You can purchase your service credit in several ways:
- Unit Payment Plan: purchase one or more months at a time, using after-tax dollars
- Lump Sum Payment Plan: purchase all or a portion of your service with one payment, using after-tax dollars
- Rollovers from other qualified retirement plans
- A refund of contributions received at retirement
Unit Payment Plan
You may purchase one (or more) month(s) of service credit at a time with after-tax dollars. There is no set schedule as to how often you can (or must) make payments to IMRF. You can send a payment at any time. However, each payment must be at least equal to the cost of one month of service. You may purchase more than one month of service credit at a time, but you may not purchase partial months of credit.
If you pay IMRF directly, make your check payable to the Illinois Municipal Retirement Fund. Return your check with your invoice.
IMRF also accepts wire transfers.
Once we receive your payment, we will mail you an acknowledgement letter, which includes a remittance form for your next payment.
The contributions and interest you pay to purchase service are not deductible for income tax purposes.
Lump Sum Payment Plan
You may purchase all the eligible service you choose to purchase at one time in a single lump sum payment with after-tax dollars.
If you pay IMRF directly, make your check payable to the Illinois Municipal Retirement Fund. Return your check with your invoice.
IMRF also accepts wire transfers.
Once we receive your payment, we will mail you an acknowledgement letter.
Rollover From Other Retirement Plans
You may purchase eligible service with a rollover from another qualified retirement plan. If you wish to purchase your service with tax-deferred funds, we recommend that you increase your withholding into a qualifying tax-deferred retirement account and then initiate a rollover distribution into IMRF.
Acceptable rollover distributions
Some examples of rollover sources IMRF can accept:
- Another qualified pension plan (for example, an out-of-state public retirement system)
- A traditional IRA
- An Internal Revenue Code (IRC) section 457 plan
- An IRC section 403(b) plan
- An IRC section 401(k) plan
If you wish to use a rollover, IMRF must first review and approve the eligibility of the funds. To obtain this approval, you and your financial institution must fill out and submit a Request for Rollover Approval to IMRF.
Do not withdraw any funds or send any rollover distributions to IMRF before we advise you of your eligibility to do so. IMRF must review your rollover information before we can accept a rollover. Please allow at least 30 days for this review. The determination letter, which tells you whether your rollover is approved or denied, will be sent by mail.
Unacceptable rollover distributions
Internal Revenue Code regulations do not permit us to accept a rollover distribution if:
- The rollover includes funds greater than the total cost of your past service. The maximum amount we can accept cannot exceed the total due on your payment schedule(s).
- The funds are from a Roth IRA.
- The funds are previously taxed money in a traditional IRA.
If you send a rollover distribution to IMRF that federal tax laws do not allow us to accept, the rollover distribution will be returned either to you or to your financial institution.
Refund of Contributions Received at Retirement
If you are eligible for an IMRF pension and receive a refund of contributions when you retire, you can use all or any portion of that refund to pay for your service. An example of the refunds you may receive at retirement includes:
- Surviving spouse contributions: If you do not have an eligible spouse when you retire (married or in a civil union for at least one year before you stopped participating in IMRF, and married or in a civil union on the effective date of your pension), you will receive your surviving spouse contributions, with interest.
- Voluntary Additional Contributions (VAC): At retirement, you may choose to take a refund of your VAC and use it to pay for your service.
Note: Retirement refunds cannot be used to purchase service to make the person eligible for retirement. Service purchased with these refunds would enhance an existing retirement benefit.
When Payments are Received
Your buyback election confirmation letter indicates costs for the current year and two subsequent years. These different amounts reflect your costs to purchase your service by December 31 of the year, before the next year’s interest is added.
Your payment must be received in our office (NOT postmarked) by December 31 of this year for that payment to be applied at this year’s lump sum or unit payment amount. Payments received after December 31 will be applied at the next year’s payment rate.
Payments Made After You Stop Participation
If you no longer participate in IMRF or in a reciprocal retirement system, you may make ONLY ONE PAYMENT to purchase your IMRF service.
Any payment IMRF receives after you stop your participation will be the final payment we can accept for your service. If you send another payment after your final payment, it will be returned to you. Your final payment can pay for all your IMRF service credit or for one or more months of service credit. To find out the exact amount needed to purchase your remaining service credit, contact IMRF.
After you stop participating in IMRF or your reciprocal system, we encourage you to make your final payment for service as soon as possible. However, you can make your final payment any time after you stop participating.
Making a Final Payment After Your Pension Starts
If you make a final payment for your service after your pension begins (that is, after the “effective date” of your pension), the additional service credit will be used to increase future pension payments. We cannot increase your benefit payment retroactively.
One exception exists: if you are using an IMRF retirement refund (for example, a surviving spouse contribution refund) to purchase service credit, IMRF will increase your pension retroactively.
Reciprocal Systems May Have Different Rules
Reciprocal retirement systems do not have the same rules as IMRF. Therefore, if you are retiring under the Reciprocal Act and you plan to make a final payment after you retire, check with your reciprocal system to learn how that final payment will affect the amount of your pension.
Purchasing Only a Portion of the Service
Purchase of any service is optional; you are not obligated to purchase any of the service just because you received a buyback election confirmation letter.
IMRF cannot provide you with a buyback election confirmation letter for only a portion of your service. Election confirmations are always issued for the total amount of service you are eligible to establish.
If you want to know the lump sum cost to purchase only a portion of the service, you need to calculate this total cost.
Multiply the Unit Payment Plan cost by the number of months you wish to purchase.
- Take the cost for one month of service (“Unit Payment Plan”) for the year in which you will make the payment, and
- Multiply it by the number of months of service you wish to purchase.
Once you calculate your cost, you can either purchase all the service credit with one lump sum payment, or you may purchase one or more months of service at a time.
When an Employer Agrees to Pay the Member's Cost for Past Service Credit
Agreements made between an employer and member regarding a member’s costs for purchasing service are considered private agreements. Click here for more information.