A military service credit buyback lets a federal civilian employee pay a deposit for their active duty years so that time counts toward their FERS or CSRS retirement. The deposit is 3 percent of the basic military pay you earned (7 percent under CSRS), plus interest if you wait past your grace period. Each purchased year is then folded into your creditable service, raising your monthly annuity and, in many cases, helping you reach retirement eligibility sooner.
Who Can Buy Back Military Time
The buyback is open to federal civilian employees whose military service ended with an honorable discharge or a discharge under honorable conditions. Active duty in any branch qualifies, including the Army, Navy, Air Force, Marine Corps, Coast Guard, and Space Force.1Defense Finance and Accounting Service. Military Service Buy Back National Guard and Reserve time only counts if it was performed under federal Title 10 orders. Title 32 state-level orders are not creditable.
Most military retirees cannot use the same service for both a military pension and a civilian pension. If you are already drawing military retired pay, you generally must waive it before those years can count toward your civilian annuity.2U.S. Office of Personnel Management. Federal Retirement Reservists receiving retirement pay under Chapter 1223 of Title 10 are the exception: they keep their reserve retirement and can still buy back the service time.1Defense Finance and Accounting Service. Military Service Buy Back
What the Deposit Costs
The deposit is a percentage of the basic military pay you earned during active duty. Housing allowances, subsistence pay, and other special payments are excluded, which is why the base cost is often smaller than employees expect.
FERS employees pay 3 percent of basic military pay for most service periods. Service performed during 1999 uses a 3.25 percent rate, and service during 2000 uses 3.4 percent.3Office of the Law Revision Counsel. 5 USC 8422 – Deductions From Pay; Contributions for Other Service CSRS employees pay 7 percent for most periods, with 7.25 percent for 1999 and 7.4 percent for 2000.4U.S. Office of Personnel Management. CSRS Information – Service Credit
Because the calculation is based on what you earned as a junior enlisted service member rather than your current civilian salary, the raw deposit is often modest. A four-year enlisted veteran who served in the early 2000s might owe a FERS deposit of roughly $3,000 to $5,000 before interest.
Why Paying Early Matters
Interest does not begin the day you enter federal service. New employees receive a two-year grace period from their entered-on-duty date. Because interest compounds annually on the interest accrual date (IAD) rather than daily, you effectively have close to three years from your hire date to pay the full deposit with no interest charged.5Defense Finance and Accounting Service. Civilian Pay Fact Sheet – Military Service Deposit
After that window closes, interest compounds annually at a rate set by the U.S. Treasury. For 2026, that rate is 4.25 percent.6U.S. Office of Personnel Management. Benefits Administration Letter 26-301 – Calendar Year 2026 Interest Rate The rate actually applied to your account is a composite based on the rates in effect during the 12 months before your IAD, so it can shift slightly each year.
The math punishes procrastination. A $4,000 deposit that could have been paid interest-free in year two might grow to $6,000 or $7,000 after a decade of compounding. The underlying deposit never changes; the interest keeps stacking. One practical detail: payments must be physically received by the agency before the close of business on the last business day before the IAD. The postmark date does not count.
What You Get in Return
Each purchased year is added to the total creditable service used to compute your annuity. Under FERS, the annuity formula multiplies your high-3 average salary by 1 percent per year of service, or 1.1 percent per year if you retire at age 62 or later with at least 20 years of service.7U.S. Office of Personnel Management. FERS Information – Computation
Four years of purchased service added to a FERS pension with a high-3 average of $90,000 raises the annual annuity by $3,600 at the 1 percent rate, or $3,960 at 1.1 percent. Over a 25-year retirement, that is roughly $90,000 or more in additional payments from a deposit that might have cost a few thousand dollars up front. Those years also count toward the service totals used to determine when you become eligible to retire.
For pure FERS employees, the rule is absolute: you must pay the deposit to receive any retirement credit for post-1956 military service.8U.S. Office of Personnel Management. FERS Information – Service Credit Without the deposit, those years do not count toward your annuity or toward retirement eligibility.
The Age 62 Trap for Certain CSRS Employees
CSRS employees first hired into federal civilian service before October 1, 1982, receive credit for post-1956 military service without paying a deposit. But when they become eligible for Social Security at age 62, OPM recomputes the annuity and removes that military credit. Paying the deposit is the only way to keep it permanently.8U.S. Office of Personnel Management. FERS Information – Service Credit CSRS employees first hired on or after October 1, 1982, get no credit at all for post-1956 military service unless they make the deposit.
Documents and Application
Start with your DD Form 214, which verifies the dates and character of your service.9National Archives. DD Form 214 – Discharge Papers and Separation Documents A replacement can be requested through the National Archives or the VA’s records portal.10U.S. Department of Veterans Affairs. Request Your Military Service Records
Next, request a statement of estimated earnings for your service period using OPM Form RI 20-97, which is routed to DFAS or the appropriate branch office.11U.S. Office of Personnel Management. Estimated Earnings During Military Service – RI 20-97 Once the earnings statement arrives, submit the application itself, Standard Form 3108 for FERS or Standard Form 2803 for CSRS, to your agency’s human resources or payroll office along with your DD-214 and estimated earnings.
Paying and the Separation Deadline
After your agency calculates the balance owed, you can pay in a single lump sum, in installments, or through recurring payroll deductions.1Defense Finance and Accounting Service. Military Service Buy Back Payroll deductions spread the cost across pay periods, which helps when interest has already added up.
The full deposit must be paid before you separate from federal service.8U.S. Office of Personnel Management. FERS Information – Service Credit The deadline is firm. Any unpaid balance at separation means you lose credit for the unpaid portion, and you cannot finish paying after you leave. Employees approaching retirement should confirm with payroll that the deposit will be fully paid before their last day on the rolls. Once payment is complete, your agency issues confirmation that the military service is creditable and your retirement account reflects the updated service total.
Death or Departure Before the Deposit Is Complete
If you die while employed by the federal government, your surviving spouse can complete the deposit on your behalf and receive credit for the military service in the survivor annuity calculation.12U.S. Office of Personnel Management. Will My Deceased Spouses Military Service Be Used to Determine the Amount of My Survivor Annuity A survivor of a former employee who separated before death and was eligible only for a deferred annuity cannot make the deposit after the fact; that window closed at separation.
Employees who paid a deposit and then leave federal service before retiring may be eligible for a refund in limited circumstances. A former employee who made a military service deposit before becoming subject to FERS may apply for a refund of the amount deposited (excluding interest) to the extent it exceeds what FERS requires.13eCFR. 5 CFR Part 842 Subpart C – Credit for Service A former employee can also elect the full amount, but that election is irrevocable and forecloses any future deposit for that service. If you might return to federal employment, taking the full refund closes the door on ever crediting that military time later.
State and Local Pensions Follow Different Rules
The rules above govern federal civilian retirement only. Many state and local pension systems offer their own military service credit programs for teachers, police officers, firefighters, and other public employees, but the cost formulas, eligible service types, deadlines, and caps vary widely from one system to the next. If you work for a state or local government, contact your pension system’s administrative office for the rules that apply to your plan.