Iowa IPERS Military Service Credit Purchase

This is a purchase right rather than a gift, and the bar on who may exercise it is broader than almost anyone expects. Who may buy. Section 97B.80, subsection 1: effective July 1, 1992, "a vested or retired member who has one or more full calendar years of covered wages and who at any time served on active duty in the armed forces of the United States, upon submitting verification of the dates of the active duty service, may make contributions to the retirement system for all or a portion of the period of time of the active duty service, in increments of one or more calendar quarters, and receive credit for membership service and prior service for the period of time for which the contributions are made." Three conditions: vested or retired in IPERS, at least one full calendar year of covered wages, and active duty service in the armed forces at any time. No wartime period, no Iowa residency during service, no discharge characterisation and no disability. The purchase is in calendar-quarter increments and you can buy part of your service rather than all of it. Note "or retired": a person already drawing an IPERS allowance may still buy, and subsection 4 provides that a member eligible for an increased allowance because of the purchase "is entitled to adjusted payments beginning with the month in which the member pays contributions." What it costs. Subsection 2 has two regimes and only the second one is live. For a purchase made before July 1, 1999, the contributions were based on the member's covered wages for the most recent full calendar year at the then-applicable rates, inflation-adjusted if the wages were older. For a purchase made on or after July 1, 1999, "the member shall make contributions in an amount equal to the actuarial cost of the service purchase", which the section defines as "an amount determined by the system in accordance with actuarial tables, as reported to the system by the system's actuary, which reflects the actuarial cost necessary to fund an increased retirement allowance resulting from the purchase of additional service." Full actuarial cost means the purchase is priced so IPERS is indifferent. There is no subsidy. Whether it is worth doing is an arithmetic question about your own age, salary and expected retirement date, and IPERS will quote you the figure. What the purchase buys is real: credit for both membership service and prior service, which affects the benefit formula and can affect when you reach a service milestone. Now the bar, which is the sentence to read before doing anything else. Subsection 3: "a member is not eligible to make contributions under this section if the member is receiving, is eligible to receive, or may in the future be eligible to receive retirement pay from the United States government for active duty in the armed forces, except for retirement pay granted by the United States government under retired pay for nonregular service pursuant to 10 U.S.C. §12731 – 12739." Three tenses: receiving, eligible to receive, or "may in the future be eligible to receive". A currently serving active-component service member on track for a twenty-year retirement is, on the face of that clause, already barred, years before any retirement pay exists. So is a member who separated with enough service to draw active duty retired pay later. The provision is designed to stop a person being paid twice for the same years, and it is drafted to catch the case prospectively. The exception is reserve retired pay, and it is the one that opens the door for most people. "Retired pay for nonregular service" under 10 U.S.C. sections 12731 to 12739 is the reserve and national guard retirement, payable from age sixty or earlier under the reduced-age provisions. A member who will draw reserve retired pay may still buy IPERS credit for their active duty periods. Subsection 3 then requires them to document it: "A member receiving retired pay for nonregular service who makes contributions under this section shall provide information required by the system documenting time periods covered under retired pay for nonregular service." So the practical shape is: a guard or reserve veteran with active duty mobilisations and an IPERS career is the intended beneficiary, and an active-duty retiree or future retiree is excluded. A veteran who served a single enlistment and left without any retirement entitlement is not caught by the bar at all and is squarely eligible. Verification and mechanics. Subsection 3: verification of active duty service and payment of contributions are made to IPERS. Subsection 5 requires the system to ensure the purchase does not exceed the annual additions limit under section 415 of the Internal Revenue Code, which can cap how much you may pay in a year and may require spreading a large purchase. What this is not. It is not a free grant of service credit for military time, which some states provide; Iowa's is a purchase. It is not limited to wartime service. And it does not interact with the section 35C.6 removal protection or the chapter 35C hiring preference, which are separate benefits for the same population. Before you buy, get three numbers from IPERS: the actuarial cost of the quarters you want, the effect on your monthly allowance, and the break-even period. Then check subsection 3 against your own military status, because a purchase made by someone the bar covers is a problem to unwind rather than a bargain.