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Purchasing Additional Service Credit

Last Updated April 2014
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You may purchase additional service credit to increase your monthly retirement benefit. You can only purchase additional service credit at the time of your retirement. You cannot use the additional service credit to qualify for retirement.

Why would I want to purchase additional service credit?

Purchasing additional service credit increases your monthly retirement benefit for the rest of your life and, if you choose a survivor option, the Department of Retirement Systems (DRS) will continue paying the increase to your survivor after your death.

You may purchase from one to 60 months of service credit in whole month increments. The cost of service is based on the annuity factor for your age and plan. The monthly increase to your benefit is based on the same formula used to calculate your retirement benefit. The administrative factors used in the following examples are for illustration purposes only. See the Administrative Factors page for the most current numbers.

Example

Becky is a 65-year-old PERS Plan 2 member who has 22 years (264 months) of service credit. Her average final compensation (AFC) is $3,000 per month. She wants to purchase five years (60 months) of additional service credit.

Step one: Before filing her retirement application, Becky will calculate her estimated monthly retirement benefit without the purchase of additional service credit.

The formula is: Months of service credit ÷12 x 2% x AFC = monthly benefit.

For Becky, this means: 264 months ÷ 12 x 2% x $3,000 = $1,320.

Step two: Becky will use the same formula to calculate how much her monthly benefit will increase when she purchases five years (60) months of additional service credit.

60 months ÷ 12 x 2% x $3,000 = $300

Purchasing 60 months of service credit will increase Becky’s monthly retirement benefit to $1,620. ($1,320 + $300 = $1,620)

Step three: Becky must figure the cost to purchase the additional five years (60) months of service credit.

To figure the cost, she will divide the amount of the benefit increase ($300) by an annuity factor for her age and plan:

$300 ÷ 0.0069798= $42,981

Becky will pay $42,981 to purchase 5 years (60 months) of service credit.


Purchase Service Credit Example in 10 Month Increments
Months to Purchase Monthly Increase to Benefit Annuity Factor Estimated Cost
10 $50 0.0069798 $7,164
20 $100 0.0069798 $14,327
30 $150 0.0069798 $21,491
40 $200 0.0069798 $28,654
50 $250 0.0069798 $35,818
60 $300 0.0069798 $42,981

What's the next step?

Log into your online account and create an estimate – this should help you determine how to proceed. After you do this, if you would like to purchase additional service credit you must submit a completed Request to Purchase Additional Retirement Service Credit form with your completed online Retirement Application.

A bill will be created in the month you retire. Your payment must be made in full for the entire amount of service credit you purchase within 90 days of the bill issue date. You may pay your bill with a check or you may roll money from a qualified plan, such as the Washington State Deferred Compensation Plan, or an IRA. Upon receipt of payment you will receive the increased benefit. For more information about purchasing additional service, contact DRS directly.

The actual provisions governing the purchase of additional service credit are contained in the Revised Code of Washington (RCW) pertaining to each specific retirement system. This brochure is a summary of those provisions, not a complete description of the law, and describes provisions currently in effect. If there are any conflicts between what is written in this brochure and what is contained in the law the applicable law will govern.