2/8/2011 - Executive Director Update: Payments on Service Purchase Accounts
The ATRS Board, in its February 7, 2011 meeting, makes it more convenient for members to make payments on Service Purchase Accounts

If House Bill 1212 sponsored by Representative Carnine is adopted, purchasing service from ATRS will change from the current formula based calculation (using the date of service being purchased, the contribution rate in effect at the time of service and an 8% annual interest rate) to the actuarial value of service. A study determined that the existing purchase formula only provides ATRS 45% of the real cost of the service to ATRS. House Bill 1212 brings the cost of purchasing service up to its actual value to the member, thus saving ATRS money at a time when ATRS needs to reduce its actuarial costs and expenses. All accounts opened before July 1, 2011, will use the old purchase formula.

ATRS is receiving several inquiries on setting up purchase accounts soon due to HB1212 having an effective date of July 1, 2011. House Bill 1212 also eliminates future purchase accounts since the cost of purchase service will vary over time based upon the member's age, salary and years of service. This is an executive director update to provide members information about new procedures that were adopted to assist members in setting up new purchase accounts and to require a payment plan on those accounts.


The ATRS Board met on Monday, February 7, 2011, and adopted a new easier process for purchase accounts for use between now and July 1, 2011. The plan highlights are as follows:

  • ATRS will no longer require a post-tax payment (typically it is $1,000) to open a purchase account.

  • A member can choose various options, or combination of options, to pay the purchase account over time.

  • The member has to submit a proposal for how the total cost will be paid. ATRS staff will approve any proposal that provides a method for realistic completion of the purchase.

The ATRS Board decided to adopt this new process to assist members by not requiring an initial down payment on a purchase plan and to also eliminate accounting issues created by the old process that always required the commingling of post and pre-tax money in a member's account.

Some members may want to know the various methods that exist for funding a purchase of service account. The methods are as follows:

1. Rollover
A member may rollover various retirement accounts to fund a purchase. This is often very beneficial in that the member can have greater buying power by using pre-tax money versus taking money that is often in a retirement account that has already been taxed to pay for the purchase. The most commonly used accounts to purchase service at ATRS are 457 deferred compensation accounts, 403 (b.) retirement accounts, 401 (a.) retirement accounts, individual retirement accounts (IRAs), and retirement accounts such as TIAA Cref.

2. IPA
A person may set up an irrevocable purchase account (IPA) as an agreement between their ATRS employer, ATRS, and the member. Typically the member agrees to have a certain amount taken out of every payroll check (this is a pre-tax deduction). The balance is paid much like a car loan. ATRS works with the member to determine the total amount the service purchase would cost and sets up payment arrangements through a specific IPA. For instance, if the member wanted to pay the total amount off in seven (7) years, ATRS would calculate the total monthly or quarterly payment that would need to be paid in order for the amount to be paid off through the employer withheld pre-tax deductions. In the event the member changed employers or otherwise had a change in status, ATRS would allow the member to amend the plan to take into consideration the change.

3. Check
The member can use post-tax dollars such as writing a monthly check from their checking account, using savings accounts, or other sums either in monthly payments or in lump sum payments to retire the obligation on the purchase account.

4. Combination of Methods
A member may use all three of these methods in combination, if the member desires. For instance, a member could roll over money from retirement accounts to pay a part of the amount, set up an IPA to pay on the balance and also supplement these payments with post-tax money in the event the member had extra money that became available to pay on the account. (It may be to the member’s benefit to just increase the IPA due to the benefit of pre-tax dollars) ATRS is very flexible in working with the member to make these purchase accounts work for the member.

The new ATRS process will require a member to have a plan in place to pay the total amount of the new purchase accounts. A copy of the new form is attached to this update. These plans can be set up just like a loan payment. The ATRS process will require to have a plan in place to pay the total amount of the new purchase account. These plans can be very flexible. At the same time, if the member does not follow the plan and does not submit an acceptable amendment to the plan; the purchase account will be terminated if HB1212 is adopted. Hopefully, this update will help clarify options to members concerning purchase accounts at ATRS between now and July 1, 2011.

If you have questions or need more information, please feel free to call me on my direct line at (501) 682-1820 or my cell (501) 318-5998 or email me at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . In addition, if you use Twitter, you can follow events by finding the Twitter ID of ATRS or find George Hopkins in the Twitter directory. ATRS will have frequent Twitter reports on legislative issues. On Twitter, you will also have access to day-to-day updates on ATRS happenings. Also remember that you can go to the ATRS website at www.artrs.gov and sign up to get these updates automatically on your public or private email address, or both. Over 2,000 people have already signed up to receive this email and other ATRS information via this list.

Respectfully,
George Hopkins

Click here to see the Purchase Account Commitment Statement

Last Updated ( Tuesday, 15 February 2011 )