Chapter 4: Reportable Compensation
PERS Reportable Compensation
Excess Compensation
Some types of reportable compensation for PERS members qualify as "excess compensation" if included in the calculation of a retirement benefit. Excess compensation is defined in RCW 41.50.150.
If a payment qualifies as excess compensation, the employer is billed for the resulting increase in the retiree's benefit to offset the increased cost to the trust funds. The employer's bill is based on the present value of the increase to the retiree's benefit. Present value is calculated using actuarial tables developed by the Office of the State Actuary and adopted into WAC by DRS. Excess compensation for PERS Plan 1 members includes:
- A cash out of annual leave in excess of 240 hours. Cash out means:
- Any payment added to salary or wages concurrent with a reduction of annual leave; or
- Any payment made instead of an accrual of annual leave.
Example:
An employer's collective bargaining agreement provides that once an employee accrues 240 hours of annual leave, the employee will not earn any additional annual leave. Instead, the employer will pay the person each month for the value of the leave the person would have accrued that month. For instance, if the employee earned 14 hours of annual leave each month and already had 240 hours of annual leave, the employer would pay the employee for an additional 14 hours each month. The employee's leave balance would remain at 240 hours. The payment qualifies as a cash out, and to the extent it is used during the AFC period, is excess compensation.
- Any payment (overtime) that is greater than twice the regular daily or hourly rate qualifies as excess compensation.
Note: Payment of double time and a half for work on a holiday does not violate this provision. The standard compensation for work done on the holiday is compensated at time and a half. The standard compensation for the holiday, plus time and a half for working after regular work hours, equals double time and a half. Accordingly, the employee is not earning more than twice his or her regular rate of pay for the work done on the holiday.
- Any termination or severance pay. Note that a termination or severance payment, which does not qualify as reportable compensation, would not be excess compensation because it is not reportable.
- Payment for extra work done in which the assignment of extra duties was based upon the employee's notification of intent to terminate or retire. (See the "Retirement Bonus or Incentive".)
Note: Refer to DRS Notice 98-001 for more information about excess compensation.
Excess compensation for PERS Plan 1 members includes:
- A cash out of any form of leave other than annual. The most common example is sick leave. Any sick leave cash out that is included in a retiree's AFC qualifies as excess compensation.
Note: If you are a state agency or an educational employer, do not report sick leave cash outs. Sick leave cash outs are not included in the employee's retirement benefit calculation.
- If a portion of an allowance or reimbursement qualifies as reportable compensation; i.e., car allowance, that portion is excess compensation. Generally, allowances and reimbursements do not qualify as reportable compensation.