Chapter 4: LEOFF Reportable Compensation

Summary

This section contains information about salary that is reportable for members of the Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF). In order for compensation to be reportable to DRS for LEOFF, it must be basic salary. Not all payments from an employer to a LEOFF member qualify as basic salary. This section discusses what is considered basic salary.

The rules that govern basic salary are contained in state retirement laws and administrative rules. This section is a summary and is not intended to be a full description of the laws and rules. If there are any conflicts between what is written in this section and state retirement law and rule, the law and rule will govern.

If you have questions regarding the information contained in this section, contact the PERS Retirement Services.

What is Reportable Compensation

In order for an employee's salary or wages to be subject to retirement system contributions and included in the calculation of his or her retirement benefit, they must meet the definition of "basic salary" in LEOFF retirement law (see RCW 41.26.030 and WAC 415-104-298).

Basic Salary Differs between Plans

The definition of basic salary is different for LEOFF Plan 1 and LEOFF Plan 2. WAC 415-104-305 through WAC 415-104-350 defines basic salary for LEOFF Plan 1. WAC 415-104-360 through WAC 415-104-405 defines basic salary for LEOFF Plan 2.

Definition of Basic Salary for LEOFF Plan 1

Basic salary for LEOFF Plan 1 means the basic monthly rate of salary or wages-including longevity pay but not including overtime earnings or special salary or wages-upon which pension or retirement benefits will be computed and upon which employer contributions and salary deductions will be based.

  • Salary or wages means payments for services rendered by a LEOFF member to an employer. Payments that are not for services rendered to an employer are not a salary or wage and do not qualify as basic salary.
  • Longevity pay means a payment in addition to the basic monthly rate of pay that is:
    • Based solely upon the length of employment with the employer; and
    • Paid to all LEOFF members who have served for the same length of time with the employer.
  • Position means the employment held at any particular time. The employment held is defined by the duties required of the employee as a condition of employment.

     

    Example:

    An employer employs two police officers, one who has a high school diploma and one who has a college degree. Although both officers have the same duties, the employer designates the first officer as an "officer 1" and the second officer as an "officer 2." The distinction between the two levels is conditioned upon different levels of education. The second officer is paid at a higher rate. For purposes of determining basic salary, both officers occupy the same position because both have the same duties. The difference in their two rates of pay is an education premium which does not qualify as basic salary.

  • Attached to a position means a payment conditioned on specific duties required of the person holding the position.

Definition of Basic Salary for LEOFF Plan 2

Basic salary for LEOFF Plan 2 is a payment that is a salary or wage earned during a calendar month for personal services rendered by a member to an employer. Certain payments that are not for personal services rendered by a member also qualify if there are specific provisions in the laws identifying them as basic salary. Other payments not specifically identified in the rules qualify as basic salary only if the payments are for services rendered. These payments are described under the section discussing what is and is not reportable for LEOFF Plan 2 members later in this chapter.

Reportable Compensation is Based upon the Nature of the Payment

DRS determines reportable compensation based upon the nature of the payment you make to an employee, not the name given to it. To determine if a payment is reportable compensation, consider the following:

  • what the payment is for; and
  • whether the reason for the payment brings it within the statutory definition of basic salary.

Plan 1 Reportable Compensation

The following are payment types that qualify as basic salary and are reportable to DRS.

  1. Basic Monthly Rate is the basic monthly rate of compensation paid by an employer to a member for services rendered. "Basic monthly rate" means the rate of salary or wages attached to a position excluding overtime or special salary or wages.
  2. Longevity pay is reportable if it is based solely upon length of employment with the employer and paid to all law enforcement officers or fire fighters who have served with the employer for the same length of time.
  3. Deferred payments attached to a position are basic salary. Deferred payments may include, but are not limited to, member contributions to LEOFF and salaries or wages deferred according to the provisions of sections 401(k), 403(b), 414(h), 457, or other similar sections of the United States Internal Revenue Code.
  4. Retroactive basic salary increases attached to a position are basic salary. If a payment is part of the basic monthly rate of salary or wages attached to a position or is a longevity payment, it is basic salary even if it is retroactive.
  5. Paid leave is basic salary. Payments from an employer for authorized paid absences from work are basic salary.

     

    Example:

    Assume a member accrues eight hours sick leave per month. The accrued leave in the member's sick leave balance is earned for personal services rendered during a payroll period. When the member is absent from work and uses the sick leave, the sick leave payment is basic salary.

  6. Payments upon reinstatement or in lieu of reinstatement are paid leave and qualify as basic salary. The payment will count as basic salary for the payroll periods when the person would have earned the payment had he or she been working.
    • In order for a payment in lieu of reinstatement to qualify as paid leave, the person's termination date must occur after the payroll period(s) when the payment would have been earned.
    • Payments under WAC 391-45-410 are basic salary for the period(s) covered by the reinstatement.
    • Payments upon reinstatement or in lieu of reinstatement are basic salary only to the extent they equal the basic salary a member would have earned had the member been working.
  7. Union leave-Periods of authorized leave to serve as an elected official of a labor organization which meet the statutory requirements qualify for service credit (see RCW 41.26.197). The salary payments provided by the employer, subject to reimbursement from the union, qualify as basic salary to the extent the payments do not exceed the basic salary for the highest paid job class covered by the collective bargaining agreement negotiated between the labor organization and the employer.
  8. Shift differential is basic salary. Additional payments to a member for working swing shift or night shift are attached to the duties of the position; i.e., working a nonstandard shift.
  9. Additional duty pay is basic salary.

     

    Example:

    A police officer is assigned to the bomb squad and receives an additional monthly payment for the hazardous duty assignment. The additional payment is for duties required by the employer as part of the member's position. It is attached to the position and is basic salary.

Plan 1 Not Reportable Compensation

The following are payment types that are not considered basic salary and are not reportable to DRS for LEOFF Plan 1:

  1. Deferred wages not attached to a position are special salary or wages and are excluded from LEOFF Plan 1 basic salary.
    • Employer matching payments are not basic salary.

      Example:

      An employer offers to contribute to a deferred compensation plan only if the member elects to defer a portion of his or her salary. Because the member does not have an absolute right to receive the additional contribution for performing the duties required of his or her position, the payment is special salary and is not reportable.

    • Additional deferred compensation offered to an individual is not basic salary. This is a special salary or wage and is not reportable.
  2. Educational premium payments-If an employer provides additional salary based upon the member's level of education, it is a special salary or wage and is not reportable.

    Example:

    An employer employs two different law enforcement officers in the position of sergeant. Although their duties are the same, one sergeant receives 3 percent more salary because he or she has a bachelor's degree, which the other lacks. The additional 3 percent is not attached to the position because it is not attached to any additional duties. It is not basic salary.

    • Payments conditioned upon acquiring and maintaining a designated certification such as emergency medical technician are a form of educational premium pay. It is a special salary or wage and is not reportable.
  3. Cafeteria plans-Compensation paid under the provisions of a "cafeteria plan," "flexible benefits plan," or similar arrangement, according to the provisions of section 125 of the US Internal Revenue Code is a special salary or wage and is not reportable.
  4. Leave cash outs or other severance pay are not reportable.
    • A cash out for unused accrued leave is a deferred salary. Cash out for unused accrued leave is a deferred salary or wage for services previously rendered. In LEOFF Plan 1, the payment is not basic salary but a special salary or wage and is not reportable.
    • Any form of severance pay based upon termination is not reportable.
  5. Overtime, which is additional pay earned for working time in excess of regularly scheduled shift(s), is specifically excluded from basic salary for LEOFF Plan 1 and is not reportable.
  6. Additional pay for working a holiday is considered overtime and is not reportable.
  7. Callback pay is a special rate of pay for being called back to work and is not reportable.
  8. Court pay is an additional payment for appearing in court or performing other duties outside of a member's regularly scheduled shift and is not reportable.
  9. Deferred payments not attached to a position are not reportable.
  10. Disability payments-Payments from an employer during periods of disability leave are not payments for services rendered and are not reportable.
  11. Third party payments such as payments from an insurance company are not reportable.
  12. Employer-paid taxes and employer-paid retirement contributions are not salary or wages and are not reportable.
  13. Fringe benefits provided by an employer such as insurance premiums are not reportable.
  14. Illegal payments are not basic salary and are not reportable.
  15. Reimbursements or allowances in lieu of a reimbursement are not reportable.

    Example:

    An employer provides an annual stipend for the purchase of a uniform or other clothing required for the performance of a member's duties. The payment is a reimbursement for expenses incurred or expected to be incurred and is not basic salary.

  16. Payments based on additional certification or qualifications-If a member receives payments based upon personal expenses incurred in maintaining a certification or qualification, the payment is reimbursement, not compensation, and is not reportable.
  17. Standby pay-payment for time not actually worked when the member must be available to work if the need arises, is not reportable.

    Example:

    Some employers provide payments to a member at less than the member's regular hourly rate in exchange for the member being available to come into work after his or her shift if called. These payments are not basic salary.

  18. Retirement or termination bonuses are not reportable.
    • Additional payments based fully or partially on notification of a member's intent to terminate or retire are not a salary for services rendered and are not reportable.
    • Payments based on retirement eligibility are specific to a member and are not attached to the position. These payments are not reportable.
  19. Payments in lieu-A payment or any other transfer in lieu of an item that does not qualify as basic salary is not reportable.

Plan 2 Reportable Compensation

The following types of payments qualify as LEOFF Plan 2 basic salary and are reportable:

  1. Basic salary
  2. Deferred wages if earned for services rendered are basic salary. Deferred wages include, but are not limited to:
    • Member contributions to LEOFF;
    • Salaries or wages deferred according to sections 401(k), 403(b), 414(h), 457 or other similar sections of the US Internal Revenue Code.
  3. Retroactive basic salary increases received for a pay period that a member worked is a salary or wage for services rendered and is reportable.
  4. Cafeteria plans-Compensation received in any form under the provisions of a "cafeteria plan," "flexible benefits plan," or similar arrangement according to section 125 of the US Internal Revenue Code is basic salary only if the member can receive cash or deferred payments instead of the fringe benefits.
  5. Overtime-Additional pay earned for working time in excess of regularly scheduled shift(s) is a salary or wage for services rendered and is reportable. Overtime includes, but is not limited to:
    • Additional pay for working on a holiday.

       

      Example:

      A fire fighter works on Christmas day. As compensation for working a holiday, the member is given the option of taking some other day off with pay or of receiving an extra day's pay. If the member opts for the extra day of pay, this payment is overtime and is reportable. If the member opts to take a day off, this is paid leave, qualifies as basic salary and is reportable.

    • Callback pay for being called back to work;
    • Court pay for appearing in court or performing other duties outside of a member's regularly scheduled shift.
  6. Paid leave-Payments received from an employer for authorized paid absences from work are basic salary for LEOFF Plan 2. Paid leave is basic salary and is reportable only to the extent that it is the equivalent of the basic salary a member would have earned had the member been working. The portion of any payment that exceeds that amount is not basic salary and is not reportable.

    Reportable leave payments include:

    • Leave payments earned for services rendered

       

      Example:

      Assume a member accrues eight hours sick leave per month. The accrued leave in the member's sick leave balance is earned for personal services rendered during a payroll period. When the member is absent from work and uses the sick leave, the sick leave payment is basic salary and is reportable.

  7. Leave payments not earned for services. If an employer authorizes a period of paid leave but does not require the use of leave previously earned for services rendered, the payment is not a salary or wage for services rendered. However, RCW 41.26.520 authorizes service credit for all periods of paid leave. Because the periods are creditable, the pay received is considered basic salary to the extent that it is equal to the basic salary the member would have earned had he or she been working and is reportable.
  8. Payments upon reinstatement or in lieu of reinstatement are paid leave and qualify as basic salary. The payments are reportable for the payroll periods when the person would have earned the payment had he or she been working.
    • In order for a payment in lieu of reinstatement to qualify as paid leave, the person's termination date must occur after the payroll period(s) when the payment would have been earned.
    • Payments under WAC 391-45-410 are basic salary for the period(s) covered by the reinstatement.
    • Payments upon reinstatement or in lieu of reinstatement are basic salary only to the extent they equal the basic salary a member would have earned had the member been working.
  9. Union leave-Periods of authorized leave to serve as an elected official of a labor organization which meet the requirements of RCW 41.26.520 qualify for service credit. The salary payments provided by the employer-subject to reimbursement from the union-qualify as basic salary to the extent that they do not exceed the highest paid job class covered by the collective bargaining agreement negotiated between the labor organization and the employer.
  10. Salary or wages not attached to a position-A salary or wage for services rendered to an employer is basic salary regardless of whether the services are attached to a position.

     

    Example:

    If an employee receives additional salary based upon his or her education, that additional salary is basic salary even if his or her position does not require that level of education. The payment of a higher salary based upon education attainment is part of the total compensation for the services provided by the employee.

  11. Performance bonuses-Payments made for meeting or exceeding performance goals set by an employer are a salary or wage for services rendered and qualify as basic salary. In order to qualify as basic salary, a performance bonus must be documented in an employer policy or specific agreement between the employer and member prior to earning the bonus.

     

    Example:

    An employer offers an annual bonus to a member if he or she meets a certain performance goal; e.g., stays accident free for a year. If the member meets the goal and is paid the bonus, the bonus would be considered basic salary.

  12. Shift differential-Additional payments to a member for working swing shift or night shift are a salary or wage for services rendered. The payments are basic salary and are reportable.
  13. Disability payments-Under certain circumstances, a LEOFF Plan 2 member is entitled to a disability leave supplement for periods of disability leave. (See RCW 41.04.500-550.) The following types of disability payments are considered basic salary and are reportable to DRS.
    • Disability leave supplement-The member-paid portion of the disability leave supplement funded through use of the member's accumulated sick or vacation leave is basic salary and is reportable.
    • Disability leave banks-If an employer maintains a disability leave bank which may be used to make salary replacement payments for members during periods of disability, such payments are paid leave and are reportable.

Plan 2 Not Reportable Compensation

The following are payment types that are not considered basic salary and are not reportable to DRS for LEOFF Plan 2.

  • Disability payments-Employer contributions to the disability leave supplement provisions do not qualify as basic salary and are not reportable.
  • Workers' Compensation-Payments made under Title 51 RCW are excluded from the definition of basic salary and are not reportable.
  • Private insurance-Any payment from a third party insurance company is neither paid leave nor payment for services rendered and is not reportable.
  • Employer-paid taxes and employer-paid contributions are not salary or wages and are not reportable.
  • Fringe benefits provided by an employer such as insurance premiums are not reportable.
  • Illegal payments are not basic salary and are not reportable.
  • Reimbursements or allowances in lieu of a reimbursement are not reportable.

    Example:

    An employer provides an annual stipend for the purchase of a uniform or other clothing required for the performance of a member's duties. The payment is a reimbursement for expenses incurred or expected to be incurred and is not basic salary.

  • Standby pay-Payments for time not actually worked when the member must be available to work if the need arises, are not reportable.

    Example:

    Some employers provide payments to a member at less than the member's regular hourly rate in exchange for the member being available to come into work after his or her shift if called. These payments are not basic salary.

  • Termination or retirement bonuses-An additional payment based on notification of a member's intent to terminate or retire is not basic salary and is not reportable.
  • Statutorily excluded payments-Payments authorized by a law that excludes the payment from the calculation of a retirement allowance are not reportable.
  • Cash outs of accrued leave for unused accrued leave is specifically excluded from the definition of basic salary and is not reportable.
  • Severance pay-Any form of severance pay is excluded from the definition of basic salary and is not reportable.
  • Payments in lieu-A payment or any other transfer in lieu of an item that does not qualify as basic salary is not reportable.

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