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November 25, 2011

Unpaid deferred salary increases not included in determining a retirement allowance


Unpaid deferred salary increases not included in determining a retirement allowance
Kivo v. Levitt, 67 AD2d 464

The salary increase negotiated by the employee’s union to Kivo. Instead the payment was deferred under the New York State Financial Emergency Act for the City of New York. The employee then retired. 

When the amount of the deferred salary increase was not included in the calculation of the employee’s final average salary for retirement purposes, Kivo sued.

The Appellate Division ruled that a public employer may not agree through a collective bargaining agreement to give retirement benefits that are contrary to state law.

The Retirement and Social Security Law provided that deferred or suspended wages, the payment of which depended upon the occurrence of some future event, are not includable for the purposes of calculating final average salary for retirement.

The Court of Appeals, in affirming the Appellate Division [see 50 N.Y.2d 1017], expressed no opinion as to the result had the deferred payments actually been made to Kivo prior to her retirement “for this question is not presented by the facts of this case”.

This suggests that had Kivo actually received the payment, even as a lump sum, before retirement, the court would have permitted the amount received to have included in the calculation of final average salary.

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