Purchasing Credit

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What are the Requirements for purchasing service?

  1. The service must be in a full-time position.
  2. The service cannot be credited to another defined benefit retirement plan.
  3. You or the employer must provide verification of employment.
  4. Most purchase types require you to be participating and vested in KERS, CERS, or SPRS at the time the purchase is made.
 

How Much Will it Cost?

Our self service website, https://myretirement.ky.gov, has a real-time service purchase calculator that uses your salary and service information as reported by your agency to give you an estimated cost. If you are not eligible to purchase the service yet, we have a calculator outside of our login page that will give you an estimate using the information you supply.

 

Once you have seen the cost using the service purchase calculator, contact our office in writing or by phone to request an official cost calculation. We will establish a cost calculation date based on when our office receives valid documentation, or notification from you if no documentation is required. Please see our Service Purchase Types page to see if any forms are required.

 

Our office staff will prepare your cost, and send it to you with your available payment options. You will have 30 calendar days from the date you receive the cost to arrange payment; if no payment is made by that date, your cost will expire and a new cost will need to be requested, with a new cost calculation date (which may result in an increased cost).

 

How are Service Purchase Costs Calculated?

 Tier 1 Service Purchase Cost Formula

How do I Pay for the Purchase?

Eligible service credit may be purchased by the following payment methods, provided it falls within the limitation set forth in Section 415 (c) of the Internal Revenue Code. Any combination of these three methods may be used to pay for most service purchases.
 
  • Lump Sum Payment: Service may be purchased by making a lump sum payment to KRS. In many instances, the lump sum payment amount for some purchase types is limited by federal tax laws.
  • Installment Purchase of Service Agreement (IPS): Members may choose to have the cost of service deducted from their paycheck for a period not to exceed five years. To be eligible, the purchase cost must be at least $1,000.00. An interest charge of 7.50% compounded annually will be applied. KRS offers both before- and after-tax IPS contracts; however, some purchases may only qualify for before Tax IPS contracts. The before-tax IPS contracts are irrevocable contracts, so you should be mindful of the conditions of the contract before you enter the agreement. Additionally, tax laws limit how much money you can pay, if any, on an after tax contract for some service types.
  • Rollover or Transfer From a Qualified Plan: The Internal Revenue Code allows KERS, CERS, and SPRS to accept rollovers from other qualified plans such as Section 401(a), Section 401(k), Section 403(b), Section 457, a "Rollover" IRA or Traditional IRA. In order to complete a direct rollover or transfer of funds from another qualified plan to purchase service with KRS, the member and the financial institution making the direct rollover or transfer of funds must complete a Form 4170, Direct Transfer/Rollover Acknowledgement Form.

 

What are the types of Service I can Purchase?

There are over 30 different types of service purchases that you may be eligible to purchase. Below we have listed the most commonly purchased types. Click here for a full list.
 
  • Repayment of Refunded Service: If you are currently participating in one of the state administered retirement systems and you have taken a refund of retirement contributions for previous employment, you may regain the service lost by paying the amount of contributions withdrawn plus interest calculated from the time of withdrawal. Note: Vesting is not required, but you must work for at least six months to validate the purchase.
  • Active Duty Military: You may purchase all periods of active duty service with a branch of the Armed Forces. This purchase requires an honorable or general discharge from service.
  • "Delayed" Service: There are several types of service available to purchase, all calculated using the same formula, if you ever worked full-time in a non-participating capacity or in the public sector. You can visit our Service Purchase types page to see all of the different types.
  • Non-Qualified Service:  Also known as Air Time or Ghost Time. If you are currently participating and have service with KRS prior to August 1, 2002, you may purchase up to five (5) years of service once you have 15 years of total service in a state administered retirement system. At least five (5) of the 15 years required for this purchase type must be in KERS, CERS, or SPRS. The Non-Qualified Service may not be used for benefit purposes until you have accrued 20 years of service, excluding the Non-Qualified Service.
 
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