Credit for Military Service in Your Federal Civil Service Retirement Annuity

Federal civil service employees and postal workers who have prior service in the military service (but not enough service for a pension) should become familiar with provisions that can affect their federal civil service retirement.  Though there are many provisions, the ones that I will discuss here are the "Catch-62" provision.

Federal civilian employees of the federal government, and postal workers, may, by making a pre-retirement deposit, buy their post-1956 military service into their federal retirement annuity. By paying a percentage (typically 7% plus intereste) of their military earnings before they retire, Federal employees and postal workers will get an increased annuity for the duration of their retirement.

If a Federal employee or a postal worker does not make the deposit prior to their retirement (or separation from civil service), his/her retirement annuity is reduced by OPM if and when he/she become eligible for Social Security benefits at age 62.  This annuity reduction can be substantial.

In most situations, a retiree whose annuity is reduced can appeal to the MSPB. When OPM reduces the retiree's annuity, and claims that the reduction is due to failing to make the military deposit prior to retirement, the retiree will have an opportunity to request that the OPM reconsiders its decision. If OPM still denies the retiree's claim and reduces the annuity, the OPM is required to inform the retiree of his or her right to appeal your Catch-62 claim to the Merit Systems Protection Board (MSPB).

Typically, the MSPB has found that if the retiree's employing Agency commits "administrative error" and as a result of that "administrative error" the retiree do not make the deposit, the MSPB will order OPM to accept a late deposit and reverse the reduction in the annuity. McCrary v. Office of Personnel Management, 459 F.3d 1344, 1349 (Fed. Cir. 2006).

"Administrative Error" can occur in any number of ways. The following are examples of cases where "administrative error" has been found:

1. The retiree is misled or not told the correct amount of the military service credit deposit before retirement. (A recent case suggests that your Agency only has to get it "close enough").
2. The retiree is not told of the actual consequences of not making the deposit. 
3. The retiree is not told when and how to properly make the military service deposit. 
4. The employing agency confuses the employee as to the amount of the deposit or the effect of any failure to make the deposit on the annuity recalculation.

If your retirement annuity is reduced to the "Catch-62" provisions, or if you feel that you failed to make the military service credit deposit due to "administrative error", the MSPB may be able to provide you relief or a remedy.