Service purchases
The new law adds ways for members to buy service credits. Service is important because it helps determine your benefit amount at retirement. Retirees may also buy service credit, which will increase their benefits. Service credits also affect disability and death benefits.
New ways to purchase service
1. Members who have earned at least five years of IPERS service may buy up to five years of service credit that is not tied to specific employment (also called buy-in of air time) at the actuarial cost.
2. Vested members who have a mixture of regular service and Special Service may convert regular service credits to Special Service credits by paying the added actuarial cost (also called a buy-up) of the higher Special Service benefits.
Effective July 1, 2008
Iowa Code Section Amended: 97B.80C(1) and (2)
Credit applied when buying back past service
When members quit working for an IPERS-covered employer and withdraw their contributions, they give up IPERS membership rights for that period of employment, including all service credits earned. If they later return to a job covered by IPERS, they can buy back that service at the actuarial cost.
The new law grants a credit that will reduce the buy-back cost to members who:
- Received a refund from IPERS before July 1, 1998,
- Were vested in IPERS when they received the refund, and
- Returned to work before July 1, 1998, and worked:
- Full-time, and
- In a job with mandatory IPERS coverage.
Employees who are interested in buying back service and think they may be eligible for the cost-reduction credit should call IPERS. The credit will be based on the employee's membership class, the number of years covered by the refund, and how much the employer contributed to IPERS during the time the employee worked.
Effective January 1, 2009
Iowa Code Section Amended: 97B.80C(3)
ABOUT PURCHASING SERVICE
When members purchase service, they pay money into the IPERS Trust Fund to buy additional service credits that IPERS will use to calculate their retirement benefits. The added service credits can increase the benefit amount or allow for an earlier retirement. IPERS does not profit from a service purchase.
Actuarial cost
IPERS’ actuary determines the cost of a service purchase by calculating the value of the extra benefits over a member’s lifetime (the actuarial cost). The calculation reflects projections of future mortality rates, salary increases, and employment patterns. While the actuary uses the same set of assumptions for all service purchase calculations, the impact of each factor varies by individual.
Generally, the sooner benefits begin, the more valuable they are. If the service purchase moves up the projected normal retirement date, the service purchase cost reflects the fact that benefit payments will begin earlier.
Applying
Each member must complete an Application for Service Purchase so the actuary can develop a cost quote. Filing an application does not obligate the member to purchase. Every individual must decide if the added benefits outweigh the cost of purchasing the service.
An IPERS benefit equals: |
Multiplier
(Based on Years of Service) |
X |
Salary
(Average of Highest 3 Years) |
For regular IPERS members, the multiplier increases 2 percent for each year worked in a job covered by IPERS, up to 30 years, and 1 percent for years 31–35. The maximum multiplier for regular members is 65 percent.
The multiplier for Special Service members (sheriffs, deputies, correctional officers, police, firefighters, and other public safety personnel) increases about 2.7272 percent each year, up to 22 years, and 1.5 percent each year for years 23–30. The maximum multiplier is 72 percent.
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