Should a CSRS/CSRS Offset “Buy” Military Time?
(Non-Retired Military)
By Mark Brown, President
High 3 Team, Inc.
Earlier this summer, I was privileged to work with Federal Fire Hawaii for 3 weeks. In the composite of the Department, there were two items that were very common.
First, the accrual of unused sick leave was extraordinary. As an example, in a random review of 30 personnel, there was an aggregate balance of 87,600 hours! This group also included firefighters covered by FERS. That is an average of 2,920 hours per person. Enough hours to cover 20+ pay periods per person on a 144 hour schedule.
The second item discovered, and the subject of this column, is the fact that 15+ persons covered by CSRS/CSRS Offset will have 35+ years of civilian service, and have prior active duty military time. Therefore, we need to look at (2) separate issues that are related in this circumstance.
Maximum Retirement Annuity under CSRS/CSRS Offset
The maximum Retirement Annuity for Special Category is 80% (35 years). Unused sick leave can extend the percentage beyond 80%. The firefighter that has “paid in” civilian service beyond 35 years continues to make bi-weekly retirement contributions of 7.5% of their “Base Pay”. At retirement, they will be refunded the “over contributions”.
Should You “Buy” Military Time?
First, “buying” military time refers to making a contribution to your retirement system so that those years will be a permanent increase in your retirement annuity. For purposes of leave seniority (your Service Computation Date), military time (non-retired) is creditable time, even if you do not buy the time.
Military time is not creditable in terms of meeting minimum required service years in the GS-0081 Series. The military time is added “on the back” of your service years.
If you’re civilian service began before 1 October 1982, your military time will be included in your annuity even if you do not “buy” the time into your civilian career. However, if you are eligible for Social Security at age 62, the military time will be deducted from your monthly annuity if the time was not bought. This is known as “Catch 62”.
If civilian service began after 1 October 1982, the military time will not be included in the retirement annuity unless the time was “bought”.
The following are examples of distinguishing the need/value of “buying” military time into the CSRS/CSRS Offset annuity.
Civilian service began prior to 1 October 1982
A.Service Years
Military time4
Civilian “paid in” time31
Total35
In the above illustration, the individual acquires 8% more (4 years military), of their High 3 into their retirement annuity. Even if the military was not bought. However, “Catch 62” applies if the individual is eligible for Social Security at age 62.
B.Service Years
Military Time4
Civilian “paid in” time35+
Total39+
In this illustration, military time is irrelevant as the Firefighter is at the maximum retirement annuity of 80% (excluding sick leave credit).
Civilian service began after 1 October 1982
A.Service Years
Military time4
Civilian “paid in” time31
Total35
In the above illustration, the individual acquires 8% more (4 years military), of their High 3 into their retirement annuity, only if a deposit is made for the military time.
B.Service Years
Military Time4
Civilian “paid in” time35+
Total39+
In this illustration, military time is irrelevant as the Firefighter is at the maximum retirement annuity of 80% (excluding sick leave credit).
Costs of Buying Military Time
A deposit payable to DFAS in the following amounts:
CSRS/CSRS Offset
7% of “base earnings” in the military + accrued interest. The interest starts accruing (on average depending on your civilian start date), the 3rd year of civilian service.
STEPS
- Send form RI 20-97 (Estimated Earnings During Military Service) to the indicated address on the second page of the form. Include your DD-214(s).
- DFAS will return to you a letter indicating your total base earnings.
- Provide this letter to your CPO/HR to have the total amount owed including interest.
- Your CPO/HR will provide a form to make a deposit for the military time. Many persons choose an allotment for payment.
Example of Costs vs. Benefit of Buying Military Time
You retire with a “High 3” of $80,000, and have 4 years of military time that you bought into your retirement system. Your costs including interest were $3200.00.
CSRS/CSRS Offset
$80,000 X 8% (4 years at 2% each) = an additional $6400.00 per year in your
retirement annuity ($533.33 per month)
Suppose the individual in this example retires at age 55 and has a life expectancy of age 84 (IRS Life Expectancy Table). Look at the additional total lifetime increase in their retirement annuity.
CSRS/CSRS Offset
$6400 per year X 29 years = $185,600.00
These numbers do not include annual Cola’s, so the aggregate amount is much higher
In order to determine your choice on this subject, I recommend that you at lease determine the costs vs. benefit relationship.
An added bonus to buying military time is the fact that you have increased the Survivor Benefit annuity as it is a monthly amount equal to a percentage of your retirement annuity.