Requirements for Purchasing Service
The service must be in a full-time position.
The service cannot be credited to another defined benefit retirement plan.
You or the employer must provide verification of employment.
Most purchase types require you to be participating and vested in KERS, CERS, or SPRS at the time the purchase is made.
Purchasing Time Cost
Our Self Service website, https://kyret.ky.gov/Pages/Login.aspx, 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.
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 the cost is sent 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).
Service Purchase Costs Calculation
Formula
Current Rate of Pay / Final Rate of Pay / Final Compensation * Actarial Factor * Years Purchased
Actuarial Factor - This is an individualized multiplier based upon a member's age, years of accrued service credit, applicable benefit factor, and eligibility for Final Compensation.
Years of Service Purchased - Purchases not calculated under this method include Repayment of a Refund, Hazardous Conversion, and Omitted Service.
Paying 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 KPPA. 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 (5) 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. KPPA offers both before-tax 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 KPPA, the member and the financial institution making the direct rollover or transfer of funds must complete a
Form 4170, Direct Transfer/Rollover Acknowledgement Form.
Types of Service for 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.
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 (6) 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.
Non-Qualified Service: Also known as Air Time or Ghost Time. If you are currently participating and have service with KPPA 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. This service credit can only be purchased with PRE-TAX monies.
Purchase Types Without Service Requirements
The following is a listing of most service purchase types and the information required to verify the period of service. If you are eligible to purchase service and wish to initiate, make sure you have the correct form completed.
A member currently participating in one of the state administered retirement systems who has taken a refund of retirement contributions for previous employment may regain the service lost by paying the amount of contributions withdrawn plus interest calculated from the time of withdrawal. The member must work for at least six months to validate the purchase. A recontribution of a refund will not alter the member’s participation date.
Verification Required: Information should be on file at KPPA
If a member worked in a participating position and, due to some oversight, contributions were not reported to KPPA, the member can purchase those months of service or missing contributions. KPPA will also bill the employer for missing employer contributions. Once KPPA receives both the member and employer contributions, KPPA will reinstate the original participation date for that service.
Verification Required: Form 4225 - Verification of Past Employment or Personnel Form
If you previously received a cost for Omitted service and did not act on that cost by the due date, you may request a recalculation. The recalculation will include interest as of the date of the original cost. Once KPPA receives both the member and employer contributions, KPPA will reinstate the original participation date for that service.
Verification Required: Information on file at KPPA
For Tier 1 and Tier 2 Members, Free Military Service is awarded to Members who take a leave of absence to enter the Armed Forces after first participating in KPPA. The member must return to employment within two (2) years of the completion of active duty service.
Verification Required: Form DD-214 and Personnel Forms
Allows a member to purchase military service in excess of six years if certain conditions are met.
Verification Required: Form DD-214 and Personnel Forms
If a member returns from military leave and does not immediately
return to work, the member can purchase up to ninety days between the date of discharge and return to employment. The
employer also must pay the employer portion for this period of time.
Verification Required: Form DD-214 and Personnel Forms
If a Tier 3 member was called to active duty military, the member can purchase the missing months of service. The cost is based on the contributions the member would have paid had they been participating during that time. The member's employer also must pay the missing employer contributions.
Verification Required: Form DD-214 and Personnel Forms
Vested Purchase Types
A member may purchase service with an agency that did not participate in KPPA but has since joined. Delayed Service (also referred to as past service) is service worked prior to the date the agency began participating.
Verification Required: Form 4225 -Verification of Past Employment
Prior to August 1, 2000, a member could purchase up to 4 years of active duty military service. Effective August 1, 2000, the statute provided that all periods of active duty service may be purchased.
A member may purchase all periods of active duty service with a branch of the Armed Forces. This purchase may require an honorable or general discharge from service.
Verification Required: A copy of your DD-Form 214 for each period of active duty.
Prior to August 1, 2000, a member could purchase up to 4 years of active duty military service. Effective August 1, 2000, the statute provided that all periods of active duty service may be purchased.
A member may purchase 1 month of credit for every 6 months served.
Verification Required: Most recent Annual Statement of Points/NGB-22
A member may purchase service credit for official maternity leave without pay, approved sick leave without pay, or approved leave without pay under the Family Medical Leave Act (FMLA) that occurred while working for a participating agency.
Verification Required: Form 4225 - Verification of Past Employment or Personnel Forms or a letter from the agency verifying the period of leave
A member may purchase service for time served in a seasonal, probationary, temporary, interim, emergency, or part-time position (more than 100 hours per month) that occurred with a participating agency.
Verification Required: Form 4225 Verification of Past Employment or Personnel Forms
A member may purchase service for certain types of employment with Kentucky’s state sponsored universities provided they did not participate in a defined benefit plan during employment and the position held would have qualified as a regular full-time position had the university been participating. This purchase is limited to the University of Kentucky and the University of Louisville since other state-sponsored universities participate in KERS.
Verification Required Form 4120 - Verification of Employment With a State University
From April 1, 2003 until June 20, 2005, Kentucky Revised Statute 61.552 (8) provided that university service may be purchased if the member did not participate in either a defined benefit plan or a defined contribution plan. Effective June 20, 2005, statute was amended to allow the purchase if the university service was covered under a defined contribution plan.
A member may purchase service credit for approved educational leave.
Verification Required: Personnel Forms or Letter from agency verifying the period of leave.
A member may purchase service worked as a full-time federal employee provided the member withdrew all funds or did not participate in the Federal Retirement System.
Verification Required: Form 4115 - Federal Verification
A member may purchase up to 10 years of service credit for full-time out-of-state public service. To qualify, the out-of-state service must have been credited in a state or locally administered defined benefit retirement plan, other than one for teachers. The member must provide verification that he or she has received a refund or is not eligible for a retirement benefit from the period of out-of-state service.
Verification Required: Form 4140 - Verification of Out of State Service
A member may purchase up to 10 years of service credit for full-time out-of-state public service if the position would be determined as hazardous duty. To qualify, the out-of-state service must have been credited in a state or locally administered defined benefit retirement plan, other than one for teachers. The member must show that he or she has received a refund or is not eligible for a retirement benefit from the period of out of state service. The member must also submit a copy of the job description for his or her out of state public service.
Verification Required: Form 4140 - Verification of Out of State Service and a copy of the former job description.
A member may purchase service worked in a non-teaching position with a Vocational/Technical School in the state of Kentucky that averages at least 80 hours per month on a calendar or fiscal year basis.
Verification Required: Form 4225 - Verification of Past Employment or Personnel Forms
A member may purchase service for regular full-time employment with a Community Action Agency created under Kentucky Revised Statute 273.405 to 273.453 if that service was not covered by a state-administered retirement system.
Verification Required: Personnel Forms or Letter from agency verifying the period of service.
A member may purchase service for employment in a regional community mental health and mental retardation services program, organized and operated under the provisions of Kentucky Revised Statute 210.370 and 210.480, which does not participate in a state-administered retirement system.
Verification Required: Personnel Forms or Letter from agency verifying the period of service.
A member may purchase service credit for periods of approved leave to work for a work-related labor organization provided that the agency approving the leave subsequently participated in CERS.
Verification Required: Letter from the IRS or U.S. Department of Labor stating that the purchase is allowable under federal restrictions.
A member may purchase service for employment with an Area Development District (ADD) created pursuant to Kentucky Revised Statute 147A.050 or a business development corporation created pursuant to Kentucky Revised Statute 155.001 to 155.230 which does not participate in KRS.
Verification Required: Letter from the IRS or U.S. Department of Labor stating that the purchase is allowable under federal restrictions.
A hazardous member may purchase service credit with an urban-county government. To qualify, the employment must have been considered regular full-time and qualify for hazardous duty coverage under Kentucky Revised Statute 61.592. The member must show that he or she has received a refund or is not eligible for a retirement benefit for the period of urban-county government service.
Verification Required: Form 4131 - Verification of Urban-County Goverment Service
Members currently participating and who have service with KPPA prior to August 1, 2002, may purchase up to five (5) years of service once they 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 the member has accrued 20 years of service, excluding the Non-Qualified Service. Even if you began participation after September 1, 2008, you may still be eligible to buy Non-Qualified Service, provided there is some other service you have purchased that was earned prior to August 2002. This service credit can only be purchased with PRE TAX monies.
Verification Required: Information should be on file at KPPA