Purchasing Service Credit
To purchase service credit is when you add additional service to your PSERS account by paying contributions and interest for service rendered. You must be an active contributing member of PSERS to purchase service credit. If you are nearing retirement, you should submit your purchase of service application as soon as possible before terminating employment.
Beginning on July1, 2011, current active contributing members of PSERS will have until July 1, 2014 to apply to purchase Non-Qualifying Part-Time service (NQPT), or termination of public school employment, whichever is earlier. Inactive or new members of PSERS who begin employment on or after July 1, 2011, have a one year window or prior to their date of termination, whichever is earlier, in which to apply to purchase NQPT service. Click here for more NQPT information.
Multiple service members who are actively contributing with the State Employees’ Retirement System (SERS) must apply to purchase prior PSERS service credit through SERS.
Payment Options – If your application to purchase service credit is approved, you will receive a Statement of Amount Due (PSRS-7). This statement will contain all of your payment options. With some exceptions, you have three different payment options -
Actuarial Debt Plan – This payment plan allows you to pay for your purchase after retirement by placing a debt against the equity in your future retirement plan. A small portion of your monthly benefit payment is set aside each month to pay for the purchase. This generally does not reduce the amount of the monthly benefit, because the service amount purchased offsets the amount of the payment in the calculation of the actual monthly benefit.
Lump Sum Payment – Some members may be given the option to pay in a lump sum. The lump sum payment must be received within 90 days of the date of the Statement of Amount Due to avoid any additional interest. This is true whether you make the payment by personal check, money order, or roll over funds from a conduit IRA.
Payroll Deduction – You must contact your employer to set up payroll deductions to pay for your purchase. Part-time per diem and hourly employees may set up payroll deductions at the employers’ discretion.
Purchasing Service Credit for Class T-E and Class T-F Members
The cost to purchase Non Qualifying Part Time (NQPT) service and most types of non-school or non-state service credit is the full actuarial cost. In other words, when you purchase service credit, you are paying an amount for the purchase that will result with you self-funding your future PSERS retirement benefit. You would pay an amount that would be based on your projected total credited service, projected final average salary, your projected contributions, the projected school contributions, the projected state contributions, all projected interest, plus the projected amount of funds needed to cover the appropriate corresponding portion of your lifetime benefit.
The only exception to funding the full cost of the purchase is when you purchase military service, as the calculation remains the same as it is for a Class T-C or Class T-D member.
Once PSERS receives the application and calculates the cost to purchase the service credit, PSERS will not at a later date, recalculate the cost. If you do not see as large of a salary growth over your career as speculated or you do not remain in PSERS until you reach superannuation (full) retirement status, the cost of the purchase will not be recalculated to coincide with the reduced impact on your benefit.
What Class T-E or Class T-F Members Should Consider Before
Applying to Purchase Service Credit
What Class T-E or Class T-F Members Should Consider Before Applying to Purchase Service Credit
Here are some questions to ask yourself to help you decide whether
the purchase will be worth it to you:
Here are some questions to ask yourself to help you decide whether the purchase will be worth it to you:
Will you work until normal retirement? The cost to you is determined by a formula that assumes you retire on the day you reach superannuation (normal retirement). If you retire sooner than normal retirement, you could pay more for the benefit than the added value of the purchase.
Will your salary increase an average of 5.5% each year? If over the course of your career you experience a salary increase less than 5.5% per year, it is possible that you could pay more to purchase the service than you would receive in benefits as a result of the purchase.
On the other hand, if over the course of your career you experience a salary increase greater than 5.5% per year, it is possible that the benefits you would receive as a result of purchasing the service, could be greater than the cost to you.