Purchasing Additional Service Credit

Last Updated March 2017
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You may purchase additional service credit to increase your monthly retirement benefit. You can purchase additional service credit at the time of your retirement only. You cannot use the additional service credit to qualify for retirement.

Why would I want to buy 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 can purchase between one and 60 months of service credit in whole-month increments. The cost of service is based on the administrative 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 illustrative purposes only. See Administrative Factors on the DRS website for the most current numbers.

Example 1
Steps 1-3

Lee 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 1: Before filing her retirement application, Lee calculates her estimated monthly retirement benefit without the purchase of additional service credit:

2% x service credit years x AFC = monthly benefit

So Lee’s estimated monthly benefit will be $1,320 (2% x 22 x $3,000 = $1,320).

Step 2: Lee uses the same formula to calculate how much her monthly benefit will increase when she purchases five years (60 months) of additional service credit.

2% x 5 x $3,000 = $300

Buying 60 months of service credit will bring up Lee’s monthly retirement benefit to $1,620 ($1,320 + $300 = $1,620).

Step 3: Lee must figure out the cost to purchase the additional five years (60 months) of service credit.

So she divides the amount of the benefit increase ($300) by an annuity factor based on her age:

$300 ÷ 0.0069798 = $42,981

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

Example 2
in 10-month increments
Months to Purchase Monthly Increase to Benefit Administrative 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 in to your online account and create an estimate. This should help you determine how to proceed. Then, if you want to purchase additional service credit, submit a completed Request to Purchase Additional Retirement Service Credit form with your 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.

To pay your bill, you can make a one-time cash or check payment, an electronic funds transfer, or roll over funds from a tax-deferred retirement account, such as the state’s Deferred Compensation Program or an IRA. After DRS receives your payment, your benefit will increase. For more information, contact DRS.

This document is a summary. It is not a complete description for purchasing additional service credit. State retirement laws govern your benefit. If a conflict exists between the information shown in this document and what is contained in current law, the law governs.