Service
Purchase Fact Sheet - KPERS
and Correctional Officers
You may be able to increase your retirement benefit and possibly retire earlier by purchasing service credit. If you are eligible, you can purchase service credit by making additional contributions to the Retirement System.
Types of Service Credit You Can Purchase
- First year you worked to become eligible for KPERS ("Year of Service" for non-school employees)
- Partial year (time you worked in a covered position for only part of a year)
- Forfeited service (years you “withdrew” from KPERS if you left the System for a while)
- Military service
- Out-of-state teaching
- Elected official service
- Out-of-state, non-federal public service
- In-state, non-federal public service
- Forfeited TIAA-CREFF
- VISTA and Peace Corps
Check with your designated agent to see if your past public service qualifies. He or she also will be able to help you start the purchase process.
Now Is the Time to Buy
Don’t wait. Purchase costs are based on salary and age. Now is probably the most inexpensive time for you to buy. Also, you can only purchase credit while an active member.
Payment Options
- Pre-tax payroll deduction over a period of time
- Rollover or trustee-to-trustee transfer from another retirement plan
like a governmental 457(b) plan, 403(b) annuity, or an individual retirement account - Lump sum (personal check, money order or Discover Card)
Cost
If you are under age 42, a year of service generally costs about 4 percent of your annual salary (or final average salary, whichever is higher). See example below. Each year after age 42, the actuarial cost increases significantly.
| KPERS Service Purchase Example - under age 42 | ||
Salary (or FAS) |
|
Service purchase cost |
$30,000 |
x 4% |
= $1,200 |
$50,000 |
x 4% |
= $2,000 |
$70,000 |
x 4% |
= $2,800 |
| Benefit of Purchasing Service Credit | ||
Your final average salary |
For each additional year of service, your benefit increases by ... |
|
$30,000 |
$43 per month |
$516 per year |
$50,000 |
$72 per month |
$864 per year |
$70,000 |
$102 per month |
$1,224 per year |
Using the above examples, a member retiring with full benefits would recover the original purchase price
after 28 months. Any money after that would be value added to the lifetime benefit.
How Does the Process Work?
- Contact your designated agent to see if your past service is eligible.
- If your service is eligible, complete an Application to Purchase Service Credit (KPERS-67) form.
- Your designated agent completes the employer part of the form and sends it to the Retirement System.
- The Retirement System calculates your purchase cost and sends a letter to you through your designated agent. At this point, you can consider the cost and benefits.
- To complete the purchase, sign the paperwork, arrange for payment and return both to the Retirement System.
- The Retirement System receives your payment or payroll deduction commitment.
- The Retirement System adds service credit to your record after the purchase is completed.
Federal Tax Requirements on Service Purchases
Only active members may purchase service. Federal law may limit you if you are purchasing service with after-tax money. This limit applies only to after-tax contributions, not to regular KPERS contributions or tax-free rollovers.
- Not on purchases with rollovers or payroll deduction
- Annual limit amount is indexed and changes each year
- Can cause a delay in completing a lump-sum after-tax purchase
- Most likely to affect high-cost purchases (large number of years or member’s age and salary)