Example 1: Tier Two retirement
Tom has decided to retire after 30 years as a police
lieutenant. In calculating his final average salary, his employer uses his three most recent full years (which
are also his highest paying years). Tom's annual salary for his three years is limited by the salary limit
in effect for each year (numbers are rounded off to the nearest dollar):
|
Year
|
Gross salary
|
Annual salary limit
|
Amount included in calculating FAS
|
Amount reported as non-subject salary
|
2024 | $292,556* | $232,976 | $232,976 | $59,580 |
2023 | $285,155 | $225,533 | $255,533 | $59,622 |
2022 | $244,000* | $210,582 | $210,582 | $33,418 |
*Includes a lump-sum vacation payout.
Example 2: Quitting after five months
Existing OPSRP member Jill works January 1 through
May 4 and then quits. To calculate her partial-year salary limit for that year, multiply (5 ÷
12) (which is
0.416667) by that year's salary limit.
Example 3: Employee who works for multiple employers
Employer Jorge is surprised to
receive a suspended record with an error message that says his employee has surpassed the annual salary limit.
He calls his
ESC representative and learns that his employee works for
two other employers, and the combined salaries put the employee over the salary limit. Jorge works with his ESC
rep to correct the record.
Example 4: New member
Tiana, a new public employee, started employment on
December 10 in a qualifying position and continued to work through all the next year. Because
she had to complete a six-month waiting period before establishing membership, the first six months of her
employment do not count as months of active membership. Therefore, Tiana has
six months (July through December) of active membership that year.
Note: The salary Tiana earned during her six-month waiting period would not be counted toward
the salary limit because the waiting period does not count as active membership.
Example 5: Partial year and December termination
Ian, an existing PERS member, is
employed with a PERS-participating employer in a qualifying position on
August 25 and subsequently terminates employment on
December 15. Ian receives his final paycheck on
January 15. He has
five months of active membership with that employer (August through December).
The salary paid on
January 15 is included with Ian's salary for the previous year because it was earned in the
previous year.
Example 6: Partial year by separation from employment and Tier One lump-sum vacation
payout
Seo-Jun, an existing Tier One member, is employed with a PERS-participating employer
in a qualifying position. She terminates employment on
February 27 in order to retire March 1. She has two months of active membership for that year.
Seo-Jun's yearly salary is normally under the annual limit. Seo-Jun receives her final check on
March 15, which contains $20,000 of a lump-sum vacation payout as part of her subject salary.
Regular salary is $10,000 for each month of January and February, which, combined with her lump-sum payout, puts
her over the two-month salary limit.
The amount of Seo-Jun's salary that is over the limit must be reported as non-subject salary.
Note: For OPSRP members, lump-sum vacation payouts and other lump-sum payments are
not included in subject salary and can be reported as they usually would be. Employers should
use the
Payment Categories chart to determine
subject versus non-subject salary, especially which lump-sum payments can be included for Tier One and Tier
Two members.
Example 7: Partial year by separation followed by working retiree employment
Jax (they/their) is employed with a PERS-participating employer in a qualifying position and terminates
on
January 31 to retire on February 1. They receive their final regular paycheck on
February 25 in the amount of $6,000. Their
one month of active membership is under the salary limit and is reported as subject salary.
Jax returns to work for a PERS-participating employer as a retiree on
September 1 and works until
October 31. They are paid $36,000 for September and October. Only the September and October pay
needs to be considered for salary limit because (1) the January pay was already processed when Jax retired and
(2) working retiree pay is processed separately from regular employee pay.
Although retirees are no longer active members, employers are responsible to pay contributions on
retirees' salaries as if they were active members. Therefore, retirees are considered active members for
Salary Limit purposes.