MEMBERS

This web page is intended to provide general information on Senate Bill 1049 and may not address your specific situation. If you are considering retirement, you may want to contact PERS for a benefit estimate, or speak with a financial adviser or other retirement planning professional.

Starting in 2020, if you are employed less than 12 months in a calendar year, your subject salary will be limited based upon a “partial year” average salary limit of $16,250 a month* (including any eligible lump-sum payments for Tier One/Tier Two members).

The salary limit applies to all eligible PERS subject salary paid and reported to PERS by your employer – regular pay, vacation payouts (if eligible), overtime pay, etc.

The changes under Senate Bill (SB) 1049 only affect how PERS calculates your pension and contributions to PERS. The limit does not impact the actual salary, wages, or payouts you receive from your employer.

Prior to 2020, only OPSRP members (those hired after August 28, 2003) were impacted by partial year salary limits. Beginning January 1, 2020, partial year salary limits apply to all members (Tier One, Tier Two, and OPSRP).

Looking for information about the annual salary limit under SB 1049? Read our SB 1049 Changes to PERS: Salary Limit webpage.

*The limit is indexed annually to the Consumer Price Index (CPI) [All Urban Consumers, West Region]. The Partial Year Salary Limits chart will be updated each year.

 

What are the partial year salary limits starting in 2020?

Starting with calendar year 2020, if you have less than 12 months of “active membership” in a calendar year (whether due to retiring or otherwise leaving your PERS-covered position anytime during the calendar year), your subject salary, as reported to PERS, could be limited by the “partial year” salary limit.

You can calculate your “partial year” limit by counting the number of months of active membership you have, divided by 12 months, and then multiply that fraction by the annual salary limit ($195,000* in 2020). Use the chart below to find your 2020 partial year limit.

Partial Year Salary Limits
Months of “Active Membership” 1 month 2 months 3 months 4 months 5 months 6 months 7 months 8 months 9 months 10 months 11 months Full Year
Months You Work ÷ 12 = Proration Factor 0.083333 0.166667 0.250000 0.333333 0.416667 0.500000 0.583333 0.666667 0.750000 0.833333 0.916667 1.000000
2020 Partial Year Limits $16,249.94 $32,500.07 $48,750.00 $64,999.94 $81,250.07 $97,500.00 $113,749.94 $130,000.07 $146,250.00 $162,499.94 $178,750.07 $195,000.00*

*The limit is indexed annually to the Consumer Price Index (CPI) [All Urban Consumers, West Region]. 

For example, if you worked five months in calendar year 2020, you would multiply (5 ÷ 12), which is 0.416667, by $195,000, which equals $81,250.07.

  • In this situation, any salary over $81,250.07, including eligible lump-sum payments for Tier One/Tier Two members (read more in Final Average Salary in a Partial Year: Tier One/Tier Two, below), would be reported as “non-subject salary” and would not be included in Individual Account Program (IAP) contributions and possibly the calculation of your Final Average Salary.

In short, your salary limit will be prorated based on the number of months you are employed with a PERS-participating employer in a qualifying position during that year.

In 2020, if your monthly salary averages $16,250 or more during your partial year period, your subject salary may be limited. As with the SB 1049 full-year salary limit, the partial year limit is indexed annually to the CPI and future salary limits may be different.

For questions about what months count in “active membership” in a calendar year, see How do you correctly calculate a “partial year”? Keep in mind your months of “active membership” determine the partial year limit, not the number of payments you receive.

It is important that your PERS-participating employer accurately reports to PERS your subject and non-subject salary. Your employer is responsible for designating your position as “active” and “qualifying.” 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 or Tier Two members. Employers: Read more details on Partial Yea​r Salary Limits: Information for Employer Reporters.

 

Partial years and retiring members: Requesting an estimate and calculating Final Average Salary

If your salary averages $16,250 or more a month, or if you are a Tier One/Tier Two member anticipating a lump-sum payment in your final year of employment (see an example in Final Average Salary in a Partial Year: Tier One/Tier Two, below), there is a possibility, depending on how many months you work in your final year of employment, that a “partial year” limit might impact the calculation of your “final average salary.”

If you are within two years of retirement eligibility (Tier One/Tier Two, OPSRP) you may request two written benefit estimates per calendar year without charge. You may wish to request a written benefit estimate to understand how your pension may be calculated (find the request form for Tier One/Tier Two or OPSRP members).

Please note that estimates created through your Online Member Services (OMS) account do not yet reflect the SB 1049 Salary Limit changes.

You can use the 2020 partial year salary limit chart below to see how the limits could impact you, depending on how many months you work (“months of active employment”) in a partial year.

Partial Year Salary Limits
Months of “Active Membership” 1 month 2 months 3 months 4 months 5 months 6 months 7 months 8 months 9 months 10 months 11 months Full Year
2020 Partial Year Limits $16,249.94 $32,500.07 $48,750.00 $64,999.94 $81,250.07 $97,500.00 $113,749.94 $130,000.07 $146,250.00 162,499.94 $178,750.07 $195,000.00*

 

 

Final Average Salary in a partial year: Tier One/Tier Two (hired before August 29, 2003)

Learn more about final average salary (FAS) for Tier One/Tier Two members.

In general, PERS always calculates your “high three calendar years” (Tier One/Tier Two members’ “high three” years do not need to be consecutive), and your total subject salary earned over the “last 36 months.” The higher amount will be used in calculating your FAS.

NOTICE: If your salary averages $16,250 or more a month and you retire early or mid-year, there is a possibility that the “partial year” salary limit could impact your “last 36 months” of total subject salary. This possibility can be increased if you receive a lump-sum payment.

Example: Tier One member retires early in the year with a large lump-sum vacation payout

See Tier One/Tier Two SB1049 Salary Limit examples on page 5 for a “full year” salary limit impacted by a lump-sum vacation payout.

Remember that in calculating “Final Average Salary,” PERS will always calculate the “high three years” and the “last 36 months” and use whichever is higher.

Take the following example of someone who makes around $150,000 a year but has a large lump-sum vacation payout ($15,000, for example) and retires or separates early in the year.

In calculating the “last 36 months,” even if the member had around $37,500 in actual salary in the first three months of 2020, their $15,000 lump-sum vacation payout pushes them over the $48,750 partial year limit. The member would still receive their actual salary and vacation payout in 2020 of $52,500, but their FAS calculation would be capped, and only $48,750 would be used for 2020 subject salary.

Vacation Hours: 200**

High 3 Years   Last 36 Months
Year Salaries   Year Months Salaries
2019 $150,000   2020 3 $48,750**
2018 $150,000   2019 12 $150,000
2017 $150,000   2018 12 $150,000
      2017 9 $112,500
$450,000 ÷ 36 = $12,500 monthly final average salary   $461,250 ÷ 36 = $12,812.50 monthly final average salary
 

 

**Lump-sum vacation hours are reflected in estimated salary up to the allowed salary limitation set by SB 1049.

Note that even though this Tier One member’s last 36 months FAS is impacted by the SB 1049 partial year limit, their “last 36 months” FAS calculation still results in a higher monthly final average salary than their “high three years” calculation.

 

Final Average Salary in a partial year: OPSRP (hired after August 28, 2003)

ORS 238A.130 defines final average salary (FAS) rules for OPSRP members slightly differently than Tier One/Tier Two members. In short, the “high three” years must be consecutive calendar years and OPSRP members’ lump-sum payments are not included in “subject salary.”

OPSRP FAS will be whichever is greater of:

  • The average salary per calendar year in three consecutive calendar years
  • The average salary in the last 36 months of employment

Because OPSRP members do not have any vacation or other lump-sum payments added to their FAS calculations, unless you make more than $16,250 a month (regular and overtime payments), which would be similar to making over $195,000 a year, OPSRP members that earn high (but under $195,000/year) salaries are very unlikely to be impacted by the “partial year” limits.

For example:

OPSRP member makes an average of $170,000 a year and has a retirement date of March 1, works through February 25, 2020 (two months of active membership in 2020).

High 3 Years   Last 36 Months
Year Salaries   Year Months Salaries
2019 $170,000   2020 2 $28,333
2018 $170,000   2019 12 $170,000
2017 $170,000   2018 12 $170,000
      2017 10 $141,667


In this example, both monthly final average salary amounts are exactly the same ($510,000 total ÷ 36 = $14,166.67 average monthly final average salary). You can see that the two months in 2020 are not impacted by the partial year salary limit, because they are below $32,500.07.

Some exceptions could apply – you should get a written estimate or speak with PERS Member Services if you think this situation may apply to you:

  • OPSRP member with a high salary that doesn’t work for a local government and receives three checks in 2020 but works only in January and February (two months of “active membership” would be $32,500.07 partial year limit despite getting three checks). Remember it is the “months of active membership” in a partial year, not how many paychecks you receive.


How do you correctly calculate a “partial year”?

Beginning January 1, 2020, the formula to calculate a partial year limit is:​

 

To clarify: Any month in which you have “active membership” is counted as a month in the numerator. The denominator is always 12.

  • For example, 7 months of active membership ÷ 12 months = 0.583333.
    • 0.583333 × annual salary limit = prorated salary limit for 7 months.

You do not have to be employed a “full month” for it to count as active membership (see examples below).

Your PERS-participating employer is responsible for designating your position as “active” and “qualifying.” Note that “active membership” continues through what your employer sends to PERS as your “Termination Date,” not your “Last Day of Service.”

Notes for special situations:

  • Any partial month is counted. For instance, if you were employed on January 1, 2020, through August 3, 2020, you would have eight months of active membership in 2020.
  • Months of Leave Without Pay (LWOP) during active membership are counted.
  • Any full month (when your employer has not officially “terminated” you in the PERS system) that you had active membership, even if you had no hours or salary reported, is counted.
  • Full months of “non-qualifying” employment do not count.

Example 1: Less than 12 months of active employment

An existing member is hired with a new PERS-participating employer on February 27, 2020, in a qualifying position, and subsequently terminates employment on August 3, 2020. The member has seven months of active membership during the 2020 calendar year (both February and August are counted).

7 months of active membership in 2020 7 months
Divided by 12 months ÷ 12 months
Proration factor for salary limitation 0.583333
2020 Annual Salary Limitation × $195,000
Prorated salary limitation for 2020 $113,749.94


This member’s 2020 salary limit is $113,749.94. This number would be used for employee and employer contributions and possibly in the calculation of Final Average Salary.

Example 2: A new member

A public employee starts employment on December 10, 2019, in a qualifying position, and continues to work through all of 2020 and into the next year. Because the employee has to complete a six-month waiting period before establishing membership, the first six months of employment do not count as months of “active membership.” This member’s “Contribution Start Date” (“Membership Date,” as shown on a Member Annual Statement) would be July 1, 2020. IAP contributions would begin on July 1, 2020, once membership is established. By continuing to work for the entire 2020 calendar year, this member would have six months (July-December) of “active membership” in 2020.

6 months of active membership in 2020 6 months
Divided by 12 months ÷ 12 months
Proration factor for salary limitation 0.50
2020 Annual Salary Limitation × $195,000
Prorated salary limitation for 2020 $97,500.00


This member’s 2020 salary limit is $97,500. This number would be used for determining employee and employer contributions, and possibly in the calculation of Final Average Salary.

Example 3: Partial year and December termination

An existing member is employed with a PERS-participating employer in a qualifying position from August 25, 2020, and subsequently terminates employment on December 15, 2020. The member receives their final pay check on January 15, 2021. The member has five months of “active membership” in 2020 (August-December).

5 months of active membership in 2020 5 months
Divided by 12 months ÷ 12 months
Proration factor for salary limitation 0.416667
2020 Annual Salary Limitation × $195,000
Prorated salary limitation for 2020 $81,250.07


Note: The salary paid on January 15, 2021, would be included with the member's 2020 salary based upon the member’s termination date of December 15, 2020. This member’s 2020 salary limit is $81,250.07. This number would be used for employee and employer contributions and possibly in the calculation of Final Average Salary.​​​​​​​​​​