Military Buyback CSRS: Deposit Rates, the Age 62 Penalty, and WEP Repeal

CSRS Deposit Rates

CSRS employees pay more than twice the FERS rate for the military buyback — 7% of military basic pay compared to FERS's 3%. The higher rate reflects the more generous annuity multiplier under CSRS, where each creditable year adds 2.0% to the pension (versus 1.0% or 1.1% under FERS).

The exact rates by service period:

• Service through December 31, 1998: 7.00%
• January 1 – December 31, 1999: 7.25%
• January 1 – December 31, 2000: 7.40%
• January 1, 2001 – present: 7.00%

For a CSRS employee who served four years at an average basic pay of $2,000/month, the base deposit would be about $6,720 — roughly double what a FERS employee would pay for the same service. But the return is proportionally higher: each year adds 2% to the annuity, so four bought-back years add 8% of the high-3 average salary.

The Age 62 Penalty: Why CSRS Employees Cannot Wait

CSRS has a unique penalty that FERS does not: if you have post-1956 military service (service after December 31, 1956) and you don't complete the deposit before you become eligible for Social Security at age 62, OPM must recompute your annuity to exclude the military years.

This isn't a reduction in the deposit benefit — it's a complete elimination of the military service credit from your pension calculation. Your annuity drops by 2% of your high-3 for every year of unpaid military service. For the four-year example above, that's an 8% permanent reduction in your annual pension.

The reduction takes effect at age 62 regardless of whether you actually claim Social Security benefits. The trigger is eligibility, not receipt.

This means CSRS employees face two deadlines: they must pay the deposit before separation from federal service (the universal deadline), and they need to understand that failing to pay before reaching age 62 eligibility for Social Security creates the recomputation trigger.

The WEP and GPO Repeal: What Changed

Before January 2025, the calculus for CSRS employees considering the military buyback was complicated by two Social Security provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). Both provisions reduced Social Security benefits for people who also received a government pension from employment not covered by Social Security — which includes CSRS service.

The Social Security Fairness Act, signed January 5, 2025, repealed both WEP and GPO entirely. The repeal is retroactive for benefits payable after December 2023. SSA has processed over 3.1 million retroactive payments totaling $17 billion.

What this means for the CSRS military buyback:

Before repeal: CSRS employees who were also eligible for Social Security faced WEP reductions that could slash their Social Security benefit by up to $600/month. The military buyback decision had to account for these reductions — and some employees concluded the buyback wasn't worth it because their Social Security benefit would be reduced anyway.

After repeal: CSRS employees receive their full, unreduced Social Security benefits alongside their full CSRS annuity. The buyback decision is now simpler: the only question is whether the 2% per year annuity increase justifies the 7% deposit cost plus accumulated interest.

For most CSRS employees with meaningful military service, the answer is clearly yes — the break-even comes within the first few years of retirement. The WEP repeal removes the one factor that could have made the math ambiguous.

CSRS Offset Employees

CSRS Offset employees — those who have CSRS coverage but also pay Social Security taxes — follow the same 7% deposit rate and the same age 62 recomputation rules. The "offset" in their name refers to the reduction in their CSRS annuity at age 62 to account for the Social Security benefit earned during federal service. This offset still applies after the WEP/GPO repeal — it's a feature of the CSRS Offset system, not a Social Security provision.

For CSRS Offset employees, the military buyback increases the CSRS annuity, but the age 62 offset will reduce it by the portion of Social Security benefits attributable to federal employment. The net effect is still positive — the 2% per year CSRS increase typically exceeds the offset reduction — but the calculation requires comparing both adjustments.

Filing the SF 2803

CSRS employees use Standard Form 2803 — "Application to Make Deposit or Redeposit" — instead of the SF 3108 used by FERS. The workflow is identical: complete Part A, attach the certified RI 20-97 and DD-214 copies, and submit to your agency HR benefits specialist for calculation and certification.

The Military Buyback Guide covers both the FERS and CSRS paths, including the age 62 recomputation rules, the SF 2803 process, and a worksheet for calculating whether the 7% deposit generates a net positive return after accounting for interest and the CSRS Offset adjustment.

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