, and the answer depends on your retirement age and health more than on the federal rules.

You would fund it by cutting TSP contributions below 5 percent. Dropping below 5 percent forfeits agency match — a guaranteed, immediate 100 percent return on the first 3 percent and 50 percent on the next 2. No deposit payback competes with that. Fund the deposit from savings, from the amount above 5 percent, or in installments, but never from the matched portion. The hierarchy is laid out in Topic 12 on TSP contribution strategy.

You are CSRS with pre-1991 refunded service, a much younger spouse, and limited cash. Here the actuarial reduction route may deliver more household value, because the reduction does not touch the survivor annuity. Model both.

XI How to apply — SF 2803 and SF 3108

The process is straightforward and the first step costs nothing.

1. Get the right form. CSRS employees use SF 2803, Application to Make Deposit or Redeposit. FERS employees use SF 3108, Application to Make Service Credit Payment. Both are on the OPM standard forms page.
2. Complete your portion and get it certified. Give the form to your agency HR benefits specialist, who completes their section and attaches the documentation of your service. If you have already left government, mail it directly to OPM at Post Office Box 45, Boyers, PA 16017-0045.
3. Wait for the bill. OPM computes the amount owed including interest and sends payment instructions. This computation is free and creates no obligation to pay.
4. Pay OPM directly. Lump sum or installments of at least $50. Payments go to OPM, not through payroll deduction — this surprises people who assume it works like a TSP loan. Electronic funds transfer from your bank is available, and OPM sends an updated statement after each payment.
5. Finish before adjudication. The payment must be complete before OPM finalizes your retirement claim.

One timing instruction from OPM runs against intuition and is worth following exactly: if you are more than six months from retirement, apply now through your agency. If you are within six months of retirement, do not file a separate application — submit the deposit request together with your retirement application. OPM will not authorize your regular annuity payments until it has your decision on the payment, so a separate late-stage request can stall your case.

XII Deadlines and traps

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