Adding to Your Service Credit

As you know, the longer you work the higher your pension will be.

But there are other ways to increase the years of service factor in your pension calculation. Service credit for certain other employment may be granted or transferred. Service credit may be purchased. And service credit may be restored if you withdrew your personal contributions to the system after a previous period of employment and want to repay the full amount withdrawn, with interest. 

Each type of service credit has specific rules, costs, and applications. Before you dig into the details though, read the following tips so you're ready to make what can be a complicated-and costly-decision.

• You must be an active member. Any service credit purchase or transfer must be completed while you are an active member-that is, while you are still employed by a participating public school system. Credit can never be purchased after you've stopped working within the retirement system.
  
  You remain an active member while laid off for a maximum of one year or on an approved leave of absence as long as an employee-employer relationship exists. (You may be asked to provide verification of your approved leave of absence.) If you work as a substitute employee, you are only considered an active member on the actual days you are working. Contractual employees hired and paid by an entity other than a reporting unit are not members of this retirement system.
• You will need to establish a wage base. Purchasing early in your career is usually cheaper. But you can't always do it your first day on the job. That's because the cost for many types of service credit is based on your highest previous school fiscal year earnings. If you had no school wages in the immediately preceding fiscal year, you may have to wait until after July 1.

In addition, Public Act 110, which takes effect July 1, 2008, requires that you must have earned at least two years of service credit before you're eligible to purchase credit.

• No double-dipping. When you get credit for other service, whether granted or purchased, you typically have to give up your rights to any benefit that would have been payable under the other pension system. 
• You can't buy your way in. Unless you plan to retire under one of the age 60 eligibility provisions, you'll need to earn at least 15 years of service credit in this retirement system (transferred state of Michigan service is treated as earned in this system). Most types of service credit have a maximum purchase limit, and most won't count in your pension calculation until you have earned ten years working within this system.
• A match may be required. Some service credit types have a match provision; you can't buy credit that will exceed the amount of credit you will earn within this system. Say, for example, you worked for an Ohio school for 12 years, and want to purchase that service. You may purchase all 12, but you won't be credited with the service until you've "matched" with 12 years in this system. (If you purchase more than you ultimately earn, we'll refund the excess.)
• You must be vested for your purchase to count. Unless otherwise noted, most purchases won't count in your service credit total until you are vested. You are vested when you have sufficient service to qualify for a future monthly benefit, whether or not you continue working for a public school. Most school employees are vested after the full-time equivalent of ten years.
• Purchased service and insurance subsidies. Buying service can help you qualify for your pension earlier, but it won't necessarily help you qualify for the plan's health insurance premium subsidy earlier. If your planning on enrolling in insurances when you retire, be sure you understand whether you will be subject to a delayed subsidy or graded premium.
  
  With few exceptions, purchased service can't count toward your vesting requirement. 

Your purchases are personal contributions. 

Your payments for service credit are put into a separate account along with any personal contributions from your earnings prior to July 1, 1977. This account is separate from your MIP contributions. Interest is credited annually on member contributions that have been on deposit for a full school fiscal year. For details about your contribution account, click here. 

If you leave public school employment before you've reached the minimum age and service requirement for a pension, you can request a refund of personal contributions. However, you would forfeit all service those contributions represent, so it's generally not a good idea if you're vested. There is no provision for a partial refund, nor can you borrow against your personal contributions. If you die before reaching retirement eligibility, your personal contributions will be paid to your beneficiary or estate. While you're an active public school employee, use the Beneficiary Nomination form (R0315C) to let ORS know who should receive your personal contributions (or, if vested, a monthly survivor pension).

 Click here for details about taking a refund if you leave. 

Weigh your cost versus benefit. 

"Buying time" isn't always an easy decision. You have to weigh the costs, which can be considerable, with the benefits. Fortunately, there's a terrific tool to help you decide the benefits: our benefit estimator. You can enter any number of "what-if?" scenarios, and the program will give you a pension estimate, quickly and easily.