What Service Purchases Can I Make?
There are six different types of service that you may be eligible to purchase while active:
Repayment of Refund: If you ever participated with KRS and took a refund upon termination, you may repurchase that service. The cost is based upon the gross amount refunded, plus accumulated interest compounded between the date of the refund and the last day of the month in which you request a calculation. Purchasing the service allows you to restore the lost service and contributions, but it does not reinstate your original participation date from that period of service.
Omitted: If you worked in a participating position and due to some oversight contributions were not reported to KRS, you can purchase those months of service or missing contributions. KRS will also bill your employer for missing employer contributions. If you purchase the omitted service, and the employer pays its required contributions, KRS will credit your account accordingly, and reinstate the original participation date of that service if it changes.
Omitted with Interest: If KRS has billed you and your employer for Omitted service and you did not purchase at that time, you can request a recalculation. Interest accrued since the due date of the original cost will be added to the new cost.
Military Omitted: If you were called to active duty military, you can purchase the missing months of service. The cost is based on the contributions you would have paid had you been participating during that time. Your employer also must pay the missing Employer contributions.
USERRA (Uniformed Services Employment and Reemployment Rights Act): Allows you to purchase Military Omitted service in excess of six years (if service qualifies for USERRA protection).
Decompression: If you return from military leave and do not immediately return to work, you can purchase up to ninety days between the date of discharge and date of return to employment. The employer also must pay the employer portion of this period of time.
No other service purchase types are available if you began participating on or after January 1, 2014. Please refer to the Summary Plan Description for more details and eligibility criteria.
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.