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For highly paid staff, do all earnings count toward the benefit increase calculation?

When negotiating termination or retirement agreements with individuals, either to induce an individual to leave the University, or to encourage him/her to stay, the following should be considered:

  • Purchase of service credit is not considered earnings and will not impact the 6% calculation.
  • Severance or separation payments are not considered earnings and will not impact the 6% calculation.
  • Retirement incentive payments are not considered earnings and will not impact the 6% calculation.
  • Base salary increases count toward the 6% rule.

Generally, payments that are directed toward increasing an employee's retirement annuity post-retirement are subject to the 6% rule. Lump sum incentive/separation payments are not.