Deposit service: buying back the pre-1989 “temporary” time most feds forget

1. The time that didn’t count

Plenty of federal careers didn’t begin with a permanent appointment. They began with a summer as a temporary, a co-op rotation, a seasonal job, or an indefinite appointment — work where retirement deductions were never withheld from the paycheck. For pension purposes, that time is invisible until you do something about it.

“Doing something about it” means making a deposit. And for the right person, it’s one of the best deals in federal retirement: a small payment converts forgotten early-career months into permanent pension years that pay for life. The catch is that the FERS window closes hard at a specific date, and the price only rises the longer you wait.

2. What deposit service is

Deposit service — the technical term is non-deduction service — is any period of federal civilian employment during which no retirement contributions were withheld from your pay. If your work history includes a non-permanent appointment excluded from retirement coverage, you have deposit service. Common examples: temporary appointments limited to a year or less, seasonal work, and student or co-op positions.

A quick vocabulary note, because the two terms get confused. A deposit covers service where deductions were never withheld. A redeposit covers service where deductions were withheld but later refunded to you when you left — a different situation covered in our guide to buying back refunded service. This article is about the first kind.

3. The FERS rule: before 1989 or nothing

Under FERS the rule is unusually blunt: no deposit, no credit. Unpaid non-deduction service counts for neither your eligibility to retire nor the computation of your annuity. Pay the deposit and it counts fully; don’t, and it’s as if it never happened.

If you had temporary federal time in the 1980s and never thought about it again, this is the moment to dig out the dates. Every year you buy back adds 1% of your high-3 to your annuity — permanently.

4. What it costs — and why interest matters

A FERS deposit is normally 1.3% of the basic pay you earned during the service, plus interest. The 1.3% applies flat, regardless of what would actually have been withheld at the time.

Interest is the part people underestimate. It’s charged at a variable rate set by the Treasury each year, accrues from the midpoint of the service period, and compounds annually until you pay in full or your annuity begins — whichever comes first. For service from the 1980s, that’s decades of compounding, which can multiply the raw 1.3% figure several times over. It’s still often a bargain relative to the pension it buys, but the interest is why sooner is cheaper.

5. See if buying it back pays off

Enter the basic pay you earned during your temporary service, how many years it covered, and your high-3. The calculator estimates the base deposit (before interest), the annual pension boost those years would add, and how quickly the boost pays back the deposit.

6. CSRS works differently

If any of your service is under CSRS, deposit service follows a different logic that splits at October 1, 1982:

• Non-deduction service before October 1, 1982 counts toward both eligibility and computation even if you never pay — but if you don’t pay the deposit, OPM permanently reduces your annuity by 10% of the deposit amount owed. The CSRS deposit is 7% of basic pay plus interest.
• Non-deduction service on or after October 1, 1982 follows the same “no deposit, no credit” rule as FERS — pay it or lose it.

So a CSRS employee with old pre-1982 temporary time faces a subtler decision: the time already counts, and the question is whether paying the deposit is cheaper than accepting the permanent 10% reduction. In most cases, paying is the better deal — but it’s worth running the numbers with an official estimate.

7. The deadline trap

Two deadlines matter. The first you already know: FERS non-deduction service must be from before 1989 to be buyable at all. The second is procedural — the deposit must be completed before OPM finalizes your retirement claim. Miss that and the credit is lost even for otherwise-eligible pre-1989 time.

Timing works against procrastinators in a third way, too: OPM can take many months to process a deposit application and compute the bill. If you wait until you’re weeks from retirement, the paperwork may not clear in time. Start the request well ahead — and if you’re already within six months of retiring, submit it with your retirement application rather than on its own.

8. How to do it

• 1. Find the dates and pay. Dig out SF-50s or earnings records for any temporary, seasonal, or co-op time before 1989. You’ll need the periods and the basic pay earned.
• 2. File Form SF-3108 (Application to Make Service Credit Payment/FERS). Complete the front and give it to your HR/benefits office, which completes its portion and forwards it to OPM.
• 3. OPM bills you for the deposit including interest and sends payment instructions.
• 4. Pay in full or in installments of at least $50, directly to OPM — not through payroll deduction. You can authorize a direct debit from your bank account.
• 5. Confirm it’s credited before you retire, and keep the receipt with your retirement records.

9. Frequently asked questions