HD40 - Application of Retirement Benefits by Public School Systems to Their Teachers Who Have Multiple Contracts with the Board

  • Published: 1993
  • Author: Department of Education
  • Enabling Authority: House Joint Resolution 168 (Regular Session, 1992)

Executive Summary:
HJR 168 requested the Department of Education, in cooperation with the Virginia Retirement System (VRS), to study the application of retirement benefits by public school systems to their teachers who have multiple contracts with the local school board.

In 1990, the General Assembly passed legislation providing that a separate contract in a form prescribed by the Board of Education be executed by a local school board with any employee who is receiving a monetary supplement for an athletic coaching assignment. This contract was to be separate from the employee's contract for teaching. During the 1991-92 school year, however, it was noted that local school divisions were excluding the compensation received for the coaching assignment from the individual salary amounts reported to the Virginia Retirement System (VRS). Therefore, this additional compensation would not be included in the calculation of the average final compensation of the employee for retirement purposes.

The VRS has considered coaching supplements, along with other types of supplements, as pay for extra duties outside of the normal teaching duties and therefore, these supplements should not be included in the creditable compensation for retirement.

If the current VRS policy is modified to include supplemental pay in the creditable compensation for retirement, there may be additional retirement benefits for the individual school employees. In one example, if a teacher's $2,500 coaching supplement is included in the retirement calculation, the teacher's monthly retirement payment increases by approximately $100. It should be noted, however, that there is no guarantee that any supplemental pay that is included in the annual contract salary and reported as creditable compensation to the VRS will be in used in the final calculation of retirement benefits. If the salary used to calculate the retirement benefit does not include the period of time when the supplemental pay was reported, the supplemental pay provides no additional benefit. Therefore, the local school divisions (and employees) will have funded contributions toward retirement benefits that will not be realized.

If the current VRS policy is modified, there will be additional cost for local school divisions. In 1990-91, local school divisions reported expenditures for supplemental pay in excess of $20.6 million. The estimated additional retirement contribution cost to local school divisions for including the supplemental pay in the salary amounts reported to the VRS is $2.3 million. In addition, the local school divisions may experience an increase in the employer retirement contribution rate over time because of increased retirement benefits resulting from inclusion of the supplemental payments in the calculation of average final salary at retirement.