Updated May 3, 2012
Creditable service
What it is, how it’s credited and/or purchased, and applicable interest rates

Overview
Service that is automatically credited by the MTRS
Service that you must apply to purchase—and pay for prior to your date of retirement
FAQs

Overview

The amount of creditable service you have is very important:

• it is one of the three factors used to calculate the amount of your retirement benefit (the other two are your age and salary average); and,
• it determines whether you are “vested” for purposes of receiving a retirement benefit.

At the time of your retirement, we will review and verify your creditable service history.

As noted below, you earn service credit automatically while you are contributing to the MTRS via regular payroll deductions, and, if you have previously rendered eligible service, you may be able to purchase credit for your prior employment.

Service that is automatically credited by the MTRS

• Regular MA public school teaching service: Credited through your school’s monthly deduction reporting. [Note: If you previously rendered MA public school service, and then left and took a refund of your MTRS account, you may “buy back” your prior service credit (this is known as a “refund buyback”). See “Other MA public service” in the chart below.]
• Authorized leaves of absence, including sabbaticals: For paid leaves, credited based on the length of your leave and amount of compensation received, as documented by you and your school district; for unpaid leaves, up to one month of credit.
• Military leave of absence during your membership in a MA contributory retirement system: If you are called to military duty while you are a member of a Massachusetts retirement system, and, after your discharge or release, you return to membership service within the applicable time period based on the length of your military service, your military leave will be credited based on documentation from you and your school district or municipality.

Service that you must apply to purchase—and pay for prior to your date of retirement
If you rendered any of the types of service listed below, you may be eligible to purchase credit for your service. If you wish to purchase credit, you must complete and submit the appropriate service purchase applications, along with any required documentation. We will review your application, determine your eligibility to purchase your service, and send you an invoice.

Please note: All service purchases must be paid for in full prior to your date of retirement; late payments will delay your date of retirement—and because retirement benefits are retroactive only to your date of retirement, late payments will cause you to lose money!

We strongly encourage you to start the service purchase process early for two important reasons:

• it often takes some time for you and your prior employers to gather documentation of your past service; and,
• depending on the service you wish to purchase and your membership status, you may have only a limited time to qualify for being charged the lower, “buyback” interest rate, as described below.

* Credit may no longer be purchased for uncompensated service rendered as a selectman, city councillor or alderman, school committee member, moderator or library trustee; however, service in these positions that was purchased prior to 7/1/2009 will count as creditable service. For Other MA public service rendered after 7/1/2009 to be eligible for purchase, you had to have earned at least $5,000 per year.

** To be eligible to purchase these service types, at the time you submit your service purchase application, you must be a member in service with the MTRS (either an active member of the MTRS or an inactive member on an authorized leave of absence for not more than one year).

*** Pursuant to pension reform legislation enacted in November 2011, the interest charged on these service purchases is either buyback interest (currently, 4.125%) or actuarial interest (currently, 8.25%), depending on your membership history and date of application. Specifically, if you are a:

• CURRENT member whose effective membership date is before 4/2/2013: You will be entitled to buyback interest if your service purchase application is received before 4/2/2013 and you either pay for the purchase in full or commit to an installment agreement before 4/2/2013, or the invoice due date, whichever is later. On and after 4/2/2013, you will be charged actuarial interest.
• FORMER member of a Massachusetts public retirement system who re-entered membership anytime on or after 4/2/2012: You will be entitled to buyback interest if your service purchase application is received within one year of your date of re-entry to membership and you either pay for the purchase in full or commit to an installment agreement by the first anniversary of your date of re-entry, or the invoice due date, whichever is later. If you apply to purchase or pay for this service after your first year of re-entry to membership, you will be charged actuarial interest.
• NEW member who establishes membership on or after 4/2/2013: You will be charged actuarial interest.
  

Is there a significant difference between buyback interest and actuarial interest?
Yes—buyback interest is, by definition, one half of the actuarially assumed interest rate (4.125% at this time), and actuarial interest is the actuarially assumed rate of return on our system’s investment fund (currently, 8.25% for the MTRS). If, as described above, based on your membership history, you qualify for being charged buyback interest, and you do not submit your completed service purchase application within the specific timeframes noted above, you will be charged actuarial interest, which will result in a significant increase in the interest charged.

Example: Tom Teacher was employed as a teacher with the Cambridge Public Schools during the 1974–75 school year. At that time, his MTRS contribution rate was 5%, and his annual salary was $10,000. After that year, he left teaching to pursue another career and took a refund of his MTRS account; he returned to Massachusetts public teaching service in September 1990 and has been an MTRS member ever since. Now, Tom is thinking about retiring in the next few years, and wants to buy back his 1974–75 teaching service to increase the amount of creditable service used to calculate his retirement benefit.

As shown in the first line of the chart below, if Tom applies to buy back his refund:

• before April 2, 2013, he will qualify for buyback interest, which, based on an invoice due date of April 30, 2013 would amount to $2,299.03.
• on or after April 2, 2013, he will be charged actuarial interest, which, based on an invoice due date of April 30, 2013 would amount to $9,969.76.

To illustrate the significant difference in buyback and actuarial interest amounts, examples of the costs to purchase one year of service rendered in different years at various annual salaries are shown below.

Frequently Asked Questions

1) How do I know how much creditable service I have?

Currently, our computer system is not programmed to track this information, and, as a result, we do not have or maintain a complete record of your creditable service. We are, however, working to implement a new system that will track your creditable service and allow us to add historical data.

Until we have installed our new computer system, you are the best source of this information. To estimate your creditable service, see the list of types of creditable service, then add up the number of years of each type of service you have rendered.

If you are nearing retirement and need to know how much creditable service you have so that you may determine when you are eligible to retire, please contact us. We will review your file and provide you with a statement of your creditable service.

2) Is all creditable service equal?

To the extent that you have, for example, two years of Massachusetts teaching service and two years of out-of-state service that you have purchased, yes—each counts as two years of creditable service. However, creditable service is also categorized as either membership or nonmembership service:

• Membership service is that which required your membership in the MTRS and during which you contributed to the MTRS via payroll deduction.
  
• Nonmembership service is that which did not require your membership in the MTRS, but is eligible for purchase. Types of nonmembership service are: substitute teaching service in a Massachusetts public school; out-of-state public school teaching; nonpublic school teaching; vocational work experience; other Massachusetts public employment; military service; Peace Corps service; pre-1975 maternity leave; and, teaching service in an overseas school for dependents sponsored by the U.S. Department of Defense.
  

3) How much does it cost to purchase past service?

Generally, the cost of purchasing past service is based on what you would have paid in contributions during that period (plus interest to date) or what you actually paid and withdrew (plus interest to date). Please refer to the information on each type of creditable service to learn how the cost is calculated for that specific type, and be aware of how the type of interest charged is determined, including, if applicable, the limited timeframe for qualifying for the lower, buyback interest rate.

4) Is it always a good idea to purchase past creditable service?

Often, but not always—depending on how much creditable service you already have, it may or may not make financial sense for you to purchase outstanding service. If, based on your established creditable service and age, you:

• are not at or near the maximum retirement allowance—80 percent of the allowable salary average—then, depending on how much outstanding service you have, purchasing it may result in a meaningful increase in your retirement allowance. While the present cost of purchasing the service may seem substantial, the difference in your retirement allowance may allow you to recoup the expense in a short period of time and pay off in the long run.
• are already eligible to receive the maximum retirement allowance (80 percent of the allowable salary average) by reason of your established creditable service and age, then purchasing outstanding service will be an expense that will not result in an increase in your retirement allowance.

5) When must I purchase creditable service?

You must purchase creditable service before the effective date of your retirement. If you wish to purchase out-of-state, overseas dependent school, vocational work experience, nonpublic school teaching service or military service credit, you must do so while you are an active member of the MTRS or while you are on an authorized leave of absence. If you wish to purchase past Massachusetts public school substitute, temporary or part-time teaching service or other Massachusetts public service, you must do so prior to your date of retirement. Because an interest charge is added to the amount due, the cost of purchasing creditable service increases monthly.

6) How do I purchase creditable service?

While the specifics differ depending on what type of service you wish to purchase, the basic steps are as follows:

Step 1: You obtain the service purchase application form, if applicable (please see types of purchasable service, above).

Step 2: You complete and submit the form, supplying us with specific information about the type of service, where and when you rendered it, and what you received as compensation.

Step 3: We review your form, determine how much service you are eligible to purchase as well as your cost, and send you an invoice.

Step 4: Depending on your particular situation, you may then pay the total in full, or, if eligible, in payments over time on our installment plan. Or—except if you are purchasing vocational work experience—you may decide to postpone purchasing the service until a later date, if at all. You are under no obligation to purchase service you have been billed for; however, if you choose to defer your purchase, the cost will increase because of interest charges. Be aware that, depending on the type of service you wish to purchase, deferring your purchase to a later date may result in a significant increase in the interest you must pay (see Applicable interest in chart, above). [Note: You may be able to pay for your service purchase with pre-tax dollars. Please see Purchasing creditable service with a direct transfer or rollover.]

7) I am participating in RetirementPlus. What types of creditable service count toward the enhanced benefit eligibility requirement of “at least 20 years of membership service with the MTRS (or Boston Retirement System) as a teacher?”

In addition to your regular service during which you contribute to the MTRS via regular payroll deductions, the following two types of purchased service count toward the 20-year “teaching service” requirement:

• repayment of a refund from the MTRS or the Boston Retirement System, and
• if you began service with an MTRS employer on a temporary or part-time basis, the purchase of your mandatory six-month waiting period.

All other types of service do not count toward the 20-year “teaching service” requirement. They do count, however, toward the 30-year creditable service requirement.

8) Is service rendered as a “consultant” in a school district, or as an “03” employee of the Commonwealth of Massachusetts, eligible for purchase?

No—this type of service continues to be ineligible for purchase by MTRS members.