PERAC Memo #10 - 2003: Impact of Furloughs on Creditable Service and Regular Compensation

Impact of Furloughs on Creditable Service and Regular Compensation

Summary

This memo clarifies how furloughs (unpaid leave) affect creditable service and regular compensation under G.L. c. 32, §§ 4(1)(c) and 5(3)(b): boards may, at their discretion, grant up to one month of creditable service per furlough period (regardless of how many separate unpaid leave periods occur), and if such service is granted, the member's pre-furlough regular compensation rate is used for that period in the three-year average calculation—even without actual contributions—but only if that period falls within the averaging window. No mandatory action is required; boards should simply apply this discretionary authority consistently when addressing furlough-related creditable service and compensation determinations.

Full Text

Memorandum # 10/2003

M E M O R A N D U M TO: All Retirement Boards FROM: Joseph E. Connarton, Executive Director RE: Impact of Furloughs on Creditable Service and Regular Compensation

DATE: February 20, 2003

Pursuant to G.L. c. 32, § 4(1)(c), when a member takes an unpaid leave (or furlough), the retirement board has the option of granting up to one-month of creditable service to that member.
The board is limited to granting up to one month of creditable service and may not grant more than one month if a member has more than one period of unpaid leave. The granting of such creditable service would require board action.

When a member takes a furlough and receives creditable service for that period, the member will be entitled to have the regular compensation that they would have received but for the leave included in their three year average compensation. G.L. c. 32, § 5(3)(b) allows the rate of regular compensation in effect immediately preceding the period of absence to be used as the rate for the period of absence. The member need not actually make retirement contributions for this period in order to receive this benefit. If the period of absence is not during the period used to calculate the three-year average compensation, then G.L. c. c. 32, § 5(3)(b) is not relevant for retirement purposes.

We trust the foregoing is of assistance. If you have further questions or concerns, please contact this office.