Purchasable Service Information

Optional Service Credit Information

What is Optional Service Credit (OSC)?
Optional Service Credit is service credit that may be purchased by a member and added to his or her account to increase the final benefit amount at retirement. This type of service credit is 'optional' because members must elect to purchase this service credit and pay for it themselves. That differentiates it from 'earned service credit', which is awarded automatically each time the employer reports payroll information. The Cost of Earned service credit is also supplemented by the employer.

Service

Purchase of Service
If you have five years of creditable service, you may purchase up to five years of additional service credit. You must pay the full actuarial cost associated with your age and average compensation at the time of purchase. The cost to purchase one year of service averages about one-third of your annual salary. Payment can be made in a lump sum or by installment agreement.

Purchase of service may also be accomplished using certain types of retirement savings accounts such as 401 (a), 401 (k) qualified pension trusts, 403 (b) and 457 retirement savings plans and IRAs.

Refund of Contributions
If you contribute under the employee/employer contribution plan, you may withdraw your employee contributions if you terminate all employment for which contribution is required or if you are employed in a position ineligible for membership for at least 90 days.

A refund cancels all rights to membership including service credit earned under the EPC plan.

Repayment of Refunded Contributions
If you received a refund of employee contributions and later return to work and reestablish active membership for a period of at least six months, you may repay the refunded contributions and restore service credit. Repayment, including interest at the actuarially determined rate, may be made in a lump sum or by monthly installments.

Benefits

Benefit Calculation Factors
The monthly benefit you receive will be based on three factors:

Service Credit - years, months and days on which contributions were paid.
Average Compensation - average of highest 36 consecutive months of employment.
Selection of Retirement Option and Age of Member and Beneficiary at the Time of Retirement.

Benefit Formula
The formula used for calculating your retirement benefit is as follows:

Service Credit x 2.5%* x Average Monthly
Compensation = Unmodified Allowance
Example: 25 years x 2.5% = 62.5%
62.5% x $2,800 = $1,750

*For service credit earned after July 1, 2001, a 2.67% multiplier will be used

Retirement Options
Benefits are paid to you for life and, after your death, to the one person named as beneficiary on the retirement application. It is not mandatory to name a beneficiary. Prospective retirees may elect one of seven retirement options.

Option 1 - The Unmodified Allowance pays you the full monthly allowance you have earned but provides no income protection for your beneficiary after your death.

Option 2 - provides an actuarially reduced allowance for your lifetime. After your death, the same allowance continues for the lifetime of your beneficiary.

Option 3 - provides an actuarially reduced allowance for your lifetime. After your death, 50% of the allowance continues for the lifetime of your beneficiary.

Options 4 and 5 are calculated the same as 2 and 3 but are not payable to a beneficiary before age 60. In Options 6 and 7, a retiree may designate the beneficiary amount.

The reduction from the unmodified allowance is determined by an actuarial percentage based on the ages of the member and beneficiary at the time of retirement.

After retirement, the named beneficiary cannot be changed; however, you may under certain conditions choose to revert to the Unmodified Option. If your beneficiary predeceases you, the law provides that your benefit will revert to the Unmodified Option.

Benefit Calculation Formula
Unreduced Service Retirement Benefit

Average Compensation = $2,800
Service = 25 years x 2.5%* = 62.5%

	Monthly Amount Retiree Will Receive	Monthly Amount Beneficiary Will Receive After Retiree's Death
Unmodified Option 1	$1,750.00	- $0 -
Option 2	$1,489.25	$1,489.25
Option 3	$1,608.25	$804.12

The additional options can be calculated upon request.

* For service credit earned after July 1, 2001, a 2.67% multiplier will be used.

**The reduced amounts under Options 2 and 3 are based on your age and your beneficiarys age at the time of retirement.

Early Retirement Reduction
In the event you earn the years of service necessary to receive a retirement benefit but have not reached the age for an unreduced benefit, you may retire at any age with your benefit reduced by four percent for each full year that you retire early. An example of how this reduction would work is provided below for a 59-year-old retiree with 20 years of service, a $2,800 per month average compensation, and a beneficiary who is age 59.

Benefit Calculation Formula
Reduced Service Retirement Benefit

4% (1 year) x $1,400 = $56.00

* For service credit earned after July 1, 2001, a 2.67 multiplier will be used.

**The reduced amounts under Options 2 and 3 are based on your age and your beneficiarys age at the time of retirement.

1. Your anticipated retirement date
2. Your name and Social Security number
3. If you plan to select one of the Options 2-7, include your beneficiarys name, birth date and Social Security number

   It is also wise to consult a PERS' counselor prior to your retirement.