In general, furloughs wouldn’t have an impact on retirement calculations for members who are early or in the middle of their careers, because such calculations are based on the highest 60 consecutive months of earnings (or 24 months for Plan 1).
There are two main components to the benefit calculation: service credit and average salary. The benefit calculation equals service credit years multiplied by the average salary and a plan-specific percentage: 2% for Plans 1 and 2, and 1% for Plan 3.
Service credit is based on the number of hours worked or paid leave taken in each month, prorated by month and including partial months.
If a person works or uses paid leave for 90 or more hours in a month (70 hours for PERS 1), they will receive full service credit.
For an employee who normally works an 8-hour day, they earn full service credit as long as they work 12 or more days in the month.
If a required furlough dropped a part-time employee below the 90-hour threshold, the employee would earn a partial retirement credit for the month. In most cases, part-time employees do not participate in furloughs.
Average salary is the highest 60 consecutive months (or 24 for Plan 1) of earnings – which might not be the last 60 months of employment.
Like a furlough, if a person takes a voluntary demotion or moves to a part-time position later in their career, it does not hurt their pension benefit calculation because the average uses the higher previous level.
If you have additional questions about how a furlough or salary reduction might affect your retirement, please contact DRS