Welcome to the LASERS Education Outreach Series.
I'm Allison Vince and our topic
for discussion is Purchases of Service.
In this video, you will learn about
opportunities to purchase service credit
and the potential benefits of making
such a decision.
Let's begin by answering the question:
What is service credit?
Service credit is earned for time that you work in a
LASERS-eligible position, and make
contributions to the system.
So, once you're enrolled as a member of LASERS,
you pay employee contributions to the retirement system
and earn or accrue service credit.
At some point in your career, you may wish to
consider purchasing additional service credit.
So why would you consider this option?
Well, purchases of service credit can be
used in two different ways.
It can be used to increase your computation of
retirement benefits, known as
benefits service credit or to change your retirement
eligibility, known as eligibility service credit.
Depending on your situation your eligibility service credit
may be different from your benefit service credit.
Either way,
a purchase can be beneficial,
so you may wish to examine your options.
In the Purchases of Service Credit chapter
in the Member's Guide to Retirement,
you will find various
examples of what will qualify as an
additional purchase of service credit.
In this video, we will discuss some common
instances where you may be able to
purchase additional service credit.
Our first example is probably one of the
most popular, Air Time.
If you have at least five years of service credit in LASERS,
you may purchase up to five years of
Air Time, in one year increments.
Air time can be used to increase your retirement
benefits or change your retirement eligibility.
Let's take a look at how Air Time works.
Can you explain to me how purchasing
Air Time can impact my retirement?
Sure. It can impact your retirement in two ways.
It can increase your benefit computation
years only, or it can increase your
eligibility and benefit computation years.
So I'm 62 years old
and I have 22 years of service. I would benefit from
purchasing the computation of benefits only.
That's correct.
Since you're eligible to retire, you can benefit from
increasing your benefit computation only.
That sounds like it would be good for me.
How can I apply for this purchase?
In order to purchase Air Time,
Form 02-07, Application for Purchases of Service
must be submitted along with a
non-refundable actuarial calculation fee
made payable to LASERS.
The fee may be paid by personal check, cashier's check,
certified check, or money order.
Once all necessary documents and the actuarial
calculation fee are received, LASERS will
forward the information to our actuary for calculation.
You will then be sent an
invoice from LASERS showing the cost to
purchase the service credit.
When you receive the invoice, you are under
no obligation to complete the purchase.
If the invoice expires, you must reapply and
pay an additional calculation fee.
All payments for purchases of service must
be made in a lump sum.
Personal checks, cashier's checks, certified checks, and
money orders are accepted.
Another option for payment is a rollover from a
qualified plan.
Using a rollover is a great way to buy service credit,
especially when a lump sum purchase can be costly.
This member took advantage of
the rollover option to purchase his service credit.
I was looking for ways to maximize my retirement benefit
and checked into buying Air Time.
After getting my invoice, I decided to buy five years,
but it was really expensive
but luckily I've been paying into the
Louisiana deferred compensation plan and
had built up a good balance.
Deferred comp is a qualified
plan, so i was able to roll part of that
money out and purchase the five years of
Air Time. It definitely made it easier on
my wallet and it will increase my
retirement benefit when I retire.
In the case of a rollover, Form 02-13,
LASERS Acceptance Letter Rollover of Assets
must be submitted to LASERS.
A copy of your invoice should accompany
your payment.
No service credit will be granted until the total payment
is received, which could include employer
contributions on some types of purchases.
You may not purchase credit for any
period for which you already have LASERS
service credit, and no more than one year
of LASERS credit may be obtained for
anyone calendar or fiscal year.
Please note that if you purchased
Air Time for retirement eligibility after
July 1, 2011, and use that time to retire
earlier than you would otherwise be eligible,
you must pay the increase in
your employer share of your health
insurance premium, until you reach the
age of which you would have reached
regular retirement eligibility without
the Air Time.
Twenty years at any age is considered regular retirement.
Check the Member's Guide to Retirement for
additional details about
health insurance increases.
Members often have questions about the value
of purchasing service.
Here is a common one:
I have been weighing the cost of
purchasing five years of air time against
what kind of return I would get on that investment.
Can you show me the numbers so i can make
the best decision for my future retirement?
Let's take a look at what Gail's return
on investment would be.
Gail is planning to retire at age 60.
She would have 21.9 service years and her final average
compensation would be $3,341.
Based on selecting the maximum option plan,
her monthly retirement benefit would be $1,829.
Now let's examine the numbers
with Gail's purchase of five years of air time.
Her service years would increase to 26.9
and her final average compensation
will remain the same.
But, her monthly retirement benefit would increase to $2,247,
which would be $418 more each month.
Keep in mind that the monthly benefit is for life.
The increase per month is significant in Gail's case.
Over a five year period,
the additional monthly benefit equals
more than $25,000.
At ten years, the number jumps to over $50,000.
At 15 years, the additional $418 per month
totals over $75,000.
This return on investment should be compared to the
cost of purchasing the air time.
Another situation where service can be purchased
involves repayment of refunded service.
It works like this.
If you were a LASERS member, left state service and took a
refund of your accumulated contributions,
then returned to state service,
you may have the option to buy back
your refunded service.
Let's take a look.
I returned to state service a few years ago and
I'm interested in buying time that I
refunded from a previous employment.
What do i need to do?
You must return to state service and have at least
18 months of un-refunded service credit
with lasers to be eligible.
I returned to state service about five years ago so
that should make me eligible.
How much is that going to cost me?
You must repay the refunded contributions
plus interest compounded annually.
That sounds expensive!
Can I make monthly installments?
LASERS refunds cannot be paid in installments;
payments must be received in a lump sum.
However, you can purchase the time on a
year-to-year basis beginning with your
last year of employment.
Well that does make it easier! Thank you for explaining.
You may repay a refund at any
time prior to the date of your retirement
The calculation will be done
and no cost to you for up to three
invoices within a 12-month period.
However, each additional invoice is subject
to a $75 non-refundable calculation fee.
You may also calculate
an estimate of your repayment
amount by using our online calculator
located under the Member Self-Service
section of our website.
To apply to repay a refund,
you must submit Form 02-11,
Application for Repayment of Refunded Service.
Most importantly, if you are
considering the purchase of service credit,
you should apply at least six months
in advance of applying for retirement.
I hope the information we have provided
has been helpful.
Purchasing service credit can be a great option to
increase your LASERS retirement benefits.
Please review the Service Credit and
Purchases of Service Credit chapters in
the Member's Guide to Retirement for more details.
You may also contact Member Services
toll-free at 800.256.3000 or
in Baton Rouge at 225.922.0600 with any questions.
Thank you
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