Not all items considered taxable by the IRS constitute salary as defined by the Retirement and Social Security Law. The following payments should not be reported to us on the monthly report (nor should contributions be taken from these payments) and will be excluded from the retirement calculation if reported:

• The value of employee use of employer-provided vehicles
• Meal allowance
• Tool allowance
• Uniform allowance (including maintenance of)
• Payments made in anticipation of retirement or as an inducement or incentive to retire
• Payments made in lieu of accepting fringe benefits (For example, an employer may offer payment if an employee declines health insurance.)
• Overtime payments made as a result of a person having worked his or her vacation
• Overtime that exceeds the annual overtime limitation for Tier 5 and Tier 6 ERS and PFRS (15 percent of regular salary) members
• Overtime which is paid by private, non-governmental entities
• Payments made for unused personal leave
• Payments made for unused sick leave
• Termination payments
• New York State Disability Insurance payments
• Payment for unused vacation for Tiers 2, 3, 4, 5 and 6 and Tier 1 members with a date of membership on or after April 1, 1972

Cafeteria Plan Salary Reductions

Some public employers have adopted cafeteria plans (e.g., specific fringe benefits: child care, parking, dental care, etc.), as provided for in Section 125 of the Internal Revenue Code. All monthly reports submitted to NYSLRS should contain the salary as if it had not been reduced as a result of the adoption of a cafeteria plan provided under Section 125 of the Internal Revenue Code.

The New York State laws regarding Cafeteria Plan Salary Reductions are as follows:

Chapter 760, Laws of 1989, effective July 25, 1989, provides that any salary reduction elected pursuant to Section 125 of the Internal Revenue Code: “…by an employee who is a participant in the New York State and Local Employees’ Retirement System or the New York State Teachers’ Retirement System… shall be considered part of annual compensation for the purpose of computing employer and employee retirement contribution…”

Chapter 301 of the Laws of 1993, effective July 21, 1993, provides: “To the extent permitted by Section 125 of the Internal Revenue Code and any regulation adopted pursuant thereto, any salary reduction elected by an employee who is a participant in the New York State and Local Police and Fire Retirement System under a cafeteria plan or flexible benefit plan shall be considered part of the annual compensation for the purpose of computing employer and employee retirement plan contributions and for computing retirement benefits.”

Note: Neither Chapter 760 nor Chapter 301 applies to salary reduction plans authorized by Section 129 of the Internal Revenue Code.

Rev. 2/20