Based on a decision of the Alaska Supreme Court, former Public Employees’ Retirement System (PERS) and Teachers’ Retirement System (TRS) DB Plan members who refunded their retirement contributions and later returned to PERS or TRS employment under the DCR Plan may reinstate their prior DB Plan service and former tier status. The following information provides guidance and FAQs on how to convert from the DCR Plan to the DB Plan.
All former DB members who have not reemployed since July 1, 2010, will be given the right to elect reinstatement of their previous tier when they are rehired in a PERS/TRS position.
Special Conversion Period: May 1 – 31, 2023
For active members who reemployed on or after July 1, 2010, and who did not previously elect to convert to their original tier between June 1, 2022, and August 15, 2022, this is your final opportunity to reinstate your former tier during this Special Conversion Period which will take place May 1, 2023, through May 31, 2023. Letters to affected members are being sent this month. It is important you read the letter and follow the directions it contains if you wish to reinstate your previously refunded DB service and former tier.
In 2005, during the passage of Senate Bill 141, the 24th Legislature created the DCR Plans under the PERS and the TRS and changes were made to plan reinstatement. Within this bill, AS 14.25.062 and AS 39.35.350 , which govern the ability for a DB member to reinstate previously refunded service was repealed. Former members of the PERS and TRS DB Plan (members who had terminated employment and received a total refund of their employee contribution account) were provided a final opportunity to reemploy up to June 30, 2010, in order to have their previous tier reinstated. Former members of the DB Plans (PERS Tier I, II, or III or TRS Tier I or II) who reemployed on July 1, 2010, or later, became members of the DCR Plan.
The State’s enforcement of the repeal of AS 14.25.062 and AS 39.35.350 was later challenged in the Superior Courts for the State of Alaska First Judicial District at Juneau as being unconstitutional and in violation of Alaska Constitution article XII, section VII.
On January 25, 2022, the Superior Court held that the state’s repeal of AS 14.25.062 and AS 39.35.350 violated Alaska Constitution article XII, section VII and, as a result, former members are now eligible to seek reinstatement under AS 14.25.062 and AS 39.35.350.
A letter was mailed on May 31, 2022, to all members who refunded their DB employee contribution account providing notification of their right to reinstate their previously refunded service. Publications were also posted in all major Alaska news outlets.
All former members who have not reemployed since July 1, 2010, will be given the right to elect reinstatement of their previous Tier when they are rehired in a PERS/TRS position.
For those active members who reemployed on or after July 1, 2010, and who did not previously elect to convert to their original Tier, there is a final opportunity offered for them to reinstate their Tier during a Special Conversion Period which will take place from May 1 – 31, 2023. Letters to these members are being sent on March 27, 2023. It is important for these members to read the letter and follow the directions it contains if they wish to reinstate their service and original Tier.
PERS or TRS Defined Benefit Members Reemployed in the Defined Contribution Retirement Plan
If you were a PERS or TRS DB member who reemployed with a PERS or TRS employer on or after July 1, 2010, and became a DCR member, and wish to restore your former DB tier status and reinstate your refunded DB service, you must have completed the online submission form by 5 p.m. Alaska time May 31, 2023. You will be contacted in the order your submission form is received.
If you are a former PERS or TRS DB member who is currently in the DCR Plan who elects to convert to your former DB tier, conversion will require all employee DCR contributions to be converted to the DB Plan to cover the cost of converting your present DCR service into DB service.
A conversion indebtedness will be established for the cost to convert your current DCR service and previously refunded service will be reinstated as a reinstatement (REI) indebtedness on your account.
Employee contributions and any net market gains or losses of your PERS or TRS DCR account balance will be transferred to pay the cost of conversion. If any PERS or TRS DCR employee contribution balance remains after the outstanding conversion indebtedness balance(s) are paid, the remaining balance will be refunded to you by Empower Retirement. The refund will be in the form of a corrective distribution with 20% federal tax withholding. No early distribution penalties will apply. Instead of receiving a refund, you will have the option to use any residual employee contributions from your DCR account to be applied to the REI indebtedness(s).
Employer matching contributions and any attributable gains and losses are not eligible to be utilized by you to pay the cost of conversion. Employer contributions made on your behalf will be transferred to the DB Plan to fund your lifetime future benefits.
The cost of conversion represents the employee contributions which would have been made including accrued interest (4.5%) had you remained a member of the PERS or TRS DB plan during the years you were enrolled in the PERS or TRS DCR plan.
Reinstated indebtedness consists of the total refund received plus accrued interest at the rate prescribed by regulation (7%) from the date of refund up to June 30, 2010. No further interest will accrue from July 1, 2010, until the previously refunded service is reinstated. Interest will begin to accrue at the rate prescribed by regulation (7%) once the refunded service is reinstated, until the indebtedness is paid in full or at the time of retirement. At retirement, members can cancel any remaining indebtedness due by accepting an actuarial reduction to their benefit for life.
Next Step for DCR Members to Convert DCR Service and Reinstate DB Service
If you wish to convert your DCR service and reinstate your previously refunded DB service and tier, you must have started the conversion process by completing the online submission form between May 1, 2023, and May 31, 2023, at 5 p.m. Alaska Time. After completing the online submission form, a retirement specialist will contact you, provide counseling on the benefits being relinquished under the DCR plan, then provide the necessary forms to convert. For more information or questions, please contact the Member Education Center toll-free at (800) 821-2251, in Juneau at (907) 465-4460, or by email at .
Former PERS and TRS Defined Benefit Members
If you are a PERS or TRS DB member who has refunded their contribution account balance and have not rehired with a PERS or TRS employer, you can reinstate your previously refunded service and restore your former tier by reemploying in a PERS or TRS eligible position. An irrevocable election to reinstate your former tier and refunded service must be approved by the Division within 30 days of rehire. If election is not made and approved by the Division within 30 days of rehire, you will default into the DCR plan.
Previously refunded service will be reinstated as an indebtedness on the member’s account. Reinstated indebtedness consists of the total refund received, plus accrued interest at the rate prescribed by regulation (7%) from the date of refund up to June 30, 2010. No further interest will accrue from July 1, 2010, until the previously refunded service is reinstated. Interest will begin to accrue once the refunded service is reinstated until paid in full or at the time of retirement. At retirement, members can cancel any remaining indebtedness by accepting an actuarial reduction to their benefit for life.
Next Step for Former Members to Reinstate DB Service:
Former members who wish to reinstate their previously refunded DB service and tier must rehire into a PERS or TRS eligible position and elect to reinstate service within 30 days of rehire. For more information or questions, or if you did not receive the form from your employer, please contact the Member Education Center toll-free at (800) 821-2251, in Juneau at (907) 465-4460, or by email at . A retirement specialist will provide counseling regarding the reinstatement indebtedness and answer any questions regarding the DB or DCR plans.
The DCR plan to DB plan webpage will be updated on an ongoing basis and will be less frequent from week to week.
You can find information on participating employers on the Participating Employers / Payroll Processing Contacts page.
Yes.
The employee contributions and any net market gains or losses of the PERS or TRS DCR account balance will be transferred to pay the cost of conversion. If any PERS or TRS DCR employee balance remains after the outstanding conversion indebtedness balance(s) are paid, the remaining balance will be refunded to the member by Empower Retirement.
Employer match contributions and any attributable gains and losses are not eligible to be utilized by the member to pay the cost of conversion. Employer contributions made on the member’s behalf will be transferred to the defined benefit plan to fund the lifetime future benefit that the member will receive from the fund as well as the system paid medical benefits that the member may be eligible for in retirement.
The reinstatement indebtedness (REI) consists of the total refund received plus accrued interest at the rate prescribed by regulation (7%) from the date of refund through June 30, 2010. No further interest will accrue from July 1, 2010, until the previously refunded service is reinstated. Interest will accrue at the rate prescribed by regulation (7%) from the date of conversion until the REI is paid in full or at the time of retirement.
The cost of conversion represents the employee contributions which would have been made and accrued interest (4.5%) had you been a member of the PERS or TRS DB during the years you were enrolled in the PERS or TRS DCR. Interest will accrue on any unpaid balance from the date of conversion until the conversion indebtedness is paid in full or at the time of retirement.
Yes, but you must first reemploy in a PERS or TRS eligible position. You will have 30 days from the date of hire to choose whether to convert. If you do not elect to reinstate your previously refunded DB service and return to your original tier status, you will default into the DCR plan. If you elect to reinstate your original tier status, your previous DCR PERS or TRS service must be converted to DB service and an indebtedness will be established on your record for the conversion cost. An indebtedness will also be established for your previously refunded DB service.
Yes. Members will be able to make payments by pretax transfer, pretax payroll deductions or with post tax monies on any remaining unpaid cost of conversion or Reinstatement Indebtedness that may exist.
Yes. Indebtedness is not a bill. If at the time of retirement, you elect to cancel any outstanding indebtedness due by accepting an actuarial reduction to your benefit for life, and the election reduces your benefit below what it would have been had the indebtedness not existed, then the claimed service and associated indebtedness will be removed from your final retirement benefit calculation.
Yes.
Yes.
Yes. Remaining balances can be paid with pretax qualified accounts after conversion is complete, including State of Alaska Supplemental Annuity Plans (SBS) and Deferred Compensation Plans (DCP). Once you have been notified that the conversion is complete, you will need to submit a Purchase of Service by Pretax Transfer form to apply any additional pretax qualified payments towards your remaining indebtedness balance(s).
Yes.
No.
Yes. The Division of Retirement and Benefits will provide members who convert a notification of pretax transfer payments applied and if there is any remaining indebtedness balance owed.
The DRB will be processing all submissions to convert first in first out. DRB counseling representatives will be contacting the members to provide counseling on the process and costs associated with the conversion. Incorrect information provided by the member will cause a delay in this process. It may take four to eight weeks for a counselor to contact you after you have submitted the online submission form.
Once you have submitted your online submission form, a member of the counseling team will contact you to set up a time to discuss the process and costs associated with conversion based on the order that forms are submitted.
This means, if, as a result of service credit claimed (reinstatement indebtedness or conversion cost not paid in full in this case) for which there is an indebtedness existing at retirement, the benefit is actuarially reduced by a factor spreading the remaining indebtedness balance out over the anticipated lifetime of the benefit. If applying an actuarial reduction reduces your benefit below what it would have been had the claimed service and associated indebtedness not existed, then the claimed service and indebtedness will be removed from your final retirement benefit calculation. Service associated with a Reinstatement indebtedness (REI) or Conversion indebtedness that has an outstanding balance will not count towards vesting or service eligibility (i.e. 20 or 30 years).
A former member means an employee who is terminated and who has received a total refund of the balance of the employee contribution account, or who has requested in writing a refund of the balance in the employee contribution account.
PERS DB members accrue interest on their individual accounts at 4.5% compounded semi-annually. TRS DB members accrue interest on their individual accounts at 4.5% compounded annually on June 30. For the former DB members who have reemployed and are now DCR members, the cost of conversion represents the employee contributions which would have been made including accrued interest (4.5%) had the employee been a member of the PERS or TRS DB plan during the years they were enrolled in the PERS or TRS DCR plan.
Under the PERS DB plan, the prescribed rate of interest that accrues on any indebtedness amount is 7% compounded semi-annually on June 30 and December 31 of each year. Under the TRS DB plan, effective July 1, 1974, the interest rate on arrearage, retroactive and reinstatement contributions is 7% compounded annually on June 30.
Once your form is received and approved by the Division, it can take up several months for the pretax transfer from Empower Retirement to be posted to your DB account. All conversion election forms submitted to the Division will be processed on a first in first out basis. Any incomplete forms will be returned to the member for correction and resubmission.
Please contact the Division if you are in this situation.
