Earning Credited Service

Credited service is the period of time you work for an SDRS participating employer, which is considered in your eligibility for benefits and the amount of benefits. Credited service represents complete or partial years of employment (you receive one-fourth of a year of credited service for each calendar quarter in which you make contributions to SDRS).

Credited service includes time spent on authorized military leave of absence for your initial tour of duty, provided that you:

• Are employed before the leave,
• Return to public service within one year of discharge, and
• Remain employed for at least one year after returning.

Service Credit Purchases

Eligible members may purchase additional credited service in order to enhance their SDRS benefit at retirement. To be eligible, you must have 5 years of contributory service, be currently working for an SDRS participating unit, and be contributing to SDRS.

Purchase Process

If you are interested in purchasing prior service, you should notify SDRS at least 60 days in advance of your interest to purchase. This provides sufficient time for the verification process, if applicable, and consultations as necessary. The types of credited service that may be purchased include:

Prior Public Employment: Public service includes all prior public employment that has already been rendered.

• To be considered eligible for a purchase of prior public employment, you must not be eligible to receive a retirement benefit from the prior public employment period of service.
• Any prior public employment service you wish to purchase must be verified by your former employer and retirement system, as necessary, via the Service and Retirement System Verification form. It is your full responsibility to secure verification of service and retirement status for this period of service. Once completed, the form must be submitted to SDRS. SDRS must approve submitted documentation before a purchase can be allowed.
• The verification process must be completed before SDRS will provide formal benefit estimates based on the purchase of credited service. Until then, please use the benefit calculator on the SDRS website at sd.gov/sdrs.

 

Nonqualified Permissive Service (Air Time):

• All members must have 5 years of contributory service to be eligible to purchase air time service.
• No more than 5 years of nonqualified service credit may be purchased.
• The verification process is not required for air time purchases.

 

Purchase Contract

Once the initial steps of the purchase process are complete, SDRS can issue a purchase contract. You must provide SDRS with information on how much service you wish to purchase and over how long a period you wish to pay for the purchase.

A purchase contract is valid for 45 days from date of issue. If a contract is not signed by you as accepted and received in the SDRS office within this timeframe, a new contract must be issued if you wish to proceed with the purchase.

 

Methods of Purchasing Service

Standard Purchase: You may make a lump-sum cash purchase or you may set up a payment plan and pay SDRS by personal check over a period of up to 10 years, with interest at the valuation interest rate.

Trustee-to-Trustee Transfer: Members of SDRS are eligible to acquire credited service by transferring funds from the SDRS Supplemental Retirement Plan (SRP) or other 457 or 403(b) plans to SDRS. In this process, the funds transfer directly from the trustee of origin to SDRS and must equal the purchase contract amount. Contact should be made with the trustee prior to the transfer to discuss any fees that may apply.

 

Special Rule for Those with Less Than 10 Years of Participation in SDRS

SDRS is a 401(a) defined benefit governmental plan within the meaning of §414(d) of the Internal Revenue Code. The benefit limits of IRC §415(b) must be followed to protect the tax qualified status of a retirement plan under IRC §401(a). Note that the benefit limitations described in IRC §415(b) are reduced proportionately for members with less than 10 years of participation in SDRS, excluding any purchased service.

 

Cost to Purchase Service Credit

The cost to purchase credited service depends upon your age at the time of purchase and is based on an actuarially determined percentage (multiplier) of your current salary or your final average compensation, whichever is higher, for each year to be purchased.

The same formula applies to each class of membership:

Multiplier x Higher of Current Salary or Final Average Compensation x Years to Purchase

To calculate the cost to purchase credited service, please use the Member Purchase Calculator link below or contact the SDRS office for assistance.

Additional information regarding service purchases: