As you know, there are federal and state limits on the amount of pensionable earnings (“regular compensation”) that can be used in computing benefits for active members of public retirement systems with effective membership dates after 12/31/1995.
What this means for employers
For any members with effective membership dates listed below, DO NOT take MTRS deductions on any earnings* that exceed the limits, as follows:
Effective membership date after 12/31/1995, but before 1/1/2011
- Pensionable earnings limit for calendar year 2024: $345,000
- Pensionable earnings limit for calendar year 2025: $350,000
- Authority: Federal, Internal Revenue Code § 401(a)(17)
(see 2024 PERAC Memo 4; 2025 PERAC Memo will be available in January 2025)
Effective membership date on or after 1/1/2011
- Pensionable earnings limit for calendar year 2024: $220,800
- Pensionable earnings limit for calendar year 2025: $224,000
- Authority: State, Section 23 of Chapter 131 of the Acts of 2010, or “Pension Reform II” (for the purposes of imposing a pension “cap,” the Legislature set the limit at 64% of the federal amount, which is indexed annually; see 2024 PERAC Memo 5; 2025 PERAC Memo will be available in January 2025)
*The limit applies to all pensionable earnings, and is based on calendar year compensation, not school year compensation or school year contractual rate. Additionally, unlike with the 2% deduction exception, the eligible earnings amount is not apportioned throughout the year; employers are to deduct contributions on all eligible earnings as they are paid, up to the limit.
The MTRS will ensure compliance
To ensure that deductions are not submitted on any earnings above the annual limit, each year after all of the prior year’s deduction reports are fully processed, we review the regular compensation amounts reported by employers for the prior year. If any members are found to have exceeded the limit for the calendar year, we will reach out to their employer to make arrangements to return the excess contributions to the member.
Questions?
Contact your district’s assigned Employer Reporting Analyst, or Shannon Murphy, Director of Employer Services, at 617-679-6826 or shannon.murphy@trb.state.ma.us.