What is a FERS military buyback?
A military service credit deposit — commonly called a military buyback — lets FERS employees count their active duty military service toward their federal civilian retirement. You pay a deposit equal to 3% of the military basic pay you earned, and OPM adds those years to your FERS creditable service as if you had been a civilian employee the entire time.
The practical effect: each military year you buy adds an amount equal to your FERS multiplier (1% or 1.1%) times your High-3 salary to your annual annuity — permanently and for life. It also increases your creditable service toward retirement eligibility thresholds.
How the deposit is calculated
The formula is straightforward: 3% × total military basic pay. Basic pay is the base monthly pay from your Leave and Earnings Statement or W-2 Box 1 — it excludes BAH, BAS, special pays, and all allowances. If you served for four years at an average of $40,000/year in basic pay, the base deposit is $4,800.
Interest begins accruing after a two-year grace period from the date of your civilian appointment. OPM applies a variable compound interest rate (historically around 4.5% per year). The longer you wait, the more the deposit grows — which is why paying as soon as possible after being hired makes financial sense.
Is the military buyback worth it?
For most FERS employees, yes — and often by a wide margin. The pension increase from each military year is paid monthly for life; the deposit is a one-time cost. A four-year buyback costing $8,000–$10,000 (including interest) that adds $333/month in pension typically recoups itself in under 30 months of retirement. After that, the additional pension is pure gain.
The buyback is less compelling for employees with very high-interest situations (many years of outstanding interest on a low-pay military career) or for those with short life expectancies. The break-even calculator above shows your specific payback age — use that to evaluate your own situation.
Military pension and the waiver rule
If you are receiving a military retired pay (pension), you generally must waive it to count those same years under FERS. This makes the buyback unattractive for most military retirees, since you would be giving up a guaranteed military annuity in exchange for adding years to a FERS pension. However, if your military service did not earn a military pension — for example, most Reserve and National Guard service — you may be able to make the deposit without a waiver. Consult your HR office or OPM for your specific situation.
How to pay — OPM Form RI 20-97
To initiate the buyback, request a military earnings statement from the Defense Finance and Accounting Service (DFAS), then complete OPM Form RI 20-97 (Estimated Earnings During Military Service) and submit it to your agency HR office. HR will calculate the exact deposit and issue a billing statement. You can pay in a lump sum or in installments via payroll deduction. The deposit must be paid before you separate from federal service — it cannot be paid after retirement.