Military and Civil-Service Pensions

Updated: April 11, 2023
In this Article

    Many members of the U.S. military seek to secure a federal job after they retire and separate from their branch of service. One of the most common questions these people have is whether or not you can draw a military pension and a civil service pension at the same time.

    Military retirement and civil service retirement taken together would be the ideal outcome, but it’s not as simple as putting in your time in civil service and retiring with two paychecks coming to you. Federal law and other factors affect how retired and separated military members can plan for retirement.

    The ability to draw a military retirement check AND a civil service retirement payment is known in some circles as “double-dipping.” Is it possible?

    What You Need To Know About Military Retirement

    Military retirement plans are essentially a percentage of the borrower’s active duty basic pay with additional cost-of-living increases factored in over time. How is military retirement pay calculated? According to the Department of Defense, there are generally two ways to determine the base retirement pay for military members:

    • Final pay method, which establishes retired base pay “equal to final basic pay,” according to the Defense Department.
    • High-36 month average method, which takes the highest 36 months of basic pay divided by 36. In general, the last three years of military service basic pay is used for this calculation.

    Additional factors can apply in some cases:

    • High-36 for military members on a retirement plan known as REDUX, which is an active duty-only retirement option. In these cases, the High-36 multiplier is “reduced by one percentage point for each year that the member has less than 30 years of service at retirement. For instance, 20 years of service would equate to a 40% multiplier,” according to the DoD.
    • For those on a disability retirement plan, the multiplier may be “the higher of 2.5% for each year of service or the disability percentage assigned by the Service at retirement,” but disability retirement multipliers are capped at 75%.

    Which method do you use? It all depends on when you first entered uniformed service, a date known as DIEMS (Date of Initial Entry to Military Service) or DIEUS (Date of Initial Entry to Uniformed Services). The date used will not change even if you leave the military and rejoin later on.

    As you can see, military retirement pay is not a 100% replacement of military income, which is why some military members look at a civil service career. Retiring in a federal service position can greatly enhance retirement pay, but there are factors that require the employee to consider some important alterations to their retirement plans.

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    What You Need To Know About Civil Service, Retirement Pay, And Military Retirement

    The federal retirement system is known as FERS,  the Federal Employees Retirement System. Most federal civilian employees hired after 1983 are automatically covered by FERS, which is described as a “three-tiered retirement plan” including the following:

    • FERS Basic Benefit
    • Social Security Benefit
    • Thrift Savings Plan Benefit

    The FERS plan in general has the employee contributing 0.8% of basic pay for basic retirement benefits.

    The employer contributes 10.7% or more. Basic benefits are calculated based on the length of federal service plus the “highest average basic pay you earned during any three consecutive years of service,” which is commonly referred to as “high-three” pay. The FERS basic benefit is generally described as being “1% of your high-three average pay times your years of creditable service.”

    Federal Retirement, Military Retirement

    The general rule is that a retired military member who takes a federal job cannot draw both military retirement and federal retirement pay for the same span of time. You aren’t allowed to be paid twice for the same years of service. There are exceptions to this rule (see below).

    There are two basic options. One is to agree to forfeit military retirement pay and buy into the federal retirement plan. The years of military service are credited toward federal retirement, so the clock toward retirement at the federal level will begin with the added years of military service included.

    The other option is not to buy in, and to “start fresh” with federal service with no credit for time served in the military. Essentially you are choosing to work with a clean slate and begin building credit toward federal retirement from “year zero” while maintaining your military pension.

    Waiving Retirement Pay And Buying Into FERS

    As described above, service members are permitted to waive their military retirement pay and have the length of their military service added to civilian service time for the purposes of computing the FERS benefit.

    But there’s a caveat here; waiving your military retired pay is not enough. Service members are required to pay a deposit “prior to separating from your agency in order for it to be creditable in your FERS retirement case,” according to the government.

    Paying The Deposit

    The deposit you will be asked to pay gives you “credit for military service performed after 1956” and is equivalent to seven percent of your basic military pay. Those who were first employed in a civilian position before Oct. 1, 1982, and are eligible for a Social Security benefit at age 62 are NOT required to pay the deposit.

    “The CSRS part of your annuity will be recomputed at age 62 to delete credit for the post-1956 military service,” according to federal rules.

    For those first hired on or after Oct. 1, 1982, there is no credit for post-1956 military service if the deposit for it is not paid.

    Those required to make the deposit to be credited for post-1956 military service must do so prior to the time they stop working for the government. The deposit is paid to the federal agency you are employed by; you may need to contact the personnel office of your agency to learn how to render this payment based on your employment records and service record.

    Not Just For Military Members

    The Uniformed Services Employment and Reemployment Rights Act of 1994, or USERRA for short, establishes eligibility for this process for those in the uniformed services above and beyond active duty and Reserve forces but also those serving in the National Guard and commissioned members of the Public Health Service.

    These individuals are entitled to be restored to the position they would have attained had the employee not entered the uniformed service, provided the employee:

    • gave the agency advance notice of departure
    • was released from uniformed service under honorable conditions; and
    • served no more than a cumulative total of 5 years and
    • applies for restoration within the appropriate time limits

    The federal agency employing these members of the uniformed services will accept military deposits required under USERRA. “The military deposit may be calculated based on military earnings or alternatively, the deposit can be calculated based on the retirement deductions the employee would have paid on the civilian salary during the same period, if it is less,” according to federal government publications.

    How To Waive Your Military Retirement Pay In Favor of FERS

    Do you wish to waive your military retirement pay and get credited for your military service for federal retirement? You will need to contact the Retired Pay Operations Center at least 60 days before your planned retirement.

    The waiver can take the form of a boilerplate fax or registered letter stating the following as suggested by the federal government:

    “I (Full Name and Military Serial Number) hereby waive my military retired pay for Civil Service Retirement or Federal Employees Retirement System purposes effective (The day before your annuity begins). I hereby authorize the U.S. Office of Personnel Management to withhold from my (CSRS or FERS) annuity any amount of military retired pay granted beyond the effective date of this waiver due to any delay in receiving or processing this request.”

    Mail your waiver via U.S. postal mail to the following address:

    Defense Finance and Accounting Service
    U.S. Military Retirement Pay
    8899 E 56th Street
    Indianapolis, IN 46249-1200

    Faxed requests of this nature can be sent to (800) 469-6559.

    Exceptions To The No Double-Dipping Rule

    The federal government agency called the Office Of Personnel Management has a guide to military retirement pay versus federal retirement which includes the following statement:

    “You cannot receive credit for any military service in your FERS retirement computation, if you are receiving military retired pay” but then lists some exceptions to this policy. Those exceptions include circumstances where you were awarded military retirement pay:

    • due to a service-connected disability either incurred in combat with an enemy of the United States or caused by an instrumentality of war and incurred in the line of duty during a period of war, or
    • under the provisions of Chapter 1223, Title 10, U.S.C. (pertaining to retirement from a reserve component of the Armed Forces).

    Federal laws that govern these retirement options may be subject to change depending on legislation, expiration of certain time-based programs, or changes in the nature of a federal agency. It is best to discuss your retirement options with your agency’s personnel department for the best results and for the most current policies and procedures required. Remember that tax laws also change and the implications of those laws for your retirement plans, (military, federal government, or civilian) may also affect how you proceed with buy-ins, early-outs, and other factors.

    About The AuthorJoe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News

    Written by Jeff Ousley

    Jeff Ousley is a mortgage credit specialist and Air Force veteran. He’s passionate about providing the best possible advice and finding smart solutions to help people achieve their dream of homeownership.