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Title 105 | Chapter 001 | Regulation 330REG

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FINANCE AND ADMINISTRATION CABINET
Kentucky Public Pensions Authority
(Amended at ARRS Committee)

105 KAR 1:330.Purchase of service credit.

RELATES TO:

KRS 16.505, 16.545,16.645, 61.505, 61.510, 61.543, 61.552, 61.592, 61.645, 61.685, 78.510, 78.545, 78.5520, 61.685, 78.545, 78.610, 26 U.S.C. 415

STATUTORY AUTHORITY:

KRS 61.545(9)(e), 61.505(1)(f)-(g) and (1)(g)

CERTIFICATION STATEMENT:

This is to certify that this administrative regulation complies with KRS 13A.150(2) because it does not have a major economic impact.

NECESSITY, FUNCTION, AND CONFORMITY:

KRS 61.505(1)(f)-(g) and (1)(g) and 61.645(9)(e) authorizeauthorizes the Kentucky Public Pensions Authority to promulgate administrative regulations on behalf of the Kentucky Retirement Systems and the County Employees Retirement System that are consistent with and necessary or proper to carry out the provisions of KRS 16.505 to 16.652, 61.510 to 61.705, and 78.510[20] to 78.852. KRS 16.545, 16.645, 61.543, 61.552, 61.592, 78.5520, 61.685, 78.545, and 78.610 provide for purchasing service credit and out-of-state service credit for Kentucky Employees Retirement Systems members. KRS 16.645(19) and 78.545(7) provide that purchase of service credit for members of the State Police Retirement System and County Employees Retirement System, respectively, shall be administered in the same manner subject to the same limitations and requirements as provided for the Kentucky Employees Retirement System. 26 U.S.C. 415 establishes federal requirements regarding purchases of service credit. This administrative regulation establishes the requirements and forms for eligibility and purchase ofdocumentation required from the employee or person as proof of eligibility for purchasing service credit, and the filing deadlines on which the cost calculation shallwill be made, and the procedures for purchase of service credit.

Section 1.

Definitions.

(1)

Unless otherwise defined in this section, the definitions contained in KRS 16.505, 61.510, and 78.510 shall apply to this administrative regulation.

(2)

Prior to April 1, 2021, "agency" means the Kentucky Retirement Systems, which administers the State Police Retirement System, the Kentucky Employees Retirement System, and the County Employees Retirement System. Effective April 1, 2021, "agency" means the Kentucky Public Pension Authority, which is authorized to carry out the day-to-day administrative needs of the Kentucky Retirement Systems (comprised of the State Police Retirement System and the Kentucky Employees Retirement System) and the County Employees Retirement System.

(3)

"File" means delivering or submitting a form to the retirement office by mail, fax, secure email, in-person delivery, or upload via Self Service on the Web site maintained by the agency (if available). A form shall not be deemed filed until it has beenreceived at the retirement office.

(4)

"Provide" means the agency makes a form or document available to a member, retired member, or person by mail, fax, secure email, or upload via Self Service on the Web site maintained by the agency (if available).

(5)

"Systems" means the State Police Retirement System, the Kentucky Employees Retirement System, and the County Employees Retirement System.

(6)

"Valid" means that all required sections on a form are completed and all required signatures on a form are executed.

Section 2.

Cost Calculation Date for Determining the Cost of the Service Purchase.

(1)

The cost calculation date for determining the cost of the service to be purchased shall be the later of the last day of the month:

(a)

InThe last day of the month in which the request for the cost of the service is filed at the agencyretirement office;

(b)

Thelast day of the month the employee or person designates as the intended purchase date;

(c)

InThe last day of the month in which documentation of the service is filed at the agencyretirement office;

(d)

InThe last day of the month in which the employee attains sufficient service credit to be eligible to make the purchase; or

(e)

InThe last day of the month in which the employee terminates employment if the employee files a completed Form 4172, Notice of Intent to Transfer Lump Sum Payment(s) to Qualified Employer Sponsored Plan, at the agencyretirement office indicating that the employee intends to defer the employee's lump sum payment for accrued compensatory and annual leave to be paid to the employee at termination to the Kentucky Public Employees Deferred Compensation Authority or other qualified employer sponsored plan. The employee shall then rollover the funds from the Kentucky Public Employees Deferred Compensation Authority or other qualified employer sponsored plan to the agency as payment, in whole or in part, for the employee's service purchase.

(2)

 

(a)

The purchase deadline date shall be the later of the end of the day as defined by 105 KAR 1:001 on the cost calculation date or thirty (30) days from the date the purchase cost is provided to the employee, unless day thirty (30) is a Saturday, Sunday, a public holiday listed in KRS 2.110, a day on which the public office is actually and legally closed, or any other federal or state holiday that disrupts mail service, then the purchase deadline date shall be the next business day.

(b)

Upon discovery of a delay in providing the purchase cost to the employee or person, the agency may extend the purchase deadline date in paragraph (a).

(3)

An employee or person shall not make a new request for cost calculation for purchase of service previously requested until the purchase deadline date has passed.

(4)

Payment for purchase of service credit shall be filed at the agencyretirement office while the employee is participating in an eligible retirement system and prior to the employee's termination date, except if the:

(a)

PurchaseIf the purchase of service credit is made pursuant to KRS 61.552(2)(a)under KRS 61.552(2);

(b)

EmployeeIf the employee files a Form 4170, Direct Transfer/Rollover Authorization Form, at the agencyretirement office while the employee is participating in an eligible retirement system and prior to the employee's termination date, andso long as the financial institution completes the transfer or rollover within sixty (60) days of the payment due date, the payment for purchase of service credit by transfer or rollover may occur when the employee is no longer participating in an eligible retirement system and after the employee's termination date; or

(c)

AgencyIf the agency discovers an error or omission in the service purchase cost, the:,

1.

Agencythen the agency may provide corrected costs to the employee, person, member, or retired member; and,

2.

Employeeto have the service purchase credited to his or her account, the employee, person, member, or retired member shall pay any additional amount due for the corrected costs to have the service purchase credited to his or hertheir account.

(5)

If the employee elects to purchase only a portion of the service for which he or she hasthey havehe or she has requested a cost calculation, the employee shall be required to obtain a new cost calculation for the remaining service unless the remaining service is service pursuant tounder KRS 61.552(2) or (3).

Section 2.Section 3.

General Requirements to Purchase Service.

(1)

The employee or person shall file at the agencyretirement office all documentation necessary for the agency to determine that the service meets the eligibility requirements for purchase of service.

(2)

The agency may require that any statement, letter, form, or other document required byin this administrative regulation be notarized, made under oath as defined in KRS 523.010, or both.

(3)

An employee or person shall not certify his or hertheirhis or her own service on any of the statements, letters, forms, or other documents required by this administrative regulation.

(4)

 

(a)

The agency shall determine how much service is eligible for purchase by statute and shall notify the employee or person in writing of the cost of the service that qualifies for purchase.

(b)

If the agency determines that the service is not eligible for purchase, it shall notify the employee or person in writing of the reasons.

Section 3.Section 4.

Purchase of Omitted Service.

(1)

 

(a)

To purchase omitted service pursuant to KRS 61.552(2) and 78.545, the employee or person shall file at the agencyretirement office a valid Form 4225, Verification of Past Employment.

(b)

If the employee or person is seeking to purchase omitted service based on employment with the Executive Branch, copies of personnel and wage records provided by the employer mayshall be filed at the agencyretirement office instead of Form 4225, Verification of Past Employment.

(c)

The agency may determine eligibility to purchase omitted service based on records submitted pursuant to KRS 61.675, 78.625, or 105 KAR 1:130 without an application by the employee.

(2)

If the agency determines that the employer recordssubmitted on Form 4225, Verification of Past Employment, or the personnel and wage records from the Executive Branch employer are not sufficient, the agency may require the employee or person to supplement the employer records with copies of check stubs, W-2 forms, personnel action forms, or payroll records in the employee's or person's possession.

(3)

If the employee or person does not have additional documentation of the service, the employee or person may file at the agencyretirement office a report of detailed earnings from the Social Security Administration for the period of service, along with two (2) Form 4160s, Affidavit and Certification for Documentation of Service completed by persons who earned, or were eligible for, service for the same period in a state-administeredstate administered retirement system with the same employer. Each affiant shall detail the employee's or person's employment status and length of service.

Section 4.Section 5.

Purchase of School Board Service. For service with a school board, the employee shall file at the agencyretirement office a valid Form 4225, Verification of Past Employment.

Section 5.Section 6.

Vested Service Purchases.

(1)

In order to purchase service credit pursuant to this section, a member shall be:

(a)

Participating in one of the retirement systems administered by the Kentucky Public Pensions Authority; and

(b)

Vested as defined by KRS 16.505(29), 61.510(22), or 78.510(30).

(2)

 

(a)(1)

 

(a)

To purchase service credit for active duty service in the Armed Forces of the United States pursuant to KRS 61.552(5)(d) and 78.545, the employee shall file at the agencyretirement office a copy of the federal form DD-214 or other official military documents clearly indicating the:

1.

DateThe date of entry into active duty service;

2.

DateThe date of discharge from active duty service; and

3.

TypeThe type of discharge.

(b)

To purchase service credit for service in the National Guard or the military reserve forces pursuant to KRS 61.552(5)(e) and 78.545, including periods of active duty training,or for service in the National Guard, the employee shall file at the agencyretirement office copies of official military documents clearly indicating the date of entry and current participation or date of discharge.

(c)

The documents required byin paragraphs (a) or (b) of this subsection shall be verified by a statement or letter signed by an authorized employee of the military.

(d)

The agency shall verify with the employer the beginning and ending dates of the period of leave associated with active duty service in the Armed Forces of the United States, or service in the National Guard, or service in the military reserve forces.

(3)(2)

 

(a)

To purchase service for a period when the employee was on educational, maternity, or sick leave without pay pursuant to KRS 61.552(5)(i) and 78.545, the employee shall file at the agencyretirement office a statement or letter from the reporting official, personnel director, or agency head certifying the beginning and ending dates ofthe period of leave and the type of leave designated by the employer.

(b)

The agency shall verify with the employer the beginning and ending dates of the period of educational, maternity, or sick leave without pay.

(4)(3)

To purchase state university service pursuant to KRS 61.552(5)(b) and 78.545, the employee shall file at the agencyretirement office a valid Form 4120, Verification of Employment with a State University.

(5)(4)

To purchase federal service pursuant to KRS 61.552(5)(f) and 78.545, the employee shall file at the agencyretirement office a valid Form 4115, Federal Verification.

(6)(5)

 

(a)

To purchase past seasonal, emergency, interim, probationary, temporary, or part-time employment that averages the required hours of work per month pursuant to KRS 61.552(5)(g) and 78.545, the employee shall file at the agencyretirement office a valid Form 4225, Verification of Past Employment.

(b)

If the employee is seeking to purchase service based on past seasonal, emergency, interim, probationary, temporary, or part-time employment with the Executive Branch, documentation to be filed at the agency shall include:

1.

Copiescopies of personnel and wage records provided by the employer;

2.

A Form 4225; or

3.

Other documentation the agency deems necessary to confirm the employment that the service purchase is being based onshall be filed at the retirement office instead of Form 4225, Verification of Past Employment.

(7)(6)

To purchase service with a non-participating agency whose service is authorized pursuant to KRS 61.552(5)(j) and 78.545, the employee shall file at the agencyretirement office the following documentation and may be required to file additional information, if necessary for determination:

(a)

The beginning and ending dates of the service and any breaks that may have occurred during the service, listed by fiscal year;

(b)

The number of calendar months worked;

(c)

The position title and status, including full-time, part-time, probationary, emergency, seasonal, temporary, or interim;and

(d)

If the employee participated in a retirement plan, and if so, if the:

1.

Planplan was a defined contribution or defined benefit plan;, and

2.

Employeeif the employee has taken a refund of contributions to the plan; and

(e)

Any other documentation the agency deems necessary to determine eligibility.

(8)(7)

To purchase urban-county government service pursuant to KRS 61.552(5)(k) and 78.545, the employee shall file at the agencyretirement office a valid Form 4131, Verification of Urban-County Government Service.

(9)(8)

Out-of-State Service Credit.

(a)

To purchase service credit for any out-of-state public service pursuant to KRS 61.552(5)(c) and 78.545, the employee shall file at the agencyretirement office a valid Form 4140, Verification of Out-of-State Service.

(b)

To purchase nonhazardous out-of-state service credit pursuant to KRS 61.552(5)(c), a member shall:

1.

Have been employed in a regular, full-time position;

2.

Have earned the out-of-state service credit in a state or local defined benefit plan other than a plan for teachers; and

3.

Provide documentation or other evidence that they are not eligible for a retirement benefit from the out-of-state plan for the same period of service.

(c)(b)

To purchase out-of-state service credit for a hazardous duty position, the employee shall:also

1.

Filefile at the agency a Form 4140 andretirement office a copy of the description of the duties of the out-of-state position from his or hertheirhis or her former out-of-state employer;.

2.

Meet the eligibility requirements established in subsection (9)(b) of this section;

3.

Be vested in any system in which the member has a hazardous service account based solely upon service in that system; and

4.

Have been employed in an out-of-state

(c)

Out-of-state service credit shall be eligible for purchase as hazardous duty if the position that is the same as or substantially similar to positions for which hazardous duty credit has been approved pursuant to, and meets the definition of a hazardous position as established in,under KRS 61.592 or 78.5522.

(d)

Nonhazardous service may not be used to meet the vesting requirement for a hazardous service credit purchase.

Section 6.Section 7.

Service Purchase Calculations Based on Actuarial Cost.

(1)

Except for employees of a school board paid under an employment contract, for a purchase based on the actuarial cost, in accordance with KRS 61.552(10)(a) and 78.545, the higher of the current rate of pay, final rate of pay, or final compensation times the actuarial age factor shall bedetermined as follows:

(a)

Current rate of pay shall bedetermined as follows:

1.

For an hourly employee paid on a seven and one-half (7 1/2) hour day, the hourly rate times 1,950;

2.

For an hourly employee paid on an eight (8) hour day, the hourly rate times 2,080;

3.

For an employee paid by the day, the daily rate times 260;

4.

For an employee paid by the week, the weekly rate times fifty-two (52);

5.

For an employee paid by the month, the monthly rate times twelve (12);

6.

For a part-time employee who averages 100 or more hours per month, the hourly rate times hours per day times 260. If the number of hours worked per day is not fixed by the employer, seven and one-half (7 1/2) hours shall be used;

7.

For an employee who receives a fixed amount in addition to an hourly, daily, weekly, monthly, or annual rate, the current rate shall include all fixed amounts, averaged into the same period;

8.

For an employee simultaneously employed in more than one (1) of the systems, the higher of the combined current rate of pay, combined final rate of pay, or combined final compensation shall be used as of the cost calculation date.

(b)

Final compensation shall be determined as of the cost calculation date, except that if the agency provides or corrects a cost calculation for a retired member, final compensation shall be based on the definition of final compensation as established in 105 KAR 1:001 in effect on the member'stheir retirement date. To determine final compensation in effect for the cost calculation or correction for a retired member, the agency shall usethe final compensation of nonhazardous members of the County Employees Retirement System or Kentucky Employees Retirement System with an effective retirement date within the window provided in KRS 61.510(14)(b) and 78.510(14)(b) shall be based on the three (3) fiscal years with the highest average monthly earnings if the sum of the employee's service when added to his age would equal at least seventy-five (75), assuming the employee's actual service, includingincludes:

1.

All serviceremaining on an active installment purchase agreement;

2.

All service thatwhich the employee purchased pursuant tois eligible to purchase under KRS 61.552(2), 61.552(3), and 78.545; and

2.

The employee's age at retirement

3.

All service the employee would accrue if employment continued through December 31, 2008.

(c)

The employee's age rounded to the nearest year as of the cost calculation date shall be used.

(c)(d)

The benefit factor used to determine the actuarial cost, in accordance with KRS 61.552(10)(a) and 78.545, shall be the benefit factor to which the employee is entitled on the first day of the month following the cost calculation date, except that the benefit factor for nonhazardous employees of the County Employees Retirement System and the Kentucky Employees Retirement System with an effective retirement date within the window establishedprovided in KRS 61.510(14)(b) and 78.510(14)(b) shall be the highest benefit factor to which the employee would be entitled, assuming total service as determined in paragraph (b) of this subsection.

(2)

For employees of a school board paid under an employment contract, for a purchase based on the actuarial cost, in accordance with KRS 61.552(10)(a) and 78.545, the higher of the current rate of pay, final rate of pay, or final compensation times the actuarial age factor shall bedetermined as follows:

(a)

The current rate of pay shall be equal to the final compensation as of the cost calculation date.

(b)

Final compensation shall be determined as of the cost calculation date, except that the final compensation of nonhazardous members of the County Employees Retirement System or Kentucky Employees Retirement System with an effective retirement date within the window establishedprovided in KRS 61.510(14)(b) and 78.510(14)(b) shall be based on the three (3) fiscal years with the highest average monthly earnings if the sum of the employee's service when added to his or hertheirhis age would equal at least seventy-five (75), assuming the employee's service includes all service:

1.

RemainingAll service remaining on an active installment purchase agreement;

2.

WhichAll service which the employee is eligible to purchase under KRS 61.552(2), 61.552(3), and 78.545; and

3.

TheAll service the employee would accrue if employment continued through December 31, 2008.

(c)

The employee's age rounded to the nearest year as of the cost calculation date shall be used.

(d)

The benefit factor used to determine the actuarial cost, in accordance with KRS 61.552(10)(a) and 78.545, shall be the benefit factor to which the employee is entitled on the first day of the month following the cost calculation date, except that the benefit factor for nonhazardous employees of the County Employees Retirement System and the Kentucky Employees Retirement System with an effective retirement date within the window establishedprovided in KRS 61.510(14)(b) and 78.510(14)(b) shall be the highest benefit factor to which the employee would be entitled, assuming total service as determined in paragraph (b) of this subsection.

Section 7.Section 8.

Correction Upon Discovery of Error or Omission in Service Purchase Costs.

(1)

After the employee, member, or retired member has purchased service, the agency may recalculate the cost of the service if, upon audit, the agency determines that any of the information utilized to calculate the cost of the service was incorrect.

(2)

If the recalculation results in an increase in the cost of $100 or more, the employee or person, member, or retired member shall have thirty (30) days to pay the additional amount.

(3)

If the employee, member, retired member, or the employer, fails to pay the additional amount, the employee's, member's, or retired member's service shall be reduced to the next lower increment or number of months for which the employee, member, or retired member is eligible based on the original payment, and the difference shall be refunded to the employee, member, or retired member.

Section 8.Section 9.

Special Considerations for Purchase of Refunded or Past Service.

(1)

The verified wages associated with service purchased under the provisions of KRS 61.552 and 78.545 that would have qualified as creditable compensation shall be added to the employee's account and shall be used in determining the employee's final compensation.

(2)

An employee purchasing service pursuant tounder the preceding subsection (1) of this section by increments or by installment purchase agreement shall have the service credited in chronological order beginning with the earliest service.

Section 9.Section 10.

Incorporation by Reference.

(1)

The following material is incorporated by reference:

(a)

Form 4172, "Notice of Intent to Transfer Lump Sum Payment(s) to Qualified Employer Sponsored Plan," April 2021;

(b)

Form 4170, "Direct Transfer/Rollover Authorization Form" 1/2026April 2021;

(c)

Form 4225, "Verification of Past Employment," 1/2026April 2021;

(d)

Form 4160, "Affidavit and Certification for Documentation of Service," 1/2026September 2010;

(e)

Form 4120, "Verification of Employment with a State University," April 2021;

(f)

Form 4115, "Federal Verification," 1/2026April 2021;

(g)

Form 4131, "Verification of Urban-County Government Service," April 2021; and

(h)

Form 4140, "Verification of Out-of-State Service," April 2021.

(2)

This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Kentucky Public Pensions Authority, 1260 Louisville Road, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. or on the agency's website at kyret.ky.gov.
CONTACT PERSON: Carole J. Catalfo, Policy Specialist, Kentucky Public Pensions Authority, 1260 Louisville Road, Frankfort, Kentucky 40601, Phone (502) 696-8679, Fax (502) 696-8615, Email: Legal.Non-Advocacy@kyret.ky.gov

7-Year Expiration: 5/31/2029

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