Military Buyback Under FERS: Cost, Rules, and Pension Impact in 2026

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A military buyback under FERS is a deposit, generally 3% of your military basic pay, that can make qualifying active-duty military service count toward your FERS pension. FERS, the Federal Employees Retirement System, doesn't automatically credit most post-1956 active-duty service. Making the deposit through your employing agency can add years of creditable service and increase your annuity for life.
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This guide explains what the buyback costs in 2026, the rules that govern it, and how it affects your retirement. It draws on the U.S. Office of Personnel Management's official guidance.
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For veterans now working in federal civilian jobs, this is a common and often valuable planning decision. It's not automatic, and it's not right for everyone.
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This article covers the 2026 deposit rate, the interest-free window and 2026 interest rate, the step-by-step process, and the interactions with military retired pay, VA disability, and the CSRS "Catch-62" rule. Federal Employee Advisor Network, a retirement planning firm specializing in federal employee benefits, sees this question raised often by veterans entering federal service. The right answer depends on each person's numbers.
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What Is a Military Buyback Under FERS?
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A military buyback, formally a "military service credit deposit," is a payment that lets a federal employee's qualifying post-1956 active-duty military service count toward their FERS annuity. According to OPM, you must pay a deposit to receive FERS credit for military service performed after 1956. Your employing agency processes that payment before you separate from federal service.
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Once you pay the deposit, the covered military years are added to your creditable service and increase your annuity. Service performed before 1957 is generally creditable without a military deposit.
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The deposit doesn't go directly to OPM. Your employing agency's payroll and human resources office processes it, and you must complete it before you stop working for the government.
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How Much Does a FERS Military Buyback Cost in 2026?
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For most qualifying military service performed after 1956, the FERS deposit is generally 3% of your military basic pay. Special rates applied for two years.
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According to OPM's Service Credit guidance, the deposit is 3% of military basic pay for service through December 31, 1998. It rises to 3.25% for 1999, then 3.4% for 2000, and returns to 3% for service from January 1, 2001 to the present.
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The calculation is based on military basic pay. Allowances and other special pays, such as Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence (BAS), aren't included. Basic pay earned while serving in a combat zone is still basic pay, even though its tax treatment differs, so tax records alone aren't a reliable basis for the deposit figure.
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The math for recent service is straightforward. A four-year enlistment with $120,000 in total basic pay from service after 2001 produces a base deposit of $3,600 before any interest. Your own figure depends on your certified basic pay across your specific dates of service.
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One important exception applies to service covered by USERRA, the Uniformed Services Employment and Reemployment Rights Act of 1994. This law protects employees whose federal civilian jobs were interrupted by military service. According to OPM, for USERRA-covered service you can instead calculate the deposit using the retirement deductions that would have applied to your civilian pay during that period, if that produces a lower amount.
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Figures per OPM Service Credit guidance and OPM Benefits Administration Letter 26-301.
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The Interest-Free Window and 2026 Interest Rate
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FERS generally provides a two-year grace period before interest begins accruing on the deposit. For prior military service, the period generally runs from your first FERS-covered employment. If the military service occurs after FERS employment begins, the interest period generally runs from your return to a FERS-covered position.
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Interest is posted annually rather than daily. The first actual charge doesn't appear until the end of the following year, which can create an effective three-year interest-free payment window.
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After that window closes, interest compounds annually on any unpaid balance. According to OPM Benefits Administration Letter 26-301, Treasury announced a 4.25% calendar-year 2026 rate for post-1956 military service credit accounts.
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The actual interest assessed on your account can be a composite rate. It's based on the rates in effect during the 12 months before your interest accrual date. The rate is set each year, so it changes from year to year. OPM published rates of 3.75% for 2024 and 4.375% for 2025.
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For illustration only: if a $3,600 unpaid balance hypothetically accrued at 4.25% every year for 10 years, it would grow to roughly $5,460. Your actual interest will differ because the applicable rate changes annually and because your account may use a composite rate. Paying within the interest-free window, when possible, avoids the question entirely.
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How a Military Buyback Increases Your FERS Pension
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The FERS pension formula multiplies your years of creditable service by 1% times your High-3 average salary. That multiplier rises to 1.1% if you retire at age 62 or older with at least 20 years of service. Your High-3 is your highest average basic pay over any three consecutive years of creditable service.
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Every qualifying military year you buy back adds another full year of creditable service to that formula. The effect compounds over retirement.
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The example below uses a $100,000 High-3 and the 1.0% multiplier for four bought-back years:
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Illustrative only. Actual results depend on your certified military basic pay, High-3, retirement age, FERS multiplier, accrued interest, survivor election, and how long you receive the annuity.
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Military Buyback and Retirement Eligibility
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Paid military service can count toward the FERS age-and-service thresholds. It doesn't replace the requirement for at least five years of creditable civilian service for a voluntary FERS retirement. According to OPM's FERS handbook, you must meet that five-year civilian minimum independently.
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Once you do, bought-back military years can help satisfy other thresholds. These include the 30 years needed for the MRA+30 option, the 20 years needed for the age-60 option, or the 10 years needed for MRA+10. Here, MRA is the Minimum Retirement Age used for several regular FERS retirement provisions, including MRA+30 and MRA+10.
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Consider a federal employee with 26 civilian years and four paid military years. That person would have the 30 years of total creditable service those provisions require, while still satisfying the separate five-year civilian rule.
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Two limits are worth knowing. First, a military buyback can increase your basic FERS annuity and help with certain retirement eligibility thresholds, but bought-back military service generally doesn't increase the FERS Annuity Supplement. According to OPM, the supplement is based primarily on civilian service under FERS. Military service generally can't be used to meet its service requirement except in limited military-leave situations.
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Second, special-provision employees should confirm their rules separately. Bought-back military service generally doesn't substitute for the required years of covered law-enforcement, firefighter, or other special-category service, except for certain military absences from an already-covered civilian position.
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Military Retired Pay and VA Disability: Two Critical Rules
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Two situations require careful attention. First, if you're receiving military retired pay, you generally can't receive FERS credit for that same military service unless you waive the retired pay and pay the deposit.
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According to OPM, there are important exceptions. A waiver is generally not required when the military retired pay was awarded under Chapter 1223 of Title 10 (reserve-component retirement). It's also not required when the pay came from 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. Outside those exceptions, waiving retired pay to gain FERS credit is a real trade-off you should model carefully before acting.
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Second, VA disability compensation is separate from military retired pay. Electing a military buyback doesn't, by itself, waive or reduce VA disability compensation, and receiving VA disability doesn't prevent you from also receiving a FERS annuity. The retired-pay rules are distinct from the VA disability rules, so veterans with both should confirm their specific situation with their agency before making an election.
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How FERS and CSRS Differ on "Catch-62"
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Catch-62 is a CSRS rule, and how it applies depends on when you were first hired. CSRS, the Civil Service Retirement System, is the older federal retirement system.
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According to OPM, CSRS employees first hired before October 1, 1982 may initially receive credit for post-1956 military service without making the deposit. That credit can be removed at age 62, or at retirement if later, when the applicable Social Security eligibility conditions are met. CSRS employees first hired on or after October 1, 1982 generally receive no post-1956 military credit at all unless they pay the deposit.
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FERS employees aren't subject to Catch-62. FERS doesn't grant post-1956 military credit for free in the first place, so there's no credit to remove later. The FERS decision is simply whether the deposit is worth the resulting annuity increase.
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The Social Security Fairness Act, signed in January 2025, repealed the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). It didn't change the Catch-62 rule.
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How to Complete a FERS Military Buyback: Step-by-Step
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The buyback process runs through your employing agency. Processing time varies by military branch, the Defense Finance and Accounting Service (DFAS), and your agency, so start well before retirement.
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1. Gather your service records. Obtain your DD-214 (Certificate of Release or Discharge from Active Duty) for each period of military service. If you no longer have it, request it from the National Personnel Records Center.
   
   
2. Request estimated earnings. Request your estimated military basic pay using OPM Form RI 20-97, which your military branch or DFAS uses to certify the basic pay your deposit is based on.
   
   
3. Apply to make the deposit. Complete SF 3108, the Application to Make Service Credit Payment under FERS, along with the military-deposit attachment SF 3108A. Submit them with your service and earnings documentation to your employing agency.
   
   
4. Receive your deposit calculation. Your agency computes the deposit plus any accrued interest and provides the total.
   
   
5. Pay the deposit before you separate. Pay in a lump sum or through payroll deductions. You must generally pay the deposit in full to your employing agency before you separate from federal service for retirement.
   
   
6. Confirm the credit. Verify in writing that the paid service is reflected in your official retirement record before you retire.

The Bottom Line
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A military deposit can materially increase a FERS annuity and may also help satisfy certain age-and-service requirements for retirement. Whether it's financially worthwhile depends on your deposit cost, accrued interest, High-3, retirement timing, survivor election, and military-retired-pay situation.
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The deposit must be paid before separation, and interest accrues after the grace period, so there's a real cost to waiting. Verify your figures against your certified military earnings and OPM guidance, and complete the process well before retirement.
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Federal Employee Advisor Network, a retirement planning firm specializing in federal employee benefits, can help you model your exact deposit cost, break-even timeline, and pension impact so you can make an informed decision.
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Frequently Asked Questions
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1. How much does it cost to buy back military time under FERS?

For most qualifying service after 2001, the FERS deposit is 3% of your total military basic pay, according to OPM, with special rates of 3.25% for 1999 and 3.4% for 2000. The calculation is based on military basic pay. Allowances such as BAH and BAS aren't included. Four years of service with $120,000 in basic pay produces a $3,600 base deposit before interest.
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2. What is the interest rate for military buyback in 2026?

According to OPM Benefits Administration Letter 26-301, Treasury announced a 4.25% calendar-year 2026 rate for post-1956 military deposit accounts. The actual interest on your account may be a composite rate tied to your interest accrual date. Interest compounds annually on any balance left after the roughly three-year interest-free window.
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3. Is a military buyback worth it under FERS?

It can be valuable, but the result depends on your deposit cost, accrued interest, High-3, retirement age, creditable service, survivor election, and whether you'd need to waive military retired pay. Compare the added FERS annuity against the full cost and anything you'd give up before deciding.
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4. Does buying back military time affect my VA disability?

No. VA disability compensation is separate from military retired pay, and a FERS military buyback doesn't by itself waive or reduce VA disability. You can receive both VA disability compensation and a FERS annuity. Only military retired pay may need to be waived, and only outside OPM's stated exceptions.
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5. Can I buy back military time if I already receive military retired pay?

Generally you must waive military retired pay and pay the deposit to credit that service under FERS. According to OPM, exceptions apply for reserve-component retirement under Chapter 1223 of Title 10 and for certain combat or instrumentality-of-war disability retirements. Waiving a military pension is a significant trade-off, so model it carefully first.
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6. When do I have to pay the FERS military deposit?

According to OPM, you must generally pay the military deposit in full to your employing agency before you separate from federal service for retirement. Unpaid service won't be credited. Starting the process early after entering or returning to FERS-covered civilian service can help you complete the deposit before interest begins accruing.

Disclaimer

This article is for educational and informational purposes only and does not constitute financial, legal, tax, or retirement benefits advice. FERS military deposit rules, interest rates, and agency procedures can change. Verify current requirements with OPM.gov and your employing agency, and review your individual military service, retired pay, and retirement circumstances before making a decision.