Employer Update

New hires often have military service or previous non-covered service with a state, local or school division employer. Each of these scenarios is an example of prior service, which a member might want to buy back to increase their retirement benefit or enable them to retire sooner.

How can you help new VRS members weigh their options when it comes to purchasing prior service?

1. Start With myVRS

Members initiate purchases of prior service through their myVRS accounts. In myVRS, members can:

• View prior service available for purchase, or add service (military, federal or from another state, for example).
• Evaluate the time it will take to recover the purchase cost in retirement.

Authorized employer roles can use myVRS Navigator to assist members throughout this process, including providing cost calculations and setting up purchase payment agreements and lump-sum purchases.

2. Review Cost Windows

Members can purchase service at any time while actively working in a VRS-covered position. However, they have a two-year window of time – from when they begin work in a covered position or return from a period eligible leave – to purchase most types of service at approximate normal cost before the cost changes to actuarial equivalent cost.

Approximate normal cost is the average cost of one year of VRS service credit. The cost is based on a percentage of the member's creditable compensation or average final compensation at the time of purchase, whichever is higher.

Actuarial equivalent cost is the amount of money needed in today's dollars to pay for the value of the increase in the member's future retirement benefit or earlier retirement eligibility date resulting from purchasing prior service. If members purchase prior service after the two-year approximate normal cost window, the cost will be actuarial.

The bottom line: Service purchased within the two-year window is cheaper to purchase, so it’s important for members to review their options and decide early if buying back service is the right choice for them. As a reminder, refunded VRS service can be purchased any time during active membership.

3. Review the Employer Manual

Your best resource for understanding the ins and outs of purchases of prior service is the VRS Employer Manual:

• Eligibility requirements.
• Purchase limits.
• Cost windows.
• Lump-sum payments.
• Setting up payment methods.