Huge salary increases excluded from retirement calculation

On Board Online • December 13, 2010

By Kimberly A. Fanniff
Associate Counsel

A recently retired administrator appealed the calculation of his final average salary, which excluded increases for his final two years of employment. Benefits are determined by calculating the average of the employee’s highest three consecutive years of salary – typically the last three years. Under a memorandum of understanding the district granted the petitioner and another administrator nearing retirement 10.22 percent and 6.5 percent raises in those two years prior to retirement. The collective bargaining agreement granted only 3.5 percent annual salary increases to members of the administrative unit.

In Thompson v. NYS Teachers’ Retirement System (TRS), the Third Department of the Appellate Division affirmed the calculation of Thompson’s retirement benefits. According to the court, TRS is directed by the law to exclude any form of termination pay or compensation otherwise paid in anticipation of retirement from the calculation of benefits. Here, the stated purpose of the memorandum of understanding was to “provide administrators with an incentive to continue [working] beyond retirement eligibility.” The district’s business official also admitted the exceptional salary increases were intended to partially offset the loss of a retirement incentive the petitioner did not qualify for since he continued working after he became eligible for retirement.