38-747

38-747. Purchase of credited service; payment;
limitations; definitions

A. A member who purchases credited service pursuant to section 38-738, 38-742,
38-743, 38-744, 38-745 or 38-922 shall either:

1. Make payments directly to ASRS as provided in subsection H of this section.

2. Elect to have the member's employer make payments as provided in subsection B of
this section.

B. A member may elect to have the member's employer make payments for all or any
portion of the amounts payable for the member's purchase of credited service pursuant to
the sections prescribed in subsection A of this section through a salary reduction
program in accordance with the following:

1. The amounts paid pursuant to a salary reduction program are in lieu of
contributions by the electing member. The electing member's salary or other compensation
shall be reduced by the amount paid by the employer pursuant to this subsection. For the
purposes of this paragraph, "other compensation" includes a member's termination pay.

2. The member shall make an election pursuant to this subsection at any time on or
after the date the member elects to purchase credited service pursuant to the sections
prescribed in subsection A of this section and before the member's termination of
employment. The election shall specify the number of payroll periods that deductions will
be made from the member's compensation and the dollar amount of deductions for each
payroll period during the specified number of payroll periods. In the case of an election
to utilize all or any part of the member's termination pay to purchase credited service,
the member's election shall be made at least three full calendar months before the date
of the member's termination of employment and entitlement to receive the termination pay.
After an election is made pursuant to this subsection, the election is binding on and
irrevocable for the member and the member's employer during the member's remaining period
of current employment. After a member makes an irrevocable election pursuant to this
subsection, the member does not have the option of choosing to receive the contributed
amounts directly. For the purposes of this paragraph, "termination pay" means any lump
sum that is paid at the member's termination of employment for accrued vacation, sick
leave or overtime pay.

3. A member who makes an irrevocable election pursuant to this subsection to have
the member's employer make payments for less than all of the amounts payable for the
member's purchase of credited service may irrevocably elect to have the member's employer
make payments for all or any portion of the remaining amounts payable for the member's
purchase of credited service. A member who makes one or more irrevocable elections
pursuant to this subsection may also make other contributions to ASRS pursuant to
subsection H of this section to the extent of any remaining amounts payable for which the
member has not made an election pursuant to this subsection. An additional election or
contribution with respect to a portion of the amounts payable for the member's purchase
of credited service does not alter, amend or revoke an irrevocable election already made
pursuant to this subsection for any other portion of the amounts payable for the member's
purchase of credited service.

4. If on termination of the member's employment with an ASRS employer all amounts
have not been paid to ASRS pursuant to the member's irrevocable election pursuant to this
subsection, the member may pay ASRS, within thirty days after the member's termination of
employment and subject to other limitations prescribed in this section, all or any
portion of the unpaid amounts as provided in subsection H of this section. These payments
do not alter, amend or revoke any irrevocable election already made pursuant to this
subsection with respect to any amount to be paid by the member's employer while the
member is employed by the member's employer.

5. Amounts paid by an employer pursuant to this subsection shall be treated as
employer contributions for the purpose of determining tax treatment under the internal
revenue code. The effective date of employer payments pursuant to this subsection shall
not be before the date ASRS receives notification from the United States internal revenue
service that pursuant to section 414(h)(2) of the internal revenue code the amounts paid
by an employer pursuant to this subsection will not be included in the member's gross
income for income tax purposes until those amounts are distributed by refund or
retirement benefit payments.

6. Unless otherwise provided, member contributions paid by an employer pursuant to
this subsection are treated for all other purposes under ASRS in the same manner and to
the same extent as member contributions that are not paid by an employer pursuant to this
subsection. ASRS shall not grant credited service for contributions made pursuant to this
subsection until those contributions are received by ASRS. ASRS may assess interest or
administrative charges attributable to any salary reduction election made pursuant to
this subsection. The interest or administrative charges shall be added to the amount of
contributions that is made to ASRS by the member each payroll period and that is paid by
the member's employer. The interest or administrative charges shall not be treated as
member contributions for any purposes under this article and a member or a member's
beneficiary does not have a right to the return of the interest or administrative charges
pursuant to any other provision of this article. Interest assessed pursuant to this
subsection shall be at the rate specified by the board pursuant to section 38-711,
paragraph 2.

7. If a member transfers employment from one participating employer with which the
member has made an irrevocable election pursuant to this subsection to another
participating employer, the member and the successor participating employer shall
complete the terms of the irrevocable election that the member made with the original
participating employer.

C. A member who elects before July 1, 1999 to receive retirement benefits based on
section 38-771, subsection C, paragraph 2 or a member who elects to make contributions to
ASRS pursuant to section 38-771.01, subsection F, paragraph 4 shall either make the
member's additional contributions required pursuant to section 38-771, subsection E or
allowed pursuant to section 38-771.01, subsection F, paragraph 4 directly to ASRS as
provided in subsection H of this section or shall elect to have the member's employer
make payments for those additional contributions as provided in subsection D of this
section. A member who elected to be covered or who was deemed to be covered by section
38-771 on or before December 31, 1995 or who elects to make member contributions pursuant
to section 38-771.01, subsection F, paragraph 3 is deemed to have made an irrevocable
election pursuant to subsection D of this section to make the member's contributions to
ASRS that are required by section 38-771, subsection D or allowed by section 38-771.01,
subsection F, paragraph 3.

D. Any member contributions that are required by section 38-771, subsection D or
that are allowed pursuant to section 38-771.01, subsection F, paragraph 3 are deemed to
be made by the member to ASRS through a salary reduction program in accordance with the
following:

1. A member may make member contributions pursuant to section 38-771, subsection E
or section 38-771.01, subsection F, paragraph 4 through a salary reduction program
elected pursuant to this subsection. If a member makes an irrevocable election pursuant
to this subsection before July 1, 1999 to have the member's employer make payments for
additional contributions pursuant to section 38-771, subsection E, the election continues
in effect from and after June 30, 1999 and shall not be revoked, amended or altered by
any election made pursuant to section 38-771.01 or otherwise. The amounts paid pursuant
to a salary reduction program are in lieu of contributions by the electing member. The
member's salary or other compensation shall be reduced by the amount paid by the employer
pursuant to this subsection.

2. Before a member's termination of employment, the member may make an election
pursuant to this subsection at any time after the date the member elects to receive
retirement benefits based on section 38-771, subsection C, paragraph 2 but before July 1,
1999 or at any time after the member elects to make member contributions pursuant to
section 38-771.01, subsection F, paragraph 4. The election shall specify the number of
payroll periods that deductions will be made from the member's compensation and the
dollar amount of deductions for each payroll period during the specified number of
payroll periods. After an election is made pursuant to this subsection, the election is
binding on and irrevocable for the member and the member's employer during the member's
remaining period of employment.

3. After a member makes or is deemed to have made an irrevocable election pursuant
to this subsection, the member does not have the option of choosing to receive the
contributed amounts directly. A member who makes an irrevocable election pursuant to this
subsection to have the member's employer make payments for less than all of the amounts
payable for the member's additional contributions allowed by section 38-771.01,
subsection F, paragraph 4 may irrevocably elect to have the member's employer make
payments for all or any portion of the remaining amounts payable for the member's
additional contributions. A member who makes one or more irrevocable elections pursuant
to this subsection may also make other contributions to ASRS pursuant to section
38-771.01, subsection F, paragraph 4 or pursuant to subsection H of this section to the
extent of any remaining amounts payable for which the member has not made an election
pursuant to this subsection. An additional election or contribution with respect to a
portion of the amounts payable for the member's additional contributions pursuant to
section 38-771.01, subsection F, paragraph 4 does not alter, amend or revoke an
irrevocable election already made pursuant to this subsection for any other portion of
the amounts payable for the member's additional contributions allowed by section
38-771.01, subsection F, paragraph 4.

4. If on termination of the member's employment all amounts have not been paid to
ASRS pursuant to the member's irrevocable election pursuant to this subsection, the
member may pay ASRS, within thirty days after the member's termination of employment and
subject to other limitations prescribed in this section, all or any portion of the unpaid
amounts as provided in subsection H of this section. These payments do not alter, amend
or revoke any irrevocable election already made pursuant to this subsection with respect
to any amount to be paid by the member's employer while the member is employed by the
member's employer.

E. The following limits apply to contributions to ASRS:

1. Except to the extent paragraphs 2 and 3 of this subsection apply to certain
contributions made by a member to ASRS and to the extent permitted under section 414(v)
of the internal revenue code, if applicable, in any one limitation year, the annual
additions contributed or allocated to ASRS for or on behalf of a member shall not exceed
the lesser of either:

(a) Forty thousand dollars or a larger amount that is prescribed by the board and
that is due to any cost of living adjustment announced by the United States secretary of
the treasury pursuant to section 415(d) of the internal revenue code. The board shall
increase the amount prescribed by this subdivision as of the effective date of the
increase announced by the United States secretary of the treasury.

(b) One hundred per cent of the member's compensation for the limitation year. The
compensation limit prescribed in this subdivision does not apply to any contribution to
ASRS for medical benefits after a member's separation from service, within the meaning
prescribed in section 401(h) or 419A(f)(2) of the internal revenue code, that is
otherwise treated as an annual addition.

2. Unless paragraph 4 of this subsection applies, for plan years beginning on or
after July 1, 1998, in any one limitation year, the annual additions credited to ASRS for
or on behalf of a member who makes contributions to ASRS to purchase credited service
pursuant to section 38-743, 38-744, 38-745 or 38-922 and with respect to which an
irrevocable election has not been made pursuant to subsection B of this section shall not
exceed the greater of either:

(a) The requirements of section 38-769. For the purposes of applying the limits
prescribed in section 38-769 under this subdivision, the accrued benefit derived from the
contributions shall be treated as an annual benefit and the reduced limit for certain
early retirement in section 38-769, subsection C, paragraph 2 does not apply.

(b) Except as provided in paragraph 3 of this subsection, the requirements of
paragraph 1 of this subsection. The contributions shall be treated as annual additions
and any of the member's other annual additions for the limitation year shall be taken
into account. For the purposes of applying the requirements of paragraph 1 of this
subsection under this subdivision, the percentage of compensation limit in paragraph 1,
subdivision (b) of this paragraph does not apply.

3. For plan years beginning on or after July 1, 1998, the requirements of paragraph
1 of this subsection shall not be applied to reduce the amount of credited service that
may be purchased by an eligible member pursuant to section 38-743, 38-744, 38-745 or
38-922 to an amount that is less than the amount of credited service allowed to be
purchased pursuant to those sections on August 5, 1997 without the application of any of
the limits prescribed in this section or section 415 of the internal revenue code. For
the purposes of this paragraph, "eligible member" means a person who first becomes a
member of ASRS before July 1, 1999.

4. Member contributions to ASRS to purchase credited service pursuant to section
38-743, 38-744 or 38-922 shall not be made by a member if recognition of that service
would cause a member to receive a retirement benefit for the same service from ASRS and
one or more other retirement plans. This paragraph does not apply to either of the
following:

(a) Contributions made by an eligible member as defined in paragraph 3 of this
subsection, except that any service purchase by an eligible member is subject to any
other limitations, including limitations on duplicative service purchase, otherwise
provided in this article.

(b) Any member contributions with respect to which an irrevocable election has been
made by a member pursuant to subsection B of this section, except that the service
purchase is subject to any other limitations, including limitations on duplicative
service purchase, otherwise provided in this article.

F. If a member's contributions are subject to the limitations of subsection E of
this section, the contributions shall be treated as being made to a separate defined
contribution plan. If the member's contributions exceed the limits prescribed in
subsection E of this section when taking into account other member and employer
contributions to ASRS on behalf of the member for the limitation year, the amount to be
paid by the member shall be reduced to not exceed the limits prescribed in subsection E
of this section and the remaining amount shall be carried forward to the next limitation
year, unless the limits are exceeded in the next limitation year. If the limits are
exceeded in the next limitation year, the procedure prescribed by this subsection shall
be repeated until all payments have been made.

G. If, after the application of subsection F of this section, the annual additions
on behalf of a member exceed the limitations prescribed in subsection E of this section,
ASRS shall dispose of excess amounts by either of the following:

1. Returning to the member any contributions that are made by the member and that
are nondeductible under the internal revenue code.

2. Holding the amounts in a suspense account established pursuant to subsection L
of this section and allocating the amounts as either member or employer contributions for
the benefit of the member in the next limitation year and before any further member or
employer contributions are made that would constitute annual additions made to a defined
contribution plan pursuant to section 415 of the internal revenue code. ASRS shall
allocate contributions as prescribed in this section, and the amount allocated shall
reduce the amount of the member or employer contributions for the limitation year in
which the allocation is made.

H. To the extent that a payment under this subsection does not alter, amend or
revoke any one or more currently effective irrevocable elections made by the member
pursuant to subsection B or D of this section, the board may accept contributions made
pursuant to section 38-771 or member contributions for the payment for credited service
purchases pursuant to section 38-738, 38-742, 38-743, 38-744, 38-745 or 38-922 or
contributions made pursuant to section 38-771.01, subsection F, paragraph 4, in whole or
in part, by any one or a combination of the following methods:

1. In lump sum payments.

2. Subject to the limitations prescribed in sections 401(a)(31) and 402(c) of the
internal revenue code and subsection J of this section, accepting a direct transfer of
any eligible rollover distribution or a contribution by a member of an eligible rollover
distribution from one or more:

(a) Retirement programs that are qualified under section 401(a) or 403(a) of the
internal revenue code.

(b) Annuity contracts described in section 403(b) of the internal revenue code.

(c) Eligible deferred compensation plans described in section 457(b) of the
internal revenue code that are maintained by a state, a political subdivision of a state
or any agency or instrumentality of a state or a political subdivision of a state.

3. Subject to the limitations prescribed in section 408(d)(3)(A)(ii) of the
internal revenue code, accepting from a member a rollover contribution of that portion of
a distribution from an individual retirement account or individual retirement annuity
described in section 408(a) or 408(b) of the internal revenue code that is eligible to be
rolled over and would otherwise be includable as gross income.

4. Providing by rule that the contributions may be made in installment payments
over a period of time.

I. To the extent that a payment under this subsection does not alter, amend or
revoke any one or more currently effective irrevocable elections made by a member
pursuant to subsection B or D of this section, the board may accept a direct
trustee-to-trustee transfer from retirement programs that are qualified under section
401(a) or 403(a) of the internal revenue code, an annuity contract described in section
403(b) of the internal revenue code or an eligible deferred compensation plan described
in section 457(b) of the internal revenue code for the payment for credited service
purchases pursuant to section 38-742, 38-743, 38-744, 38-745 or 38-922. If a direct
trustee-to-trustee transfer is from a retirement program that is qualified under section
401(a) of the internal revenue code and that includes a cash or deferred arrangement
described in section 401(k) of the internal revenue code, the member on whose behalf the
transfer was made is not eligible to retire under section 38-764, subsection I before the
date the member attains fifty-nine and one-half years of age.

J. ASRS shall separately account for all amounts rolled over or directly
transferred to ASRS. Subject to the limitations contained in the internal revenue code
applicable to the type of plan from which an eligible rollover distribution is
transferred, to the extent any eligible rollover distribution that is directly
transferred to ASRS consists wholly or partially of amounts that would otherwise not be
included in the member's gross income if not so transferred, ASRS shall separately
account for the amounts so transferred, and earnings on those amounts, including
separately accounting for the portion of the amount that is includable in gross income
and the portion of the amount that is not includable in gross income.

K. ASRS shall not grant credited service under section 38-738, 38-742, 38-743,
38-744 or 38-922 for contributions made pursuant to subsection H of this section until
the contributions are received by ASRS. ASRS may assess interest or administrative
charges attributable to any installment payment made pursuant to subsection H, paragraph
4 of this section to purchase credited service pursuant to section 38-738, 38-742,
38-743, 38-744 or 38-922. The interest or administrative charges shall be added to the
amount of contributions made to ASRS by the member. The interest or administrative
charges shall not be treated as member contributions for any purposes under this article,
and a member or a member's beneficiary does not have a right to the return of the
interest or administrative charges pursuant to any other provision of this article.
Interest assessed pursuant to this subsection shall be at the rate specified by the board
pursuant to section 38-711, paragraph 2.

L. ASRS shall establish a suspense account that conforms with 26 Code of Federal
Regulations section 1.415-6(b)(6) regarding excess annual additions.

M. If the member retires before all payments are made pursuant to this section,
ASRS shall calculate the member's benefits based only on the payments actually made.

N. On satisfaction of the requirements of this section, ASRS shall adjust the
member's credited service history and add any additional service credits acquired.

O. Annual additions on behalf of a member in any limitation year shall be the sum
of:

1. The amount of the member contributions made to ASRS to purchase credited service
pursuant to section 38-738, 38-743, 38-744, 38-745 or 38-922 and with respect to which an
irrevocable election made pursuant to subsection B of this section is not in effect.

2. The amount of member and employer contributions made to ASRS on behalf of a
member who elected or was deemed to have elected to receive retirement benefits pursuant
to section 38-771 or who is entitled to benefits pursuant to section 38-771.01, except
that, other than as provided in subsection P of this section, corrective contributions
shall be considered annual additions for the limitation years to which the contributions
relate and interest and gains shall not be considered as annual additions for the purpose
of any limitation prescribed in this article or in section 415 of the internal revenue
code. If the corrective contributions exceed the limit on annual additions for a
limitation year prior to the limitation year in which the corrective contributions are
contributed by the employer to ASRS, the retirement benefit attributable to the excess
corrective contributions shall be treated as an excess benefit and shall be payable to
the member as any other excess benefit is payable pursuant to section 38-774, and the
employer shall pay the excess corrective contributions to the separate unfunded
governmental excess benefit arrangement administered by the board pursuant to section
38-774.

3. Any member or employer contributions made to ASRS or any other plan that are
treated as being made to a defined contribution plan maintained by an employer of the
member.

4. Any forfeitures, including any income attributable to forfeitures, allocated for
or on behalf of a member of ASRS or any other plan that are treated as being allocated
under a defined contribution plan maintained by an employer of the member.

P. To the extent any portion of the subject benefits, if treated as subject to the
benefit limitations of section 415(b) of the internal revenue code, exceed the applicable
limitation on benefits pursuant to section 38-769 for the form of distribution, a
percentage of corrective contributions and interest and gains shall be treated as annual
additions for the limitation year in which contributed by the employer to ASRS. This
percentage of corrective contributions and interest and gains shall be equal to the
percentage determined by dividing the subject benefits that exceed the limitation on
benefits pursuant to section 38-769 by the subject benefits. If the corrective
contributions and interest and gains that are treated as annual additions for the
limitation year in which the corrective contributions and interest and gains are
contributed by the employer to ASRS exceed the limit on annual additions for the
limitation year, the retirement benefit attributable to the excess shall be treated as an
excess benefit and shall be payable to the member as any other excess benefit is payable
pursuant to section 38-774, and the employer shall pay the excess to the separate
unfunded governmental excess benefit arrangement administered by the board pursuant to
section 38-774.

Q. Subsection O of this section shall be construed and interpreted in accordance
with 26 Code of Federal Regulations section 1.415-6 to the extent that section is
applicable.

R. For the purposes of this section:

1. "Compensation" has the same meaning prescribed in section 38-769.

2. "Corrective contributions" means any contributions that are paid by an employer
pursuant to section 38-771.01, subsection C, paragraph 3 and that are attributable to
employer contributions that should have been made for prior limitation years.

3. "Defined contribution plan" has the same meaning prescribed in section 38-769.

4. "Eligible rollover distribution" has the same meaning prescribed in section
38-770.

5. "Interest and gains" means employer contributions to ASRS pursuant to section
38-771.01, subsection C, paragraphs 3, 5 and 6 that are attributable to earnings and
supplemental credits that would have been earned or added to a member's annuity payment.

6. "Limitation year" has the same meaning prescribed in section 38-769.

7. "Participating employer" means an employer that participates in ASRS.

8. "Subject benefits" means the retirement benefit received by a member pursuant to
section 38-771.01 minus the sum of the portion of such retirement benefit attributable to
contributions that were made by or on behalf of the member to the defined contribution
program administered by ASRS for periods before July 1, 1981 and contributions that were
made by the member after June 30, 1981 and that were not picked up as provided in section
414(h)(2) of the internal revenue code.