When a plan-to-plan transfer made up part of the payment, the department shall proceed under the payment shortfall provisions of s. 40.285 (5) (c)
, Stats., except as otherwise provided by subd. 2. c.
When no plan-to-plan transfer is involved and subd. 2. c.
do not apply, or the participant made a timely request to withdraw the application, the department shall refund all amounts received as provided in par. (f)
If a Wisconsin retirement system annuity or lump sum in lieu of an annuity under s. 40.25 (1)
, Stats., is to be paid to the applicant, and the applicant so requests, the balance due shall be deducted from the lump sum or a subsequent monthly annuity payment payable. This subdivision paragraph does not apply if the balance due exceeds the amount of the benefit under s. 40.25 (1)
, Stats., or if the Department determines that the amount of the monthly annuity available for this deduction is insufficient.
If the application was for the purchase of credit for forfeited service or other governmental service, and subdivision paragraph c. does not apply, the department may complete a partial purchase as provided in sub. (3) (d)
or (4) (g)
No participant withdrawal or cancellation of application; exception.
The participant may not cancel or withdraw an application to purchase service credits once any payment has been received by the department, except under the circumstances specified in par. (h) 2. b.
Treatment of purchased service credit as pre-2000 or post-1999 service.
For purposes of computing formula annuity benefits under s. 40.23 (2m) (e)
, Stats., and the differing multipliers applicable to creditable service that was performed before January 1, 2000, and on and after that date, purchased service credits will be treated as provided in s. ETF 20.19 (2)
Words, phrases and terms used in this section shall have the same meanings as set forth in s. 40.02
, Stats., and s. ETF 10.01
. In addition, in this section:
“Current earnings" means the participant's earnings in the most recent complete annual earnings period, provided the participant was a participating employee for the full annual earnings period. If the participant was not a participating employee throughout the most recently ended annual earnings period, “current earnings" means the product of the participant's hourly pay rate on the date of application, multiplied by the number of hours the participant would reasonably be expected to be employed as a participating employee during the current annual earnings period, assuming that the participant would continue to be employed for the remainder of the current annual earnings period.
“Date of application" means the date the signed application on the form approved by the department for the purchase of the type of service in question is received by the department, as determined under s. ETF 10.82 (1)
ETF 20.17 Note
Note: The forms approved by the department for the purchase of service credits are “Application to Purchase Other Governmental Service," form ET-2205, “Qualifying Service Purchase Estimate/Application," form ET-4314, “Forfeited Service Purchase Estimate/Application" form ET-4315, “Uncredited Teaching Service Purchase Estimate/Application," form ET-4323. These are individually customized forms that reflect the department's estimate of the amount required from the participant for that particular purchase. In addition, where no standard form exists for the type of service purchase, customized estimates will be prepared by the department upon request. All forms and estimates can be obtained at no charge by writing to: department of employee trust funds, P.O. Box 7931, Madison, WI 53707-7931, or by calling (608) 266-3285 or toll free at (877) 533-5020. Forms should be requested at least four (4) weeks before the date the participating employee intends to apply, and well in advance of any anticipated termination of employment, to allow sufficient time for the department to calculate the personalized estimates of the cost.
“Money purchase balance" means the sum of the participant's employee required contributions and accrued interest, including accumulations resulting from purchases under this section, plus an amount from the employer reserve equal to the employee required accumulation less any amount resulting from purchases under s. 40.285 (2) (b)
, Stats., and interest accumulated on those amounts.
“Other governmental service" means one of the following:
The government of a U.S. state other than Wisconsin or a political subdivision, department or agency of such state.
An employer as defined by s. 40.02 (28)
, Stats., that does not participate in the Wisconsin retirement system with respect to the employee's employment category.
Service as an employee for a participating employer in the Wisconsin retirement system that was performed before the employer began to participate with respect to the employee's employment category, and that has not been recognized by the employer as creditable prior service.
ETF 20.17 Note
Under s. 40.21 (6)
, Stats., an employer may choose to recognize none, 25%, 50%, 75% or 100% of the previous service of existing employees when the employer first joins the Wisconsin retirement system, and may subsequently increase the recognized percentage for those who are still participating employees at the time. Any percentage of an employee's previous service remaining unrecognized is “other governmental service" within the meaning of subd. 2.
Purchasing creditable service forfeited by a separation benefit or withdrawal of employee or member contributions. ETF 20.17(3)(am)1.1.
An applicant is eligible to purchase service under this subsection if, on the date of application, the applicant is a participating employee with at least 3 continuous years of creditable service, as defined by s. ETF 10.01 (7)
and no break in service between the three continuous years and the application date.
For purposes of s. 40.285 (2) (a) 2. b.
, Stats., unless barred because of receipt of a benefit as provided in subd. 3.
or as otherwise provided in this section or s. 40.285
, Stats., a person may purchase credit for rendering services that were then covered by the state teacher retirement system, Milwaukee teacher retirement fund or Wisconsin retirement fund, if the person subsequently received a lump sum payment under one of the separation or withdrawal laws in effect before January 1, 1982, including ss. 41.16
, 1969-79 stats., 42.242 (5)
, 42.243 (7) (e)
, 1957-79 stats., 42.245 (4)
, 1965-79 stats., 42.49 (1) (a)
, 1945-79 stats., 42.49 (14)
, 1955-79 stats., 42.49 (16)
, 1965-79 stats., 42.75 (1)
, 42.76 (10)
, 42.78 (6)
, 1971-75 stats., 42.86 (1)
, 1969-79 stats., 66.90 (15)
, 1945 stats., 66.91
, 1947-67 stats.
Conversely, a person who received an annuity, or a lump sum payment in lieu of an annuity under s. 40.25 (1)
, Stats., is not eligible to purchase credit under s. 40.285 (2) (a)
, Stats., for any services rendered to a participating employer as a participating employee prior to payment of the benefit. Correspondingly, no person may purchase credit under s. 40.285 (2) (a)
, Stats., for services rendered prior to receiving a lump sum benefit under the similar laws in effect for the Wisconsin retirement fund, state teacher retirement system or Milwaukee teacher retirement fund prior to January 1, 1982, including ss. 41.11
, 1969 stats., 41.11 (8)
, 1971-79 stats., 42.242 (7)
, 1957-79 stats., 42.245 (6)
, 1965-79 stats., 42.49 (15)
, 1955-79 stats., 42.73 (1)
and 42.76 (12) (c)
, 1971-79 stats., 42.78 (2) (k) 1.
, 1975-79 stats., and 66.906 (3d)
, 1967 stats. Those are not separation or withdrawal benefit laws within the meaning of s. 40.285 (2) (a) 2. b.
Service in different categories of employment; Calculation of cost.
In cases where the service to be reestablished was earned in more than one employment category, separate calculations shall be done for each period of service using the applicable statutory contribution rate under s. 40.05 (1) (a)
, Stats., as affected by s. 40.05 (1) (b)
, Stats., for each employment category. The department's estimate to purchase service shall be calculated based on all the years and fractions of a year of forfeited service that are then available for purchase under s. 40.285 (2) (a)
, Stats., and this subsection, including the limits of s. 40.285 (2) (a) 1. a.
, Stats., unless the applicant specifies a lesser amount. If the applicant so requests on the application received by the department, the final calculation of cost made after the application is received may include all years and fractions of a year of forfeited service eligible for purchase under s. 40.285 (2) (a)
, Stats., as of the date of application.
Proration of multiple category service for payment shortfall.
If the participant's payment to purchase service forfeited by a separation benefit or withdrawal of employee or member contributions is less than the amount needed to purchase all of the forfeited service that the participant is eligible to buy, the department shall complete the purchase by reducing the service credit purchased to the prorated credit that can be purchased by the payment actually received. Within each category of employment, the payment received shall be applied first to purchase service credit eligible to be treated as pre-2000 service, as provided in s. ETF 20.19 (2) (d)
. If the participant has forfeited service based on employment in more than one category under s. 40.23 (2) (b)
, Stats., and the participant does not specify the service category or categories to which the payment is to be applied, the department shall use the following order of priority in determining to which category of service to apply the payment, until the amount paid is exhausted:
Purchase and crediting of other governmental service. ETF 20.17(4)(b)
The department shall grant creditable service for other governmental service to participants who meet all of the following requirements:
On the date of application, the applicant is a participating employee with at least 3 continuous years of creditable service, as defined by s. ETF 10.01 (7)
, with no break in service between the three continuous years and the application date.
With respect to the other governmental service for which credit is to be purchased, the participant was the employee of a federal, state or local governmental entity. In this paragraph, notwithstanding s. 40.02 (26)
, Stats., the terms “employee" and “employer" have their common meanings. The term “employee" does not include an unpaid volunteer, an independent contractor, a person contracted to furnish more than his or her personal services, a patient or inmate of a hospital, home or institution who performs services therein, or anyone who did not receive salary, wages or other compensation for his or her services. Employment by a private or non–profit entity which received government moneys or which was under contract to provide services to or on behalf of a governmental entity does not constitute employment with a governmental entity.
The participant submits an application to the department with payment, on a form approved by the department. The applicant shall then have 90 days to complete the application process by submitting all of the following:
Evidence that the service was other governmental service and which meets the requirements of par. (c)
. The department's determination as to the sufficiency of the documentation shall be subject to timely appeal to the employee trust funds board under ch. ETF 11
A written certification by the employer for which the service was rendered that the service will not be used to establish entitlement to, or the amount of, any other pension or retirement benefit from a plan for federal, state or local government employees which is subject to sections 401
of the internal revenue code, except for a disability or OASDHI benefit or a benefit paid for service in the national guard and the reserves. If the participant is unable to obtain the employer's certification through reasonable efforts, the department may accept the employee's written statement in lieu of the employer's certification, or contact the employer directly. If the employer does not have the information necessary to make this certification, the department may accept the employee's written statement in lieu of the employer's certification.
ETF 20.17 Note
Note: If the federal, state or local governmental retirement or pension plan, like the Wisconsin retirement system, provides a benefit defined in part by service but also includes an alternative money-purchase benefit, then service under that plan is used to establish entitlement even if the particular individual received a benefit calculated without reference to years of service. The same is true for any plan with a vesting requirement.
Required evidence of service.
A participant who proposes to purchase other governmental service shall provide to the department all of the following:
The correct name and current or latest address, and telephone number, if any, of the employer for which the service was rendered.
The dates of service for the other governmental employer, including the beginning and ending dates of each period of employment.
Evidence of whether the employment was considered full-time or part-time, and of the number of hours worked in each calendar year, sufficient to establish the amount of service which the participant is eligible to purchase. Full-time employment will be assumed to be 8 hours per day and 40 hours per week, absent a showing that the employer established a different standard. Years of service shall be calculated from hours of service rendered in the manner provided in s. ETF 10.03 (3)
Evidence that the employer was a federal, state, or local governmental entity in the United States. The department may rely on the determination of the social security administration as to whether an employer is a governmental entity.
Evidence that the participant was an employee of the governmental entity.
The service was not performed as an independent contractor or subject to a contract under which the employee furnished more than his or her personal services.
That the services were not performed as a student assistant, or as an employee-in-training or for a school or other educational institution where the employee was a student attending classes and performing services incidental to the course of study.
The services were not performed on or after April 23, 1992, while the person was a full-time student who had not attained age 20.
The services were not performed after the person had already become an annuitant, excluding annuities received in the capacity of another person's beneficiary, named survivor or alternate payee.
The services were not performed for a hospital, home or institution while the person was a patient or inmate.
The employer was not a private or non-profit entity under a contract to provide services to or on behalf of a governmental entity.
If the participating employee is applying to receive creditable service for service in the U.S. armed forces or national guard, evidence that the employee was discharged from the U.S. armed forces or national guard under honorable or general conditions.
The cost to purchase other governmental service is intended to fully fund the anticipated benefit increase provided by the purchased service credit, based on the laws then in effect.
The actuary shall devise the method for calculating the cost to purchase other governmental service. The actuary's calculation shall use the same economic and actuarial assumptions used in the actuary's valuations of the Wisconsin retirement system. The actuary shall establish the factors necessary to determine the actuarial value to each applicant of the purchased service credit. Those factors may include, without limitation:
The participant's current employment category as determined under s. 40.23 (2m) (e)
, Stats. If the participant is employed in 2 or more categories on the date of application, the computation shall be based on the current employment category in which the participant has accrued the most creditable service.
The participant's earnings for the last completed annual earnings period, as of January 1 preceding the date of application.
The number of years, in hundredths of a year, of service credit the participant requests to purchase.
The participant's accumulated employee required contributions, including interest, as of the January 1 preceding the date of application.
Twelve times the participant's final average earnings determined as of January 1 preceding the date of application.
The participant's years of creditable service, including all previously purchased service credit, by employment category and by pre-2000 and post-1999 service.
ETF 20.17 Note
This amendment (CR 09-057
) to the existing rule provides clarification that the actuary may include the eight factors specified in the rule when determining the actuarial value of the purchased service credit along with other relevant factors. In addition, the rule corrects a typo by adding the word “service" to the applicable section.
The actuary may, at any time, change the method of calculating the cost of other governmental service credits if warranted by changes in the benefit laws or valuation assumptions of the Wisconsin retirement system or by other factors the actuary determines to be actuarially significant. The actuary's new method of calculation shall be applied as soon as possible unless a delayed effective date is recommended by the actuary. The department may complete pending transactions and honor cost estimates produced before the new method of calculation went into effect.
Creditable service based on purchase of other governmental service; limitations. ETF 20.17(4)(e)1.
The amount of other governmental service purchased through all purchases made under this section may not exceed the amount of the participant's creditable service earned under the Wisconsin retirement system and credited as of the date of the last application to purchase other governmental service, excluding any service previously purchased by the participant.
Other governmental service shall be credited in the general employment category regardless of the employee's current employment category or the nature of the service, and benefits based on the purchased service shall be calculated under s. 40.23 (2m) (e) 1.
Service, including teaching service, shall be granted in hundredths of a year, at the rate of one year for 1,904 hours or more worked in one calendar year. If the participant worked less than 1,904 hours in a calendar year, the partial year of other governmental service shall be calculated by dividing the number of hours worked by 1,904.
A participant's total creditable service in any annual earnings period from all sources may not exceed one year.
Creditable service purchased under this section shall be used solely to calculate a formula annuity benefit amount based upon years of creditable service, as under ss. 40.23 (2) (b)
or (2m) (e)
, 40.25 (1)
, 40.63 (8)
, and 40.73 (1) (c)
, Stats. The department may not consider purchased other governmental service for any other purpose, including but not limited to determining:
The amount of creditable service which the participant is eligible to reestablish under s. 40.285 (2) (a)
, Stats., or to purchase under this subsection.
Notwithstanding sub. (1) (g) 1.
, if any service for a Wisconsin employer which has been credited under this section is subsequently recognized as creditable prior service under s. 40.21 (6)
, Stats., the participant's creditable service for other governmental service shall be reduced accordingly and the associated contributions plus the interest credited to those contributions shall be transferred to the employee's additional account and shall be available to the employee in the same manner as other contributions under s. 40.05 (1) (a) 5.
, Stats. No other refund to the employee may be made.
Payments received to purchase other governmental service; limitations on benefits.
The department shall account for amounts received to purchase other governmental service, and the interest credited to such in a manner that permits identifying and subtracting such funds from amounts to be increased by a matching amount from the employer reserve when computing a money purchase annuity or a death benefit, as provided by ss. 40.23 (3)
and 40.73 (1) (am)
, Stats., and for purposes of calculating the hypothetical annuity under s. 40.73 (1) (c)
If the participant does not withdraw the application or pay the balance due on a payment shortfall within 30 days after notice is sent to the participant, the department shall complete the purchase, either by deducting the amount due from the participant's annuity, if any, as provided in sub. (1) (h)
or by reducing the amount of service credit purchased to the credit that can be purchased by the payment actually received.
Credit for service during qualifying period. ETF 20.17(5)(b)
Calculation of amount due.
The department's estimate to purchase service shall be calculated based on the fraction of a year of qualifying service that is available for purchase under s. 40.285 (2) (d)
, Stats., and this subsection. The payment to purchase qualifying service as provided in s. 40.285 (2) (d)
, Stats., shall be based on the applicant's highest earnings in a single annual earnings period as of the date of application. The earnings shall be annualized prior to calculating the amount due from an applicant who earned less than a full year of service in the highest annual earnings period as defined in s. 40.02 (3)
ETF 20.17 Note
Example 1. Calendar year 2005 was the applicant's highest annual earnings period on the date her application to purchase service is received. During 2005, the applicant had 0.75 years of creditable service and $27,000 in earnings. The earnings will be “annualized" to $36,000 (i.e., $27,000 divided by 0.75) and that amount will be used for purposes of calculating the payment due.
ETF 20.17 Note
Example 2. An applicant whose annual earnings periods are calendar years had $34,000 in earnings and 1.0 years of creditable service in 2004, the highest earnings reported for any calendar year as of the date of application. The applicant also had $27,000 in earnings but only 0.75 years of creditable service in 2005. For purposes of calculating the payment due, the actual earnings for 2004 will be used because that is the highest earnings year, and the department will not annualize the lower 2005 earnings to $36,000.