8.01.05: Post-Tax Employer Payment for Service Credit Purchase by an Employer

Reporting unit post-tax purchases of service credit are covered by the following rules:

  • A purchase of active duty military service credit and/or payment for a repayment of a refund, contributions for pre 1992 weekly workers compensation, and MIP Window buy-back made by the reporting unit on behalf of the employee is a fringe benefit and is not to be reported as compensation. Do not remit employer retirement contributions for these payments.
  • These payments are considered employee rather than employer contributions toward retirement and must be accompanied by the billing statement sent to the employee. Submit these payments with a check separately from the regular employer contributions. Include a copy of the member billing statement. Indicate on your check stub the purpose for the payment, including the employee name and social security number.
  • All service credit payments, delinquent MIP contributions, MIP window payments, and Pension Plus and Pension Plus 2 defined benefit employee contributions are deposited into the Reserve for Employee Contributions as defined by PA 300 of 1980, as amended, and are credited to the individual employee’s account as after-tax contributions. If the member or the member’s beneficiary receives a refund of contributions, these payments will be included in the refund. If the member retires, these after-tax contributions will be distributed over the individual’s expected lifetime according to IRS life expectancy tables.
  • Member retirement health care contributions are NOT deposited into the Reserve for Employee Contributions as defined by PA 300 of 1980, as amended, and are NOT credited to the individual employee’s account as after-tax contributions.
  • These types of payments must be reported to the IRS as income on your employee’s W-2 form.

Last updated: 02/01/2018