Presenter outlines how purchasing optional service credit can help Nebraska school employees retire sooner

A presenter explained how Nebraska public school employees can purchase optional service credit to bridge gaps in credible service, meet retirement eligibility (including the rule of 85), or increase their monthly pension payments. The presenter said, “money equals time,” and walked through three purchase types, a worked example, required timelines, and payment options.

Why it matters: For some members, buying service credit can remove early‑retirement reductions and increase lifetime monthly benefits. Using a concrete example, the presenter showed how a six‑month purchase could eliminate a 6% permanent reduction and raise monthly pay by $161, paying off an $8,000 purchase in roughly 50 months under that scenario.

Details of the three purchase types and key limits The presenter outlined three ways members can buy service credit: (1) qualified leaves of absence (sabbaticals, maternity leave, exchange teaching, elected office, collective bargaining leave, education leave), where purchase is limited to the leave length or four years (whichever is less) and the associated salary is not used in benefit calculations; (2) verified out‑of‑state public school service or Omaha Public Schools service, limited to the amount of forfeited service (up to 10 years) and requiring proof of forfeited benefits and payment of the plan’s actuarial cost; and (3) 12‑month pre‑retirement service (often called airtime), which may allow up to five additional years to be purchased in the final year of employment but requires eligibility thresholds (if a member joined before July 1, 2014, a minimum of five years of credible service; if on or after July 1, 2014, a minimum of ten years), a written agreement to retire within 12 months, and full payment prior to termination. The presenter noted that purchased service is used to calculate retirement benefits but the salary associated with purchased service generally is not included in benefit salary calculations.

Procedures, timelines and costs The presenter said members should initiate the process with NPERS in writing no less than 12 months before termination; NPERS will estimate cost and provide application and payment method forms. To be eligible to complete a purchase, the required paperwork must be received at least 60 days before the member’s last day of employment. The presenter used a hypothetical example in which purchasing six months of pre‑retirement service cost $8,000 and increased the monthly pension by $161, producing a payoff in about 50 months; that example was presented as illustrative, and the presenter emphasized that actual eligibility and cost vary by individual circumstances.

Payment and tax notes Acceptable payment options discussed included after‑tax direct payments or installments, after‑tax payroll deductions, and rollovers from qualified accounts (for example, 401(a), 401(k), 403(a)/(b), 457(b), or IRA accounts). The presenter said personal checks are not accepted and that after‑tax purchases may be subject to Internal Revenue Code contribution limits, recommending members consult a tax professional.

Using the online estimator and member services The presenter guided members through the NPERS purchase‑of‑service estimator available at npers.n.gov: from the Member Info tab, select Purchase of Service Estimator, accept the disclaimer, select service type, enter birthdate, plan participation start date (to determine tier), estimated termination date, benefit start date, total years of service, highest 12‑month salary, and amount of time to purchase to receive an estimate. The presenter recommended contacting NPERS member services and using the online estimators before deciding.

What the presentation did not resolve The presentation did not provide an exhaustive list of exceptions, did not name NPERS staff by name, and noted that precise costs, tax consequences, and eligibility determinations depend on individual records and plan rules. Members seeking to act were directed to NPERS member services and the online estimators for case‑specific figures.

Next steps Members interested in exploring a purchase should contact NPERS member services, run the purchase‑of‑service estimator on npers.n.gov, and follow the application and timing rules described.