Purchase of Prior Service Credit From a PERS

[Guest Joel Lee]

Can the purchase be made on a pre-tax basis through payroll deductions? Or is a direct transfer of funds from a 403(b) or 457 the only way to purchase it with pre tax dollars?

Thanks,

Joel L. Frank

[Michael Devault]

It is permissible to purchase service credits through salary reduction. However, such purchases may have an impact on the amounts that may be contributed by salary reduction to other plans, since the purchase amount is considered an elective deferral.

Hope this helps.

[Ellie Lowder]

Michael, my friend - participants who elect to purchase service credits using pre-tax 414(h) picked up contributions are not making elective deferrals (those are defined in IRC 402(g)) and there is no direct offset of elective deferrals to 403(b) (or 401(k) where grand fathered plans exist). The pre-tax contribution does reduce includible compensation for purposes of determining the contribution limits for 403(b) (or 401(k)); however, now that limits are base on 100%, doesn't make a heck of a lot of difference, yes?