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Service Purchase

Increasing Your Benefit

What is a Service Credit?

Service credits represent how long a member has worked. Employees automatically earn “participating” credit for the years they work in a KPERS-covered position. Purchasing additional service credit could help you vest your benefit faster, get more at retirement and possibly retire sooner.

Don't wait. Purchase costs are based on salary and age. Now is probably the most inexpensive time for you to buy.

How Does the Process Work?

  1. Contact your designated agent to see if your past service is eligible.
  2. Complete an Application to Purchase Service Credit
    KPERS and KP&F (KPERS-67)    |    Judges (KPERS-67J)
  3. Your designated agent completes the employer part of the form and sends it to the Retirement System.
  4. The Retirement System calculates your cost and sends you a letter. At this point, you can consider the cost and benefits.
  5. To complete the purchase, sign the paperwork, arrange for payment and return both to the Retirement System.
  6. The Retirement System receives your payment or payroll deduction commitment. We must receive your complete payment on or before your last day on your employer's payroll.
  7. 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 on purchases with rollovers or payroll deduction
  • Annual limit 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)

Information by KPERS Group

Types of Service Credit You Can Purchase

  • "Year of Service" or first year you worked to become eligible for membership (KPERS 1 non-school members only)
  • Partial year of service
  • 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-CREF (Board of Regents) service
  • Waiting period for Regents plan eligibility
  • 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.

Cost of Purchase

KPERS 1
If you are under age 45, a year of service generally costs about 6% of your annual salary (or final average salary, whichever is higher). See example below. Each year after age 45, the actuarial cost increases significantly.

KPERS 1 Service Purchase Example - under age 45

Salary (or FAS)

 

Service purchase cost

$30,000

x 6%

= $1,800

$50,000

x 6%

= $3,000

$70,000

x 6%

= $4,200

KPERS 2
If you are under age 37, a year of service generally costs about 6% of your annual salary (or final average salary, whichever is higher). See following example. Each year after age 37, the actuarial cost increases significantly.

KPERS 2 Service Purchase Example - under age 37

Salary (or FAS)

Service purchase cost

$30,000

x 6%

= $1,800

$50,000

x 6%

= $3,000

$70,000

x 6%

= $4,200

Benefit of Purchase

Using the earlier example, a KPERS 1 member retiring with full benefits would recover the original purchase price through additional monthly benefits after about 41 months.

Benefit of Purchasing Service Credit - KPERS 1

Your final average salary

For each additional year of service, your benefit increases by ...

$30,000

$43.75 per month

$525 per year

$50,000

$73 per month

$875 per year

$70,000

$102 per month

$1,225 per year

Using the earlier example, KPERS 2 member would break even after about 39 months. Any money after that would be value added to the lifetime benefit.

Benefit of Purchasing Service Credit - KPERS 2

Your final average salary

For each additional year of service, your benefit increases by ...

$30,000

$46.75 per month

$555 per year

$50,000

$77 per month

$925 per year

$70,000

$108 per month

$1,295 per year

KPERS 1 Members Can Purchase "Year of Service"

Until July 1, 2009, non-school employees worked for one year in a covered position before becoming a KPERS member. Employees hired between July 1, 2008, and June 30, 2009 have a partial year of service. KPERS 1 members can purchase service credit for this time worked.

You can also buy other kinds of service, including forfeited service, military service, out-of-state teaching and others. Purchase costs are based on your age, salary and membership group.

Service credit can be purchased by payroll deduction, personal check, Discover Card, or a rollover or trustee-to-trustee transfer from another retirement plan, including KPERS 457, the state's 457 deferred compensation plan.

Payment Options

  • Pretax payroll deduction over time
  • Rollover or trustee-to-trustee transfer from another retirement plan
    Eligible plans include a governmental 457(b) plan like KPERS 457, the state's deferred compensation plan, a 403(b) annuity, or an IRA
  • Lump sum (personal check, money order or Discover Card)

Types of Service Credit You Can Purchase

  • Forfeited KP&F service. All available forfeited service must be purchased together.
  • Military service. You can purchase year for year of active military service and one quarter of service credit for each year of military reserve service. Up to 5 years of military service credit may be granted at no cost to you if your service is surrounded by covered employment (military service interrupted your public employment and was immediately followed by reemployment). You can purchase service credit for military service that is not granted. You can purchase up to 6 years of military service regardless of how many years are granted. Purchased military service does not count towards your eligibility to retire, but does increase your benefit.
  • Forfeited KPERS service. Previous KPERS service must be purchased in a lump sum and is added to your KPERS record.

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.

Cost

If you are under age 37, a year of service generally costs about 7.15% of your annual salary (or final average salary, whichever is higher). See example below. Each year after age 37, the actuarial cost increases significantly.

KP&F Service Purchase Example - Under Age 37

Salary (or FAS)

 

Service purchase cost

$30,000

x 7.15%

= $2,145

$50,000

x 7.15%

= $3,575

$70,000

x 7.15%

= $5,005

Using the above examples, a member retiring with full benefits would recover the original purchase price after 34 months. Any money after that would be value added to the lifetime benefit.

Benefit of Purchasing Service Credit

Your final average salary

For each additional year of service, your benefit increases by ...

$30,000

$63 per month

$750 per year

$50,000

$104 per month

$1,250 per year

$70,000

$146 per month

$1,750 per year

Payment Options

  • Pretax payroll deduction over time
  • Rollover or trustee-to-trustee transfer from another retirement plan
    Eligible plans include a governmental 457(b) plan like KPERS 457, the state's deferred compensation plan, a 403(b) annuity, or an IRA
  • Lump sum (personal check, money order or Discover Card)

Types of Service Credit You Can Purchase

  • Forfeited Judges service
  • Forfeited KPERS and KP&F service
  • Military service
  • Senior judges service (retired judges only)
  • VISTA service
  • Additional benefit service (first took office after age 60)

District Magistrate Judges may increase or convert certain types of DMJ service.

  • Convert KPERS District Magistrate service to Judges District Magistrate service
    (1.75% to 3.5% multiplier)
  • Increase Judges District Magistrate service rate from 3.5% to 5%
    (membership date before July 1, 1987)

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.

Cost of Purchase

If you are under age 45, a year of service generally costs about 6 percent of your annual salary (or final average salary, whichever is higher). See example below. Each year after age 45, the actuarial cost increases significantly.

Judges Service Purchase Example - Under Age 45

Salary (or FAS)

 

Service purchase cost

$80,000

x 6%

= $4,800

$100,000

x 6%

= $6,000

$120,000

x 6%

= $7,200


Benefit of Purchase

Benefit of Purchasing Service Credit

Your final average salary

For each additional year of service, your benefit increases by ...

$80,000

$233 per month

$2,800 per year

$100,000

$291 per month

$3,500 per year

$120,000

$350 per month

$4,200 per year


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Kansas Public Employees Retirement System
611 S. Kansas Ave, Topeka, KS 66603
Toll-free: 1 888 - 275-5737
Email: [email protected]