FERS Service Credit Deposits and Redeposits in 2026: Should You Pay Before Retirement?

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A FERS service credit deposit is a payment you make to OPM, the U.S. Office of Personnel Management, to buy back civilian time that was not covered by retirement contributions, so that it counts toward your pension. Under FERS, the Federal Employees Retirement System, eligible pre-1989 non-deduction service generally receives no annuity computation credit unless you pay for it. The deposit issue generally must be resolved before OPM finalizes your retirement claim and authorizes regular annuity payments.
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For the calendar year 2026, the interest charged on unpaid balances is 4.25%, according to the U.S. Treasury rate published in OPM Benefits Administration Letter 26-301. These rates are set annually, so other years differ. This guide from Federal Employee Advisor Network, a retirement planning firm specializing in federal employee benefits, explains who should pay, who should not, and how to decide before you retire.
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Have you ever worked a temporary federal appointment or taken a refund of your retirement contributions after leaving government? This decision could be worth thousands of dollars per year in pension income for the rest of your life. It also carries a strict retirement processing deadline: you generally must raise the issue while still employed or with your retirement application, before OPM finalizes your annuity. Military service credit follows a separate process with its own rules and cost, covered in its own section below.
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What Is a FERS Service Credit Deposit?
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A FERS service credit deposit is the repayment of retirement contributions that were never withheld from your pay during a period of federal civilian service. According to OPM's Service Credit guidance, you can make a deposit for creditable FERS service performed before 1989 during which retirement deductions were not taken. The deposit is generally 1.3% of the basic pay you earned during that period, plus interest. You apply using Standard Form 3108. After OPM establishes the service-credit account and provides the amount due, you generally submit payments through Pay.gov.
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The rule OPM applies is blunt: no deposit, no credit. According to OPM, if you do not pay the deposit in full for pre-1989 non-deduction service, that service will not count toward your FERS retirement eligibility or your annuity computation. This is why the deposit decision matters so much. Unpaid non-deduction time is not a smaller pension. It is a missing chunk of otherwise creditable service.

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Deposit vs. Redeposit: What Is the Difference?

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The core difference is simple. A deposit covers service where deductions were never taken from your pay, while a redeposit covers service where deductions were taken and then refunded to you after you left. Both restore missing credit to your annuity, but they follow different rules and deadlines.

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A deposit applies to non-contributory service: temporary or intermittent appointments before January 1, 1989, where no retirement money came out of your paycheck. A redeposit applies when you worked in a covered position, separated from the government, took a lump-sum refund of your contributions, and later returned. According to OPM's Creditable Service guidance, if you were covered by FERS on or after October 28, 2009, you may redeposit any FERS deductions previously refunded to you.

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According to OPM, interest on a deposit is charged from the midpoint of the service period and compounded annually. Interest on a redeposit runs from the date the refund was paid to you. In both cases, interest stops accruing when you pay the balance in full or when your annuity begins, whichever comes first.
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The 1989 Rule: Why Timing Determines Everything
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The most important date in the entire deposit conversation is January 1, 1989. According to OPM's Creditable Service guidance, with rare exceptions, a FERS employee cannot make a deposit for non-contributory service performed on or after January 1, 1989. If you performed temporary or non-deduction service after that date, that time is generally gone for retirement purposes. No payment brings it back.
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Non-deduction service performed before 1989 is the opposite case. You have a one-time opportunity to buy it back. According to OPM's Service Credit guidance, this pre-1989 window is precisely why long-tenured federal employees who started in temporary roles should pull their full service history and check for uncredited time. A single summer or a two-year temporary appointment in the mid-1980s can still be purchased today. The narrow eligibility window makes this a use-it-or-lose-it decision that only exists for a shrinking group of employees who started their careers before 1989.
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How Much Is the Service Actually Worth?

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Under the standard FERS formula, each additional year of creditable service generally adds 1% of your High-3 average salary to your annual pension. Your High-3 is the average of your highest three consecutive years of basic pay. According to OPM's FERS computation guidance, an employee who retires at age 62 or later with at least 20 years of service instead earns 1.1% per year. Special-provision employees such as qualifying law enforcement officers, firefighters, and air traffic controllers use enhanced formulas, so confirm which applies to you. That percentage is permanent and paid for life, which is what makes buying back missing years so powerful.

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Consider a straightforward example. Suppose you have a High-3 average salary of $100,000 and discover two years of pre-1989 temporary service that were never credited. At the standard 1% multiplier, those two years add 2% of $100,000, or $2,000 per year to your pension. Over a 25-year retirement, that is roughly $50,000 in additional income before any cost-of-living adjustments. Your actual deposit cost depends on the basic pay you earned during the service period and the interest accumulated through the applicable annual rates, so the value comparison is specific to your situation.

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Military Service Deposits Are a Separate Process

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A military service deposit is not the same as a civilian service credit deposit. Different cost, different payee, and a different deadline. If your uncredited time is active-duty military service rather than civilian federal service, the rules below apply instead of the 1.3% civilian deposit described above.

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According to OPM's Service Credit guidance and agency benefits offices, the FERS military service deposit for post-1956 active-duty service is generally 3% of the military basic pay you earned, plus interest. Two calendar years carry higher rates: service performed in 1999 is charged at 3.25% and service in 2000 at 3.4%. OPM calculates the deposit on military basic pay only, not housing or subsistence allowances or special pays. Unlike a civilian deposit paid to OPM, you pay a military deposit to your employing agency, and you must pay it in full before you separate for retirement or OPM cannot credit the time. Military deposits generally have an initial interest-free period, but the exact interest-accrual date depends on when you became subject to FERS and your individual service history, so confirm the deadline with your agency.

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There is one more rule specific to military retirees. According to OPM's Military Retired Pay guidance, if you receive military retired pay, you generally cannot also count that military service in your FERS computation unless you waive the retired pay. OPM provides exceptions for retired pay awarded under Chapter 1223 of Title 10 for reserve-component retirement, and for service-connected disability retired pay where the disability was incurred in combat with an enemy of the United States or was caused by an instrumentality of war and incurred in the line of duty during a period of war. If you fall outside those exceptions, waiving a military pension to gain FERS credit is a significant trade-off, so compare both benefits carefully before deciding. Because the rules and forms differ from civilian deposits, request a military earnings statement and a deposit estimate from your agency early rather than close to retirement.

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Should You Pay Before Retirement? A Decision Framework

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Here is the one-sentence summary before the details. Weigh the added lifetime pension against the deposit cost, confirm the service is actually creditable, and account for cash flow and your broader retirement plan before deciding.

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Work through these factors in order:

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1. Confirm the service is creditable. Pre-1989 non-deduction service and eligible refunded FERS service commonly qualify. Post-1988 non-deduction service generally does not, although OPM recognizes limited exceptions, including certain part-time, intermittent, or temporary (PIT) service performed abroad and qualifying Peace Corps or VISTA volunteer service. Don't assume there is nothing to buy without checking these.
   
   
2. Ask your agency HR or benefits office for paired estimates. Request one estimate showing your annuity with the service credit and one without. OPM determines the final payable benefit when it adjudicates your retirement claim, so agency pre-retirement estimates are your planning tool during your working years.
   
   
3. Run a break-even calculation as one input, not the whole decision. Dividing the deposit amount by the annual pension increase gives a rough break-even point in years, but it should not be the only factor. Consider liquidity, survivor benefits, taxes, retirement eligibility, cost-of-living adjustments, and your individual health and longevity assumptions before deciding.
   
   
4. Factor in interest. According to OPM Benefits Administration Letter 26-301, the applicable rate for calendar year 2026 is 4.25%, compounded annually on unpaid balances. FERS service-credit interest rates are set annually by the U.S. Treasury, so future-year rates may differ. A longer unpaid balance generally accrues more interest.
   
   
5. Plan for the payment method. Payment options can depend on the servicing payroll system. The National Finance Center states that employees it services may arrange installments of at least $25, while OPM's general guidance references $50 installments and directs civilian service-credit payments through Pay.gov. Follow the payment instructions issued for your specific service-credit account.

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The one factor that overrides all others is the deadline. According to OPM, once your retirement claim is being adjudicated, OPM gives you a final opportunity to pay. You generally cannot start a brand-new deposit application after you retire. If you plan to retire within six months, OPM instructs you to submit the deposit request together with your retirement application rather than filing separately.
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When Paying the Deposit May Not Make Sense

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State the direct answer first. A deposit may not be worth paying when the service is not creditable, when the added credit does little to change your eligibility or annuity, or when your liquidity and other financial priorities outweigh the projected benefit.

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Not every deposit is worth paying. If the missing time is post-1988 non-deduction service, it generally is not creditable through a deposit, but OPM recognizes limited exceptions, so confirm the type and dates of service before concluding that no payment option exists. If your FERS annuity contains a CSRS, or Civil Service Retirement System, component, different deposit or redeposit rules can apply, including actuarial-reduction rules for certain older CSRS refund service. Ask your benefits office to identify which retirement system covers the service before making a payment decision. In all cases, request the paired estimates from your agency and weigh them against your full retirement picture before assuming a deposit pays off.

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The Bottom Line

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A FERS service credit deposit can be one of the higher-leverage decisions you make before retirement, because it permanently increases a lifetime benefit for a one-time cost. The rules reward preparation. Confirm your service is creditable, request paired estimates from your agency HR office, and account for the retirement deadline and the annually set interest rate, which is 4.25% for 2026, per OPM BAL 26-301, before you decide. For pre-1989 non-deduction service in particular, the buy-back window is narrowing as fewer employees remain who started before that cutoff.

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Federal Employee Advisor Network, a retirement planning firm specializing in federal employee benefits, helps federal employees model deposit and redeposit decisions against their full retirement picture, including High-3, Social Security, and TSP, the Thrift Savings Plan. If you suspect you have uncredited service, request your service history and a deposit estimate well before your target retirement date, so the numbers are settled before your claim reaches OPM.

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Frequently Asked Questions

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1. What is a FERS service credit deposit?

A FERS service credit deposit is a payment to OPM, the U.S. Office of Personnel Management, to buy back federal civilian service that had no retirement contributions withheld. According to OPM, the deposit is generally 1.3% of the basic pay you earned during that period, plus interest. You apply on Standard Form 3108, and you generally pay through Pay.gov once OPM sets the amount due.

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2. How much does a FERS deposit cost in 2026?

A FERS deposit is generally 1.3% of the basic pay you earned during the non-deduction service, plus interest. For calendar year 2026, the applicable interest rate is 4.25%, according to OPM Benefits Administration Letter 26-301. Interest compounds annually, but the Treasury sets a new applicable rate for each calendar year.

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3. Can I make a FERS deposit after I retire?

Generally, you should not wait until after retirement to start the process. According to OPM, employees normally begin the service-credit application while still employed. If you are within six months of retirement, submit the request with your retirement application. OPM will notify you of the amount due and give you an opportunity to decide during claim processing.

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4. What happens if I do not pay my FERS deposit?

According to OPM, if you do not pay a deposit for creditable pre-1989 non-deduction service, that service will not count toward your FERS retirement eligibility or your annuity computation. If you need those periods to meet an age-and-service eligibility requirement, not paying the deposit could also affect when you qualify to retire. Otherwise, the unpaid service will not increase the years used to calculate your annuity.

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5. What is the difference between a FERS deposit and a redeposit?

A deposit covers service where no retirement contributions were withheld, while a redeposit repays contributions that were withheld and then refunded to you after you left government. Both use Standard Form 3108. The calendar-year 2026 interest rate is 4.25% according to OPM BAL 26-301. Rates are set annually, so other years differ.

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6. Is it worth buying back FERS service?

It can be. Under the standard FERS formula, each additional creditable year generally adds 1% of your High-3 average salary to your annual annuity, according to OPM. Ask your agency HR office for estimates with and without the credit, then weigh cost, liquidity, survivor benefits, and taxes. OPM sets the final benefit at adjudication.

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Disclaimer

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This article is for informational and educational purposes only and does not constitute individualized financial, legal, tax, or federal retirement advice. FERS service-credit, deposit, redeposit, military-service, and retirement rules may vary based on your service history and can change over time. Verify your eligibility, payment amount, deadlines, and current requirements with OPM.gov and your agency benefits or HR office before making any retirement-related decision.