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.
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.