What is Optional Service Credit (OSC)?
Optional Service Credit is permissible service credit that may be purchased by a member and added to his or her account to increase the final benefit amount at retirement. This type of service credit is 'optional' because if eligible, members must elect to purchase this service credit and pay for it themselves. That differentiates it from 'earned service credit', which is awarded automatically each time the employer reports payroll information.

Types of Purchasable Service Credit
There are many types of service credit that are eligible for purchase. A member may be eligible to purchase service credit for periods of official leave; active duty military service prior to joining the system; prior service in a public school system or local city or town; or allowable state service where no contributions were made to the Employees Retirement System of Rhode Island. There is a table below that lists all of the types of service that may be allowable for purchase under current Rhode Island General Laws (RIGL). Clicking on the type of service will take you to a brief description with some general eligibility criteria. After determining that you may be eligible to purchase service, you are encouraged to first do a cost estimate on this website (click 'Optional Service Credit Estimate' on the toolbar to the left, under 'Do it!') If you are interested in purchasing service, you can fill out a purchase request form online and submit it to ERSRI over the web.

Figuring the Cost of Service
The cost of OSC is calculated typically by one of two methods, as prescribed by RIGL for each particular type of purchase. The first method is 'interest based.' Interest based purchases involve determining how much in contributions the member would have made to ERSRI during the period being purchased, and then adding interest at a rate set by the Retirement Board. Currently, such purchases are subject to 5% compounded interest. Purchased military service credit is calculated slightly different; it is based on the member's first year of earnings in the system and is subject to interest charges only if the purchase is made after the member's first 5 years of employment in the system.

The other type of calculation is full actuarial cost. Under this method, the retirement system's actuarial consultants, according to legislation, have provided a table of factors used to estimate what the actual cost of the service credit being purchased will be to ERSRI. This process is simplified by taking the member's salary at the time of the purchase and multiplying it by a factor based on the member's age, provided by the actuaries. Actuarial purchases are the most expensive type of service credit purchase, and are for purchase of service credit for eligible employment outside of Rhode Island or in non-participating cities, towns or private schools in Rhode Island.

Lastly, there is granted service credit.. The only instance of granted service credit is for members in the military who are called to active duty during their participating employment (having been employed at least 6 months). If the member returns to employment within 1 year after honorable discharge from the military, service credit (maximum 4 years) is granted.

Limitations on Service Purchases
The limits for each type of service are set individually in the statutes of Rhode Island General Law, but there is also a total maximum on the number of years of service credit a member may purchase. A member may not purchase more than 5 years of service credit. The only exception is for purchase of withdrawn time, or probationary time. Withdrawal purchase is for time you worked and contributed as an ERSRI member, but later terminated and withdrew your contributions. If you repurchase your withdrawn time (an interest purchase), it will be considered as contributing time, and not as purchased service credit. However, if your withdrawn time contains purchased service credit, this purchased service credit, once restored, will again count toward the 5-year limit on purchases. All purchases, including withdrawals, are optional; however, if the withdrawal is not purchased, the service credit will not be restored to the member's account. Probationary time purchased (municipal employees only) counts as contributing service credit, not purchased service credit.

You can see any years of 'optional' service credited to your account on this website. On the toolbar to the left, under 'Do it!', there is a selection for 'view my account'.

When to Purchase Optional Service Credit
You must be an 'Active Member' to purchase optional service credit. This means you must be an active employee in a contributing position. For most types of service credit purchases, RIGL requires that you contribute for 1 year before you are allowed to make the purchase. In most cases, the sooner you purchase service, the less expensive it will be.

OSC doesn't affect your Vesting
Optional Service Credit can be classified in one of two ways - it is either 'contributing' or 'non-contributing'. When assessing your vesting status, only 'contributing' service credit counts. For example, you are 'vested', or guaranteed a benefit, after you have 10 years of contributing service credit in your account. The simplest explanation is that when you work and earn your salary, ERSRI awards you service credit on your contributions to the system, thus, you earn a year of 'contributing' service credit each year you work. If you purchase, for example, 'Out-of-State' Teaching service credit, that credit will increase your total benefit when added to your contributing service total, however, it does not count toward your vesting requirement of 10 contributing years.

Don't purchase service unless you know you are going to retire from ERSRI!
According to RIGL, if you terminate your position you may request a refund of your entire account if you wish to leave the retirement system altogether. If you have purchased service on your account, all of your contributions will be refunded to you, as well as the principal of any purchases you have made, but interest paid on purchased service credit is not refunded. If you refund your account, you forfeit all of your rights to benefits from ERSRI. Please read our informational page about refunds carefully before taking a refund.

Installment Purchase Program
Rhode Island Public Law 269, which took effect January 1, 2002 allows that ERSRI and MERS members may purchase service credit in installments, by payroll deduction. Purchases must be made prior to retirement, and purchases made on the installment plan will be charged interest for this service. The law further provides that the Retirement Board create rules and regulations for service credit purchases by installment. A summary of the Retirement Board's regulation on purchasing service credit by installment follows:

1. No service will be posted to your account until you completely pay off your payment agreement. At that time, the full amount of service credit will be added to your account. This has no impact on you as a member, since service credit is really of no value to you until you retire. If you decide to retire before completing your payment agreement, ERSRI will end the agreement and post a pro-rated amount of service into your account based on how much of the agreement has been completed. This way, you'll be able to retire and receive the benefits from the payments you have made.

2. You cannot enter into a payment agreement that lasts over 5 years.

4. Payments on installment agreements are only through payroll deduction by the employer and may be accepted from active Member Agencies (via payroll deduction.) The payment frequency is fixed at one (1) per month; the employer shall conform to all the reporting and transmittal of OSC funds on a monthly basis, regardless of their wage and contribution reporting frequency. The monthly installments are made on a pre-tax basis.

5. Payment frequencies from active Member Agencies on installment agreements are set at one (1) per month. Early payments can not be applied to principal, thereby changing the structure of the agreement. Therefore, the total interest on an installment payment plan will remain the same throughout the life of the agreement. Pursuant to the statute, a nominal interest rate is applied to installment agreements, equal to the actuarial rate of return calculated by the system actuary. This is presently 8.25%.

Optional Service Credit Reference Chart

Call Fire Fighter - If you were an On-Call firefighter who did not contribute to ERSRI, you may be eligible to purchase the time you served.

Granted Military - If you took a leave of absence to serve in the military, then returned to the same employer for at least 6 months following your leave, you may be eligible receive that time awarded to you at no charge.

Non-Participating Municipality - If you worked for a public agency that does not (or did not at the time you worked there) participate in the System, you may purchase the time you worked for the agency but did not contribute to ERSRI.

Nurse Teaching - If you taught nursing at a state school and hold a teaching certificate, you purchase that time. You must be an active teacher to purchase this time.

Official Lay-Off - If you were laid-off from your job and later went back to public service (with some restrictions) you may be eligible to purchase the time you were laid-off. You will need supporting documentation from the employer you were laid off from.

Official Leave - If you took an official (authorized) Leave of Absence, such as a Sabbatical or to go back to school, you may be eligible to purchase that time. You will need supporting documentation from the employer you took leave from.

Official Leave Worker's Compensation - If you were on Worker's Compensation during a medical leave, you may be eligible to purchase a portion of the time that you were on leave.

Out-of-state Teaching - Teachers who have taught in Public Schools outside of the State of Rhode Island may be eligible to purchase that time toward their ERSRI retirement. Verification of employment, salaries and other retirement system information may be required. Tip: If you contributed to another State's Retirement System but expect to retire from Rhode Island, you might consider taking a refund of your contributions from that other system, and using that money o purchase your out-of-state service in Rhode Island. This option also gives you certain tax benefits by 'rolling-in' the money from the other state system.

Part-Time - If you were a part-time employee of a participating agency, you might not have contributed on your earnings at that time. If you are now a contributing member (full-time employee), you may be eligible to purchase your part-time service provided you were employed a minimum of 20 hours per week (state and municipal employees). Documentation from employer detailing your exact payroll information will be necessary to purchase this time.

Purchased Military - If you served in the military prior to becoming a public employee, or took a leave from work for military service but did not return to work immediately following your discharge, you may purchase your military time into the Retirement System.

Peace Corps - You may be eligible purchase the time you spent in the US Peace Corps.

Probationary Time - If you had a probationary period at the beginning of your employment where your status as an employee of that public agency was not decided, most likely you were not contributing to ERSRI during that time. If so, you may be able to purchase that time.

Private Teaching - Teachers who taught in private schools in RI may be able to purchase that time towards their public retirement.

Prior Time - Participating - This service is only available for members whose MUNICIPAL employer misreported their work history to ERSRI. In the event that your employer did not report you as a working employee, you may purchase this time. You are not responsible for your employer's portion of the contributions, only those contributions that should have been withheld and sent to ERSRI. Accumulated interest must also be repaid.

Prior Time - State - This service is only available for members whose STATE employer misreported their work history to ERSRI. In the event that your employer did not report you as a working employee, you may purchase this time. You are not responsible for your employer's portion of the contributions, only those contributions that should have been withheld and sent to ERSRI. Accumulated interest must also be repaid.

Prior Time - Teaching - This service is only available for certified teachers members whose SCHOOL employer misreported their work history to ERSRI. In the event that your employer did not report you as a working employee, you may purchase this time. You are not responsible for your employer's portion of the contributions, only those contributions that should have been withheld and sent to ERSRI. Accumulated interest must also be repaid.

Purchased Prior Service - If you elected to 'opt-out' of participation in ERSRI when your employer joined, and later decide you want to be a member, you can purchase your time with that employer prior to joining the system. This time would be free to you as 'granted prior time' if you elect to participate in ERSRI when your employer joins the system.

Refund Payback - Any member who has taken a refund of their contributions may restore those contributions into the system by 'paying them back'. A refund payback will restore the member's rights to pension benefits through ERSRI. Since a refund will close a member's entire account at once, the refund must be paid back IN FULL to restore the member's service credit and pension privileges. Interest is charged on the contributions being paid back, calculated from the time of the refund to the date of the payback agreement.

Rollover Granted Prior Service - When a new agency joins the Employees Retirement System of Rhode Island, the employer may have had a prior retirement plan. If those monies are being transferred into ERSRI, each employee's share of that fund will be put into their ERSRI account using this type of 'purchased service'.

Substitute Teaching - As a substitute teacher, you do not contribute to the Retirement System. If you later become a full time teacher (you must be an ACTIVE, contributing member to purchase service) you may purchase the time you spent as a substitute teacher.

Teacher Corps - If you served in the Teacher Corps and are a Certified Teacher, you may be eligible to purchase this time.

Volunteer In Service to America (VISTA) - If you ever served as a Volunteer In Service to America, you may be eligible to purchase this time.

Vocational Education - If you taught at a vocational school which was not a member of ERSRI and are a Certified Teacher, you may be able to purchase you time as a vocational educator.