28 Jun I’m a state worker. Can I buy service credits?

Q. I started my New Jersey state government career on Oct. 20, 2001. I’ve completed 18 years of service and I’m an active member. Am I eligible to purchase service credits, and if so, how much, using my own money to take early retirement?
— Still working

A. Early retirement does sound inviting.

As a state employee, your retirement pension is based in part on the amount of service credits you have at the time of retirement, said Joe Sarnecki, a certified financial planner with U.S. Financial Services in Fairfield.

“Because of this, if you are eligible to purchase additional service credits, it may be beneficial for you,” he said. “Keep in mind, these do not have an impact on your membership tier or enrollment date.”

Sarnecki said you stated that you are an active member – meaning you made a contribution to the retirement system within two years of the purchase request, have not retired or withdrawn contributions – which is the first criteria for eligibility.

Sarnecki said you can purchase service credit in several ways, including a lump-sum payment, through payroll deductions, direct rollover from a retirement plan or a combination.

“If payment is made from a checking account, it will not be tax-deferred, however they will not be included as taxable income when benefits begin,” he said.

So do you qualify? Maybe. You’ll have to check your own record and estimate the cost of purchasing service credits through the Member Benefits Online System (MBOS).

There are several types of services that are eligible for purchase, he said. These include:

Temporary Service Members: Credit for temporary or substitute employment if the employment was continuous and followed immediately by a permanent position.

Leaves of absence without pay: Up to a maximum of two years for personal illness and three months for personal reasons, including child-care/maternity leave.

Out of State Service: Members can purchase up to 10 years of public employment outside of N.J. (within the U.S.) if they are not receiving or eligible to receive retirement benefits from the out of state system. Leaves of absence out of state do not qualify.

U.S. Government Service: Members can purchase up to 10 years of credit if they are not receiving or eligible to receive retirement benefits from the out of state system. Leaves of absence out of state do not qualify.

Military Service: Members are eligible to purchase credit for up to 10 years of active military service rendered prior to enrollment, provided the member is not receiving or eligible to receive a military pension or a pension from any other state or local source for such military service.

You can learn more from the state here.

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This story was originally published on June 28, 2019.

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