Last Updated August 2011
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.
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.
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 (0.0069798). See the annuity chart for a partial list of factors.
$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|
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 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 retroactive to your retirement date. For more information about purchasing additional service, contact DRS directly.