January 2012 Issue
December 22, 2011

TRS: Learn what can be counted in your final average salary

Source: NYSUT United
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Q: We've all heard about golden parachutes and buy-outs for corporate executives. Can public employees increase their pensions with pre-retirement bonuses or special payments?

A: Pension-spiking and eve-of-retirement salary inflation are not factors for New York State Teachers' Retirement System members. Lawmakers have placed increasingly severe limits on the amount of annual salary increases that can be included in a member's final average salary for benefit computation. Tier 3, 4 and 5 members, now 96 percent of the TRS membership, are subject to a strict cap on the amount of annual salary increases that can be included in the benefit calculation, plus rules excluding non-regular compensation.

Final average salary, or FAS, is the average of your highest three consecutive school years of salary. We are often asked which payments can be included in the FAS calculation.

The Three-Year FAS is available to all tiers and can include payments for: full-time teaching, coaching, tutoring, summer school, chaperoning, workshops, driver education, supervision of traditional after-school clubs, administration or teaching at after-school programs.

It cannot include:

  • non-regular compensation (i.e., bonuses, taxable fringe benefits, payments in lieu of health insurance); 
  • employer contributions into a tax shelter account; 
  • payments made outside contract terms; 
  • payments made on the eve of retirement; 
  • buyouts/termination pay (e.g., payments for unused leave or a local retirement incentive); 
  • payments for services ordinarily performed by classified positions, consultants, or independent contractors; 
  • payments used to purchase district health insurance; 
  • pay for duties not reasonably incidental to that of an administrator or full-time teacher (e.g., bus driver, district clerk, school attorney), or compensation for computer maintenance or similar roles.

In addition, the Three-Year FAS calculation for Tiers 3, 4 and 5 excludes yearly increases in regular salary exceeding 10 percent of the average of the previous two years' salaries.

For more information or clarification, call TRS at 800-348- 7298, ext. 6250.

Q: Can a member count summer school as time toward retirement? For example, could an eight-month substitute add summer school time to equal one year?

A: While summer school and other school district employment (such as tutoring and coaching) may help you accrue service credit, no more than one year of credit may be granted in any given school year, July 1-June 30. (Nine months equals one year of credit.)
Keep in mind, the salary for this employment might not increase your FAS. Since the additional work is often paid at a lower rate of pay, the additional salary may reduce your FAS, especially if you retire mid-year.

We recommend scheduling a New York State TRS benefits consultation to receive comparison estimates.

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