Buying SDRS years you didn't work here

Can you buy service credit in SDRS?

Yes, while you're a contributing member. You can buy prior public employment you can't get a retirement benefit for, and up to 5 years of "air time" (service you never worked) once you have 5 years of contributory service. The cost is actuarial, so SDRS quotes it for you.

• You can buy prior public service you cannot get a benefit for, and up to five years of 'air time' after five years of contributory service. The cost is actuarial, based on your age and the higher of your salary or FAC.Foundation Handbook (July 2024), p. 8; SDCL 3-12C-504, 3-12C-511

You may buy prior public employment for which you cannot get a retirement benefit, and up to five years of nonqualified permissive service ('air time') once you have at least five years of contributory service. The cost depends on your age and is an actuarially determined percentage of the higher of current salary and FAC. Military leave for an initial tour of duty counts if you were employed before, return within one year of discharge and stay at least one year. Foundation Handbook (July 2024), p. 8, Earning Credited Service & Service Purchases; SDCL 3-12C-504, 3-12C-509, 3-12C-511, 3-12C-514

Rules for particular service

• Buying other public service that no other retirement system pays you a benefit for requires at least five years of contributory service in SDRS. For air time, the handbook says at least five years and the statute says over five.SDCL 3-12C-509, 3-12C-511; Foundation Handbook (July 2024), p. 8
• On an employer-approved unpaid leave, you keep earning credited service if contributions are paid during the leave. If they aren't, you can buy the leave later at the purchase cost.Foundation Handbook (July 2024), p. 8, Leaves of Absence; SDCL 3-12C-513

What a bought year adds

At a $50,000 final average compensation, a year adds $775 a year to a Foundation benefit (1.55%) or $900 to a Generational benefit (1.8%). For a Foundation member, more years can also bring the Rule of 85 closer. The percentages are explained in the SDRS formula. Foundation Handbook (July 2024), p. 11, Normal Retirement Benefits (formula graphics, see source/handbook-image-text.txt); SDCL 3-12C-1106; SDRS Actuarial Valuation (June 30, 2024), pp. 53-54; Generational Handbook (July 2024), p. 11, Normal Retirement Benefits (formula graphic, see source/handbook-image-text.txt); SDCL 3-12C-1204

What it costs and how you pay

• The cost is fixed when SDRS receives your notice that you intend to pay. You can pay it in level installments over up to ten years, discounted at SDRS's assumed rate of return. Unless your employer is making the payments, any balance is due in full within 90 days of your retirement or death; a surviving spouse may finish the payments.SDCL 3-12C-517
• You can pay with a trustee-to-trustee transfer of pre-tax money from a 403(b) or 457 plan.SDCL 3-12C-510
• The law sets the price as an actuarially determined percentage times the member contribution rate, applied to the higher of your current pay or your final compensation as if you retired that day, for each year bought.SDCL 3-12C-504

No source publishes purchase cost factors. SDRS's actuarial valuation (June 30, 2024, p. 50) says: cost is actuarial, based on age, with a minimum of 100% of combined member and employer contributions. Ask SDRS for a quote. Check with SDRS

Service purchased after July 1, 2004 is not contributory service for vesting. SDRS Actuarial Valuation (June 30, 2024), p. 50, Credited Service; SDCL 3-12C-101(29) That matters if you might leave before you're vested.

To see what extra years would pay, add them to your service in the calculator, or start from a filled-in Foundation example and raise the years. Related: what one more year of work adds.

Questions