How Does the WMS Benefit Estimator Project My Highest Average Salary?
If you’re in Tier 1 or 3, the Benefit Estimator is looking for a figure that represents your highest 1 year of consecutive pay periods. For Tier 2 and 4, it looks for your highest 3 years.
If you are being paid less right now than at some previous point in your career, the Benefit Estimator will go back in time in your payroll records and find your absolute highest consecutive pay periods, and use those payroll records to calculate your Projected Final Average Salary.
If you are being paid more right now than any time in your career, the Benefit Estimator may use some of your payroll records and may project some of your payroll records, depending on how far in the future the projected Separation Date you choose is. If the projected Separation Date you entered is within the next year for Tiers 1 and 3, or within the next 3 years for Tiers 2 and 4, the Benefit Estimator will use some payroll records, and then fill in the future payroll records with the amount you made in the last paycheck it has on record for you, which could be one of your last 2-3 paychecks.
For example, if you’re in Tier 2, and you chose a projected Separation Date exactly 2 years from now, the Benefit Estimator would use your last year of payroll records, plus it would take your last paycheck and fill in the next 2 years into the future with that amount. Then it takes the total that it projects you will be paid over the full 3-year period, and divides by 36 months to find your Projected Final Average Salary. If your projected Separation Date is more than 3 years in the future, the Benefit Estimator will simply use your last paycheck it has on file to fill in 3 years’ worth of future paychecks, and use that to find your Projected Final Average Salary.
The bottom line is, when you click the View button to generate your Retirement Benefit Estimate PDF, the estimate will tell you what the Average Salary Date Range is for the scenario you’re getting an estimate for. If part of that range is in the past, the Benefit Estimator is using some of your actual payroll records. If all of that range is in the future, the Benefit Estimator is projecting all of your future paychecks using your most current paycheck on file.
Don’t Overestimate When You Add Hours of Cash Vacation Compensation
First, you should understand how unused vacation leave affects your retirement allowance. In many cases, getting paid for your unused vacation during your final compensation period will increase your average salary in the retirement formula, and therefore increase your retirement allowance. Use the information on the linked web page to determine your limit for how much vacation pay can be included in your highest average monthly salary calculation by law.
When using the Benefit Estimator in WMS, you have the opportunity to add Hours of Cash Vacation Compensation to see how it affects your estimate. Don’t add more than your limit of hours to this field in the estimator.
For example, on the page linked above, let’s say you determine ACERA can include a maximum of 8 weeks of vacation pay in the salary calculation for you at retirement. Let’s also say your workweek is 40 hours. Eight weeks x 40 hours = 320 hours maximum that you should put in the vacation hours field.
If You’ve Sold Vacation in the Past 3 Years, Pay Attention to the Date Range
Looking at your Retirement Benefit Estimate PDF, look for the Average Salary Date Range. If you know you sold vacation during this date range, that salary is already included in the projected salary for the estimator. That means you don’t want to include this vacation compensation field.
Let’s continue the example from above: You’ve determined that ACERA can include a maximum of 320 hours of cash vacation compensation in your salary calculation. In looking at the Average Salary Date Range on your Retirement Benefit Estimate, you remember that you sold 2 weeks of vacation during that time, which equals 80 hours. Since this 80 hours of compensation is already included in your salary projection, if you put the full 320 hours in the Hours of Cash Vacation Compensation field in the benefit estimator, you’ll get an over estimate. If you plan your retirement based on this, you’ll be disappointed when you see your actual retirement allowance amount! To get an accurate estimate, take 320 hours – 80 hours = 240 hours, and so put 240 if the vacation compensation field.