Helping Idaho Public Employees Build A Secure Retirement

Purchase of PERSI Base Plan Service

If you are a vested PERSI member, you may purchase additional service to improve your Base Plan retirement benefit. You may purchase up to 48 months (4 years) of service for any reason. These months may be added to your existing months of service to increase your retirement benefit amount. And if you have reached at least minimum retirement age (50 for Police/Firefighters, 55 for General Members) you may also be able to reach your Rule of 80/90 sooner.

Purchase must be paid in full no more than 90 days prior to retirement
For the additional service to be included in your retirement, it must be paid completely before you retire. PERSI may only accept payment for purchased service within 90 days prior to retirement. There are several reasons for this:

  • Long-term projection amounts are not accurate: Because the purchase cost is based on many factors – your salary, age, years of service and when you retire – an exact cost cannot be determined until you are actually ready to retire. For example: if our calculations project that your salary will increase 3% per year and your salary increases are even slightly different, your projection amount will be incorrect. Once you are within a few months of retirement an exact cost can be determined.
  • Flexibility : Once PERSI begins accepting purchase payments, due to IRS regulations, we cannot return your funds to you until you retire or separate from employment. We don't want you to be irreversibly locked into this decision. You may feel now that you want to purchase the service, but 5 - 20 years from now you may decide you want to do something else with that money. If you wish to save gradually over many years for your purchase, PERSI will work with you to estimate your cost to purchase and to give you ideas on where to place your savings – such as PERSI's Choice 401(k) Plan account or another savings account – until you are ready to make the purchase decision at time of retirement. At time of retirement, you may convert your Choice Plan funds to purchase service.

Purchase of Service is expensive and may not be right for you
Purchase of Service is very expensive. It could cost you $120,000 or more to buy 48 months, depending on your salary. You must pay for the total cost of the change to your benefit. You are paying for the increase in your lifetime pension benefit because of the additional service and because you may reach your Rule of 80/90 earlier.

Basically by purchasing service you are paying now for an increased benefit over your entire retirement. If the purchase improves your retirement benefit an estimated $50,000 over your lifetime, you pay us the present value of $50,000 now and we pay it back to you throughout your retirement. How long you live determines whether you will actually receive back more or less than you paid.

Purchase of Service is an extension of current service
If you purchase service, it may only be done as an extension of your current service. This means that:

  • If you are a general member, you may not purchase police/firefighter service and vice versa.
  • If you have mixed service (general and police/firefighter), you may only purchase service as an extension of your current membership class (if you once were a police officer, but now are a general member, you may only purchase as a general member).
  • If you are a Board Member or Elected/Appointed official, you may only purchase service at the minimum-benefit amount. If you later become a full-time employee, and decide to purchase service then, you may do so at the higher rate.

Choice 401(k) Plan Account may be converted to purchase service
You may convert all or a portion of your Choice Plan account to purchase service. To take advantage of this option, you must be retiring and otherwise eligible for the purchase.

Employer Participation
Your employer may purchase service for you. Should they decide to do so, their payment must be a lump-sum payment made within 90 days prior to your retirement. Employer payments for Purchase of Service are not refundable to you. Employer contributions must be preceded or accompanied by a written, signed statement from the employer's governing body verifying authority to purchase.

Death Benefits
Death benefits on Purchase of Service payments are identical to other PERSI death benefits except that unlike your PERSI Base Plan account, the Purchase of Service payment amount will not be doubled. Your beneficiary would receive only your purchase amount and interest in addition to the death benefit that relates to your regular contributions.

Purchase Limits
There are Idaho Code and IRS limits on the amount of service you may purchase. Idaho Code states that your PERSI benefit, including the part resulting from your purchase, cannot exceed your 3-year average salary at time of retirement. The limitations should affect relatively few PERSI members. These include:

  • Those who will have very large monthly benefits, or
  • Elected/Appointed officials or other individuals who receive very little salary.

If you fall into one of these categories, check with a PERSI Retirement Specialist prior to a purchase.

Estimating your costs to purchase service
You many figure out your cost to purchase service either on-line with our Purchase of Service Calculator or by requesting a Purchase of Service Estimate from the PERSI Answer Center at 1-800-451-8228. With the on-line calculator you can estimate how different purchased would affect your benefit and how much it would cost you (e.g. buying 6 months would cost me $14,000, buying 48 months would cost me $110,000, etc) You may enter multiple scenarios to see if any of the outcomes suit your needs.

If you want to save for your purchase over several years, you may use the on-line calculator to estimate the monthly amounts needed for the purchase.

The formula used is based on Idaho Code as of July 1, 2000. Your retirement benefits will only be calculated using the formula in Idaho law at the time of your last contribution. You must be working on or after the effective date of a formula for those factors to be applied to your benefit.

To estimate your cost to purchase service, you will first figure out your Base Plan retirement benefit, then what your benefit would be with the additional service. You will be able to see the difference between the two amounts, and then using an "Age" Factor you will be able to calculate how much it will cost you to purchase the service.

If you have any other questions regarding Purchase of Service, please contact the PERSI Answer Center at 1-800-451-8228 or 208-334-3365 in the Boise area.