Chapter 5: Special Conditions - School District and Educational Service District Pay Adjustments

Summary

This section provides information that applies to school district and educational service district employees in the Public Employees' Retirement System Plan 1 (PERS), the School Employees' Retirement System (SERS), or the Teachers' Retirement System (TRS).

You must continue to set up regular contracts to be reported as earned.  However, DRS provides alternatives to reporting as earned for pay adjustments.  You do not need to change how you report to DRS and in some cases, your current business policies may not allow you to change.

The pay adjustments were developed within the following framework:

  • time impact on daily work
  • impact to benefit calculation—service versus compensation

Note: Review Employer Responsibilities before using pay adjustments.

Reporting Options

For pay adjustments only, beginning with the 2006-2007 school year, you may report payments:

  • as evenly distributed over the months of the school year associated with the pay, or
  • as a lump sum payment.

Types of Payments that Qualify

This section of Chapter 5 identifies the types of payments that qualify for the reporting options if:

  • there are no additions or adjustments to previously reported hours/days, and only pay is being adjusted, or
  • hours/days are not an issue because the employee will earn a full year's service credit based on regular compensation, and
  • you are making pay adjustments for the current school year only.

This Chapter Includes Pay Adjustments for:

  • Calendar Issues
  • Overpayments
  • Pay in Lieu of Vacation
  • Retroactive Pay
  • Time Sheet Cycles
  • Time vs. Responsibility
  • TRI Contracts

Employer Responsibilities

As the employer, you have responsibilities for accurately reporting retirement data. While regular school district contracts must be created and reported as earned, special reporting is allowed for pay adjustments. When using the special pay adjustments in this chapter, you need to know the following:

  • Pay adjustments can't result in a negative impact to a member's service credit.
  • You must determine if the employee is part-time or full-time. You have less flexibility when reporting part-time employees because additional hours may increase service credit.
  • Pay adjustments are allowed only within one school year.
  • You are responsible for documenting the earning periods associated with the payments and hours should DRS need the information.
  • If the employee terminates prior to the end of the school year, you must adjust the reporting if service credit is impacted.
  • You must adjust reporting for contribution rate changes.
  • Keep in mind that the fiscal year ends June 30th for TRS Plan 1, and adjust special reporting for this.
  • Time sheets aren't required for supplemental contracts for DRS purposes. The district assigned hours used to determine pay will meet DRS requirements. Districts, however, may need to use time sheets to determine if the employee worked overtime.
  • Refer to the Summary for an overview of the reporting options and the types of payments that qualify.

Adjustments for:

Overpayments

Salary overpayments for full and part-time employees that don't involve adjustments to service credit can be recovered during the school year:

  • Over a period of time
    • You can back out the overpayment equally over the remaining working months of the school year using Status Code A.
  • As a lump sum
    • The lump sum negative adjustment can be backed out with Status Code M in the month that the adjustment is recovered from the employee, provided the amount doesn't exceed the dollars available.
    • If the lump sum back out creates a large discrepancy between hours reported and compensation for the earning period, you may receive a request to verify earnings when the member retires or withdraws contributions.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that may apply.

Questions and Answers

These are examples for how to report an overpayment adjustment.

A new teacher was erroneously placed on the wrong step in the salary schedule causing an overpayment. The error was discovered in January, and the teacher is contracted to work through June 20th. The employer wants to recover the overpayments in installments from the employee. How would this be reported to DRS?
Because this is only an adjustment to pay, the employer could back out the payments equally over the remaining working months of the school year, using Status Code A.
Using the scenario above, how would the employer report the recovery of the over payment in a lump sum?
Back out the lump sum with Status Code M in the month that the negative adjustment is recovered from the employee. Again, make sure you are backing out the overpayment in an earning period where there are sufficient dollars available.

Pay in Lieu of the Ability to Take Vacation

Some school districts negotiate additional compensation for staff that can't accumulate and use vacation leave. Sometimes it is labeled "vacation payout", but it isn't a payment for unused accumulated vacation leave; it is a term used in place of "bonus pay". This payment has no additional service associated with it.

The payment is reportable for all systems and plans and the coding of the payment will depend on the following:

  • If paid out equally
    • Full-time and part-time - report evenly over the working months of the school year associated with the pay using Status Code A.
  • If paid in a lump sum at the end of the school year
    • Full-time and part-time - Report with Status Code M in the month it was paid.
    • If paid in July or August, report a lump sum payment in the last month of work for the employee, usually June.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that may apply.

Retroactive Payments

A retroactive payment is additional salary paid to a full or part time employee for services already rendered. No additional hours or days are reported. An employer reporting retroactive pay can:

  • break the payment into the specific earning periods and report to DRS with a Status Code A as earned; or
  • If the retroactive pay adjustment is paid equally over the remaining months of the school year, report the additional compensation as paid with a Status Code A. The pay cannot be reported in months that the employee did not work, usually July or August; or
  • If the adjustment is paid as a lump sum, it can be reported with Status Code M in the month in which it is paid. If paid in July or August, report the lump sum in the last month of work for the employee, usually June.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that may apply.

Questions and Answers

These are examples of how to report a retroactive payment.

Transcripts received for a part time teacher in October require a retroactive increase due to a new salary placement. No additional service is associated with the pay. The additional pay will be paid out evenly over the remaining school year. How do you report the retroactive payment?
Since there are no additional hours to report, there will be no impact to service credit. The additional compensation can be reported evenly over the working months of the school year with Status Code A.
If the adjustment was paid as a lump sum in October, it could be reported with Status Code M in the month that it was paid.
A bargaining group negotiates a retroactive adjustment to an hourly rate used to pay a group of employees for the current school year. The adjustment will be paid in July.
Because no additional hours of service are associated with the pay adjustment, report the lump sum adjustment with Status Code M in the last working month, usually June.

Snow Days

School calendar adjustments may not be necessary provided the employees are full-time.

  • Full-time
  • Part-time
    • For part-time employees who earn less than a full year of service credit, the impact of the snow day must be analyzed to determine if it affects service credit accumulation. If service credit is impacted, you must report retirement data as earned and may need to adjust the calendar.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that may apply.

Questions and Answers

This is an example of how to report a pay adjustment due to snow days.

John Smith is a full-time science teacher. His school calendar runs from September 4, 2006 to June 15, 2007. On January 12, 2007 the school is closed due to inclement whether. The remainder of the school calendar is unchanged and the last day of school now occurs on June 18, 2007.
Because John has full service credit as a full-time teacher, you don't need to adjust his service or compensation for January and June.

If John was a part-time teacher, you would need to determine if the snow day impacts service credit. If it does, you will need to report compensation and service as earned.

Time Sheet Cycles

Typically, time sheet pay is turned into the payroll office by a designated cut off date each month.  Most school districts designate specific cut off dates or create a payroll calendar. These dates direct employees and administrators when time sheets must be turned into payroll.

While you may continue to break the payment into the specific earning periods and report with a Status Code A as earned, if additional time is submitted past the expected time sheet cycle, you may follow these guidelines:

  • Full-time:
    • If you receive a time sheet for several earning periods for a full-time employee, this can be reported in the current working month with Status Code M. Status Code M won't allow you to submit hours, so be sure the member has full service credit for the months when the compensation was earned. If not, use Status Code A and report as earned.
  • Part-time:
    • Because compensation and service credit are impacted, the wages and service must be reported by the specific earning period using Status Code A.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that may apply.

Time Versus Responsibility

Additional Time

Staff may receive additional compensation for additional work that occurs beyond the normal work hours, such as providing after school tutoring services or coaching a sport.

  • If paid out equally
    • Full-time - the payment and hours can be evenly distributed over the working months of the school year associated with the pay and reported with Status Code A.
    • Part-time - Report additional service and compensation as earned with Status Code A. The additional hours may increase the employee's service credit.
  • If paid in a lump sum at the end of the school year
    • Full-time - report with Status Code M in the month it was paid. If paid in July or August, report a lump sum payment in the last month of work for the employee, usually June.
    • Part-time - Report additional service and compensation as earned with Status Code A. The additional hours may increase the employee's service credit.
  • Time sheets aren't required for supplemental contracts for DRS purposes. Districts may need to use time sheets to determine if the employee worked overtime. If your district only uses time sheets, then report this service to DRS. However, if you use both time sheets and assigned hours, the latter can be reported as service.

Additional Responsibility

Staff may receive additional compensation for added responsibilities occurring during their regular scheduled workday, such as being available in the lunchroom while they are at work. No additional hours or days are reported.

  • If paid out equally
    • Full-time or part-time - if there is no corresponding service associated with the payment, it can be evenly distributed over the working months of the school year associated with the pay and reported with Status Code A.
  • If paid in a lump sum at the end of the school year
    • Full-time or part-time - If paid in a lump sum at the end of the school year - report with Status Code M in the month it was paid. If paid in July or August, report a lump sum payment in the last month of work for the employee, usually June.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that may apply.

Questions and Answers

These are examples of how to report a payment for additional time or responsibility.

A full-time teacher takes a coaching position. The compensation is paid in the months the teacher coaches. How should this be reported?
Because the teacher already has full service credit, the district can report the additional compensation and service evenly during the months in which the teacher coaches with Status Code A.
A part-time teacher takes a coaching position, and the compensation is paid in a lump sum at the end of the coaching season. How is this reported?
Because the position is less than full-time, any additional hours can potentially increase service credit. The additional hours and compensation should be reported as earned with Status Code A.
A teacher monitors one study period a day. From January through June, the teacher agrees to advise a group of foreign students during the same study period for additional pay. The teacher works through June 20th and is paid in a lump sum in July.
Whether the teacher is full-time or part-time, because there are no additional hours, the additional pay can be reported in June, the last working month, with Status Code M .

TRI Contracts

An employee has three mandatory days connected with a TRI contract. The work for these days is assumed to occur during the school year in addition to the normal number of works days.

The method for reporting TRI pay is dependent on the employer business practices, contractual agreements, whether the employer tracks time with the TRI responsibility, and whether the employee is full-time or part-time

Payments for Responsibility Only

The employer pays the TRI contract over the school year with no additional hours and the employee receives additional compensation as a portion of pay for each day of the school year.

  • If paid out equally
    • Full-time or part-time - If paid out equally and there is no corresponding service associated with the payment, it can be evenly distributed over the working months of the school year associated with the pay and reported with Status Code A.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that may apply.

Payments for Time Plus Responsibility

The employer designates a set number of hours and responsibility associated with the tri contract.

  • If paid out equally
    • Full-time - the payment and hours can be evenly distributed over the working months of the school year associated with the pay and reported with Status Code A.
    • Part-time - report additional service and compensation evenly over the period they were earned based on the designated hours using Status Code A.
  • If paid in a lump sum
    • Full-time - report with Status Code M in the month it was paid or the employee's last working month. The associated hours are not required.
    • Part-time - report additional service and compensation evenly over the period they were earned based on the designated hours using Status Code A.

Note: If designation of hours does not exist, you must track hours and report as earned.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that may apply.

Using Status Code A or Status Code M

Using Status Code A or Status Code M

Full-time Status Impacts the Status Code

When determining which status code to use, you must evaluate whether the employee's service credit will be impacted. If the employee is full-time and meets the required Compensated Criteria for Full Service Credit more flexibility is allowed.

Full-time employees earn a full year of service credit as follows:

System and Plan Compensated Criteria for Full Service Credit:
TRS Plan 1 144 full-time days = 12 months of service credit
TRS Plan 2 & 3 If compensated in 9 months of the school year and for 810 hours or more = 12 months of service credit
SERS Plan 2 & 3 If compensated in 9 months of the school year and for 810 hours or more = 12 months of service credit
PERS Plan 1 If compensated in 9 months of the school year and for 630 hours or more = 12 months of service credit

Refer to Chapter 3, Service Credit Rules for how service credit is earned for part-time members and for rules prior to September 1, 1991.

Note: Newly hired employees, except TRS Plan 1, must begin in September to earn a full year's service credit.


Status Code A

Full-time

  • If additional compensation and service are paid out equally through the school year, report the adjustment evenly over the working months of the school year associated with the pay using Status Code A. Use this method only if there is no negative impact to the member's service credit.
  • The adjustment can't be reported in months that the employee didn't work, usually July and August.
  • You have the option to report the adjustment as earned using Status Code A.
  • If the employee terminates prior to the end of the school year, you must adjust the reporting if service credit is impacted.

Part-Time

  • If there is additional compensation but no service attached to the adjustment and it is paid out equally through the school year, the adjustment can be evenly distributed over the working months of the school year associated with the pay using Status Code A.
  • An adjustment with additional service must be reported as earned because the additional hours or days can potentially increase the employee's service credit.
  • Part-time includes substitutes and anyone who doesn't meet the full-time definition.
  • For more information for reporting as earned using Status Code A, review chapter 7, List of Status Codes for Current Reporting - Status Code A.

Status Code M

Effective 6/12/2008, National Board for Professional Teaching Standards (NBPTS) certification payments or bonuses are considered reportable compensation. Employers are to report the payment as a lump sum using the status code M in the month in which it is paid.

This code is used for lump sum payments. This code can also be used for backing out overpayments in a lump sum.

Some examples of lump payments are: settlements resulting from contract agreements, court-ordered back-pay settlements, holiday and longevity pay, or supplemental contract payments, such as coaching contracts.

  • Status Code M is optional. You can use Status Code M to report lump sum payments and back outs, or you can use Status Code A and break the data into earn periods.
  • Service can't be reported with Status Code M, only compensation.
  • Status Code M can be used for:
    • Full-time - If there is additional service attached to the adjustment, you can report only the compensation because the member already has full service credit.
    • Part-time - If there is additional compensation but no service attached to the adjustment.
  • Status code M can't be used for:
    • Part-time - If there is service attached to the payment because additional service can impact the employee's service credit. Report the adjustment as earned with Status Code A.
    • Substitutes - A substitute is defined as "a classified or certificated employee who is employed as a substitute for an absent employee or is working in an ineligible position" for a school district or an educational service district.
  • If paid in July or August, report a lump sum payment in the last month of work for the employee, usually June. This status code can't be reported in months that have no service.
  • You must document the earning periods associated with the adjustment in case DRS needs this information.
  • If the earning periods for the lump sum payment fall into more than one contribution rate period, you will need to report the adjustment applicable to each rate period.
  • If the earning period for the lump sum payment falls into the period of time used to calculate the member's retirement benefit (the AFC period), a month-by-month breakdown of the lump sum payment may be required at the time of the member's retirement.
  • For more information about reporting retirement data using Status Code M, review chapter 7, List of Status Codes for Current Reporting - Status Code M.

Contribution Rate Changes

To correctly report earnings that fall into more than one rate period, you must calculate retirement contributions at the rate in effect when the service was earned. You may need to report compensation using Status Code A, or use a Status Code M for each rate period when a lump sum payment occurs. Refer to Chapter 6, Contributions, for additional information.

Here are examples of how to report pay adjustments for service earned during two rate periods.

Using Status Code A

It is March, and a retroactive pay adjustment is to be paid equally over the remaining months of the school year. There is a contribution rate change April 1. How do you report the pay adjustment?

Because September through March and April through June have different contribution rates, report the payments as earned.


Using Status Code M

In this scenario, there is again a rate change in April but the retroactive pay adjustment is paid as a lump sum in June. How do I report the pay adjustment?

Because the earning periods for the lump sum payment fall into more than one contribution rate period, you will need to report the adjustment applicable to each rate. Report the pay adjustment for August through March in the March earning period. Report the pay adjustment for April through June in the June earning period.

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