Can I Collect Military Retirement and Civil Service Pay?

Individuals often wonder if they can receive both military retirement pay and a federal civil service salary. This article clarifies how these two forms of compensation interact and the key considerations for those combining them.

The General Rule for Combining Payments

Individuals are generally able to receive both military retirement pay and a salary from federal civilian employment. This dual receipt is permitted under federal regulations.

Historically, laws like the Dual Compensation Act of 1964 restricted combined income for military retirees in federal civilian positions. However, the Fiscal Year 2000 National Defense Authorization Act largely repealed these specific reductions, eliminating most offsets. This change made it more common for military retirees to receive their full military pension alongside their civilian federal salary.

Currently, most federal civilian employees who are also military retirees receive their full military retirement pay without reduction when they begin civil service. This means an individual is entitled to full benefits from both sources concurrently. The primary consideration arises when an individual wishes to use the same period of military service to calculate both their military retirement and their federal civilian retirement annuity. This scenario requires a decision regarding military service credit, distinct from simply receiving two paychecks.

Navigating Military Retired Pay and Civil Service Earnings

Individuals combining military service with civilian federal employment face specific decisions that impact their overall compensation and future benefits. Two significant options involve military service buyback and the waiver of military retired pay. Understanding how VA disability compensation interacts with these earnings is also important.

Military Service Buyback

Military service buyback allows federal civilian employees with prior active-duty military service to receive credit for that service under their federal civilian retirement system (CSRS or FERS). This is done by making a deposit to increase the number of creditable years used in the calculation of a federal civilian annuity, potentially leading to a higher retirement benefit and earlier retirement eligibility.

To initiate a military service buyback, individuals need specific documentation. A copy of the DD-214, Certificate of Release or Discharge from Active Duty, is essential, along with an estimate of military earnings obtained by completing OPM Form RI 20-97. The deposit is typically 3% of basic military pay earned for FERS employees and 7% for CSRS employees, plus any accrued interest if the deposit is not made within a grace period. Required forms for making the deposit include SF 2803 for CSRS and SF 3108 for FERS, available on the Office of Personnel Management (OPM) website or through an agency’s human resources office. The process often begins by submitting the RI 20-97 and DD-214 to the Defense Finance and Accounting Service (DFAS) for the earnings estimate.

Waiver of Military Retired Pay

Another significant decision is the waiver of military retired pay. In most cases, military retirees cannot receive credit for their military service in the computation of a federal civilian annuity if they are simultaneously receiving military retired pay. However, individuals can elect to waive their military retired pay to allow that service to be counted towards their civilian retirement, especially under CSRS rules. To waive military retired pay, a written request should be sent to the DFAS Retired Pay Operations Center, typically 60 to 90 days before the anticipated civilian retirement date.

VA Disability Compensation

Unlike military retired pay, Department of Veterans Affairs (VA) disability compensation operates under different rules. VA disability compensation is generally tax-free at the federal level and is not subject to the same dual compensation restrictions as military retired pay. This means individuals can receive VA disability compensation concurrently with both their civil service pay and their military retired pay without any reduction or offset to either of the latter two.

Impact on Federal Retirement Benefits

The decisions made regarding military service buyback and the waiver of military retired pay have a direct and lasting impact on an individual’s federal civilian retirement annuity. Credited military service, whether through a buyback or by waiving military retired pay, increases an individual’s total years of creditable service. This additional service directly translates into a higher federal civilian retirement annuity, as the annuity calculation is based on a percentage of the highest three consecutive years of basic salary multiplied by the years and months of creditable service.

Federal Employees Retirement System (FERS)

Under the Federal Employees Retirement System (FERS), the annuity formula typically uses a multiplier of 1% of the “high-3” average salary for each year of service. This multiplier increases to 1.1% if an employee retires at age 62 or older with at least 20 years of creditable service. By buying back military service, individuals can add those years to their federal civilian service, increasing their overall creditable service time and potentially qualifying them for the higher 1.1% multiplier, resulting in a significantly larger monthly annuity. This can also enable earlier retirement eligibility.

Civil Service Retirement System (CSRS)

For employees covered by the Civil Service Retirement System (CSRS), military service credit similarly enhances their annuity calculation. The deposit for post-1956 military service under CSRS is 7% of military basic pay. A specific consideration for CSRS employees is the “Catch-62” provision: if a CSRS employee hired before October 1, 1982, does not make the military service deposit and becomes eligible for Social Security benefits at age 62, their CSRS annuity will be recomputed to eliminate credit for post-1956 military service. Making the military service deposit avoids this potential reduction, ensuring full credit for military service in the CSRS annuity calculation.

The fundamental implication of buying back military service or waiving military retired pay is that the period of military service is then counted towards the federal civilian annuity, rather than being used to generate a separate military pension for those same years of service. This prevents “double-dipping” for the same years of service credit across different federal retirement systems. The financial benefit of this decision is realized through an increased federal civilian annuity, which can provide a substantial return on the initial deposit over an individual’s retirement lifespan.