Publications

Buying Other Governmental Service

ET-2207, Rev. 7/2005

You may be eligible to increase your Wisconsin Retirement System (WRS) benefit by purchasing the time you worked for non-WRS public employers at the federal, state, or local level. Other Governmental Service (OGS) that you purchase is treated as WRS creditable service for purposes of calculating your formula retirement benefit or your disability benefit under Wis. Stat. § 40.63. It will always be credited as general category service.

What does it cost to purchase OGS? Most benefits paid by the WRS are funded by contributions from employers and employees, plus investment income. Since there is no employer contribution toward the benefit provided from OGS, the employee must contribute enough to fully fund the projected future benefit increase that the service will provide.

Your OGS cost is calculated using a special calculation program created by the WRS actuary. Based on your age, salary, accrued service, and WRS account balances, the program calculates the increase to your retirement benefit that is likely to result from the purchase. Your cost is the value of this probable increase, discounted by 8% per year for the years remaining until your projected retirement date. The calculation is based on group averages for employees in your employment category. It may not reflect your own future experience.

The higher formula multipliers authorized by 1999 Wisconsin Act 11 apply to any purchased OGS that was actually performed before January 1, 2000 and the lower formula multipliers apply to any purchased OGS performed after that date. If you buy some OGS that was performed before January 1, 2000 and some that was performed after that date, different formula multipliers apply to the two portions. Since the cost of buying OGS is calculated to be the full actuarial value of the benefit increase that the service will provide, the cost will be higher for years of service performed before 2000.

One year of OGS can vary in cost from a minimum of 5% of your current annual earnings to as much as 27%. The cost may not be exactly proportional to the amount of service purchased. For example, one year of OGS could cost more or less than one-half the price for two years, depending on other characteristics of your account.

Example: A general employee who retires at age 60 with 23 years of service, 20 years of which were performed pre-2000 and three of which were performed post-1999, and final average earnings of $2,500 per month has an actuarial reduction factor of .944. The For Annuitant's Life Only monthly benefit amount is:

Pre-2000 Service: $2,500.00 x .01765 x 20 x .944 = $833.08

Post-1999 Service: $2,500.00 x .016 x 3 x .944 = $113.28

Total: $833.08 + $113.28 = $946.36

If the employee purchases 2 years of OGS, the actuarial reduction factor becomes .960, and the monthly benefit is:

Pre-2000 Service: $2,500.00 x .01765 x 22 x .960 = $931.92

Post-1999 Service: $2,500.00 x .016 x 3 x .960 = $115.20

Total: $931.92 + $115.20 = $1,047.12

The OGS purchase results in a monthly increase of $100.76.

This employee’s cost at age 60 is $14,155 (23.6% of annual salary for each year purchased).

How would an OGS purchase benefit me? If you receive a formula retirement benefit from the WRS, each year of OGS that you purchase increases your For Annuitant's Life Only monthly formula benefit. It may also increase your benefit by lowering your actuarial reduction for early retirement. If you receive a WRS disability benefit, the OGS purchase would increase your disability benefit amount and any death benefit payable to your beneficiary(ies). OGS is not counted toward the service requirements for WRS vesting, military service crediting, disability benefits, insurance eligibility after termination of employment, or how many years of forfeited WRS service you may be eligible to buy.

Will I receive a good return on my OGS investment? You should carefully evaluate your other investment alternatives before choosing to purchase OGS. The money you spend to purchase OGS will normally be paid out to you or your beneficiaries in some form. However, the return on your investment will vary according to future events.

If you close your account by taking a separation benefit, your refund will include the OGS payment plus accrued interest.
If you die before taking a benefit from your WRS account, the OGS payment plus accrued interest will be included in your death benefit.
If your money purchase benefit is higher than your formula benefit at retirement, the account balance on which your money purchase retirement benefit is based will be increased by the amount of your OGS payment plus accrued interest.
If you receive a formula benefit but you already have enough years of service so that your formula benefit exceeds the benefit maximum, purchasing more years of OGS will not increase your formula retirement benefit.

A voluntary additional contribution to your WRS account is always credited with interest at the WRS effective rate. As a long-term investment, additional contributions may be more beneficial than buying OGS.

For more information about additional contributions, you may request an Additional Contributions brochure (ET-2123).

What service is eligible for purchase? Eligible service includes work for federal, state or local governmental entities in the United States outside the State of Wisconsin.

Examples:

Teaching in public schools, colleges or universities outside Wisconsin
Service with the Federal government, except military service
Employment with a U.S. state, county or city outside Wisconsin

Can I purchase public employment in Wisconsin? Employment with a Wisconsin governmental employer can be purchased as OGS if the employer was not a WRS “participating” employer with regard to employees in your employment category. A “participating” employer is one that reported employees in your employment category to the WRS or a predecessor system (i.e., State Teachers Retirement System, Milwaukee Teachers Retirement Fund or the Wisconsin Retirement Fund) at the time you rendered the service.

Examples:

Employment with Milwaukee County
Service as a non-teacher with the City of Milwaukee or with a Wisconsin school district that does not cover its educational support employees under the WRS (or did not report non-teaching employees at the time the service was performed)
Service as a non-protective employee with a Wisconsin city that does not report its non-protective employees

However, if your employer reported employees in your employment category to the WRS or a predecessor system at the time you performed the service that you wish to buy, your service cannot be purchased as OGS. ETF can tell you whether your employer participated in the WRS at the time you were employed. The following service is not eligible for purchase:

Military service, including service in the National Guard or Reserves.
Work for a WRS participating employer which did not qualify for retirement coverage (e.g., limited term employment, positions requiring less than 600 hours per year).
Service that you will use to establish eligibility for, or the amount of, any retirement benefit paid by or on behalf of the other government entity. Retirement benefits are benefits regulated by ss. 401 or 403 of the Internal Revenue Code. Using the service toward a benefit from an IRA, Social Security or the National Guard, or toward a disability benefit, does not make the service ineligible for purchase.
Employment while you were under age 20 and regularly enrolled as a full-time high school student.
Employment by a university as a student assistant or employee-in-training, and any employment which was part of your training at an educational institution where you attended classes.
Employment by a private or non-profit agency under contract with a government agency.
Volunteer activities for which you did not receive compensation.
Business or professional services which you provided to governmental clients as a private contractor.

How will OGS be credited to my WRS account? By law OGS is credited as general category service, regardless of the type of duties you performed during the years of OGS that you are purchasing or your current employment category. One year of service is equivalent to 1,904 hours of work, or about 48 weeks of full-time employment. Thus a full year of half-time employment (1,040 hours) equals .55 year of service, and nine months of full-time teaching represents approximately .75 year of service. You cannot be credited with more than one year of service in one annual earnings period, regardless of the number of hours you actually worked.
Your payment for OGS is credited to your WRS account for most purposes as employee-required contributions and interest is credited to your OGS payment at the same rate as your regular employee-required contributions.

Amount of service you can buy. You can purchase all or any portion of your OGS, and you can make more than one purchase. You are limited to buying an amount equal to the creditable service you have earned under the WRS at the time of the purchase. Before making any purchase, you must have three complete continuous years of service under the WRS (three complete fiscal years for teachers, educational support personnel, and judges, and complete calendar years for all other categories). The three continuous years of employment do not have to be full-time.

You can only receive a maximum of one year of creditable service in an annual earnings period. Therefore, if you already have some WRS service credited for a calendar year, you can only purchase enough OGS worked during that year to bring your total service for that year to one full year of service.

Supporting evidence. You must provide evidence of the service you wish to purchase as OGS. Individual situations vary, but at a minimum you must show that your employer was a governmental entity and provide the name, address, and telephone number of the employer, the dates of the service and the number of hours you worked in each calendar year. The employer (or you, if the employer is not available) must certify that you will not receive another retirement benefit for the service.

Method of payment. You can pay for your service by submitting payment with your application, by transferring monies from your WRS additional account(s), a plan-to-plan transfer of pre-tax monies from your account(s) in other qualified non-WRS retirement plans, or a combination of all three.

The non-WRS retirement plans from which the Department can accept plan-to-plan transfers of pre-tax funds to buy Other Governmental Service include plans qualified under sections 401(a), 401(k), 403(b) and 457(b) of the Internal Revenue Code (IRC). The plan(s) must agree to this transfer of funds. There is no immediate tax liability on the monies transferred from other qualified retirement plan(s) to buy WRS creditable service.

If you use a plan-to-plan transfer, you must pay at least 10% of the total cost of the service at the time you apply. You may pay this minimum 10% amount by submitting payment with your application, a transfer from your WRS additional contributions, or a combination of the two. The Department must receive the transfer from the other qualified plan(s) within 90 days after the date on which the Department receives your OGS purchase application.

When should I make this purchase? The cost of OGS as a percent of annual salary generally increases as you grow older and earn more WRS creditable service. For general employees and teachers, the cost is usually highest for employees in their late fifties and early sixties, when an OGS purchase is most likely to reduce the actuarial discount for early retirement. By age 62, the cost for most participants begins to decline as a percent of salary. The cost of OGS may also be lower if your money purchase balance is larger in proportion to your projected formula retirement benefit.

Deadline for purchase. You should begin planning for your OGS purchase as early as possible. Under state law, the Department must receive your application for purchase, supporting evidence of your service and payment no later than the day you terminate WRS employment.