I’ve written about "Catch 62" several times here already, but judging by the search engine traffic it seems to still be a very popular subject. (See here and here for some previous information)
Based on some recent conversations with military/civil service retirees the subject still seems to be widely misunderstood, so perhaps it’s time for a short primer. There are a few other legal issues floating around out there that also have "62" in their names so let me be specific. This primer is referring to the "Catch-62" provisions of Public Law 97-253.(9-82).
In essence these provisions may apply to any person who has served in the active components of the US military and who has also been employed in the US civil service, so the number of folks possibly impacted is a lot larger then the knowledge base on this subject seems to be.
In particular, personal conversations and perusal of lawyer’s web sites gives me the feeling that a lot of lawyers out there who may otherwise be very expert in divorce procedures also don’t have a comprehensive understanding of this legal speed bump. I’ll write more at a later date date on some of the finer points of valuation and division of marital assets and Catch 62, in this article I’ll just cover the basics of how it affects most potential retirees … even though you almost certainly need competent legal assistance for a divorce, you need a basic understanding of the points that your attorney has to consider, at the least.
In simplest terms the Catch 62 (I’m sure this term was adapted from Heller’s "Catch 22" novel, (especially since the novel, in some cases, makes more sense than the law) attempts to give employees with combined military and federal civil service time a way to get credit for all their years of government service, while at the same time insuring that their time in the military (which counts toward any potential military retirement benefit) is ‘paid for’ in the applicable retirement system (CSRS or FERS) that the civil servant retires under.
There are major differences in how Catch 62 applies to CSRS and FERS employees. I’ll cover the FERS system first, since the rules seem to be the simplest there and the potential pitfalls for the employee don’t seem as fearsome.
Catch 62 and FERS: For those employees hired under the FERS (Federal Employees Retirement System) the required contribution is 3% of the base pay received during their active military service. The employee must pay the contribution in order to receive any credit for their military time. Thus, the vast majority of FERS employees will have already paid the contribution. In spite of some (in my opinion) nonsensical claptrap advice an employee will always be ahead of the game by paying this contribution. It seems smart to pay it during the first three years of employment when their is no interest penalty, but even when an employee has delayed payment and interest has begun accruing I can’t see any circumstance where the decision to pay would be wrong … unless the employee plans to die early. if an employee still decides not to pay there is no pitfall awaiting him or here. The employee will simply retire with a smaller annuity than s/he would have been entitled to had the contribution been made, and life goes on.
To amplify this, since it still seems unclear to people .. my fault I suppose, for unclear writing .. in the “real world” there IS no Catch 62 for FERS employees. You either buy back your military time prior to your FERS retirement, or you don’t. Nothing happens at age 62.
Catch 62 and CSRS: Now, as Shakespeare is alleged to have written, here’s the rub. For military time served before 1956 the employee is ‘home free". The time is added to the employee’s total service time, his or her annuity is calculated and … life goes on.
For military time accrued after 1982, the same rule as the FERS program applies. The employee must make a contribution (7% in this case) and if s/he chooses not to, the military time disappears for purposes of annuity calculation.
Those CSRS employees with military time between 1956 and 1982 (which includes a great many CSRS employees coming up for retirement) are the ones that the "goofiness" of the law puts most at risk. The employee gets credit for the military time as if it were "good" civil service time. If he or she retires before age 62 the annuity will be calculated using the "real" civil service years and the military years. If the employee failed to consider Catch 62, however, a time bomb is ticking … the employee’s 62nd birthday.
Since a person eligible for Social Security retirement may choose to begin collecting their retirement benefit at age 62 the law assumes that they will … regardless of the amount of money involved and regardless of the advisability of taking "early" Social Security retirement. An ignorant or careless employee will find their Civil Service annuity pay reduced … recalculated to exclude the unpaid years of military service.
This can be a significant cut in pay … reductions of $1,000 a month or more are common. At the same time, employees eligible for Social Security not only find that their reduced age 62 benefit doesn’t match the amount they have lost from their civil service annuity, but that the Social Security benefit they are entitled to may be further reduced by the Windfall Elimination Provision (WEP) which many of us subject to the provision are convinced should be referred to as the WEPT.
Basically, for a federal retiree who had service for which Social Security Tax was not deducted is determined to have received a ‘windfall" by being eligible for both CSRS annuity and a Social Security annuity and the Social Security benefit is reduced … by hundreds of dollars per month in many cases to eliminate this so-called "windfall".
To amplify this: If you have qualified military years and you retire under CSRS before age 62, you must buy back the military time, BEFORE CSRS retirement, or at age 62, you will lose those military years and it is already too late to do anything about it. A very, very few people have beat the system and convinced OPM to make an exception for them, but the chance of winning a “re-do” on this decision is virtually nil. Decide BEFORE you retire.
Bottom line? Every federal civil service employee had better learn about the Catch 62 rules before retirement and CSRS employees in particular must make some very important decisions as early as possible. Unless you think a surprise reduction of a thou or so per month won’t affect you.
And if you’re a potential divorce candidate looking for an attorney and the prospective attorney gives you a blank look when you mention Catch 62 … run, don’t walk to find a different lawyer. You’re playing around with huge sums of money over a lifetime and decisions that once made can be irrevocable … don’t take a chance, know before you light the fuse.
Disclaimer
As always remember that this site, although written by a retiree with substantial experience in the school of hard knocks, it is for personal, lay opinions and informational purposes only. If you have a legal question you should seek help from a legal professional. If you have questions involving current or future values of pensions you need an actuary or competent pension valuation expert. If your questions are tax-related, seek a competent tax advisor. In other cases, I recommend the base chaplain.
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Bill ,
how does catch 22 affect the Fers retirement of a civil service employee who retire after 20 years of military service
Hi David, thanks for reading and for your comment. Catch 22 only really doesn’t affect FERS retirees. With FERS, if you want credit for any military time, you ahve to buy that time … make the 3% contribution equivilent to the FERS regular contributions before you retire. This is eitgher a thing you want to do, or not, based on your individual numbers. But noting essentially ‘happens’ at age 62 for you except a birthday.
Catch 62 really only affects CSRS employees with military time. When a CSRS retires earlier than age 62 with less than a 20 year military retirement, s/he gets ‘free credit’ fi=or huis her years of military service. If the employee chooses to retire without paying the 7% contribution BEFORE retirement, at age 62 those ‘free’ years of military time go away, and the CDRS annuity is recalculated as if the employee had not worked for those years.
Since FERS employees never gets those ‘free years’ to begin with, they can’t lose them at 62. They either have them already paids for and ‘good for life; or they gave them away at retirement.
For a military retiree (as opposed to a vet with military service short of retirement), Catch 62 affects nothing. You earned your military pension. You either continue drawing it and also drawing what your CSRS or FERS annuity is, or you made a decision to combine your years of service, paid the “buy back” cost again, before civil service retirement, and life goes on. In short, any bought back years military tears are your for life, Ctach 62 only affects “free” years of credit that the employee cjhose not to buy back. Hope this helps navigate the mine field a bit.
I retired in 2002 after a combined service of 30 years federal law enforcement; 4 years military – bought back and 26 years Fed Law Enforcement. In 1998, a switched from CSRS to FERS. So in essence I had about 4 years under the FERS system before I hit the door. What’s the likely impact of Catch 62 for me? Thank you….
Hi Ken,
If you ‘bought back’ your military time, there is no affect at all at age 62 … it only affects CSRS folks who got free credit of “none-bought” military time when retiring before age 62. If you retired under FERS, all the time you were credited with was paid for, becuase, unlike CSRS, FERS doesn’t give crediut for unpaid military time. Enjoy your 62nd birthday
Bill
I am a national guard technician so I had 4 months Active duty basic training.
I bought back that military time. Then I started as a Temporary CSRS employee for 10 months in 1981 thru early 1982 no retirement deductions were taken out but FICA was. At the end of my 10 months temp I converted to a regular CSRS employee. I converted from CSRS to FERS in 1998. My question is should I buy back the 10 months Temp time ? Thanks
@Timmy: I’m not sure you can buy back temporary CSRS time, but if you can (check with your personnel office … and be persistent, they probably don’t know the answer right off the bat), I’m pretty sure you’d be money ahead to do so.
In round numbers, each year of CSRS time credited is ‘worth’ about 2% of your inal top three salary. So 10/12th’s of 2% is what you would gain, every month for the rest of your retirement years. Verus whatever 7% of your base salary was for those 10 temporary months. Unless you plan on dying really, really early, you should make your money back in the first year of retirement or less, and then it’s all profit from there.
In answer to RP–yes, a CSRS employee who transfers to the FERS system can buy back temporary CSRS time. (I just did it)
An employee that is hired under FERS (ie: has no CSRS component to his service) cannot buy back temp time.
I’m still unclear as to whether an original CSRS employee (pre 1982) who transfers to FERS needs to buy back military time. My guess is yes, because the amount to be repaid is calculated at 7% just like CSRS , so the time is credited to the CSRS component of the FERS retirement. CSRS transferees to FERS have some very different rules.
@EH: Thanks for that answer, info and confirmation. That’s agood thing to know for those with CSRS Temp Time, because as a person who bought back 10 years of regular military time, the results are sweet. I’m now entering my seventh year of retirement and that buy-back money which seemed big at the time is now re-payed who knows how many times over.
I have a question, i spent 14 and half years on active duty in the air force. six years ago i joined the air national guard and became a military technician, in that time i’ve started buying back my active duty time. my question is when it comes time for me to retire will i be able to use all of the points i’d attained while on active duty towards my military reserve retirment or will i lose them because i bought my time back?
@Steven: Hello Steven, and thanks for your question. Yes those points will still work for you, both ways. Reserve Forces retirement has essentially nothing to do at all with your Civil Service retirement. When you complete the buy back, you will have those 14 and a half years to your credit for either CSRS or FERS civil service time. As you know, for your active duty time, you earn a point per day toward your ANG retirement. there is no rule or ‘catch’ that prevents you using both. n fact, my own pensions are very similarly based … I had 10 years active USAF time, which I ‘bought back’ for my CSRS retirement, giving me 38 plus years of CSRS time when added to my 28 years of “real” civil service time. And my USAFR Reserve annuity check is based on all the points I had accumulates in 10 years active and a total of 14 ‘good years’ in the USAFR. I also started in Civil Service as an ART, so welcome to the club
With all the different ways it seems the government seems to ‘take away’ from retirement programs, this seems to good to be true, but it is not an oversight on the part of the bean counters.
You get the apparent ‘double credit’ because you paid (are paying) for it. The military does not contribute in cash to the retirement programs, so you are entitled to use any creditable time without any sort of payback. The civil service, OTOH does require cash ‘contributions’ from your pay, so what you are ‘buying back’ is ‘converting’ those years of military service to what they would have been, contribution-wise, had they been civil service rather than military time.
You’re in good shape, so enjoy, you’ve earned it/paid for it.
I was military for 4 years prior to CSRS. I transferred from CSRS to FERS in 1988 and left the govt. entirely in 1989. I have been re-instated to FERS in 2007 and plan to retire in 6 months. I am already 65. Do I have to buy back my 4 years of military time to avoid a reduction in my social security or my CSRS/FERS retirement?
Thanks.
@Steve: if you want to use those years to increase your FERS annuity, yes. There is no Catch 62 for FERS retirees, because unlike CSRS, you can’t have ‘free use’ of your military time until age 62.
But to convert military years of service into civilian years of service, you have to pay OPM what you would have paid in retirement contributions for those years. In your case it is likely a no-brainier, because your years in the military ‘way back when’ likely have little monetary value, and your contribution would normally be only the lower FERS percentage … while the impact of those years over the rest of your life will be large.
In my case (CSRS) I had to pay $10,000. Many of my fellow workers argued it wasn’t worth it. But those 10 years of military service increased my annual annuity more than $10k, so my payback was achieved in a year … and now every year I live I get $10K more. Four years and FERS has less impact, but be sure you do the math before you make the deison … remember, you might live to your 100th birthday, I certainly plan to
Sir,
Thank you for posting this blog and clearing these issues.
My questions are the follow:
I serve 9 years of Active military service. I have a year in the NSPS FERS system with rumors that it will be GS again in this year. I just receive my pay back papers and they want 6,200 for my 9 years.
-Now if this means that after 3 years they are going to charge interest rate in this?
-If I pay, can I work 11 years and retire after 62 with a total of 20 years of complete service?
I was reading in this web site:
http://www.opm.gov/retire/pre/election/handbook/h_fers3.htm
What I understand is that if I don’t complete the extra 11 I can receive retirement for 10 years of service after minimum requirement age in my case 57, but like you said it is better to wait after 62. It this is right?
Thank you,
Daniel Santiago
@Daniel Santiago: Hi Daniel. I don’t know all the answers. But yes, regarding your payback, interest is charged (based on some formula off the national T-Bill rate, compounded and accruing annually. So if you are going to pay it is better to do so as soon as possible.
Those paid for years should count for total time in service to retire … once they are paid for they are part of your personal history, so far as I know.
I am not sure what effect NSPS changing back to GS will have on FERS retirement, but it appears that there will be no change to FERS itself, you will just be changed to a GS grade and step that equals or exceed your current pay.
Just turned 62. Retired DON 1995 (CSRS). My annuity has been reduced $1000 due to “Catch 62″ =Non Deposit for 11years,10 mon military (Vietnam).
Am I process of Appeal w/ OPM (Judge Hearing). My case different: tlod at retirement pay DEPOSIT or by reduced when filing for SSI benefits.
Public Law 97-253 seems to follow.
Did I read Public Law 97-253 wrong or did OPM interpret PL 97-253 for their Handbook??
@Edward P. palahang: Edward, sorry to hear you got “caught”. That’s why I write about this problem and I guess I better write more. You would not believe how many people I talked to before retirement … civil service leadership included who gave out false or incomplete information on this … and, of course, none of us likes to have to push ourselves to the head of the line to pay Uncle Sam a big chunk of deposit. However, as you found out to your dismay, the bite if you don’t pay really can hurt.
As regards your case, best of luck. A few have been one that I have heard of. I would love to help you with your question but I am not sure I understand … you said your case is different, because why?
You were told you would just get a smaller Social Security payment to make up for no military years payback deposit?
Or. different in what way that I am not understanding?
Who told you this and what documentation have you that they ‘told you’?
What is it that you say PL 97-235 seems to follow?
Best of luck and hope to hear back …
Hi Bill,
I currently fall under the FERS retirement program at my federal job and I have 11 yrs of prior active military service. The kicker is that I continued my military service till this date in the reserve while currently employed with my federal employer. So with that said, how would this catch-62 affect me in the future when I decide to retire in the reserve and in my federal job? By electing to buy my military time affect my retirement in the reserve?? I was told yes/no and really do not know who to turn to for this question. In a nut shell I guess, will I still be able to collect a retirement in the reserve if I elect to buy my active duty time back in the federal agency? I have two years in the federal agency and two in the reserve with a combination of 11 active for a total of 13 years of military time and 7 yrs left to retire in the reserve. I really hope you can shine some light on my issue so I can make the right decision for my future. Thank you for your time and consideration.
@Allan j Manco: Hello Allan, thanks for the interesting question. Questions, actually. You have several components at work here.
First, there is no such thing as Catch 52 for FERS retirees. Your 11 years of active duty can be added to your creditable years of FERS civilian service if you chose .. provided you pay 3% of your active duty basic pay into your retirement contribution. Your civilian personnel office can figure this for you. It’s usually an easy decision, because the extra FERS annuity you would get from an additional 11 years of service quickly recoups the amount you have to pay to “buy” those years into FERS.
The other option, of course, is just ignore those years. If you retire from FERS without having “bought” those years, you owe nothing and you owe nothing at age 62, because you haven’t been getting “free” use of those years as CSRS Catch 62 folks who didn’t “by their years did.
Since you didn’t qualify for an active duty military requirement, ‘pay and use’ or ‘don;t pay and don’t use’ are essentially your only two options regarding your active service and FERS.
Several of your statements indicate you are confusing active duty (regular) military retirement with Reserve Component retirement.
They are not related at all so far as FERS is concerned. You say you have 11 years active service and now two more in the Reserve, leaving 7 to go until you qualify for Reserve retirement. That’s great. You can just keep on participating in the Reserves and at the end of your 20 good years, or even longer .. you can stay in the Reserves until age 60 if all is still going well for you, you’ll earn the annuity based on your points and rank and time in service.
The Reserve Component retirement you earn has no effect what so ever on your FERS retirement … even if you chose to the 11 years active from FERS to (significantly) increase your annuity. In other words, you can use those years twice, since the retirement programs are separate.
Your FERS annuity, whatever you earn and your Resevre Component Retirement Annuity, whatever it comes u pto are completely separte “animals”. You can enjoy them both.
I know. I’m receiving both my CSRS retirement, boosted by buying back my 10 years active time, and my reserve annuity, 10 years active and 12 years USAF Reserve service.
You can too, Lord willing and the creek don’t rise. Godspeed, sir.
I served in the Navy for 8 years (Jan1973- Nov 1981) and then went to work for DON (Civil Service) in Jan 1982. I plan to retire at age 62 with a total of 40 yrs service. In Jan1988, I transferred to FERS (6 yrs 11 months CSRS; frozen service) because I was advised that since I paid 13 years into Social Security (started working at a young age), and had plans to heavily invest into TSP, that I would see a better retirement income (TSP, CSRS, FERS and SS combined) . Additionally, I haven’t paid back my military time ($19,281 as per my last LES). I will have over 300K in my TSP and considered that the reduction of my FERS annuity didn’t appear to be that much since I was also getting a CSRS component (will include pre 1982 military service under CSRS). I’m aware of the reduction of my FERS annuity but plan to start collecting Social Security when I retire after age 62. Will I be better off in completing a military time payback or will it be better since the reduction of the FERS annuity is not as much as paying back the amount owed ($19k plus).
I am retired from 22 active years in the US Army with a regular retirement pension and small VA disability pension. I also have about 8 years of active reserve time on time of that (total of about 30 Military years. I was a in CSRS for 7 years 1974 through 1981 but also paid in Social Security through my national guard reserve drill pay and retirement duirng that period. I then went active duty until my military retirement and took out my share of CSRS deposits. I have been working in a state job paying in social security and am thinking about bidding back on a federal civil service job and work for several years and pay back my share of initial time and add to the CSRS. What are my liabilities if any in this situation. I have about 3years to 62 and would like to do a high 3 and buy back 4 years of military time if possible. Please advise……thanks.
@Milt: Thanks for writing in, Milt. You have a whole bunch of issues all rolled into one here. Let me put together my best shot at a comprehensive answer.
RP. I probably need to clarify that my all of my active duty time was as Active, Guard, Reserve status which in some cases is treated or at least discusssed differently, but fortunately not in retirement pay and benefits which is basically the same as active duty time with AC components. Some articles and discussions would appear to indicate that the AGR time may not affect some of the “IEDs” of military/CS retirement planning. Looking forward to your thoughts…=-)
I think that you could be more explicit in your section on CSRS with military service during 1956-82. Namely, if you are not eligible for Social Security (i.e., you do not have “40 quarters”) when you become 62, or retire later than age 62, then you are not affected by catch 62. As I remember you can also acquire the “40 quarters” afterwards and then claim Social Security with no repurcussions.
@Carl: Hello and thanks for coming by an commenting. Indeed you are correct, Carl, regarding the “ineligible” rule. There is, in effect, no “Catch 62″ for those who truly won’t qualify for Social Security. But I make an issue about the “Catch” itself, becuase in 40 years of Civil Service, I, personally, have NEVER met anyone who didn’t have their 40 quarters in, and I sure have met up with many guys who ignored the rule and have lived to regret it. Now for the second part, can you qualify after age 62 and still keep your “free” military years? Interesting question to research. Mea Culpa, and to all, get authoritative guidance from an official source.
(1) I have 36 quarters and am past 62. Someone has to be an anomaly!
(2) What I have been told from two retirement courses (1996 and 2003) is that you are checked once and only once for catch 62 – either (a) at retirement when 62+, or (b) at 62 if retired earlier. If you get 40 quarters after (a) or (b) is checked then it is not checked later when you apply for Social Security after obtaining 40+ quarters. (I would get VERY little money from SS if I got the 40 quarters post-retirement so I’m not even considering it.) I’ll check again when I take my third (and final) retirement course at the end of this year from the National institute of Transition Planning.
(3) I agree with your comment on getting authoritative guidance. Don’t put your trust exclusively in what I have written here.
Hi Carl,
Yep, I guess someone has to be the exception always, don’t they. My guess is, as you say, if you attain age 62 with your ‘non-eligibility intact, I doubt anyone is going to check on that aspect of your retirement later. When I applied for Social Security (at age 62), the Social Security people asked nothing that was catch 62-related. But they sure asked plenty of annuity-related questions. My CSRS annuity reduced my Social Security (earlY) down to $309 a month … but hey, you can’t find $309 lying in the street every month, now can you?
I can’t over emphasize the authority aspect, as you mentioned. Most of the guys I have known who have run into Catch 62 problems come up with a story that “they attended a briefing or class that told them they didn’t need to buy back”. But seldom can they even come up with a date, or even the agency or contractor who conducted the briefing. It is important, guys and gals. Not only that you were told, but who told you and when.
Very few people reversals on Catch 22, those that have, typical, have proof that they were told wrong by an official source. Without proof of an actual error by a government employee or contractor? You have little chance.
The funny part is, those who fight making the payment are missing a very valuable point … it is almost always (unless you are not Social Security qualified) a very good eal for the “investor”. Even if you owe thousands and thousands … I wound up owing more than $10,000, mainly becuase of procrastination, it’s still a great deal. That one time $10k investment yields me more than $20k per year … where can you get that rate of return in today’s market?