Why Creditable Years of Service are so Powerful

Jun 22, 2022

Creditable Years of Service

When it comes to retirement, creditable years of service are incredibly important to FERS federal employees. They determine how close you are to being able to retire and how much money you will receive in retirement. But did you know that you still gain creditable years of service while on Federal Disability Retirement? In this blog post, we will discuss what creditable years are and the significant role they play in your retirement!

What are creditable years of service?

Simply put, creditable years of service are the amount of time a federal employee has worked for the federal government that counts towards their regular FERS retirement.

Creditable service under FERS usually includes:

  • Federal service subject to FERS retirement deductions
  • Military buyback
  • Unused sick leave
  • Federal service performed before 1989, where an employee’s pay is not deducted from retirement, such as, service under a temporary appointment, as long as a deposit is paid. However, there are a few exceptions to the rule that the service must have been performed before 1989.

Calculating Creditable Years of Service

When calculating your creditable years of service, each day of full or part-time service is counted as a day of creditable service, as long as you are contributing to your FERS retirement. There are many ways to gain creditable service, all of which are calculated differently according to your agency.

Military service can be creditable if you buy it back. Military service is creditable for retirement purposes if it was active service, terminated under honorable conditions, and performed prior to your separation from civilian service for retirement. You must have fully paid your deposit prior to separation from the federal government.

If you are receiving or have received OWCP Federal Workers’ Compensation benefits, you will also receive credit for that time.

If you are utilizing leave without pay (LWOP), 6 months per calendar year will count as creditable years of service, however if you are approved for Federal Disability Retirement, you will receive full credit for that time.

Additionally, you may be wondering how sick or annual leave will factor into your creditable years of service. Sick leave will be credited on as additional years of service when computing annuity payments, but it cannot make you eligible to retire. Check out the sick leave conversion chart to determine how much credit your sick leave will add up to. Annual leave will be paid out as a lump sum after separation. Generally, this payment includes all the compensation that you would have received if you had used the annual leave.

If retirement deductions are not withheld from your salary, you must make a deposit to get credit for those service hours. The deposit amount is usually 1.3% of your salary plus interest. Paying into your FERS retirement is essential when calculating your service hours. Your creditable years of service represent all of the hard work and dedication you have invested in your federal agency, so it is critical to be appropriately compensated for your work.

Creditable years of service and Federal Disability Retirement

One of the most overlooked benefits of Federal Disability Retirement is that every year on this benefit counts as an earned creditable year of federal service. So even if you receive Federal Disability Retirement, and you go to work in the private sector, you will still be earning creditable years of service towards your regular FERS retirement. These years will be added to your pre-existing creditable years of service to determine your pension at age 62.

This chart below showcases how your Federal Disability Retirement years add on to your previous creditable years.

Federal Disability Retirement can be a life changing benefit that can allow federal employees to find the income they need to reach their retirement age and significantly impact their annuity in retirement.

Creditable years of service for regular FERS retirement

Creditable years of service determine your eligibility to retire, whether you retire at your minimum retirement age or take early retirement like Federal Disability Retirement.

Creditable years of service are used to calculate your regular FERS retirement pension once you turn age 62. If you have less than 20 years of federal service (including years on Federal Disability Retirement) you’ll receive 1% of your high-3 salary for each year of service.

For example, if you have 15 years of creditable service at retirement, and your high-3 average is 50,000, you will receive $7,500 a year.

15 x .01 x 50,000 = $7,500

If your service equals more than 20 years (including years on Federal Disability Retirement) you’ll receive 1.1% of your high-3 salary for each year of service.

For example, if you have 25 years of creditable service at retirement, and your high-3 average is 50,000, you will receive $13,750 a year.

25 x .011 x 50,000 = $13,750

Creditable years of service are so powerful because they allow federal employees to reach their retirement, and in the case of Federal Disability Retirement, can have a major impact by increasing your retirement income. Whether you worked for years at your federal agency or received Federal Disability Retirement, you deserve to receive the maximum value your benefits can offer.

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