Wisconsin Statutes 40.285 – Purchase of creditable service
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Terms Used In Wisconsin Statutes 40.285
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- Contract: A legal written agreement that becomes binding when signed.
- Entitlement: A Federal program or provision of law that requires payments to any person or unit of government that meets the eligibility criteria established by law. Entitlements constitute a binding obligation on the part of the Federal Government, and eligible recipients have legal recourse if the obligation is not fulfilled. Social Security and veterans' compensation and pensions are examples of entitlement programs.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Following: when used by way of reference to any statute section, means the section next following that in which the reference is made. See Wisconsin Statutes 990.01
- Qualified: when applied to any person elected or appointed to office, means that such person has done those things which the person was by law required to do before entering upon the duties of the person's office. See Wisconsin Statutes 990.01
- State: when applied to states of the United States, includes the District of Columbia, the commonwealth of Puerto Rico and the several territories organized by Congress. See Wisconsin Statutes 990.01
- Statute: A law passed by a legislature.
- Trustee: A person or institution holding and administering property in trust.
- United States: includes the District of Columbia, the states, the commonwealth of Puerto Rico and the territories organized by congress. See Wisconsin Statutes 990.01
- Year: means a calendar year, unless otherwise expressed; "year" alone means "year of our Lord". See Wisconsin Statutes 990.01
(1) General requirements.
(a) Deadline for purchase of creditable service. An application to purchase creditable service must be received by the department, on a form provided by the department, from an applicant who is a participating employee on the day that the department receives the application.
(b) Calculation of creditable service. Creditable service purchased under this section shall be calculated in an amount equal to the year and fractions of a year to the nearest one-hundredth of a year.
(c) Use of creditable service. Credit for service purchased under this section is added to a participant’s total creditable service, but may not be treated as service for a particular annual earnings period and does not confer any other rights or benefits.
(d) Applicability of Internal Revenue Code. The crediting of service under this section is subject to any applicable limit or requirement under the Internal Revenue Code.
(2) Conditions for the purchase of different types of creditable service.
40.285(2)(a) (a) Forfeited service.
1. A participating employee may purchase creditable service forfeited in the manner specified in subd. 2., subject to all of the following:
a. The participating employee must have at least 3 continuous years of creditable service at the time of application to purchase the creditable service.
b. The number of years that may be purchased may not be greater than the accumulated current creditable service of the participating employee at the date of application, excluding all creditable service purchased under this section or s. 40.02 (17) (b), 1981, 1983, 1985, 1987, 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., s. 40.02 (17) (e), 1987, 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., s. 40.02 (17) (i), 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., s. 40.02 (17) (k), 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., s. 40.25 (6), 1981, 1983, 1985, 1987, 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., or s. 40.25 (7), 1991, 1993, 1995, 1997, 1999, and 2001 stats., less the number of years of creditable service previously purchased under this paragraph or s. 40.25 (6), 1981, 1983, 1985, 1987, 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats.
c. The participating employee pays to the fund an amount equal to the employee’s statutory contribution on earnings under s. 40.05 (1) (a) for each year of forfeited service to be purchased, based upon the participating employee’s final average earnings, determined as if the employee had retired on the first day of the annual earnings period during which the department receives the application. The amount payable shall be paid in a lump sum payment, except as provided in sub. (4) (b), and no employer may pay any amount payable on behalf of a participating employee.
d. Upon receipt by the fund of the total payment required under this subdivision, the creditable service meeting the conditions and requirements of this paragraph shall be credited to the account of the participating employee making the payment.
2. Creditable service may be purchased under this paragraph if it was forfeited as a result of any of the following:
a. Payment of an amount under s. 40.25 (2).
b. The receipt of a separation or withdrawal benefit under the applicable laws and rules in effect prior to January 1, 1982.
c. Payment of an amount under s. 40.25 (2m), 1991, 1993, 1995, and 1997 stats.
3. Unless otherwise provided by the department by rule, a participating employee may not purchase creditable service under this paragraph more than 2 times in any calendar year.
(b) Other governmental service.
1. Each participating employee who has performed service as an employee of the federal government or a state or local governmental entity in the United States, other than a participating employer, that is located within or outside of this state, or each participating employee whose creditable service terminates on or after May 4, 1994, and who has performed service as an employee for an employer who was not at the time a participating employer but who subsequently became a participating employer, may receive creditable service for such service if all of the following occur:
a. The participating employee has at least 3 continuous years of creditable service at the time of application.
b. The number of years of creditable service applied for under this paragraph does not exceed the number of years of creditable service that the participating employee has at the date of application, excluding all creditable service purchased under this section or s. 40.02 (17) (b), 1981, 1983, 1985, 1987, 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., s. 40.02 (17) (e), 1987, 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., s. 40.02 (17) (i), 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., s. 40.02 (17) (k), 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., s. 40.25 (6), 1981, 1983, 1985, 1987, 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., or s. 40.25 (7), 1991, 1993, 1995, 1997, 1999, and 2001 stats., less the number of years of creditable service previously purchased under this paragraph or s. 40.25 (7), 1991, 1993, 1995, 1997, 1999, and 2001 stats.
c. At the time of application, the participating employee furnishes evidence of such service that is acceptable to the department.
d. Except as provided in sub. (4) (b), at the time of application, the participating employee pays to the department a lump sum equal to the present value of the creditable service applied for under this paragraph, in accordance with rates actuarially determined to be sufficient to fund the cost of the increased benefits that will result from granting the creditable service under this paragraph. The department shall by rule establish different rates for different categories of participating employees, based on factors recommended by the actuary.
e. If the participating employee is applying to receive creditable service for service in the U.S. armed forces or national guard, the participating employee must have been discharged from the U.S. armed forces or national guard under honorable or general conditions.
2. The creditable service granted under this paragraph shall be the same type of creditable service as the type that is granted to participants who are not executive participating employees, elected officials, or protective occupation participants.
3. A participating employee may apply to receive part or all of the creditable service that he or she is eligible to receive under this paragraph.
4. A participating employee may not receive creditable service under this paragraph for service that is used for the purpose of establishing entitlement to, or the amount of, any other benefit to be paid by any federal, state, or local government entity, except for the following:
a. A disability or OASDHI benefit.
b. A benefit under the retired pay for nonregular military service program under 10 U.S. Code § 12731 to 12740.
c. A benefit paid for service in the national guard.
5. Unless otherwise provided by the department by rule, a participating employee may not purchase creditable service under this paragraph more than 2 times in any calendar year.
(c) Uncredited elected official and executive participating employee service. Each executive participating employee whose creditable service terminates on or after May 3, 1988, and each participating employee who is a present or former elected official or an appointee of a present or former elected official and who did not receive creditable service under s. 40.02 (17) (e), 1987 stats., or s. 40.02 (17) (e), 1989 stats., and whose creditable service terminates on or after August 15, 1991, who was previously in the position of the president of the University of Wisconsin System or in a position designated under s. 20.923 (4), (8), or (9), but did not receive creditable service because of age restrictions, may receive creditable service equal to the period of executive service not credited if the participant pays to the department a lump sum payment equal to 5.5 percent of one-twelfth of the employee’s highest earnings in a single annual earnings period multiplied by the number of months of creditable service granted under this paragraph.
(d) Qualifying service. Each participating employee in the Wisconsin retirement system whose creditable service terminates on or after January 1, 1982, who was previously a participant in the Wisconsin retirement fund and who has not received a separation benefit may receive creditable service equal to the period of service during any qualifying period under s. 41.02 (6) (c), 1969 stats., s. 66.901 (4) (d), 1967 stats., or under any predecessor statute, but not to exceed 6 months. The additional creditable service shall be granted upon application by the employee if the applicant pays to the department a lump sum payment equal to 5 percent of one-twelfth of the employee’s highest earnings in a single annual earnings period multiplied by the number of months of creditable service granted under this paragraph.
(e) Teacher improvement leave. Each participating employee in the Wisconsin retirement system whose creditable service terminates on or after April 25, 1990, and whose earnings include compensation for teacher improvement leave granted by the board of regents of the Wisconsin State Colleges during the period beginning on January 1, 1964, and ending on August 31, 1967, in a written and satisfied contract, may receive creditable service for the period for which those earnings were received in an amount not to exceed one year if all of the following apply:
1. The participant meets the requirements of this paragraph and submits an application to the board of regents of the University of Wisconsin System.
2. The board of regents of the University of Wisconsin System certifies the creditable service requested under subd. 1.
3. The participant pays to the department a lump sum equal to 5 percent of one-twelfth of the employee’s highest earnings in a single annual earnings period multiplied by the number of months of creditable service that is granted under this paragraph.
4. The employer does not pay any amount payable under this paragraph on behalf of any participating employee.
(f) Uncredited junior teaching service. Each participating employee whose creditable service terminates on or after May 11, 1990, and who submits to the department proof that the participant performed service in this state as a junior teacher, as defined in s. 42.20 (6), 1955 stats., that was not credited under s. 42.40, 1955 stats., shall receive creditable service for the period for which that service was performed, even if the participant did not become a member of the state teachers retirement system after performing that service, if all of the following occur:
1. The participant pays to the department a lump sum equal to 5 percent of one-twelfth of the employee’s highest earnings in a single annual earnings period multiplied by the number of months of creditable service that is granted under this paragraph.
2. The employer does not pay any amount payable under this paragraph on behalf of any participating employee.
(3) Application process.
(a) Provision of application forms and estimates. Upon request, the department shall provide a participating employee an application form for the purchase of creditable service under sub. (2) and shall also provide to the participating employee an estimate of the cost of purchasing the creditable service.
(b) Certification of plan-to-plan transfers. Upon request, the department shall provide a participating employee a transfer certification form for payments made by a plan-to-plan transfer under sub. (5) (b). If the participating employee intends to make payments from more than one plan, the participating employee must submit to the department a separate transfer certification form for each plan from which moneys will be transferred.
(4) Payment.
(a) Required with application. Except as provided in par. (b), the department may not accept an application for the purchase of creditable service without payment in full of the department’s estimated cost of creditable service accompanying the application. A participating employee may also do any of the following:
1. Use his or her accumulated after-tax additional contributions that are made under s. 40.05 (1) (a) 5., including interest, to make payment.
2. Use his or her accumulated contributions, including interest, to a tax sheltered annuity under section 403 (b) of the Internal Revenue Code, to make payment, but only if the participating employee’s plan under section 403 (b) of the Internal Revenue Code authorizes the transfer.
(b) Alternate payment options. Notwithstanding par. (a), the department may accept an application under this section without full payment if payment of at least 10 percent of the department’s estimate of the cost of the creditable service is included with the application, in the manner required under par. (a), and the remaining balance is received by the department no later than 90 days after receipt of the application, in the form of a plan-to-plan transfer under sub. (5) (b).
(c) Final cost calculation for purchase of creditable service. The department may audit any transaction to purchase creditable service under this subsection and make any necessary correction to the estimated cost of purchasing the creditable service to reflect the amount due under sub. (2). Except as otherwise provided in sub. (7), if the department determines that the final amount that is due is more than the amount paid to the department, the department shall notify the participant of the amount of the shortfall. If payment of the amount of the shortfall is not received by the department within 30 calendar days after the date on which the department sends notice to the participant, the department shall complete the creditable service purchase transaction by prorating the amount of creditable service that is purchased based on the payment amount actually received and shall notify the participant of the amount and category of service that is credited. The department, by rule, shall specify how a forfeited service purchase is prorated when the participant forfeited service under more than one category of employment under s. 40.23 (2m) (e).
(d) Treatment of amounts to purchase creditable service. All amounts retained by the department for the purchase of creditable service under sub. (2) shall be credited and treated as employee required contributions for all purposes of the Wisconsin Retirement System, except as provided in ss. 40.23 (3) and 40.73 (1) (am).
(5) Transfer of funds; plan-to-plan transfers.
40.285(5)(a) (a) Transfer from certain benefit plans. Subject to any applicable limitations under the Internal Revenue Code, a participating employee may elect to use part or all of any of the following to purchase creditable service under this section:
1. Accumulated after-tax additional contributions, including interest, made under s. 40.05 (1) (a) 5.
2. Accumulated contributions treated by the department as contributions to a tax sheltered annuity under section 403 (b) of the Internal Revenue Code, but only if the employer sponsoring the annuity plan authorizes the transfer.
(b) Other plan-to-plan transfers. The department may also accept a plan to plan transfer from any of the following:
1. Accumulated contributions under a state deferred compensation plan under subch. VII.
2. The trustee of any plan qualified under sections 401 (a) or (k), 403 (b), or 457 of the Internal Revenue Code, but only if the purpose of the transfer is to purchase creditable service under this section.
(c) Payment shortfall. Except as otherwise provided in sub. (7), if the department determines that the amount paid to the department to purchase creditable service under this subsection, together with the amount transferred under a plan-to-plan transfer, is less than the amount that is required to purchase the creditable service, the department shall notify the participant of the amount of the shortfall. If payment of the amount of the shortfall is not received by the department within 30 calendar days after the date on which the department sends notice to the participant, the department shall complete the creditable service purchase transaction by prorating the amount of creditable service that is purchased based on the payment amount actually received and shall notify the participant of the amount and category of service that is credited. The department, by rule, shall specify how a forfeited service purchase is prorated when the participant forfeited service under more than one category of employment under s. 40.23 (2m) (e).
(6) Refunds. Except as provided in sub. (7), if the department determines that the amount paid to the department to purchase creditable service, including any amount in a plan-to-plan transfer, is greater than the amount that is required to purchase the creditable service, as determined by the department, the department shall refund the difference. The department shall pay any refund to the participant, up to the amount received from the participant. Any remaining amount shall be returned to the applicable account in the trust fund for transfers under sub. (5) (a) or to the trustee of a plan which was the source of a plan-to-plan transfer under sub. (5) (b). When more than one plan-to-plan transfer occurs, the department may determine which transfer is to be refunded, in whole or part. No funds transferred to the department by a plan-to-plan transfer may be refunded to a participant.
(7) Limit on payment of corrections. The department may not require a participant to pay any shortfall under sub. (4) (c) or (5) (c) that is $25 or less. The department may not pay any refund under sub. (6) if the amount of the refund is $25 or less.