Purchasing Service Credit

Methods of Payment for Purchasing Credit

All purchasable service credit must be paid in full within three months following your effective retirement date (the first of the month after your last day of paid service assuming age and service requirements are met). Purchasing service credit within three months after retirement will delay the finalization of your retirement benefit and it may delay partial payments. You may purchase service credit up to three months after your retirement but before the final benefit determination only if:

• Certification forms have been received in the STRS Ohio office before your retirement date, and
• A cost statement for the purchase is issued prior to your retirement date.

If credit is not purchased before your retirement date and the above criteria for purchasing credit following retirement are not met:

• the retirement date will be changed to the first day of the month following the purchase, or
• your service retirement will be canceled if you are not eligible to retire without the purchase.

The following methods may be used to purchase service.

Lump-Sum Payment

• Cost statements are prepared for the total amount and by cost per year of service credit.
• The minimum payment is $200 or the price to purchase .01 years of service credit, whichever is higher.
• Costs are valid only for the period indicated.

Members may purchase service credit in a lump-sum payment by rolling over tax-deferred funds from:

• Any 403(b), 457(b) governmental plan, 401(k), 401(a) or 403(a) qualified plan with pretax dollars.
• Any IRA account with pretax dollars.

If your employer is purchasing the credit for you, the employer must send its check to STRS Ohio with a letter certifying how the money is to be treated for tax purposes.

Contact STRS Ohio directly for specific rollover forms and procedures.

Partial Lump-Sum Option Plan (PLOP) Payment
At retirement, members have the option of electing a PLOP payment and a permanent reduction of the monthly benefit amount. Although the PLOP payment will reduce the monthly benefit, in some cases using the PLOP to purchase service credit will restore the benefit reduction and even increase the benefit. Whether the money is rolled into a qualified plan to defer taxes or taken in a lump sum after taxes, the option must be processed quickly to allow purchase of the service credit within three months after the retirement date. If you elect to use the PLOP payment to purchase credit, there are some important items to consider.

If you qualify for retirement without the purchase of service credit, you will receive the PLOP payment on your retirement date provided you filed your retirement application at least 30 days before your retirement date and you have provided complete information. To avoid any tax withholding, you may elect to roll over the PLOP payment to a tax-deferred account and then roll over the amount needed to purchase the service credit back to STRS Ohio. The rollover back to STRS Ohio must be completed within three months after your retirement date.

If you are not eligible to retire without the purchase of credit, you will need to first purchase the credit to be eligible to receive a PLOP payment. You may elect to roll over existing funds from a tax-deferred account to STRS Ohio to pay for the credit and then roll over the PLOP payment to the tax-deferred account to replenish the funds used to purchase the credit. If you do not have existing tax-deferred savings to pay for the credit, you may choose to purchase the credit with other savings or through borrowing, and then use the PLOP payment to replenish the savings or pay off the short-term loan.

For additional information, see the Partial Lump-Sum Option Plan section.

Payroll Deduction
STRS Ohio offers employers two payroll deduction options. Your employer may elect to use one or both methods. Payment may be submitted with money that has already been taxed (after-tax) or with money that has not been taxed (pretax).

When you request a cost statement for purchasable credit that has been certified with STRS Ohio, you will automatically be issued a payroll deduction cost form if payroll deduction is available and you have not yet filed for retirement.

To initiate payroll deduction, the cost form must be completed and given to your treasurer or payroll officer. In addition:

• You must be employed in a position that allows for regular year-round monthly deductions. (If you are paid on a nine-month schedule or other seasonal pay schedule, contact STRS Ohio regarding payroll deduction.)
• You must specify a monthly dollar amount or designate a specific time period.
• You may take up to five years to pay for each year of credit, with a minimum payment of $50 or the amount required to purchase .01 years of service credit, whichever is higher. However, purchases will be terminated in the month before your retirement date. You will have up to three months after retirement to purchase any remaining service through a lump-sum payment paid directly to STRS Ohio.
• Payroll deduction, whether pretax or after-tax, can be used to purchase service credit represented on only one cost statement at a time.
• Interest rates are subject to change. In the event of an interest rate change, the amount of your monthly payroll deduction may be affected.

Limitations of Pretax Payroll Deduction Plan
The decision to begin a pretax payroll deduction plan is irrevocable. Once started, the plan cannot be canceled or converted to an after-tax plan. The monthly payment amount cannot be stopped or changed even in the case of unforeseen circumstances or financial hardship. Extra payments may not be submitted on the pretax plan. The plan must continue until the member terminates employment or the credit is fully purchased.