Wisconsin Administrative Code › Department of Employee Trust Funds › Chapter ETF 20 - Wisconsin Retirement System › Section ETF 20.17 - Service purchases

Current through June 24, 2024
(1) GENERAL PROVISIONS.
(a)
Scope.
This section
			 applies to service purchases under s.
			 40.285,
			 Stats.
(b)
Preparation of
			 estimates; deadline for application.
1. Upon request, the department shall prepare
			 a written estimate of the cost of purchasing service under s.
			 40.285(2),
			 Stats., on an application form to be used for the purpose and send the
			 application form to the participating employee. Anytime after the department
			 receives a completed application and at least the minimum payment or
			 authorization to transfer additional contributions required to accompany that
			 application, the department may update and correct the calculation of the
			 amount due as necessary, before finalizing the purchase of service
			 credit.
2. Except as provided in
			 subd. 3. the application to purchase creditable service, on the form approved
			 by the department, must be actually received at the department on or before the
			 date the applicant terminates all participating employment covered by the
			 Wisconsin retirement system.
3. The
			 deadline for a part-time elected official whose date of separation from the
			 last participating employer is determined under s.
			 40.23(1) (am)
			 2, Stats., is the date the applicant
			 terminated participating employment other than as a part-time elected official,
			 or the date on which the applicant elected to waive further Wisconsin
			 retirement system participation under s.
			 40.23(1) (am)
			 2, Stats., whichever date is later.
Note:
The "Waiver of Part-Time Elected Service,"
				form ET-4303, becomes effective on the day after its receipt by the department
				or, if more than one ET-4303 is being submitted, on the first day after the
				first waiver is received by the department.
(c)
Rejection of
			 application.
1. An application
			 received after the deadline in par. (b) shall be rejected.
2. If the department determines that the
			 participant is ineligible to purchase service for which the participant has
			 applied, the application shall be rejected and any payment previously received
			 by the department shall be refunded as provided in par. (f).
3. The department shall reject an application
			 which is not accompanied by a payment in one of the following forms:
a. Payment in full of the department's
			 estimated cost of the service credit if the purchase is for a qualifying
			 period, teacher improvement leave or previously uncredited service as a junior
			 teacher or executive official under s.
			 40.285(2) (c) to
			 (f), Stats. Such payment may include
			 authority to transfer 403(b) funds or additional contributions under s.
			 40.05(1) (a)
			 5, Stats., already held by the department in
			 order to make the purchase. A transfer of 403(b) funds must be authorized by
			 the school district or other educational institution employer operating the
			 plan under section 403(b) of the internal revenue code.
b. In lieu of payment in full, the applicant
			 may include at least 10% of the department's estimated cost of the creditable
			 service with the application and arrange for the balance to be paid by a
			 plan-to-plan transfer under s.
			 40.285(5),
			 Stats. Such transfer funds must be received within 90 days after receipt of the
			 application or the application or the purchase will be treated under the
			 payment shortfall provisions of s.
			 40.285(5)
			 (c), Stats., and par. (h).
c. Partial payment of the department's
			 estimated cost of the service credit, but only if the purchase is for forfeited
			 service or other governmental service, under s.
			 40.285(2) (a) or
			 (b), Stats.
4. The department may reject any application
			 which 90 days after the date of application remains incomplete in any respect
			 other than receipt of payment. If an application is rejected under this
			 subdivision then the department shall refund any associated payment as provided
			 by par. (f).
5. An application to
			 purchase creditable service for forfeited service or other governmental service
			 under s.
			 40.285(2) (a) or
			 (b), Stats., shall be rejected if the
			 applicant does not have at least three continuous years of creditable service
			 immediately preceding the date the completed application form is received by
			 the department, with no break in service between the three continuous years and
			 the application date.
(d)
Effect of purchasing
			 service.
Buying creditable service under this section adds the amount
			 of service purchased to the person's total creditable service for the purpose
			 of calculating a formula annuity benefit under s.
			 40.23(2) (b) or (2m)
			 (e), Stats., or making a formula annuity
			 calculation in the same manner, including under s.
			 40.25(1),
			 40.63(8)
			 or
			 40.73(1)
			 (c), Stats. Buying creditable service has no
			 retroactive effect, including but not limited to the following:
1. Buying creditable service does not undo
			 any effects of the requirement that a person who takes a separation benefit
			 must thereafter be treated as a new employee upon subsequent employment by a
			 participating employer.
Note:
See s.
				40.25(3),
				Stats.
2. Buying creditable
			 service does not establish an earlier date of participation nor restore an
			 account as though it had never been closed.
3. Buying creditable service does not restore
			 or entitle the purchaser to any benefits or rights associated with being a
			 participant in the Wisconsin retirement system, or a member of any predecessor
			 retirement system, at the time the services for which credit is being purchased
			 were actually performed.
4. Buying
			 creditable service does not establish creditable service in or for any
			 particular annual earnings period or calendar year, or prior to any past date,
			 or for purposes of measuring continuous years of creditable service.
Note 1:
As a consequence of purchased service
				credits not establishing creditable service in or for any particular annual
				earnings period or calendar year, purchased service does not affect the
				denominator for the calculation of final average earnings in s.
				40.02(33) (a)
				2, Stats., nor the amount of a person's
				creditable service in a particular annual earnings period for purposes of s.
				40.23(2m)
				(fm) or
				40.63(1)
				(a), Stats., for example.
Note 2:
Purchased service credit is included in
				the "creditable service" used to determine the normal retirement age and the
				maximum formula benefit for a protective occupation participant under ss.
				40.02(42)
				(a) and
				40.23(2m)
				(b), Stats., respectively, as well as months
				of creditable service for reducing the actuarial adjustment under s.
				40.23(2m) (f)
				2, Stats., and the reduction of duty
				disability benefits for service over 25 years under s.
				40.65(5)
				(a), Stats. Credit purchased under s.
				40.285,
				Stats., except under s.
				40.285(2)
				(b), Stats., also applies to the "creditable
				service" used to determine eligibility for creditable military service, group
				health, and post-retirement life insurance, under ss.
				40.02(15)
				(c),
				40.02(25) (b)
				6 a., 6e., 6m. b. and 6r. and 40.72 (4) (b),
				Stats. Limitations on the use of purchased credit for other governmental
				service in particular are listed in sub. (4) (e) 5.
Note 3:
Service purchased under s.
				40.285,
				Stats., shall be included with all other creditable service in the
				participant's account divided by a qualified domestic relations order pursuant
				to s.
				40.08(1m)
				(b), Stats., provided the application for the
				purchase was actually received by the department prior to the decree date, as
				that term is defined by s.
				40.02(18f),
				Stats. See s.
				ETF
				20.35(3) (c).
Example 1.
A person became a participating
				employee covered by the Wisconsin retirement system in 1995. The participant
				terminated employment in 1999 and took a separation benefit in 2000 thereby
				closing her Wisconsin retirement system account. She again became a
				participating employee on January 1, 2002, and later purchased all the service
				forfeited by taking the separation benefit in 2000. The years of service
				purchased are added to the participant's current service balance and are
				included in the creditable service used to calculate a formula annuity benefit
				under s.
				40.23(2)
				(e), Stats. However, for all Wisconsin
				retirement system purposes she is treated as a new participant as of January 1,
				2002. Her account and benefit rights are not restored as though her account had
				never been closed.
Example 2.
A former member of the state teacher
				retirement system took a separation benefit in 1971. Subsequently buying
				creditable service for teaching services rendered in 1970 does not confer any
				present right to the minimum retirement age of 50 for teachers that was in
				effect in 1970.
Example 3.
A former member of either the state or
				Milwaukee teacher retirement system before 1964 whose account was later closed
				by withdrawing member contributions as a member of either the combined or
				formula group, or by withdrawing both member and state deposits as a member of
				the separate group, does not reestablish that account by subsequently
				purchasing credit for the forfeited service. The former teacher is treated for
				all WRS purposes as a new employee upon returning to participating employment.
				Consequently, any benefits now paid to the participant are not being paid on
				the account of a December 31, 1963, member. However, nothing in this section
				shall be construed to prevent the Wisconsin department of revenue from
				interpreting s.
				71.05(1)
				(a), Stats., as it sees fit for its
				purposes.
5. Buying credit
			 for service does not affect or restore earnings for any annual earnings period
			 or for purposes of calculating a benefit or final average earnings.
(e)
Limitation on
			 creditable service purchases.
1. A
			 maximum of two purchases per calendar year may be made under each of subs. (3)
			 through (8).
Note:
The purchase of the service for the
				qualifying period, teacher improvement leave, and previously uncredited service
				as a junior teacher or executive participating employee are all intended to be
				one-time purchases of the entire available credit with payment-in-full
				accompanying the application. Applications without full payment would generally
				be rejected. However, because a plan-to-plan transfer under s.
				40.285(5),
				Stats., is now an available payment option for all forms of creditable service
				purchase, the possibility exists that there will be a payment shortfall
				resulting in proration of the service purchased as provided by s.
				40.285(5)
				(c), Stats. This paragraph permits an
				additional creditable service purchase of the same type during the same
				calendar year, provided the participating employee remains otherwise
				eligible.
2. A person may
			 not purchase credit for service to the extent that the effect would be to
			 exceed the 1.0 year limit on creditable service for any annual earnings period.
			 For purposes of this subdivision, notwithstanding par. (d) 4., the service for
			 which the person wishes to purchase credit and all the person's other purchased
			 service credits shall be treated as if credited under the Wisconsin retirement
			 system or a predecessor retirement system in the annual earnings periods when
			 the services were actually rendered. The person's current creditable service
			 for an annual earnings period together with all previously granted service
			 credits associated with that annual earnings period, including but not limited
			 to purchased service credits as provided in this subdivision, shall first be
			 subtracted from 1.0 year to determine the balance remaining, if any, for each
			 annual earnings period that may be purchased under this section and s.
			 40.285,
			 Stats.
Example 1.
A participant earned 0.40 years of
				creditable service working for a participating employer during the 2004 annual
				earnings period. During the same annual earnings period, the participant worked
				1,905 hours, the equivalent of one full year of creditable service, for another
				governmental employer not covered by the Wisconsin retirement system. Even if
				the participant is otherwise eligible to purchase credit for the other
				governmental service, no more than 0.60 years of service for the 2004 annual
				earnings period may be purchased.
Example 2.
A participant whose annual earnings
				periods are calendar years, earned 0.60 years of creditable service between
				January and May 2005 by working overtime. The participant then terminated and
				took a separation benefit, forfeiting the service. The participant then
				returned to participating employment in July and earned 0.58 years of
				creditable service for the remainder of 2005. Some years later, the participant
				meets the qualifications to purchase the forfeited service. The participant may
				not purchase credit for more than 0.42 years of the forfeited service.
(f)
Refunds.
Refunds may not be made for amounts under the
			 threshold established by s.
			 40.285(7),
			 Stats. Refunds shall be made in the manner provided by s.
			 40.285(6),
			 Stats. Interest on refunds is subject to the provisions of s.
			 40.08(6),
			 Stats. No excess funds transferred to the department by a plan-to-plan transfer
			 may be refunded directly to the participant. If the department refunds any
			 payment taken from additional contributions under subd. 2. or 3., it shall
			 restore the refunded amount to the additional account as if the transfer had
			 not occurred. The following order of priority shall determine the sources of
			 any refund due:
1. The participant's lump sum
			 payment to the department. The refunded amount shall be paid directly to the
			 participant.
2. Additional
			 contributions transferred from the participant's after-tax additional
			 contribution account. The amount refunded shall be transferred back to the
			 participant's after-tax additional account.
3. Additional contributions transferred from
			 the participant's tax sheltered additional contribution account. The amount
			 refunded shall be transferred back to the participant's tax-sheltered
			 additional account.
4. Funds
			 transferred from another qualified retirement plan under s.
			 40.285(5),
			 Stats. When more than one qualified retirement plan was the source of
			 transferred funds, the department shall determine the refunded amount to be
			 returned to each qualified retirement plan.
(g)
Treatment of payments.
1. Payments retained by the department shall
			 be deposited in the participant's required contribution account under s.
			 40.04(4) (a)
			 1, Stats. Except as otherwise provided in
			 subd. 3., if the participant participates in the variable trust the payment
			 shall be divided between the core and variable accounts in the same proportion
			 as the participant's current contributions are so divided at the time that
			 payment is received.
2. For
			 interest crediting purposes, except as otherwise provided in subd. 3., all
			 payments received to purchase creditable service including plan-to-plan
			 transfer funds shall be treated as amounts received during the year in which
			 the department actually receives the payment or transferred funds.
3. Notwithstanding subd. 2., for interest
			 crediting purposes, funds transferred from the participant's voluntary employee
			 additional contributions that were in the prior year's closing balance of the
			 additional contribution account, including interest credited, when the transfer
			 occurs shall retain that status so that the participant will not forfeit
			 interest to be credited on the prior year's closing balance. Notwithstanding
			 subd. 1., amounts transferred from a participant's additional contributions in
			 the core investment fund to buy service shall remain in the core investment
			 fund, and additional contributions transferred from the participant's variable
			 additional contributions to buy service shall remain in the variable fund.
			 Nothing in this subdivision shall be construed to affect an individual's
			 variable cancellation rights under s.
			 ETF
			 10.30(5).
(h)
Payment shortfalls.
1. For any type of creditable service
			 purchased under s.
			 40.285(2),
			 Stats., if the purchase includes a plan-to-plan transfer and the total amount
			 received by the department is less that amount required for the purchase of the
			 service, and the difference exceeds the threshold for corrections under s.
			 40.285(7),
			 Stats., then the department shall proceed under s.
			 40.285(5)
			 (c), Stats., and allow the participant 30
			 days to pay the difference. If the difference is not received within 30 days
			 after notice is sent to the participant, the department shall complete the
			 purchase, reducing the amount of service credit purchased to the credit that
			 can be purchased by the payment actually received.
Note:
See s. ETF 20.17(3) (d) for the required
				rules concerning how a forfeited service purchase is prorated when the
				participant forfeited service under more than one category of
				employment.
2. If the
			 department determines that the actual cost of purchasing service under s.
			 40.285(2),
			 Stats., is greater than the amount estimated by the department for the
			 participant, and the participant paid the estimated amount in full, then the
			 participant shall be notified and allowed 30 days to either pay the balance due
			 or withdraw the application, without prejudice. If the balance due or is not
			 received prior to the deadline, then the department shall proceed under subd.
			 2. a., b., c. or d., as appropriate.
a. When a
			 plan-to-plan transfer made up part of the payment, the department shall proceed
			 under the payment shortfall provisions of s.
			 40.285(5)
			 (c), Stats., except as otherwise provided by
			 subd. 2. c. or d.
b. When no
			 plan-to-plan transfer is involved and subd. 2. c. or d. do not apply, or the
			 participant made a timely request to withdraw the application, the department
			 shall refund all amounts received as provided in par. (f).
c. If a Wisconsin retirement system annuity
			 or lump sum in lieu of an annuity under s.
			 40.25(1),
			 Stats., is to be paid to the applicant, and the applicant so requests, the
			 balance due shall be deducted from the lump sum or a subsequent monthly annuity
			 payment payable. This subdivision paragraph does not apply if the balance due
			 exceeds the amount of the benefit under s.
			 40.25(1),
			 Stats., or if the Department determines that the amount of the monthly annuity
			 available for this deduction is insufficient.
d. If the application was for the purchase of
			 credit for forfeited service or other governmental service, and subdivision
			 paragraph c. does not apply, the department may complete a partial purchase as
			 provided in sub. (3) (d) or (4) (g), respectively.
(i)
No participant
			 withdrawal or cancellation of application; exception.
T he participant
			 may not cancel or withdraw an application to purchase service credits once any
			 payment has been received by the department, except under the circumstances
			 specified in par. (h) 2. b.
(j)
Treatment of purchased service credit as pre-2000 or post-1999
			 service.
For purposes of computing formula annuity benefits under s.
			 40.23(2m)
			 (e), Stats., and the differing multipliers
			 applicable to creditable service that was performed before January 1, 2000, and
			 on and after that date, purchased service credits will be treated as provided
			 in s.
			 ETF
			 20.19(2).