NC TSERS Service Credit Purchase: Military, Withdrawn and Out-of-State Service

Why Purchasing Service Credit Changes Your TSERS Benefit

Every year of creditable service feeds directly into your pension formula: Average Final Compensation × 1.82% × Years of Creditable Service. Add two years of purchased credit to a career with $55,000 AFC, and your monthly benefit rises by roughly $167 before any option reductions. That bump compounds over a 20- or 30-year retirement.

The catch: all service credit purchases must be paid in full before your effective retirement date. Miss that deadline and the opportunity is gone permanently — you cannot buy credit once your retirement takes effect.

Types of Service You Can Purchase

Withdrawn TSERS Service

If you left state employment, withdrew your contributions, and later returned, you may be eligible to repurchase the withdrawn service. The cost is based on the refunded contributions plus compound interest accrued since the withdrawal date. Request a current estimate from RSD before deciding whether the additional benefit justifies the cost.

Military Service Credit

Active-duty military time served before or between periods of TSERS membership may qualify for free credit or an eligible purchase. For purchased military credit, the cost uses the applicable statutory rate or full actuarial cost basis.

Out-of-State and Federal Service

Time spent in another state's public retirement system or in federal service can be purchased at full actuarial cost. RSD calculates this based on your current age, salary, and the number of years being purchased. Actuarial-cost purchases are the most expensive category, but they may be worthwhile if they push you across the 30-year unreduced retirement threshold.

How the Purchase Process Works

Start by logging into the ORBIT portal and reviewing your Member Annual Retirement Statement (MARS). Your statement shows your total membership service credit and flags any withdrawn service on record. If you see service gaps you want to fill, contact the Retirement Systems Division at (919) 814-4590 to request a formal service purchase cost estimate.

Once you receive the cost estimate, the available payment methods depend on the purchase category. They include:

• Lump-sum personal payment from after-tax funds
• Pre-tax rollover from your NC 401(k) or NC 457 supplemental retirement account into TSERS

An eligible pre-tax retirement plan or IRA can fund a service purchase through a rollover or plan-to-plan transfer. This is a tax deferral, not necessarily a tax-free benefit: rollover-funded service can affect the taxable portion of your later pension, so confirm the tax treatment with a qualified tax professional.

The Deadline You Cannot Negotiate

Submit your purchase request six to twelve months before your target retirement date. RSD needs time to calculate the cost, you need time to arrange payment, and payroll deductions need enough pay periods to clear. Every dollar must be received and processed by your effective retirement date — partial payments at retirement forfeit the entire purchase.

Your sick leave conversion is separate from purchased service. Unused sick leave converts automatically at 20 days per month of creditable service, certified by your employer through Form 641 or Form 6C. You do not need to purchase sick leave credit.

When a Service Credit Purchase Makes the Most Sense

The strongest case for buying credit is when you are close to a benefit threshold: the 30-year unreduced retirement milestone, or the 20-year mark for fully state-paid retiree health coverage (for members hired between October 1, 2006 and December 31, 2020). Falling one or two years short of either benchmark is worth investigating.

Before committing to a large purchase, request a Custom Benefit Estimate through ORBIT that includes the additional service. Compare the monthly benefit increase against the purchase cost to see how many months of retirement it takes to break even.

The NC TSERS Retirement Guide includes a service credit audit worksheet and walks through each purchase category with the exact forms and funding options, so you can evaluate whether buying credit fits your retirement timeline.

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