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Employers Manual

Purchasing Service Credit

Purchasing Service Credit Through Payroll Deduction (Defined Benefit Plan Only)
Pursuant to Section 3307.70, Revised Code, and the provisions under State Teachers Retirement Board Rule 3307:1-3-11, members may purchase additional retirement credit by payroll deduction for any type of purchasable credit.

General Provisions

  • Upon request, STRS Ohio will provide the member a form to initiate the purchase of service credit through payroll deduction. The member shall complete and sign the form, indicating the amount to be deducted monthly, and file the form with the employer.
  • The employer will then complete the form to establish the date deductions are to begin. This date shall be agreed upon by the member and employer, but will not be later than three months after the form is filed with the employer. The employer will then transmit the form to STRS Ohio.
  • Deductions made by the employer shall be deposited monthly with STRS Ohio no later than the 15th day of the month following the deduction.
  • A member will be eligible for payroll deduction by any one employer for only one type of restoration or purchase at any given time. A member may not simultaneously participate in deductions for the same type of credit.
  • Service credit and contributions will be posted annually by fiscal year to the accounts of participating members.
  • STRS Ohio will prepare a monthly list of participating members based on the payroll deduction forms and designated changes previously submitted by an employer. This list, the Monthly Remittance of Payroll Deductions for Purchased Service form, will be sent to the employer and will indicate both the expected and minimum deduction for each participant. The employer shall enter the amount actually deducted and return the list with payment to STRS Ohio by the 15th day of each month.
  • Accumulated deductions for the purchase or restoration of service credit are refundable only upon termination of covered employment. However, the cost of credit purchased may be refunded if, upon commencement of a benefit, the credit does not increase the benefit payable.
  • Employers may have two types of payroll deduction plans — one after-tax and one pretax — or they may elect to offer only one type of plan.

Additional Provisions for After-Tax Payroll Deduction Plan

  • If a member terminates payroll deduction prior to restoration or purchase of the entire amount of qualifying credit, the credit established to date will be calculated and posted to the member’s account. A new application is required for restoration or purchase of additional service credit.
  • The amount of deduction may be changed by the member upon written notice to the employer. However, the monthly amount deducted shall not be less than the applicable minimum.
  • A member may terminate payroll deduction at any time by notifying the employer. Termination of employment will discontinue deduction. Written notice must be given to the employer.

Additional Provisions for Tax-Deferred Payroll Deduction Plan
(Federal and state taxes would be deferred)

  • Tax-deferral on these purchases or repayments became available on July 1, 1997, for employers who adopt a tax-deferred plan.
  • Employers are required to notify STRS Ohio at least 60 days before the effective date of the plan.
  • The employer must pass a resolution that it agrees to deduct and remit the payments on a pretax basis.
  • The employer must complete the Notification of Adoption of a Tax-Deferred Payroll Deduction Plan form and submit it, along with a copy of the school board or authorizing resolution, at least 60 days before the effective date of the plan. STRS Ohio will send the employer a Confirmation of Tax-Deferred Payroll Deduction Plan form upon receipt of notification.
  • The participating member in a tax-deferred plan must irrevocably agree to continue payroll deductions until the purchase is complete or employment is terminated.
  • Members who begin the purchase of credit by tax-deferred payroll deduction cannot make payments directly to STRS Ohio for the same credit.
  • Members cannot change the payment amount and cannot make accelerated or extra payments directly to STRS Ohio for the same credit.
  • Overpayments on tax-deferred payroll deductions will be returned to the employer for proper tax accounting.

STRS Ohio agrees to account for designated service credit purchases on a pretax basis but otherwise assumes no further liability. The current or deferred taxation of payments is determined solely by the Internal Revenue Service, and compliance with the guidelines set forth does not guarantee that taxes on payments will be deferred. STRS Ohio may refuse to account for payments on a pretax basis if so directed by the IRS, if guidelines based on the changing state of the law are not allowed, or if the qualified plan status of STRS Ohio is placed in jeopardy.

Once a tax-deferred plan is adopted by an employer, STRS Ohio will notify members currently participating in that employer’s payroll deduction plan of the restrictions and options of a tax-deferred plan. Members will be asked to discuss this notice with their employer. Employers should note changes in the member’s plan, certify the notice and return it to STRS Ohio.