Buying back military time for federal retirement

Your military years count toward federal retirement, but you have to pay for them

In Puerto Rico this question reaches a lot of people: you served in the Army, the Navy, the National Guard or the Reserve, and then went to work at a federal agency, the VA, Fort Buchanan, the Postal Service, the IRS, TSA. Do those years count toward your federal pension?

The short answer is yes, but almost always **you have to buy them**. The rule is in **§ 8411(c)(1) of Title 5 of the United States Code**, the part of FERS (the federal employees' retirement system) that defines creditable service.

And the year that splits the waters is **1957**:

• **Each period of military service performed before January 1, 1957** is credited **with no deposit**.
• **Each period performed after December 31, 1956**, and before the separation on which your annuity is based, is credited **only if a deposit is made** (with interest, if any) under § 8422(e).
• § 8411(c)(1) itself notes that all of this is subject to the exceptions in paragraphs (2), (3) and (5), which we take up below.

What it costs: 3% of your basic military pay

**§ 8422(e)(1)(A)** sets the amount, and it is cheaper than people assume: **3 percent of the basic pay** you received under section 204 of Title 37 for each period of military service after December 1956.

Mind two isolated years where the percentage differs, under **§ 8422(e)(6)**: service performed from **January 1 through December 31, 1999 is paid at 3.25%**, and service from **January 1 through December 31, 2000, at 3.4%**.

Note the basis of the calculation: it is your **military basic pay back then**, not your federal salary now. That is why buying a couple of years of a young soldier's service usually costs a few thousand dollars, while those same years can be worth considerably more in your lifetime annuity.

The statute also says **how the pay is proven**: the payment is computed on the evidence of basic pay **you provide**; if the Office of Personnel Management determines sufficient evidence has not been provided to adequately determine it, the payment is based on **estimates** furnished to it by the appropriate agencies under § 8422(e)(4).

The clock almost nobody sees: two interest-free years

This is the part that turns a paperwork errand into a dated decision, and it is the most actionable fact in this guide.

**§ 8422(e)(2)** provides that any deposit made **more than two years after** the later of these two dates **must include interest**, computed and compounded annually from the expiration of that two-year period:

• **January 1, 1987**; or
• **the date on which the person first becomes an employee or Member following the period of military service** for which the deposit is due.
• The interest rate applicable each year is the one applicable that year under § 8334(e).

What that clock means in practice

For nearly everyone employed today, the controlling date is the second: **the day you started working for the federal government after your military service**. From there run **two interest-free years**.

A veteran who joins the VA in January and makes the deposit before two years pass pays a flat 3%. That same veteran who leaves it for year eight pays the 3% **plus six years of compound interest**. The starting amount does not change; what changes is what is piled on top.

If your two years have already passed, that is no reason to skip it: the deposit remains possible up until the separation on which your annuity is based, and compound interest only grows with time. The worst moment to do it is the year you retire.

And a concrete protection if the fault was not yours: **§ 8422(e)(7)** provides that, in calculating and processing the deposit, **if your employing agency makes an administrative error, that agency may pay on your behalf the additional interest** that error caused. Keep everything you send and the date you sent it.

If military service interrupted your federal job: there is a cap

This case differs from the previous one and happens to a great many Guard members and reservists in Puerto Rico: you were already a federal employee, you were activated, and you returned to your position.

**§ 8422(e)(1)(B)** provides that when military service **interrupts creditable civilian service** under this subchapter and reemployment occurs under **Chapter 43 of Title 38 (that is, USERRA) on or after August 1, 1990**, the deposit **may not exceed** the amount that would have been deducted and withheld from your civilian basic pay during that service had you not served.

That is: in that scenario you do not pay 3% of your military pay if that comes out higher. You pay, as a cap, what would have been withheld from your civilian salary. It is a protection specific to someone activated from their federal position, and it goes hand in hand with USERRA's reemployment rights.

If you already collect military retired pay: the rule that decides everything

Here is the most important exception, and the one to read carefully before sending a single paper.

**§ 8411(c)(2)** provides that if an employee has been awarded **military retired pay** based on any period of military service, their service **may not include credit for that period**, unless that retired pay was awarded:

• **For a service-connected disability** that was **(i) incurred in combat with an enemy of the United States**, or **(ii) caused by an instrumentality of war and incurred in line of duty during a period of war**, as that term is defined in section 1101 of Title 38; **or**
• **Under Chapter 1223 of Title 10** (or the former Chapter 67 of that title, before the Reserve Officer Personnel Management Act) which is the retirement of the **reserve components**.

Why that second exception matters so much to the National Guard

Read that second exception again, because it changes the math for thousands of people in Puerto Rico. Retired pay received **under Chapter 1223 of Title 10** (the reserve component pension, the one collected for reserve years of service) **does not trigger the prohibition** in § 8411(c)(2).

Put another way: a Reserve or National Guard retiree may, under the text of that exception, collect their reserve pension **and** credit that service in their federal retirement by making the deposit. Someone in that situation who has never asked is probably leaving money on the table by assuming «you cannot collect twice».

The opposite case is the regular active-duty retiree, whose military retirement falls into **neither** exception. The Code itself presupposes that **waiving** that retired pay is a thing: **§ 8411(c)(5)** governs what happens when someone waives, after January 1, 1997, retired pay **subject to a court order** served on the appropriate Secretary under section 1408 of Title 10, in that case the military service may be credited only if the person **authorizes OPM to deduct from their annuity** the amount that would have gone to the former spouse under that order, and pay it to them.

That decision (waiving military retired pay in exchange for credit in the federal annuity) is not one you make from a guide. It is a long-run money calculation with effects on your family's benefits, and it has to be run with your numbers, not somebody else's example.

If you already made the deposit under the old system

A case that shows up in long careers: you made the military deposit while under CSRS, the earlier system, and later moved to FERS.

**§ 8411(c)(3)** covers you. A person who made a deposit under **§ 8334(j)** (or a similar prior provision) for a period of military service, and **has not taken a refund of that deposit**:

**(A)** shall be allowed credit for that service **without regard to the deposit requirement** of paragraph (1)(B); and **(B)** is entitled, upon filing the appropriate application with OPM, to **a refund equal to the difference** between what was deposited under that section, excluding interest, and what would otherwise have been required under paragraph (1)(B).

It is not only that you do not pay twice: you may get the difference back. And that refund must be **applied for**.

Survivors: two rules worth knowing before, not after

§ 8422(e)(5) provides something brief and valuable: **deposits authorized by that subsection may also be made by a survivor** of the employee or Member. If someone dies without having bought their military time, the door does not close automatically.

And **§ 8411(c)(4)(A)** adds its own rule for computing a survivor annuity: **notwithstanding** paragraph (2)'s prohibition, for an employee **who was awarded military retired pay** and **whose death occurs before separation from service**, the deceased's creditable service **shall include** each period of military service includable under subparagraphs (A) or (B) of paragraph (1) or under paragraph (3).

With one adjustment, in subparagraph (B): that survivor annuity **is reduced** by the amount of any survivor's benefits payable to a survivor (other than a child) under a uniformed services retirement system, if (and to the extent that) those benefits are based on that same period of military service.

How it is paid, and what this guide cannot tell you

§ 8422(e)(1)(A) says who is paid: the deposit is made, under the regulations OPM issues, **to the agency by which the employee is employed** (or, for a Member or Congressional employee, to the Secretary of the Senate or the Chief Administrative Officer of the House). And **§ 8422(e)(3)** provides that the payment is **immediately remitted to OPM** for deposit in the Treasury to the credit of the Fund.

That is: the process starts at your agency's Human Resources office, not directly at OPM.

And now the honest part. The **forms and regulations** used to process this are published by OPM, and `opm.gov` is not reachable from where this guide was written. So you will not find form numbers or procedural steps here: we would have had to invent them or copy them from third parties, and we do not do that. Everything above comes from the text of the Code, verified line by line.

With what you have, the conversation with Human Resources is already a different one: you know what you are owed, what the base costs, what clock is running, and which exception applies to you.