Service Purchase
You can increase your benefit, but it comes at a cost. Check with us if it's right for you.
What is 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?
- Contact KPERS or your employer to see if your past service is eligible.
- Complete an Application to Purchase Service Credit: KPERS & KP&F | Judges
- Your designated agent completes the employer part of the form and sends it to KPERS.
- KPERS calculates your cost and sends you a letter. At this point, you can consider the cost and benefits.
- To complete the purchase, sign the paperwork, arrange for payment and return both to KPERS.
- KPERS receives your payment or payroll deduction commitment. We must receive your complete payment on or before your last day on your employer's payroll.
- KPERS 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 rollover 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)
Types of Service Credit You Can Purchase
- "Year of Service" or first year you worked to become eligible for membership (KPERS 1 non-school only)
- Partial year of service
- Forfeited TIAA-CREF (Board of Regents) service
- Military service
- Out-of-state teaching
- Elected official service
- Forfeited service (years you "withdrew" from KPERS if you left the System for a while)
- Out-of-state, non-federal public service
- In-state, non-federal public service
- Waiting period for Regents plan eligibility
- VISTA and Peace Corps
Check with your employer to see if your past public service qualifies. He or she 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 | Salary x 6% = $1,800 |
| $50,000 | Salary x 6% = $3,000 |
| $70,000 | Salary 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 increase significantly.
| KPERS 2 Service Purchase Example - under age 37 | |
|---|---|
| Salary (or FAS) | Service purchase cost |
| $30,000 | Salary x 6% = $1,800 |
| $50,000 | Salary x 6% = $3,000 |
| $70,000 | Salary x 6% = $4,200 |
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.
Payment Options:
- Pretax payroll deduction over time
- Rollover or trustee-to-trustee transfer from another retirement plan
- 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.
- Forfeited KPERS service. Previous KPERS service must be purchased in a lump sum and is added to your KPERS record.
- In-state, non-federal governmental work. Must qualify as KP&F service. Cannot be credited in another pension plan.
- 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.
Check with your employer 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 37, a year of service generally costs about 7.15% of your annual salary (or final average salary, whichever is higher). See examples 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 | Salary x 7.15% = $2,145 |
| $50,000 | Salary x 7.15% = $3,575 |
| $70,000 | Salary 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 | ||
|---|---|---|
| Final Average Salary | 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 |
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)
Check with your employer to see if your past public service qualifies. He or she also will be able to help you start the purchase process.
District Magistrate Judges may increase or convert certain types of DMJ service.
- Convert KPERS District Magistrate Service to Judges Distrcit 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)
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.
| KP&F Service Purchase Example - Under Age 37 | |
|---|---|
| Salary (or FAS) | Service Purchase Cost |
| $30,000 | Salary x 7.15% = $2,145 |
| $50,000 | Salary x 7.15% = $3,575 |
| $70,000 | Salary x 7.15% = $5,005 |
Benefit of Purchase
| Benefit of Purchasing Service Credit | ||
|---|---|---|
| Final Average Salary | Each Additional Year of Service, Your Benefit Increases By ... | |
| $30,000 | $233 per month | $2,800 per year |
| $50,000 | $291 per month | $3,500 per year |
| $70,000 | $350 per month | $4,200 per year |