PERAC Memo #16 - 2003: Retiree Contribution Limitations and Retroactive Contract Settlements
Retiree Contribution Limitations and Retroactive Contract Settlements
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This memo clarifies that, despite the general prohibition on collecting retirement contributions from retirees (per Memo #38/2002), boards must collect retirement deductions on retroactive salary/wages paid to a member after retirement when that pay results from a retroactive contract settlement covering the member's active employment period, since such amounts count as regular compensation. Boards are required to recalculate the retirement allowances of any affected retirees to reflect this additional compensation and pay any resulting increased benefits retroactive to the member's retirement date.
Full Text
Memorandum # 16/2003
M E M O R A N D U M TO: All Retirement Boards FROM: Joseph E. Connarton, Executive Director RE: Retiree Contribution Limitations and Retroactive Contract Settlements
DATE: May 6, 2003
In PERAC Memo #38/2002, the Commission directed retirement boards to cease taking any retirement contributions from retirees. The Commission subsequently received inquiries regarding taking contributions and counting as regular compensation salary/wages that is paid after retirement as a result of a retroactive contract settlement. After consulting with special tax counsel, the Commission has determined that such salary/wages is “compensation in the limitation year” and as such must be included in a me mber’s retirement calculation. Therefore, retirement boards shall collect retirement deductions after a member has retired if the contributions are from retroactive regular compensation for periods during the member’s employment. The boards shall recalculate any affected retirees and pay increased retirement allowances, if any, retroactive to the date of retirement.
We trust the foregoing is of assistance. If you have further questions or concerns, please contact this office.