I am departing from my usual question-and-answer format in this issue because of the recent settlements of two contracts between the city and your PBA that have produced a significant amount of retroactive money that has already or soon will be paid to you. Many members have called expressing the hope that these retroactive payments could be included as pensionable earnings in their final year of service.

Unfortunately, that’s not so.

This income becomes pensionable when earned, not when paid. This is true for overtime as well. The retroactive money from the Aug.-2004-through-July-2006 contract, although paid in 2008, is pensionable from Aug. 1, 2004, through the date paid. The Police Pension Fund knows how much of your retroactive check was earned for each pay period since Aug. 1, 2004.

The following applies to all members hired between July 1, 1973, and July 1, 2000:

The retirement allowance — whether for service, accident/ordinary disability, or vesting out with less than 20 years of service — is based on total pensionable compensation earned during the final 12 months immediately preceding your retirement date or the three-year average, whichever is greater. In fact, if your retirement decision was based on your three-year average being higher than your final 12 months and the arithmetic changes after a contract is settled, the Pension Fund will automatically adjust your pension to the final 12 months if the new contract improves your pension under the final-12- months calculation.

Pensionable compensation consists of wages, overtime, night differential, worked vacation, holiday and portal-to-portal pay. The five- and ten-year longevity becomes pensionable at the completion of 20 years. The 15- and 20-year longevity becomes pensionable at the 25th year. (The uniform allowance is not pensionable.) Again, it’s important to remember that compensation is credited the day it’s earned, not when it is paid.

The last-12-months option.

For pension purposes, your last 12 months are when you are on the active payroll, not the 12 months before the date you file for retirement at the Pension Fund. For example, if your date of retirement is July 31, 2008, then your last 12 months is the period from Aug. 1, 2007, through July 31, 2008. The amount earned during that period cannot be more than 20% above the amount earned during the preceding 12 months. The chart below compares two police officers who use the last 12-month period from August 1, 2007, thru July 31, 2008.

The Three-Year Average

The three-year average can be calculated two ways — either as the final 36 months immediately preceding your retirement date or as your best three consecutive calendar years. The latter can be any three consecutive years during your police career as long as they begin on a January 1st. Whether you use the last 36 months or three consecutive calendar years, no year can be more than 20% above the preceding two-year average.

The chart below illustrates the example of a police officer who uses calendar years 2005, 2006 and 2007.

For members hired after July 1, 2000, the retirement allowance is based on the total pensionable compensation earned during the final 12 months of their police careers, as explained above. These officers cannot use the three-year average. Therefore, if a member hired in 2001 retires on a disability pension effective Nov. 30, 2008, his or her pension would be based on his or her total pensionable earnings for Dec. 1, 2007, through Nov. 30, 2008. Those earnings cannot be more than 20% above the earnings from Dec. 1, 2006, thru Nov. 30, 2007. As stated earlier, the five- and ten-year longevity become pensionable at the completion of 20 years, so no longevity will be credited towards your disability pension.

I hope this information adds to your knowledge about how our pensions are calculated. To learn more, I recommend that you attend a PBA retirement seminar.

PBA Pension Consultant Joseph Maccone will answer your retirement and pension questions in print. Write or email at the PBA, 40 Fulton St., NY, NY 10038, or jmaccone@nycpba.org.