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Under state law, a person hired in a PERF-covered position is required to become a PERF member on the first day of employment. PERF requires that employers submit a membership record via ERM prior to the first wage and contribution submission for that member. If this is not done, the transaction will error out and will not be able to be processed until the membership record is submitted. This means that there can be no probationary period of employment for any employee, regardless of job description, for determining PERF coverage. The law will not permit an employer to classify an employee as less than full-time for purposes of delaying PERF coverage when the employee is actually performing full-time duties or working full-time hours.
For all PERF and TRF (Teachers’ Retirement Fund) retirees employed in a PERF-covered position, employers must complete, in ERM, a membership record for re-employed retirees when they are hired. If you hired a PERF or TRF retiree prior to July 1, 2008, statutes in place at that time still apply through June 30, 2008. Please contact our office at (888) 876-2707 if you have questions or need clarification.
Who Cannot Participate in PERF
Note: This does not apply to those PERF members who are authorized to participate simultaneously in the Indiana State Teachers’ Retirement Fund.
School employees in PERF-covered positions normally requiring work of more than 600 hours and less than 1,000 hours may choose to become a member of PERF. If the employee elects not to become a member upon date of hire, he/she may choose to become a member at a later date. The employee will not be eligible to receive service credit for any time period they elected to not become a member and no employee and employer contributions were reported to PERF.
Note: Once an employee becomes a member of PERF, he or she cannot opt out of the Fund. Also, if an employee is working in a position normally requiring more than 1,000 hours and is a member of PERF and goes into a position normally requiring 600 to 1,000 hours of work, he or she must remain in PERF.
PERF-covered employees are required by state law to contribute three percent of their gross wages (regular and overtime pay) to the Fund. Effective July 1, 1986, Indiana law required the state of Indiana to pay the three percent contributions for state employees as part of a wage adjustment. Under the law, local units of government and universities have the option of paying their employees’ three percent contributions as part of a wage adjustment. Pursuant to Indiana pension law, employee contributions that are not picked-up by the employer must be payroll deducted from the employees’ wages and paid to PERF.
As the employer, you must report, on a payroll basis, a re-employed retiree’s wages and mandatory three percent contributions and make the employer contributions beginning July 1, 2008.
The three percent contributions made by either the employee or employer are sent to PERF for deposit in an Annuity Savings Account (ASA). These contributions and any accumulated interest credits are distributable to the employee should the employee terminate employment prior to being eligible for benefits. Once an employee with less than 10 years of service terminates employment and his/her ASA has been inactive for 10 years, any investments in the Guaranteed Fund will no longer accrue interest.
PERF can accept pre- and post-tax voluntary contributions from active members subject to certain conditions. For more information, see the PERF Member Handbook.
Under state law, vested status is defined as 10 or more years of creditable service under PERF. A member who has attained vested status will be entitled to benefits when meeting the age and service requirements for either early or normal retirement.
An elected county official, whose governing body has provided for the official’s participation in PERF, is vested if the official:
An elected county official described above who has been elected at least twice and would have served for eight years had the official’s term of office not been shortened by a law that makes the terms of office for constitutional county officeholders uniform is also vested.
Generally, members who terminate employment with 10 years of service and before becoming eligible for benefits will retain vested rights only if their Annuity Savings Account funds are not withdrawn. If the funds are not withdrawn, those funds will be credited with any earned interest until the member initiates a retirement benefit.
However, after January 1, 2008, a member is eligible to withdraw the ASA after separating from employment and retain a vested right to a pension benefit when the member becomes age eligible.
If a member is not vested when withdrawing from the fund the only way a member may reinstate the withdrawn service credit is by returning to work in a PERF-covered position and contributing to the Fund for a period of six consecutive months.
Your employees will receive service credit for each period of continuous employment in a PERF-covered position from the date of hire to the last day in pay status. In addition, they may be entitled to service credit during military service and certain types of leave.
Under Indiana Code 5-10.2-3-1, employees are entitled to service credit if their position was not covered by PERF at the time of employment, but came under coverage before January 1, 1985.
The law also allows a member who has past service in a position that was not covered by PERF to earn credit for that service if the position is covered after December 31, 1984, while that member holds that position or another position with the same employer. However the employer’s governing body may include in its PERF resolution a specific date from which prior service for its employees will be computed.
If a prior service credit date is provided in the resolution, any service before that date will not be used in computing benefits. However, Indiana Code 5-10.3-7-7.5 states that service with the employer before the prior service date will be used for the purpose of determining eligibility for benefits.
If you have any questions about these plan provisions, please contact the Employer Pension Plan Administration (EPPA) group.
A member who is questioning a service credit amount with a former or current employer is responsible for providing evidence that service was rendered for the time period being questioned with that employer. Once that evidence is provided:
If the service occurred prior to 1987, an EPPA representative will process the adjustment using the manual adjustment procedure.
Members are entitled to six months of creditable leave in any given four-year period. This leave must be approved by the employer and should be reported to PERF within 90 days after the leave commenced. Certain types of leaves, such as FMLA and adoption, are federally mandated to be creditable. If a member goes on an unpaid leave of absence for personal reasons, the employer may report it as creditable leave and accept the additional pension liability. However, PERF will only grant six months of service credit.
Except as otherwise required by the Family and Medical Leave Act (FMLA), employers must enter the leave/life event through the ERM application. To submit via ERM, see the Member Management User Manual. The employer must accept pension liability for creditable leaves of absence. Creditable leaves are determined by the employer. Typically, paid leaves are considered creditable. During a qualifying paid leave of absence, both employer and employee contributions must be made and creditable service will be granted to the extent permitted by law.
Workers’ compensation leaves are always creditable. Service credit is granted for the full extent of the leave.
Family and Medical Leave Act (FMLA)
Under Indiana Code, IC 5-10.3-7-6, an employee may receive credit for up to 12 weeks of leave (paid or unpaid) taken during a calendar year under the Family Medical Leave Act (29 USC 2601, et. seq.). However this leave is creditable only for the purposes of determining eligibility and not for calculating benefits.
An employee is entitled to up to one year of service credit for Adoption Leave (paid or unpaid).
Purchase of Out-of-State Service
Indiana Code IC 5-10.3-7-4.5 provides for the purchase of out-of-state service credit with the Public Employees’ Retirement Fund.
In order to qualify for the purchase of this credit, the member must meet the following criteria:
If you have a member who meets the criteria above and is interested in purchasing credit for out-of-state service, please instruct the member to fill out the Purchase Out-of-State Service form.