KRS § 61.552 — KY Code / Title VIII / Chapter 61 / Section 61.552
61.552 Credit for service -- Purchases and grants
Status: in_force

61.552 Credit for service -- Purchases and grants.

(1) Called to Active Duty Military Service. An employee of an employer participating

in the system who is called to active military duty in the Armed Forces of the

United States shall be credited in accordance with 38 U.S.C. sec. 4318 with service

credit, creditable compensation, and in the case of employees participating in the

hybrid cash balance plan, employee contributions, employer credits, and interest

credits, for a period of active military duty of up to six (6) years, provided:

(a) The employee was called to active military duty in the Armed Forces of the

United States:

1. After the employee's membership date in the system and provided the

employee was on leave of absence from the employer and did not

withdraw his or her accumulated account balance; or

2. Prior to the employee's membership date in the system and the date the

employee terminated employment with his or her employer;

(b) The employee entered active military service within three (3) months of his or

her last day of paid employment;

(c) The employee's discharge military service was terminated in a manner other

than as described in 38 U.S.C. sec. 4304;

(d) The employee returns to work with an employer participating in the system

within two (2) years after completion of the period of active military duty, or

upon the subsequent termination of any total disability which existed at the

expiration of the two (2) years after discharge; and

(e) For an employee whose membership date is on or after January 1, 2014, who

is participating in the hybrid cash balance plan under KRS 16.583, 61.597,

78.5512, or 78.5516, the employee pays the employee contributions on the

credited compensation as provided under KRS 16.543, 61.543, and 78.615.

For periods of active military duty that meet the requirements of this subsection, the

employer shall pay the employer contributions payable under KRS 61.565, 61.702,

78.5536, and 78.635.

(2) (a) Omitted Service. Any person who is entitled to service credit for employment

which was not reported by the employer in accordance with KRS 16.543,

61.543, or 78.615 may obtain credit for the service subject to the provisions of

this subsection.

(b) Provided the person pays for the omitted service with within six (6) months of

notification by the system, the cost of the service shall be equal to the

employee contributions that would have been paid if the person had been

correctly reported in accordance with KRS 16.543, 61.543, or 78.615.

(c) Any employee participating in one (1) of the state-administered retirement

systems entitled to service credit under paragraph (a) of this subsection who

has not repaid the employee contributions due within six (6) months of

notification by the system may purchase the credit after the six (6) months by

paying to the system the employee contributions plus interest at the actuarially

assumed rate from the date of initial notification under paragraph (b) of this

subsection.

(d) Omitted service purchased under this subsection shall:

1. Be considered service credited under KRS 16.543(1), 61.543(1), or

78.615(1) for purposes of determining eligibility for retirement benefits

under KRS 78.510 to 78.852; and

2. Not be credited to the member's account until the employer

contributions due and any interest or penalties on the delinquent

employer contributions for the period of omitted service are received by

the system.

(e) Employees who begin participating on or after January 1, 2014, in the hybrid

cash balance plan provided by KRS 16.583 or 61.597 or 78.5512 or 78.5516

shall, upon payment of the employee and employer contributions due under

this subsection, have their accumulated account balance increased by the

employee contributions, employer pay credits, and interest credits that would

have been credited to their member's account if the contributions had been

paid on time.

(f) Contributions payable by the employer under this subsection for omitted

service shall be considered delinquent from the date the employee should

have been reported and received service credit in accordance with KRS

16.543, 61.543, and 78.615.

(3) (a) Recontribution of a Refund. Any employee participating in one (1) of the

state-administered retirement systems who has been refunded his or her

accumulated account balance under the provisions of KRS 61.625, thereby

losing service credit in the system, may regain the credit by paying to the

system the amount or amounts refunded by the system with interest at a rate

determined by the board. Service purchased under this subsection on or after

January 1, 2014, shall not be used to determine the member's membership

date in the systems.

(b) Recontribution of a refund purchased under this subsection shall not be used

in determining a retirement allowance until the member has accrued at least

six (6) months of service credit in a state-administered retirement system,

excluding the service purchased under this subsection. If the member does not

accrue at least six (6) months of service credit in a state-administered

retirement system, excluding service purchased under this subsection, then the

payment plus interest as provided in KRS 16.560, 61.575, or 78.640 shall be

refunded upon retirement, death, or written request following termination of

employment. The service requirement shall be waived if the member dies or

becomes disabled as provided for by KRS 16.582, 61.600, 61.621, 78.5522, or

78.5524.

(4) (a) Summer Months. Any employee participating in one (1) of the state-

administered retirement systems who is or has been employed by a school

board or community action agency participating in the County Employees

Retirement System or a state-operated school under KRS Chapter 167 or an

institution of higher learning participating in the Kentucky Employees

Retirement System, who receives service credit for less than twelve (12)

months each year, may purchase the additional months of service credit

needed to total one (1) year of service credit, except the amount purchased for

any specific year shall not exceed three (3) months.

(b) The cost of the summer months service credit shall be determined by the

formula established by subsection (10) of this section and may be purchased

by the employee, or the employer on behalf of the employee, or the cost may

be paid by both the employer and employee in which case the employer and

employee shall each pay fifty percent (50%) of the cost. Service credit shall

not be credited to the member's account until both the employer's and

employee's payment are received by the system.

(c) If the employee has purchased service credit under this subsection based on

months reported by the employer for the fiscal year, and an audit of the

employee's account reduces the number of months of service credit for which

the employee is eligible to no fewer than nine (9) months, the employee shall

retain credit for the months purchased unless the employee is ineligible for

any service in the fiscal year. The employee shall be eligible to purchase the

additional months under this subsection to total one (1) year.

(d) This subsection shall not apply to members who began participating in the

County Employees Retirement System on or after January 1, 2014.

(5) Vested Service Purchases. Any employee who began participating in the County

Employees Retirement System, the Kentucky Employees Retirement System, or the

State Police Retirement System prior to January 1, 2014, who is vested may

purchase service credit for:

(a) Past service. "Past service" means periods of employment:

1. Between July 1, 1956, in the case of the Kentucky Employees

Retirement System, or July 1, 1958, in the case of the County

Employees Retirement System, and the effective date of participation by

the employer; or

2. With a public agency that did not participate in the Kentucky Employees

Retirement System but would have been eligible to participate under

KRS 61.520 or a political subdivision that did not participate in the

County Employees Retirement System but would have been eligible to

participate under KRS 78.530, provided the public agency or political

subdivision has merged with or been taken over by a participating

employer;

(b) State university service, provided the university does not participate in a state-

administered retirement system and the university service being purchased

was in a nonteaching position that did not participate in a defined benefit

retirement program;

(c) 1. Up to ten (10) years of out-of-state service. "Out-of-state" means service

credited to a state or local government-administered public defined

benefit plan in another state that is not a defined benefit plan for

teachers.

2. Up to ten (10) years of out-of-state hazardous service. "Out-of-state

hazardous service" means service in a regular full-time position that was

credited to a defined benefit retirement plan administered by a state or

local government in another state, if the service could be certified as

hazardous pursuant to KRS 61.592 or 78.5520, as applicable. The

employee may purchase out-of-state hazardous service under this

subparagraph provided the employee is vested to receive benefits from

the State Police Retirement System or hazardous duty benefits from the

Kentucky Employees Retirement System or the County Employees

Retirement System.

The employee must purchase out-of-state service or out-of-state hazardous

service in the system in which he or she is vested based solely upon the

service in that system;

(d) Active military duty, which means periods of active military duty in the

Armed Forces of the United States, provided:

1. The employee's military service was terminated in a manner other than

as described in 38 U.S.C. sec. 4304; and

2. The service has not been credited as free military service under

subsection (1) of this section;

(e) National Guard service. An employee may purchase one (1) month of service

for each six (6) months of service in the National Guard or the military

reserves of the United States. The service shall be treated as service earned

prior to participation in the system;

(f) Federal service. "Federal service" means service with the United States

government, that is not service in the Armed Forces;

(g) Seasonal, emergency, interim, probationary, or temporary employment or

part-time employment as provided by KRS 61.510(21) or 78.510(21)

averaging one hundred (100) or more hours of work per month on a calendar

or fiscal year basis. If the average number of hours of work is less than one

hundred (100) per month, the member may purchase credit for only those

months he or she receives creditable compensation for one hundred (100)

hours of work;

(h) Part-time employment in a noncertified position at a school board prior to the

1990-91 school year which averaged eighty (80) or more hours of work per

month on a calendar or fiscal year basis. If the average number of hours of

work is less than eighty (80) per month, the noncertified employee of a school

board shall be allowed to purchase credit only for those months he or she

receives creditable compensation for eighty (80) hours of work;

(i) Any period of:

1. Authorized maternity leave without pay or sick leave without pay;

2. Unpaid leave authorized under the federal Family and Medical Leave

Act;

3. Approved educational leave; and

4. Agency-approved leave to work for a work-related labor organization if

the agency subsequently participated in the County Employees

Retirement System, but only if the board receives a favorable private

letter ruling from the United States Internal Revenue Service or a

favorable opinion letter from the United States Department of Labor;

(j) Non-participating employer service, which means periods of employment

with the following types of agencies provided the agency does not participate

in a state-administered retirement system:

1. A regional community services program for mental health organized and

operated under the provisions of KRS 210.370 to 210.480;

2. A community action agency created under KRS 273.405 to 273.453.

The service provided by this subparagraph shall be purchased in the

County Employees Retirement System;

3. An area development district created pursuant to KRS 147A.050; or

4. A business development corporation created pursuant to KRS 155.001

to 155.230, provided the system receives a favorable private letter ruling

from the United States Internal Revenue Service or a favorable opinion

letter from the United States Department of Labor;

(k) Urban-county government service, which means employment in an urban-

county government position that would qualify for hazardous duty coverage

under KRS 61.592 or 78.5520. The provisions of this paragraph shall only be

applicable to vested members participating in the State Police Retirement

System or in a hazardous position in the Kentucky Employees Retirement

System or the County Employees Retirement System;

(l) Periods of service as assistants to officers and employees of the General

Assembly for persons who were unable to acquire service under KRS

61.510(20) for service performed after January 1, 1960;

(m) Service as a volunteer in the Kentucky Peace Corps, created by KRS 154.1-

720; and

(n) Employment with a vocational technical school in a noncertified part-time

position averaging eighty (80) or more hours per month, determined by using

the number of months actually worked within a calendar or fiscal year. The

service provided by this paragraph shall be purchased in the Kentucky

Employees Retirement System.

(6) Non-qualified service. Provided the employee's membership date in the system is

prior to July 15, 2002, and provided the employee has total service in all state-

administered retirement systems of at least one hundred eighty (180) months of

service credit, the employee may purchase a combined maximum total of five (5)

years of service credit, known as non-qualified service, which is not otherwise

purchasable under any of the provisions of KRS 16.505 to 16.652, 61.510 to

61.705, or 78.510 to 78.852. The service purchased under this paragraph shall not

be used in determining a retirement allowance until the member has accrued at least

two hundred forty (240) months of service, excluding service purchased under this

subsection. If the member does not accrue at least two hundred forty (240) months

of service, excluding service purchased under this subsection, upon retirement,

death, or written request following termination, the payment, plus interest as

provided in KRS 16.560, 61.575, or 78.640, as applicable, shall be refunded.

(7) For purposes of service purchased under subsections (2) to (6) of this section:

(a) Except for subsection (6) of this section, the service must qualify as regular

full-time as provided by KRS 61.510 and 78.510;

(b) No service credit may be purchased for periods already credited to the system

or another public defined benefit retirement fund, including non-qualified

service purchased in another state-administered retirement system;

(c) Except as provided by paragraph (a)2.a. of subsection (9) of this section, the

employee payment for service purchases shall not be picked up, as described

in KRS 16.545(4), 61.560(4), or 78.610(4), by the employer;

(d) Except for service purchased under subsection (2) or (3) of this section,

service purchases made pursuant to this section may be purchased by the

entire amount of service available or by increments. Service purchases made

pursuant to subsections (2) and (3) of this section shall only be purchased by

the entire amount of service available; and

(e) Service purchases as provided by subsections (5)(b), (d) to (f), and (j)1. and

(6) of this section may be purchased in any system in which the member has

service credit.

(8) (a) Employer purchase of past service. Any employer participating in the system

may purchase service credit, between July 1, 1956, in the case of the

Kentucky Employees Retirement System, or July 1, 1958, in the case of the

County Employees Retirement System, and the participation date of the

employer, for present employees of the county or department who have

elected coverage under KRS 61.525(2) or 78.540(1), provided the employee

began participating in the system prior to January 1, 2014.

(b) A Kentucky Employees Retirement System employer shall pay the cost of the

service credit within the fiscal year the election is made to purchase the

service credit. A County Employees Retirement System employer may

purchase the service, with interest at the rate actuarially assumed by the board,

over a period not to exceed ten (10) years.

(c) If an employer elects to purchase service under the provisions of this

subsection, any present employee who would be eligible to receive service

credit under the provisions of this subsection and has purchased service credit

under subsection (5)(a) of this section shall have his or her payment for the

service credit refunded with interest at the rate paid under KRS 61.575 or

78.640.

(d) Any payments made by an employer under this subsection shall be deposited

to the retirement allowance account of the system and these funds shall not be

considered accumulated contributions of the individual members.

(9) (a) An employee participating in the system may purchase service credit under

any of the provisions of KRS 16.505 to 16.652, 61.510 to 61.705, or 78.510 to

78.852 for which he or she is eligible to purchase, or as otherwise required by

38 U.S.C. ch. 43, by:

1. Making a lump-sum payment on a before-tax basis as provided in

subparagraph 3. of this paragraph, or on an after-tax basis if the

employee is purchasing service credit under subsection (1) or (3) of this

section, service available pursuant to 38 U.S.C. ch. 43 not otherwise

provided for in this section, or grandfathered service as defined in

paragraph (b) of this subsection;

2. Entering into an agreement to purchase service credit through an

installment purchase of service agreement with the systems as provided

by paragraph (c) of this subsection:

a. On a before-tax basis in which the service is purchased pursuant to

the employer pick-up provisions in 26 U.S.C. sec. 414(h)(2); or

b. On an after-tax basis if the employee is purchasing service credit

under subsection (1) or (3) of this section, service available

pursuant to 38 U.S.C. ch. 43 not otherwise provided for in this

section, or grandfathered service as defined in paragraph (b) of this

subsection; or

3. Transferring funds to the system through a direct trustee-to-trustee

transfer as permitted under the applicable sections of the Internal

Revenue Code and any regulations or rulings issued thereunder, through

a direct rollover as contemplated by and permitted under 26 U.S.C. sec.

401(a)(31) and any regulations or rulings issued thereunder, or through a

rollover of funds pursuant to and permitted under the rules specified in

26 U.S.C. secs. 402(c) and 408(d)(3). The system shall accept the

transfer or rollover to the extent permitted under the rules specified in

the applicable provisions of the Internal Revenue Code and any

regulations and rulings issued thereunder.

(b) For purposes of this subsection, "grandfathered service" means service

purchases for which a member, whose membership date in the system is prior

to July 1, 1999, is eligible to purchase under KRS 16.505 to 16.652, 61.510 to

61.705, or 78.510 to 78.852, that were available for all members of the system

to purchase on August 5, 1997.

(c) 1. For service purchased under a before-tax or after-tax installment

purchase of service agreement as provided by paragraph (a)2. of this

subsection, the cost of the service shall be computed in the same manner

as for a lump-sum payment which shall be the principal, except that

interest compounded annually at the actuarial rate in effect at the time

the member elects to make the purchase shall be added for the period

that the installments are to be made.

2. Multiple service purchases may be combined under a single installment

agreement, except that no employee may make more than one (1)

installment purchase at the same time.

3. For after-tax installment purchase of service agreements, the employee

may elect to stop the installment payments by notifying the system; may

have the installment purchase recalculated to add one (1) or more

additional service purchases; or may pay by lump sum the remaining

principal or a portion of the remaining principal.

4. Before-tax installment purchase of service agreements shall be

irrevocable, and the employee shall not be able to stop installment

payments or to pay off the remaining balance of the purchase of service

agreement, except upon termination of employment or death.

5. One (1) year of installment payments shall be made for each one

thousand dollars ($1,000) or any part thereof of the total cost, except

that the total period allowed for installments shall not be less than one

(1) year and shall not exceed five (5) years.

6. The employee shall pay the installments by payroll deduction for after-

tax purchase of service agreements, and the employer shall pick up

installments for before-tax purchase of service agreements. Upon

notification by the system, the employer shall report the installment

payments monthly continuously over each twelve (12) month period at

the same time as, but separate from, regular employee contributions on

the forms or by the computer format specified by the board.

7. The system shall determine how much of the total cost represents

payment for one (1) month of the service to be purchased and shall

credit one (1) month of service to the member's account each time this

amount has been paid. The first service credited shall represent the first

calendar month of the service to be purchased and each succeeding

month of service credit shall represent the succeeding months of that

service.

8. If the employee utilizing an installment purchase of service agreement

dies, retires, does not continue employment in a position required to

participate in the system, or elects to stop an after-tax installment

purchase of service agreement, the member, or in the case of death, the

beneficiary, shall have sixty (60) days to pay the remaining principal or

a portion of the remaining principal of the installment purchase of

service agreement by lump sum, subject to the restrictions of paragraph

(a)1. of this subsection, or by transfer of funds under paragraph (a)3. of

this subsection, except that payment by the member shall be filed with

the system prior to the member's effective retirement date. If the

member or beneficiary does not pay the remaining cost, the system shall

refund to the member or the beneficiary the payment, payments, or

portion of a payment that does not represent a full month of service

purchased, except as provided by subsection (6) of this section.

9. If the employer does not report installment payments on an employee

for sixty (60) days for an after-tax installment purchase of service

agreement, except in the case of employees on military leave or sick

leave without pay, the installment purchase shall cease and the system

shall refund to the employee the payment, payments, or portion of a

payment that does not represent a full month of service purchased.

10. Installment payments of employees on military leave or sick leave

without pay shall be suspended during the period of leave and shall

resume without recalculation upon the employee's return from leave.

11. If payments have ceased under subparagraph 8. or 9. of this paragraph

and the member later becomes a participating employee in the County

Employees Retirement System, Kentucky Employees Retirement

System, or State Police Retirement System, the employee may complete

the adjusted original installment purchase by lump sum or installment

payments, subject to the restrictions of this subsection. If the employee

elects to renew the installment purchase, the cost of the remaining

service shall be recalculated in accordance with subsection (10) of this

section.

(d) Member payments, including interest, properly received pursuant to this

subsection, shall be deposited to the member's account and considered as

accumulated contributions of the individual member.

(10) (a) The cost of purchasing service credit under any provision of this section,

except as provided by subsections (1) to (3) of this section, shall be

determined by multiplying the higher of the employee's current rate of pay,

final rate of pay, or final compensation as of the end of the month in which

the purchase is made times the actuarial factor times the number of years of

service being purchased. The actuarial factor used to determine the cost of

purchasing service credit shall assume the earliest date the member may retire

without a reduction in benefits and the cost-of-living adjustments provided to

members upon retirement.

(b) Service purchased on or after August 1, 2004, under the provisions of KRS

16.505 to 16.652, 61.510 to 61.705, or 78.510 to 78.852, except for service

purchased under subsections (1) to (3) of this section or service purchased as

described by paragraph (d) of this subsection, shall not be used to determine

eligibility for or the amount of the monthly insurance contribution under KRS

61.702 or 78.5536.

(c) For a member whose membership date is on or after August 1, 2004, service

purchased under the provisions of KRS 16.505 to 16.652, 61.510 to 61.705, or

78.510 to 78.852, except for service purchased under subsections (1) to (3) of

this section or service purchased as described by paragraph (d) of this

subsection:

1. Shall not be used to determine eligibility for a retirement allowance

under disability retirement, early retirement, normal retirement, or upon

death of the member under any of the provisions of KRS 16.505 to

16.652, 61.510 to 61.705, or 78.510 to 78.852; and

2. Shall only be used to determine the amount of the retirement allowance

of a member who is eligible for a retirement allowance under disability,

early retirement, normal retirement, or upon death of the member under

any of the provisions of KRS 16.505 to 16.652, 61.510 to 61.705, or

78.510 to 78.852, based on service earned as a participating employee.

(d) Paragraphs (b) and (c) of this subsection shall not apply to a member who was

bound by an educational contract as a conditional employee to the state of

Kentucky prior to December 31, 2003, regardless of membership date in the

system. Educational leave, seasonal service, or any other qualified service

purchased by a member with this classification under this section shall be

used to determine eligibility for benefits, membership dates, and the amount

of benefit for:

1. A retirement allowance under disability retirement, early retirement,

normal retirement, or death under any of the provisions of KRS 16.505

to 16.652, 61.510 to 61.705, and 78.510 to 78.852; and

2. The monthly insurance contribution under KRS 61.702 or 78.5536.