What is the Military Buyback Program?
The Military Buyback Program is a program for veterans to retroactively “buy back” their time spent in the military where they weren’t contributing to FERS or CSRS, or if they had received a refund of their retirement contributions. The purpose of buying back this time is so that they can increase their pensions they will receive from FERS or CSRS, as well as to increase their creditable service years for retirement eligibility purposes.
When should I buy back my military time?
There is a formula for calculating how much buying back the military time will cost, as well as how much this would increase your pension payout. The formula for how much the buyback will cost you would be the total amount of base pay received while in the military and not contributing to retirement, and multiplying this by 3% if in FERS, or 7% if in CSRS. If you wait longer than 2 years to complete this buyback, then interest begins to accrue on how much you will owe, meaning you will owe more money for waiting.
As a general rule of thumb, it’s best to buy back your military time within those 2 years in order to avoid paying interest. This would of course assume that you find a civilian job working for the federal government, and plan to remain in FERS or CSRS. If let’s say you found a job not with the federal government and didn’t plan to return, then it would probably not make sense for you to buy back your time.
How do I buy it back?
There are a few forms that you will need to fill out in a specific order to complete your buyback. You will need to complete an Estimated Earnings During Military Service request form, RI 20-97: obtain a copy of your Certificate of Release or Discharge from Active Duty form, DD 214; and then fill out the Application to Make Service Credit Payment, SF 3108 (if you are in FERS). Submit all of these forms to your human resources office who will then process the information and get back to you with exactly how much you owe, which can be paid either in a lump sum or in installments through a payroll deduction. Be sure to obtain a Paid in Full letter once you’ve completed the buyback as proof of your buyback when it comes time to retire.
What is the impact on my retirement if I buy back military time?
The level of impact of buying back your military time is going to depend on how long you were in the military for. Because it increases your creditable service years, it has a double effect of increasing what your pension will pay out along with qualifying for certain retirements.
Let’s say that Sue is age 58 and has 27 years of creditable service, but also had 4 years of time in the military that she hasn’t bought back yet. Well, she doesn’t currently qualify for a full, immediate retirement, which would either be: (1) reaching Minimum Retirement Age (MRA) with 30 years of creditable service; or (2) being Age 60 with 20 years of service, or (3) being age 62 with 5 years of service. If she chooses to buy back those 4 years of time spent in the military, she would now increase her amount of creditable service from 27 years to 31 years, which now makes her eligible for a full, immediate retirement (MRA and 30 years of service). Not only that, it would also increase her pension with the extra 4 years of service. The formula for how much your pension pays out is the number of years of creditable service, multiplied by your High-3 average salary, multiplied by either 1 or 1.1%, depending on your age. Those 4 extra years for Sue would mean an extra 4% pension increase, every single year – (4 years multiplied by 1%).