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Date: August 11, 2010

Bulletin Number: 1005

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Subject

Tier 5 Pensionable Overtime Earnings Limit for Employees Enrolled in the New York State Employees’ Retirement System (ERS)


Purpose

To notify agencies that OSC has modified the Retirement Plan Table in PayServ for Plan Type “7Y” (ERS) in order to achieve compliance with the pensionable overtime earnings limit established for Tier 5 members.


Affected Employees

Employees who are Tier 5 members of ERS.  Tier 5 members are those who first joined ERS on or after January 1, 2010.


Effective Date(s)

Institution Paychecks dated 8/26/10.
Administration Paychecks dated 9/1/10.


Background

As previously announced in Payroll Bulletin No. 960, on December 10, 2009, the Governor signed into law pension reform legislation (Article 22 of the Retirement and Social Security Law) that includes an annual overtime compensation limit for Tier 5 members.

The overtime compensation limit for calendar year 2010 is $15,000 and will be increased by 3% each calendar year thereafter.

Overtime compensation as defined by the legislation is compensation paid at a rate greater than the employee’s standard rate for additional hours worked beyond those required. 

Overtime compensation paid at the straight time rate is not limited.


OSC Actions

OSC will make the necessary update in PayServ each year to ensure that Tier 5 employees do not have retirement contributions withheld from, nor receive pensionable earnings credit for any overtime paid at a rate greater than the employee’s standard rate in excess of the calendar year limit.

PayServ will now, via a special accumulator code, automatically track all year to date non-straight time overtime compensation earned by Tier 5 employees as of the date of membership entered in the Election Date field on the Retirement Plans panel.

This new special accumulator total will be utilized during the  payroll calculation process for Tier 5 employees to determine how much of their current overtime compensation, if any, will be reportable to ERS and subject to retirement contributions.


Agency Actions

As outlined above, PayServ now utilizes the Election Date field to ensure compliance with the overtime compensation limit for Tier 5 employees.  As a result, it is critical that the employee’s correct Date of Membership be entered in the Election Date field on the Retirement Plans panel to ensure the employee does not exceed the overtime limit.

Agencies should ensure that appropriate staffs in payroll, personnel, and/or benefit service offices are prepared to assist Tier 5 employees with questions.

It is anticipated that most questions will relate to the payroll calculation process and how the total, pensionable earnings amounts reflected on Annual Member Statements from ERS was derived.

To answer questions relating to the payroll calculation process, agencies should review the employee’s Earnings Balances in PayServ to confirm that the employee’s retirement contribution has been reduced or eliminated as a result of reaching the overtime compensation limit for the calendar year.

Example:

As of the paycheck of 8/18/10, employee “X” earned total YTD overtime compensation (non-straight time) of $14,750.00 per a review of Earnings Balances in PayServ.

The employee’s paycheck of 9/1/10 includes regular earnings of $1,726.00 and overtime compensation (non-straight time) of $325.00.

Based on the overtime compensation limit of $15,000 for 2010, PayServ will include only $250.00 of the employee’s overtime compensation to be paid in the 9/1/10 paycheck ($15,000 - $14,750.00) when calculating the employee’s pensionable earnings ($1,726.00 + $250.00) and retirement contribution amounts for the 9/1/10 paycheck.

Any additional overtime compensation (non-straight time) earned by this employee will be excluded from the pensionable earnings and retirement contribution calculations for the remainder of 2010.

In order to answer questions relating to the pensionable earnings amounts reflected on Annual Retirement Member Statements, agencies should add the ERSBT5 Calculated Base total from the employee’s Paycheck Deductions tab in PayServ for each paycheck attributable to the applicable ERS fiscal year reporting period.


AC-230 Report of Check Returned for Refund or Exchange

To ensure that Tier 5 ERS employees receive proper pension credit for all pensionable overtime payments in a calendar year up to the applicable limit, agencies must use the Earn Code “OTO” (OT Override) when returning any overtime earnings for partial salary overpayments submitted on Form AC-230.

Earn Code “OTO” should be used regardless of the initial overtime earn code used to process the overtime.



Questions Questions regarding this bulletin may be directed to the Payroll Deduction mailbox.