Tier 2 Optional Service Credit
When hired, you become a member of SERS and mandatory contributions are automatically credited to your account. As a SERS contributing member, you may elect to purchase optional service credit.
There are several different types of optional service.
Leave of Absence
You may establish service credit for periods of less than one year spent on an authorized leave of absence, provided the period of leave began on or after January 1, 1982. You may also establish service credit for more than one authorized leave of absence. The total period of service established can then exceed one year.
Repayment of a Refund
- Repayment of a refund if you terminated state employment, and received a refund of your contributions, and were later rehired, you may reestablish your credited service by repaying the refund with interest after completing at least two additional years of credited service with SERS or any of the Reciprocal Retirement Systems that participate in the Retirement Systems' Reciprocal Act. (list of Reciprocal Systems)
A person who has met the two-year requirement may also purchase a portion of the refund. If part of the refund is repaid, the member may repay additional whole months of the remaining portion if they choose.
- Military service includes active duty in the United States Army, Navy, Air Force, Marines, or Coast Guard, or any of the women's auxiliaries.
1. Free credit with no contributions if ALL of the following conditions are met:
- You were a state employee within 6 months immediately before entering military service.
- You return as a state employee within 15 months after honorable discharge.
- You establish creditable state service immediately before and after military service.
2. Paid credit, with contributions.
If you do not qualify for free military service credit, you may purchase up to 48 months of military credit for active duty by paying the required employee and employer contributions, plus interest, provided:
- You were not dishonorably discharged
- The service credit purchased does not exceed five years, when added to the military service granted under Item 1 listed above.
Interest is calculated from the date the employee last became a member of SERS or November 19, 1991, whichever is later.
Tax-Deferring Optional Service Purchases
SERS allows members to tax-defer optional service purchases through payroll deduction. This lets members defer taxation until they retire. The tax-deferred withholding is made through an irrevocable payroll agreement for the total service credit purchase amount. SERS members may also transfer funds from their Deferred Compensation account to purchase permissive service credit or repay a refund.
Service credit is granted only after a refund or service purchase is paid in full. If the member dies, a partial service credit may be granted based on contributions and interest paid on the date of death.
In the case of retirement, termination or absences of more than one year, the member can choose to make an after-tax lump sum payment for the balance due, or the contributed amount can be refunded with taxes withheld and reported as income in that calendar year. Any after-tax lump sum payment must be made no later than 30 days after the member has been notified by SERS of the amount due.
Lump Sum Salary Payments
Most employees will receive a lump sum payment at retirement for unused vacation. This lump sum payment can be used to purchase any tax-deferred optional service credit. This election must be completed before the member leaves state service.
Unused Sick Leave
Unused and unpaid sick leave can be used to meet service eligibility requirements and increase your retirement benefit. This additional service credit does not affect final average compensation.
Paid Vacation Time
If you receive a lump sum payment for vacation or personal days when you retire, you may use this time to meet service eligibility requirements and increase your retirement benefit (21 days of sick & vacation leave equals one month of service credit). This additional service credit does not affect final average compensation. You can make the required contributions on a pre- or post-tax basis. To be eligible for this option, your retirement date must be effective within 90 days of resignation.
You may rollover money from another qualified pension plan, an Individual Retirement Account, Roth IRA, 403b or 457 containing money from a qualified total distribution to purchase optional service credit or repay a refund. To do so, you must obtain and complete a Transfer/Rollover Certification Form.
To inquire about the cost to establish additional service credit you may submit a request on your Member Services account. For instructions on submitting a request, see the Optional Service Purchase Fact Sheet.