Chapter 4: Reportable Compensation
TRS Reportable Compensation
Excess Compensation
Some types of reportable compensation for TRS members qualify as "excess compensation" if included in the AFC period used in the calculation of a retirement benefit. Excess compensation is defined by statute 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 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 TRS Plan 1 members includes:
A cash out of annual leave in excess of 30 days. 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 30 days 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 two days of annual leave each month and already had 30 days of annual leave, the employer would pay the employee for an additional two days each month. The employee's leave balance would remain at 30 days. The payment qualifies as a cash out and, to the extent it is used during the AFC period, is excess compensation.
Personal leave cash out payments are excess compensation to the extent they are included in the calculation of the member's retirement benefit.
A cash out of any form of leave other than annual is excess compensation to the extent they are included in the calculation of the member's retirement benefit.
Note: Payment of double time and a half for work on a holiday does not violate this provision. The standard payment for working on a holiday is compensated at time and a half. The standard payment for the holiday, plus time and a half for working after regular work hours, equals double time and a half. The employee is not earning more than twice his or her regular rate of pay for working on the holiday.
- Any other termination or severance pay. Note that a termination or severance payment that does not qualify as reportable compensation would not be excess compensation since it is not used in the calculation of the retirement benefit.
- 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".)
Excess compensation for TRS Plan 1, Plan 2 and Plan 3 members include:
- 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.
- Any payment (overtime) that is greater than twice the regular daily or hourly rate of pay.
Note: Refer to DRS Notices 98-001 for more information about excess compensation.