Purchasing Service Credit
When planning for your retirement, you have the option to purchase service credit so that you may be able to do one or more of the following:
- Receive a higher benefit amount
- Retire earlier
- Receive a larger health care subsidy in retirement if you enroll in PERACare
Ways to purchase PERA service credit:
- Based on a PERA Defined Benefit (DB) Plan account that you refunded or rolled over after leaving a previous PERA-covered job
- For any employment not covered by PERA or another retirement program
Your eligibility and cost to purchase service credit is dependent on several factors including:
- The date your current membership began
- Your Highest Average Salary (HAS)
- The type of purchase you are making
- Your age at the time of purchase
Types of Employment to Purchase
It’s important to understand the difference between qualified and nonqualified employment. Qualified employment is defined by federal law as any U.S. employment where the employer is set up under federal, state, or local government, as well as public and private K-12 school employment, and employment with public employee organizations. Nonqualified employment is all employment which does not fit into qualified employment. See the Purchasing Service Credit booklet for more details.
- If your PERA membership began before January 1, 1999, you must have one year of earned service credit and you may purchase up to 10 years of qualified or nonqualified employment.
- If your PERA membership began on or after January 1, 1999, you must have one year of earned service credit to purchase qualified employment and five years of earned service credit to purchase nonqualified employment. You may purchase up to five years of nonqualified employment and your purchase is limited to a total of 10 years.
- If you are a Local Government Division employee, you may qualify to purchase more than 10 years of service credit if you were employed on the date your employer affiliated with PERA and the employer affiliated with PERA after November 1, 2003. In this instance, you may purchase all pre-affiliation employment with that employer after earning one year of service credit.
The above limits apply only to purchases based on employment not covered by PERA or another retirement program. Purchases based on a refunded/rolled over PERA DB Plan account do not count toward the 10-year maximum.
Employment Not Eligible for Purchase
Any period of employment in which you contributed to a mandatory retirement plan and are entitled to a current or future benefit or payment (except Social Security or military service) is not eligible for purchase. In addition, any employment in which you did not receive any monetary pay may not be purchased.
Purchase Based on a Rolled Over/Refunded DB Plan Account
If your current membership in the PERA benefit structure began on or before December 31, 2006, or you are a member of the DPS benefit structure, the cost to purchase is the amount rolled over/refunded plus interest. The interest rate is PERA's assumed rate of investment return from the date of withdrawal to the date of payment in full.
If your current membership in the PERA benefit structure began on or after January 1, 2007, the cost to purchase is the amount rolled over/refunded, interest, and 1% of HAS for each month purchased (the 1% goes to the annual increase reserve fund). The HAS used in this cost calculation is the higher of the HAS associated with your current DB Plan account or the HAS based on a combination of both your current and rolled over/refunded accounts.
Use this calculator to estimate your cost to purchase based on a rolled over/refunded DB Plan account (log-in required).
Purchase Based on Employment Not Covered by PERA
The cost to purchase service is the actuarial cost of providing the future benefit resulting from the purchase and is calculated using your HAS, your age, and your PERA membership start date.
Use this calculator to estimate your cost to purchase based on employment not covered by PERA (log-in required).
All service credit purchases must be completed while you are an active member and before you retire or leave a job covered under PERA.
Payment for purchases may be made in a lump sum, monthly installments, or a combination of the two. Installments can be made over a period equal to twice the number of months being purchased, up to a maximum of 120 months.
You can use certain tax-deferred (pre-tax) funds to purchase service credit via rollover or transfer, including the PERAPlus 401(k) and 457 Plans, and if eligible, the PERA DC Plan. You cannot do a rollover or transfer tax-paid (after-tax) funds such as those in a Roth account. Tax-paid funds must be paid to you and then you can write a check to PERA.
See the Purchasing Service Credit booklet for more details.
When you’re ready to purchase, you can apply online by logging into your member account or by filling out an application and mailing it to PERA.