BAL 23-105 Military Deposit Notice: An Audit for HR
The BAL 23-105 military deposit notice must reach new hires with military service within 90 days. A Veterans Day audit checklist for HR offices.
By Shawn McCoy7 min read
The BAL 23-105 military deposit notice requires agencies to tell newly appointed employees, within 90 days of their entry on duty date, that they may be eligible to make a military service deposit. Veterans Day is a good moment for HR and benefits offices to check that the procedure exists and works. OPM issued the requirement in Benefits Administration Letter 23-105 on September 8, 2023. It is meant to help veterans start paying while the deposit is still interest-free, instead of discovering a large balance just before retirement.
What the BAL 23-105 military deposit notice requires
BAL 23-105 builds on BAL 17-101, Additional Guidance on Military Deposits. It asks agencies to establish internal procedures to notify newly appointed employees of their eligibility within 90 days of their EOD date. According to OPM, the notice should include:
- Required documents, such as the RI 20-97 and the DD 214.
- General deposit computation and interest accrual information.
- Payment options, such as payroll deduction or personal check.
- Advance notice that the deposit must be paid in full before separation from federal service.
- Agency contact information so the employee can request individual counseling.
OPM's reasoning is practical. Early notice gives new employees more time to pay during the initial interest-free period. It also lets them pay a smaller amount through payroll deduction over a longer period, which reduces the need to pay a large sum before separation.
Why the deposit matters to veterans
Under FERS, post-1956 active duty military service counts toward a civilian retirement only if the employee pays a deposit. OPM's FERS service credit page lists the deposit rates:
| Period of military service | FERS deposit rate |
|---|---|
| Through December 31, 1998 | 3% of military basic pay |
| Calendar year 1999 | 3.25% of military basic pay |
| Calendar year 2000 | 3.4% of military basic pay |
| January 1, 2001 to present | 3% of military basic pay |
The deposit is paid to the employing agency, not OPM, and it must be completed before the employee stops working for the government. For employees with a CSRS component, the rules differ. The CSRS deposit is 7% of military basic pay, and those first hired on or after October 1, 1982 receive no CSRS credit for post-1956 military service without the deposit.
Interest and the three-year window
Interest is where timing becomes expensive. Under 5 CFR 842.307, interest accrues beginning on the second anniversary of the employee's FERS coverage date and compounds annually. No interest is charged if the deposit is completed before the end of the year after interest begins. The regulation's own example: an employee covered on March 1, 1988 starts accruing interest on March 1, 1990, but owes no interest if the deposit is completed by February 28, 1991.
That is why the 90-day notice matters. An employee who learns about the deposit in the first three months has more than two years to arrange payroll deductions before interest becomes a factor.
Employee and agency responsibilities
BAL 23-105 does not change the responsibilities set out in BAL 17-101. It summarizes them.
The employee's role
Paying the deposit is voluntary. OPM states it is the employee's decision to pay, or not pay, for any distinct period of creditable military service. The employee is responsible for:
- Seeking counseling from the employing agency.
- Obtaining military service records and basic pay documentation, such as the RI 20-97 estimated earnings request.
- Making sure the deposit is paid in full before separation.
The agency's role
The agency is responsible for:
- Accurate and complete counseling, including a determination of whether a period of active duty is creditable.
- For service covered by USERRA, preparing two computations and using the smaller one.
- Accurate information on interest, and correct determination of the interest accrual date (IAD).
- During retirement counseling, telling employees with unpaid or partially paid deposits that they may accelerate or add payments before separation.
That last point carries weight. OPM states plainly that not having enough time to pay a military service deposit is not considered an administrative error.
A Veterans Day audit checklist for HR
Use this list to test your agency's procedure.
- Is there a written procedure? BAL 23-105 calls for internal procedures, not ad hoc reminders.
- Is the 90-day clock tracked? Confirm the notice is triggered from the EOD date and that someone owns the task.
- Does the notice cover all five items? Compare your template with the OPM list above.
- Are rehires included? OPM notes the early notice benefits all new or rehired employees.
- Is payroll deduction available and explained? Agencies are not required to accept installments under $50, so state any minimum clearly.
- Are IADs calculated correctly? Errors in the interest accrual date can change the amount owed.
- Does retirement counseling check deposit status? Every pre-retirement review should ask whether a deposit is unpaid or partially paid.
Common gaps an audit may find
Agencies that review their process often find the same weak points.
The notice goes out, but nobody follows up
A notice without a path to counseling does little. BAL 23-105 requires agency contact information for individual counseling, and the agency must provide accurate and complete counseling when an employee asks. Make sure the contact listed in the notice is current and staffed.
The notice says "you may want to consider" and nothing more
Employees need enough detail to act. The required items, such as documents, computation and interest basics, payment options and the deadline before separation, give the employee a concrete next step.
Interest is explained incorrectly
The interest-free window is often described loosely. The regulation sets the rule: interest begins accruing on the second anniversary of FERS coverage, and none is charged if the deposit is completed before the end of the year after interest begins. Use that wording, or OPM's, in your template.
Retirement counseling misses the deposit
The deposit has to be finished before separation. A pre-retirement checklist that does not ask about military service leaves a costly gap. OPM is explicit that running out of time is not an administrative error.
Sample notice language
Our records show you may have prior active duty military service. Under FERS, you can receive retirement credit for post-1956 military service by paying a military service deposit before you separate from federal service. Interest-free payment is available for a limited time after you are first covered by FERS. To start, request your estimated military earnings using form RI 20-97 and gather your DD 214. You can pay by payroll deduction or personal check. Contact the benefits office to schedule individual counseling.
Documents employees will need
Under the regulation, the agency has the employee complete an application, provide a DD Form 214 or equivalent, and provide official military pay documents. If those are not available, the employee obtains a statement of estimated earnings from the appropriate branch of service. Payment can be a lump sum or installments, and a deposit is not considered made for a distinct period until that period is paid in full.
Questions to route to OPM
For questions about BAL 23-105, OPM directs benefits officers to its Benefits Officers Development and Outreach group at benefits@opm.gov.
How FEBA supports veterans in your workforce
Veterans often learn about the military deposit years too late. FEBA's agency benefits briefings cover FERS service credit, the deposit and the cost of waiting, in plain language for new and mid-career employees. Our financial wellness programs help employees plan payroll deductions alongside other goals, and employees can find more resources here. To add a military deposit session to your onboarding or Veterans Day programming, contact our team.
Questions
- What does BAL 23-105 require agencies to do?
- BAL 23-105 says agencies need internal procedures to notify newly appointed employees, within 90 days of their entry on duty date, of their eligibility to make a military service deposit.
- What must the military deposit notice include?
- OPM lists required documents such as the RI 20-97 and DD 214, general computation and interest accrual information, payment options such as payroll deduction or personal check, advance notice that the deposit must be paid in full before separation, and agency contact information for individual counseling.
- Is an employee required to pay a military service deposit?
- No. BAL 23-105 states there is no requirement to pay the deposit, and it is the employee's decision whether to pay for any distinct period of creditable military service. Without the deposit, FERS employees do not receive retirement credit for post-1956 military service.
- When does interest start on a FERS military deposit?
- Under 5 CFR 842.307, interest accrues beginning on the second anniversary of the employee's FERS coverage date, but no interest is charged if the deposit is completed before the end of the year after interest begins. That gives roughly a three-year interest-free window.
- Can an employee pay the deposit after retiring?
- Generally no. The FERS deposit must be completed before separation from service. A survivor may pay in a lump sum in limited circumstances, and OPM may allow a later lump sum if it rules there was an administrative error. Not having enough time to pay is not an administrative error.
Federal Employee Benefits Advocates is an independent educational organization. This article is not a government publication and is not official guidance from OPM or any federal agency.
