Lump Sum Payment is Creditable for ERS…
Unfortunately President Greenwood’s letter to faculty members dated September 17, 2010 is misleading and causes confusion by many readers regarding their right to earned wages and credit for the purpose of pension calculation. Representatives of UHPA were not sent a copy of the letter.
The part in question is included (emphasis added) the following excerpted text:
“As you are aware, in accordance with the 2009-2015 Unit 7 agreement, the base salaries of faculty members hired on or before December 31, 2009, and paid from appropriated funds (e.g., general, special, revolving or appropriated federal funds), were temporarily decreased by six and two-thirds percent (6.667%). The agreement also included a provision allowing for an exemption to the reduction for faculty members retiring on or before December 31, 2010. Faculty members retiring after December 31, 2010 will be entitled to a lump sum payment equal to the remaining balance of the pay reduction; however, the lump sum payment will not be considered earned wages and will not be creditable for the purpose of pension calculation.”
On September 25, 2010, UHPA’s Chief Negotiator and Executive Director, Dr. J.N. Musto, forwarded an electronic message to President Greenwood notifying her of the error and requested that her office issue a correction to all of those who received this notification.
Dr. Musto stated in part, “The highlighted statement is incorrect based upon the agreement of the parties when the contract language was agreed to. Since the temporary salary reduction was to be terminated if an individual indicated that they would retire no later than December 31, 2010, and any salary withheld would then be returned in a lump sum, it is earned income during this year for the purposes of the ERS. The three lump sum pay outs that will be returned to all continuing faculty in subsequent years will also be used in the ERS calculation if the faculty member works before the date of receiving the lump sum payment. Should they retire and receive all of the withheld temporary salary reduction in a lump sum at that time, then it would be treated as a vacation payout and not included in the retirement calculation.”
Both the UH System-HRO and UHPA have addressed these questions in the Q&A sections of their respective web-sites. There is agreement on these issues. For example:
Faculty Question #1: “If I tell the administration that I will retire by December 31, 2010, will they stop the 6.67% reduction, return the money withheld, and calculate my pension based on the salary earned without the reduction?”
UHPA’s Response: Yes, to all three points if you retire on December 31st. Note, you have to make your retirement application with the ERS NO LATER than December 1, 2010.
Faculty Question #2: “What happens if I retire after December 31st?”
UHPA’s Response: If you retire after December 31st, you will get all the money back that was withheld, but it is paid out over three years if you wanted it counted in your pension. However, you’ll get all the money back in a lump sum if you retire after December 31st but it is not used in calculating your pension.