PLOP Information

Purchasing Service & PLOP
Many members are eligible to purchase service credit that will increase their monthly benefit. The availability of PLOP can be a useful tool to help you determine if purchasing credit is worthwhile.

For example, assume you are planning to retire at age 60 with 30.00 years of STRS Ohio credit and a final average salary of $50,000. Also assume you have certified your eligibility to purchase 3.00 years of STRS Ohio credit for private teaching service at a cost of $20,000.

Without the purchased credit, your monthly Single Life Annuity benefit would equal $2,750:

2.2%	$50,000	$33,000
x 30	x 66%	÷ 12
66%	$33,000	$2,750

With the purchase, your monthly Single Life Annuity benefit increases to $3,025:

2.2%	$50,000	$36,300
x 33	x 72.6%	÷ 12
72.6%	$36,300	$3,025

In this example, purchasing 3.00 years of private teaching service credit increases the monthly benefit $275.

Members who are eligible to purchase service credit have three options regarding the purchase of their credit. They can purchase the credit and take no PLOP payment to maximize the monthly benefit, use the PLOP to purchase credit or retire without the purchase of additional credit.

Option 1 — Purchase Credit Without Electing a PLOP Payment
This option will provide the member with the largest monthly benefit. As shown in the example above, if the member purchases service credit without receiving a PLOP payment, the monthly benefit is $3,025.

Option 2 — Purchase Credit With a PLOP Payment
This option may allow the member to increase the monthly benefit without adding additional cost to the member. The monthly reduction for the PLOP payment may be less than the increase resulting from the purchase. For example, the PLOP reduction for the 60-year-old Defined Benefit Plan member is $6.64 for each $1,000 of PLOP payment. Therefore, a $20,000 PLOP payment would result in a $132.80 (20 x $6.64) monthly reduction. As noted earlier, the purchase of this member’s three additional years of service credit resulted in a monthly increase of $275. By using a $20,000 PLOP payment, this member would have a net monthly increase of $142.20.

If you are eligible to retire without the purchase of credit and you elect to use a PLOP payment to purchase credit, you may roll over all or part of the tax-deferred PLOP payment to STRS Ohio to purchase service credit. The remainder of the PLOP payment will go to the same financial institution as your monthly benefits. We will withhold 20% for federal taxes and you may be subject to a 10% penalty for the amount paid directly to your financial institution. You may want to contact your tax advisor for additional advice.

To avoid any tax withholding, you may elect to roll over the entire PLOP payment to a qualified retirement plan and then roll over the amount needed to purchase the 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 qualified retirement plan to STRS Ohio to pay for the credit and then roll over the PLOP payment to the qualified retirement plan 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.

If you do not roll over the PLOP payment, the payment is subject to tax withholdings.

All service credit must be certified before your date of retirement and purchased within three months after your date of retirement.

Important Reminders:

• You may use the PLOP payment to purchase credit if the Service Retirement Application is filed at least 30 days before the retirement date and you are eligible to retire without purchasing the service credit.

• If you elect to roll over part of your PLOP payment to buy service credit and the amount is more than the cost to buy your service, STRS Ohio will electronically deposit the balance to the account you specify on your Service Retirement Application.

Option 3 — Retire Without the Purchase of Additional Credit
Members may have reasons to not purchase eligible credit. For example, a member may not want to use limited personal savings. In addition, a member may not want to use a PLOP payment if the minimum payment is considerably larger than the cost of the service, and the monthly benefit after taking the minimum PLOP payment to purchase credit will be a lower monthly benefit. For example, a member may be eligible to purchase one year of service that would increase the monthly benefit by $90; however, the minimum PLOP payment may cause a $150 reduction, resulting in a net decrease of $60.

Purchasing Service Credit Using PLOP — Survivor Benefit Recipients
The PLOP is also available to retirement-based survivor benefit recipients. Information pertaining to retirement-based survivor benefit eligibility requirements can be found in the Survivor Benefits brochure. A survivor benefit recipient eligible for retirement-based benefits may purchase service credit to increase the monthly benefit. Call STRS Ohio toll-free at 1-888-227-7877 for more information about using the PLOP to purchase service credit.

Steps to Follow When Purchasing Service Credit With PLOP

• Certify all purchasable service credit before your effective retirement date.
• Complete and mail your Service Retirement Application to STRS Ohio at least 30 days before your effective retirement date. You must complete Section 5 of the Service Retirement Application requesting a PLOP payment.
  

Direct Payment of PLOP for Service Credit Purchase
If you elect a PLOP payment as a direct payment to you:

1. Request a PLOP payment that factors in tax provisions when determining your PLOP payment amount. For example, if you want a PLOP payment of $25,000, you would request $32,000* to account for the 20% federal tax withholding ($32,000 – 20% = $25,600).

2. Request a cost statement valid for the month you plan to purchase credit.

3. STRS Ohio will deposit the PLOP payment into the account you specified on your Service Retirement Application, after withholding the 20% federal tax withholding. You will pay the 10% early withdrawal penalty, if applicable, when filing your income taxes.

4. Write a personal check for the cost of the service credit or get a cashier’s check from your bank. Either type of check, personal or cashier’s, should be made payable to STRS Ohio. All service must be purchased within three months following your retirement date.
   
   
5. Mail the signed cost statement and your check to STRS Ohio.

*A PLOP payment must be elected in $1,000 increments, unless the minimum or maximum amount is selected.

Direct Rollover to STRS Ohio of PLOP for Service Credit Purchase
You may roll over part or all of your PLOP payment to STRS Ohio to purchase all or part of your eligible service credit.

1. Request a PLOP payment amount* and provide instructions for the amount to be directly deposited to STRS Ohio to buy service credit.

2. Sign, date and return the cost statement mailed to you for the month in which the PLOP payment will be made.

3. STRS Ohio will deposit all or part of the PLOP payment in your membership account to purchase credit. If there is still remaining credit to buy, you will be notified of the cost and the final date you can buy credit.

4. Any PLOP payment not used for the purchase of credit will be direct deposited into the same account as your monthly benefit payment, after 20% is withheld for federal income tax. The amount deposited to your account will be included as income for the year and a 1099-R form will be issued.

*A PLOP payment must be elected in $1,000 increments, unless the minimum or maximum amount is selected.

Rollover of PLOP for Service Credit Purchase
If the PLOP payment will be rolled over to another qualified account and then rolled back to STRS Ohio:

1. Set up a qualified retirement plan to accept the STRS Ohio PLOP payment and to defer the 20% federal tax withholding and avoid a 10% early withdrawal penalty (if applicable).
   • Qualified retirement plans include any IRA account, or any Keogh Plan, 401(a), 403(a), 403(b), 457(b) governmental plan or 401(k).
   • The plan must be in your name.
   • If you do not have a qualified retirement plan account, contact your financial institution for assistance.
2. Confirm the qualified retirement plan will accept the PLOP rollover and allow you to roll the money back to STRS Ohio, which is a 401(a) plan, no later than three months following your retirement date.
3. The PLOP payment will be issued on your retirement date if the request was made at least 30 days before your retirement date.
4. Obtain the form titled Service Credit Purchases With Tax-Deferred or Pretax Money from STRS Ohio.
   • Complete and return the form to STRS Ohio.
   • This form authorizes your financial institution to roll the PLOP money back to STRS Ohio to complete the service credit purchase.
5. Sign, date and return the cost statement to STRS Ohio. The month shown on the cost statement must match the month STRS Ohio receives the rollover check.
6. STRS Ohio will accept a check from the member if there is a balance due after the rollover has been applied to the member’s account. A cost statement showing the balance due will be mailed, if applicable.
   • STRS Ohio cannot accept a rollover in excess of the amount required to purchase the service credit.