Financing the Purchase of Service Credit or a Redeposit

General Information

General Information

Can I finance a purchase of service credit or a redeposit with monthly installments?

Yes, but you must first complete your rollovers before you can begin making payroll deduction installment payments. After you complete your rollover(s), you will receive a billing statement for the remaining balance of your purchase for you to choose a payroll deduction installment plan.

What interest rate will I pay?

The interest rate for your purchase is based on the date your service credit cost was calculated by CalSTRS and is locked in for the duration of your purchase.

The regular interest rate is set each fiscal year by the Teachers’ Retirement Board.

Purchasing Service Credit

Can my employer purchase service credit on my behalf?

There are four types of service credit that your employer may purchase on your behalf: sabbatical leave, leave for the federal Mutual Educational and Cultural Exchange Program, maternity or paternity leave, and family care and medical leave as provided under Section 22803 of the Education Code.

Can I roll over post-tax funds to purchase my service credit?

No. CalSTRS cannot accept post-tax rollovers. You can only roll over pre-tax funds from a qualified plan.

Can I roll over from my spouse’s IRA or other tax-sheltered account to purchase my service credit?

No. You cannot roll over from your spouse’s IRA or other tax-sheltered account to purchase your service credit.

Can I purchase service credit with a combination of rollovers and payroll deduction installment payments?

Yes, but you must first complete your rollovers before you can begin making payroll deduction installment payments. After you complete your rollover(s), you will receive a billing statement for the remaining balance of your purchase for you to choose a payroll deduction installment plan.

Payment Methods

What payment methods are offered?

You can purchase service credit with:

  • A lump-sum cash payment
  • Monthly cash installments
  • Monthly tax-deferred payroll deductions, if offered by your employer
  • A lump-sum rollover of pre-tax funds from:
    • 401(a)
    • 401(k)
    • 403(b)
    • 457(b)
    • IRA (Traditional or Conduit) plans
    • SEP IRA

CalSTRS cannot accept installment payments made from the monthly roll over of pre-tax funds.

What is the process for making cash payments?

If you elect to make monthly cash payments, sign and date your billing statement and send your initial payment to CalSTRS by the due date on the billing statement. If your payment is not postmarked by the due date, the cost of service credit may increase substantially.

Be sure to include your 10-digit CalSTRS Client Identification number on your check.

Payments for cash installments may be submitted in amounts greater than the scheduled monthly installment.

You will receive a billing invoice each month and payments are due the 20th of the month. If a payment due becomes 120 days delinquent, CalSTRS will prorate your service credit and close your account, unless you request a refund of your payments.

While I’m making monthly cash payments, can I roll over funds to pay off the remaining balance?

Yes. You can roll over funds to pay off the remaining balance on your service credit purchase. Contact CalSTRS for rollover paperwork.

Can I continue my pre-tax payroll installment plan if I change employers?

Yes. You can continue payroll deductions at the same installment amount with your new employer.

Verify that your new employer offers pre-tax payroll deductions and contact CalSTRS immediately to avoid any delinquent payments.

Your previous employer will need to complete an Assignment form to assign the irrevocable payroll authorization to your new employer.

Can I continue to make payments on my service credit purchase after I retire or while I am receiving a disability retirement?

No. Your service credit purchase must be completed before you retire.

Before filing for disability benefits, consult a CalSTRS benefits specialist to verify whether completing the purchase will be beneficial to you.

If I cannot continue my installment payments due to financial hardship, can I request a refund of my payments?

You can request a refund only if you are paying monthly cash installments.

However, if you are making pre-tax payroll deduction installment payments, you are locked in to the irrevocable agreement and can only request a refund if you quit, retire or change employers.

Payroll Deductions

What is the process for selecting pre-tax payroll deductions?

Once you receive your billing statement, select one of the installment plans on the Permissive Installment Payments Irrevocable Payroll Authorization form and return the completed forms to CalSTRS to initiate the payroll deductions with your employer:

CalSTRS
P. O. Box 15275, MS11
Sacramento, CA 95851-0275

Can I elect a payroll deduction installment plan that is not included in the billing statement?

Yes. You can elect a different installment amount or number of installments by completing the alternative installment plan section and returning the billing statement to CalSTRS. The number of installments or installment amount cannot exceed a 10 year period and must be based on the full amount of the bill.

A bill with the custom payment plan will be mailed to you to complete and return to CalSTRS to initiate the payroll deductions with your employer.

Will my payroll deductions be made on a pre-tax or post-tax basis?

You will need to verify with your employer if they offer pre-tax or post-tax payroll deductions.

If your employer offers pre-tax payroll deductions and you choose this payment method, you must complete and sign the Permissive Installment Payments Irrevocable Payroll Authorization included with your billing statement. If your employer does not offer pre-tax payroll deductions, your payroll deductions will be made on a post-tax basis. You do not need to complete the Permissive Installment Payments Irrevocable Payroll Authorization.

Can I stop my pre-tax payroll deductions?

No. The Permissive Installment Payments Irrevocable Payroll Authorization you signed cannot be cancelled unless you terminate employment, retire from service or change employers.

Can I change my pre-tax payroll deduction installment plan?

No. If you are in the process of making pre-tax payroll deductions, you cannot make any changes to the installment plan. 

If pre-tax payroll deduction is an irrevocable contract, do I have to continue working until my account is paid in full?

No. If you quit, retire or change employers before you complete your service credit purchase or redeposit, you can elect one of the following options:

  • Pay off the remaining principal balance
  • Receive prorated service credit for the payments CalSTRS received
  • Request a refund of your payments. The payments will be returned to your employer to withhold applicable taxes and pay the balance to you.

If I take a leave of absence while making pre-tax payroll deduction installment payments, will it affect my service credit purchase?

Yes. If you take a leave of absence while making pre-tax payroll deductions and your account becomes 120 days delinquent, CalSTRS will cancel your purchase and you will receive credit for service based on the payments that were made. Alternatively, you can request a return of your payments and CalSTRS will refund your payments to your employer. Your employer will withhold any applicable taxes and refund the remainder to you.