If members choose to purchase credit for their previous service, they have the option to pay the required contributions, plus interest (if applicable), by means of:
- A single lump sum payment; or
- Transferring funds through a direct trustee-to-trustee transfer from an eligible retirement tax-sheltered plan or account (this method can only be used for the purchase of optional service credit); or
- Payroll deductions spread over a period of time equal to or less than the number of months they are purchasing. For example, if the member is purchasing 36 months of service, the payments may be spread out for as long as 36 months.
Members may elect to make supplemental lump sum payments in addition to payroll deductions. The easiest way for members to manage and make additional payments is through their Retirement Online member accounts.
If members request payment be made by payroll deduction, you will receive a notice from us to begin the payroll deductions. You should not begin deductions without authorization.
Taxable/Non-Taxable Service Credit Purchase Payments
Mandatory purchases of ERS service on or after July 1, 1989, are covered under Section 414(h) of the Internal Revenue Code. Mandatory purchases of PFRS service on or after October 1, 2013, are also covered under Section 414(h). Section 414(h) service credit purchases (SCP; previously “arrears”) are the only SCP deductions to be taken before tax for federal income tax purposes; all others are to be taken as after-tax deductions. When taking these payments, you will still report the full gross reportable earnings to NYSLRS. However, you must reduce the amount of the member’s earnings you report to the Internal Revenue Service for federal income tax by the amount of each deduction taken. For Social Security and State and local income taxes, use the full earnings before the deductions are taken.
If the member’s SCP is covered under Section 414(h), the letter we send notifying you to start deductions will indicate this. Otherwise, you should take the payments as normal after-tax SCP deductions.