07 Dec How can I buy service credits for my state pension?

Q. I work for the state and for the first four months of my employment, I was not allowed to buy into the pension. Now I can buy the service credits for these four months. If I do it, would it come out of my checking account and will I have to report it to the IRS if it’s not a rollover from another plan?
— Trying to plan

A. You’re smart of consider buying the extra service credits.

Not everyone has the opportunity.

According to the state of New Jersey, an eligible individual is an active member “who has made contributions to the retirement system within two years of his/her purchase request, and who has not retired or withdrawn his/her contributions.”

These credits are added to your total service credit, but do not have an impact on your membership tier, said Michael Pappachristou, a certified financial planner with RegentAtlantic in Morristown.

He said the additional purchase also does not change your date of enrollment.

There are a few ways in which one can purchase service credits – a lump sum payment, payroll deductions and rollovers are among the options.

“Contributions using funds from a checking account will not be tax-deferred, however, they will not be included as taxable income when retirement benefits commence,” Pappachristou said.

In order to purchase service credits, you must submit a Purchase Application through the Member Benefits Online System (MBOS). This can be found on New Jersey’s Treasury Department website under Pensions & Benefits.

“This application will prompt a Purchase Quotation Letter outlining the cost of the credits,” he said. “If you decide to move forward with the purchase, you have 90 days to return the Purchase Authorization piece of the quotation letter provided to you.”

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