Early retirement pay plans

Early retirement pay plans
Opinion of the State Comptroller - Opinion 2000 - 4

Early retirement or similar incentives are sometimes offered to employees.

M. Cornelia Cahill, Esq., on behalf of the Hadley-Luzerne Central School District, wrote to the State Comptroller seeking his opinion concerning a district's termination pay program having the following elements:

1. The plan would be established in accordance with the terms of a collective bargaining agreement.

2. The plan would provide an incentive to certain employees to terminate their employment with the school district, i.e., any employee choosing to participate in the program would receive post-separation cash payments of $400 per month for 120 months.

3. Eligible employees electing the plan would be required to agree to separate from service with the school district, but would not be required to commence their retirement benefits or otherwise retire from active employment other than with the school district.

The Comptroller said that a school district could establish such a plan to implement the terms of a collective bargaining agreement where:

1. The program is to provide an incentive to certain employees to separate from service, irrespective of whether the employee begins receiving retirement benefits;

2. Payments are made to employees separating from service who are at a specified minimum salary level or who have a minimum number of years of service; and

3. Periodic payments, in the same fixed amount over the same fixed period of time, would be paid to each qualifying employee.

The Comptroller concluded that neither Section 201(4) of the Civil Service Law nor Sections 113 and 470 of the Retirement and Social Security Law prohibited the district from establishing a program providing for payments to an eligible employee to be made over a period of years rather than as a single lump-sum payment upon separation from service. 

The Comptroller said: There is ... no nexus between an employee's retirement and eligibility for these payments ... the amount and duration of these payments are not open-ended ... [and] although there are threshold years of service and minimum salary criteria, the payments to each qualifying employee who chooses to separate from service are the same, regardless of years of service or level of compensation beyond the threshold.