What Is Creditable Service?
You may have heard the term “creditable service,” but what exactly is creditable service, and why does it matter? Creditable service refers to the years of service when your salary was subject to FERS deductions. Which for most Federal employees will be every year of their civilian career. Now, this important because only creditable service is counted when calculating your FERS pension.
There are a few exceptions. For example, you may be able to receive creditable service under the following scenarios: non-deduction, refunded service, and military service.
You may have non-deduction service (also called non-deposit service) from a period in your career when you were ineligible to make FERS contributions. Typically, this period would have occurred if you worked as either a temporary or seasonal employee. Suppose the non-deduction happened before January 1, 1989. In that case, you might be eligible to make a deposit for that period (generally, 1.3% of salary plus interest), allowing you to include that time as creditable service in your pension computation.
A redeposit is when you pay back refunded FERS contributions. For instance, if you leave the Federal Government and request a refund of your FERS deductions, you surrender your right to a pension for the period of service that the refund covers. However, if you return to Federal Government service, you may redeposit the refund with interest to recover your right to your prior creditable service. If you decide not to make a redeposit upon reemployment, your prior service will only be used for determining your retirement eligibility but not for computing your pension.
The general rule is that your military service is creditable for retirement purposes if it was active service, and you received an honorable discharge. Additionally, the service must have been performed before your separation from Federal civilian employment. To add your military service to your creditable service for computation of your pension, you must make a deposit based on your military salary plus interest; the exact amount of the deposit will depend on the period you served. However, “Buying back” your military time may not be advantageous if you are retired military, as it is often required that you waive your military pension. Learn more about buying back military time here.
How To Verify Your Creditable Service
Although some believe that their Service Computation Date (SCD) is the date their creditable service for retirement benefits starts, that’s not correct. The SCD is only used for calculating leave and might not be the date used to compute your pension. The date you want to verify is the Retirement Service Computation Date (RSCD). You can find your estimated RSCD on your Personal Statement of Benefits. It’s important to remember that the RSCD is only an estimate, and OPM will not compute your official RSCD until you have retired. Lastly, when reviewing your RSCD, ensure that any military time bought back is included.
No one wants to arrive at their desired retirement date only to find out that years of their Federal service did not count towards their retirement benefits. Therefore, knowing what is considered creditable service is critically important to ensuring your Federal time is counted. You can find additional resources on the OPM website. And as always, if you would like help creating your financial life plan, consult with a qualified financial planner.