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Edited JDO 6/30/22


Defined Contribution Plan
to Defined Benefit Plan
Conversion Process


Learn more about the DCR Plan to DB Plan conversion process and if it applies to you.

Based on a decision of the Alaska Supreme Court, former PERS and TRS Defined Benefit (DB) Plan members who refunded their retirement contributions and later returned to PERS or TRS employment under the Defined Contribution Retirement (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.

In 2005, during the passage of Senate Bill 141 in the 24th Legislature which created the Defined Contribution Retirement (DCR) plans under the Public Employees’ Retirement System (PERS) and the Teachers’ Retirement System (TRS), changes were made to plan reinstatement. Within this bill, AS 14.25.067 and AS 39.35.350, which govern the ability for a Defined Benefit (DB) member to reinstate previously refunded service, was repealed. Former members of the PERS and TRS DB plans (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 status 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 14.25.067 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 14.25.067 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 14.25.067 and AS 39.35.350.

A letter was mailed on May 31, 2022 to all members who refunded their defined benefits account providing notification of their rights to reinstate their previously refunded service. Publications have also been posted in all major Alaska news outlets.

PERS or TRS Defined Benefit Members Reemployed in the Defined Contribution Retirement Plan

If you are a PERS or TRS DB member who reemployed with a PERS or TRS employer after July 1, 2010, and became a DCR member, you can convert your present DCR service to your former DB tier status and reinstate your refunded DB service. To initiate the conversion process, you must complete the online submission form to the Division by July 15, 2022. Members will be contacted in the order that submission forms are received. If you do not wish to restore your former DB tier status and convert your DCR service, no action is necessary.

Please click here to access the online submission form. If you have any questions or do not have access to the Internet, please feel free to contact our office toll-free at (800) 821-2251, in Juneau at (907) 465-4460, or by email at .

Former PERS or TRS DB members who are currently active in the DCR plan who elect to convert to their former DB tier status will require all employee DCR contributions to be converted to the DB plan to cover the cost of converting the members present DCR service into DB service.

A conversion indebtedness will be established for the cost to convert current DCR service and previously refunded service will be reinstated as a reinstatement (REI) indebtedness on the member’s account.

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. 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, the member has the option to use any residual employee contributions from their DCR account to be applied to the REI indebtedness(s).

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 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.

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:

Members who wish to convert their DCR service and reinstate their previously refunded DB service and tier status must complete the submission form at the bottom of this page. A retirement specialist will contact you, provide counseling on the benefits being relinquished under the DCR plan, then provide the necessary forms to convert.

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 status by reemploying in a PERS- or TRS-eligible position. An irrevocable election to reinstate your former tier status 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, members 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 status must rehire into a PERS or TRS eligible position and elect to reinstate service within 30 days of rehire. For more information, please complete the submission form at the bottom of this page. A retirement specialist will contact you to provide counseling regarding the reinstatement indebtedness and answer any questions regarding the DB or DCR plans.

1. How often is the Defined Contribution plan (DCR) to Defined Benefit (DB) plan Conversion Process page updated?

The DCR plan to DB plan webpage will be updated on an ongoing basis and will be less frequent from week to week.

2. Where can I find the PERS/TRS participating employers?

You can find information on participating employers on the Payroll Processing Contacts page.

3. Is the conversion election from the DCR Plans to the DB Plans irrevocable?

Yes.

4. If I convert my current DCR service to the Defined Benefit Plan, do I retain my contributions?

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.

5. How is my Reinstatement Indebtedness (REI) calculated?

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.

6. How is my conversion indebtedness calculated?

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.

7. If I am a refunded DB member who reemployed in the DCR plan, and have fully refunded my DCR PERS or TRS account, can I still convert?

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.

8. Can I pay over-time if I do not have enough to pay the full balance upon conversion?

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.

9. If I am already vested in the DCR plan, will I be able to take an actuarial reduction for the Reinstatement Indebtedness?

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.

10. Will I be able to pay reinstatement indebtedness with pre-tax dollars, such as a pre-tax transfer or payroll deduction?

Yes.

11. Will I be able to pay for the conversion service with pre-tax money?

Yes.

12. Can I use pre-tax qualified accounts to pay if I do not have enough funds in my PERS or TRS DCR account to cover the conversion?

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).

13. If I am already vested in the DCR, will I be able to take an actuarial reduction for the Reinstatement Indebtedness?

Yes.

14. Will there be a conversion estimator available in myRnB?

No.

15. If I choose to convert, will I receive written confirmation?

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.

16. I have submitted the online submission form. How soon will I be contacted?

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.

17. How can I confirm/verify if you received my submission request?

Once you have submitted your online submission form, an auto-generated confirmation will be emailed from surveymonkey@t.outbound.surveymonkey.com confirming your successful submission. 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.

18. What is an actuarial reduction and what does it mean to cancel any outstanding indebtedness by accepting an actuarial reduction?

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).

19. Can I submit a claim form for the Military/outside service during the conversion process?

Yes. However, each form will need to be submitted according to the directions provided on the specific claim forms. The conversion needs to be completed first, then the military/outside claim will be processed after the conversion has been completed.

20. What does “former member” mean?

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.

21. What does “accrued interest” mean?

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.

22. What does “interest at the rate prescribed by regulation” mean?

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.

23. How long once my conversion election form is received by DRB will the conversion process take?

Once your form is received and approved by the Division, it can take up to 60 days 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.

Page Last Modified: 06/30/22 14:44:37

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