What's Included
Creditable compensation includes all salary, wages, tips, fees, and qualified transportation expenses paid to all employees. Payments for lump-sum compensatory time are included only for Tier 1 employees.
Wages paid outside of an employee’s regular salary may be creditable compensation. Before reporting any payment outside of the employee’s regular salary to KPPA please request a Form 7250, Verification of Payments Outside Regular Wages from your ERCE representative. After KPPA receives the completed form along with any additional paperwork regarding the payment, the Director of ERCE will review the form and documentation to determine if the payment meets the criteria of a payment outside of regular wages. If the payment is determined not to be part of the regular wages, then on the monthly report, these wages must be reported separately from the employee’s regular pay on a record with the payment reason of Bonus/Severance Pay. If these types of payments exceed $1,000 for the fiscal year, then the combined payments will be averaged over the employee's total service with the system in which they are reported.
If an employee's compensation package includes non-monetary items, such as employer provided vehicles or housing, the KPPA Board of Trustees shall determine the value of these items for purposes of reporting contributions.
What's Not Included
Living allowances, expense reimbursements, and lump-sum payments for accrued unused vacation leave are not considered creditable compensation and should not be reported to KPPA. Lump sum payments for unused sick leave when an employee terminates may only be reported to KPPA if the agency participates in the Alternate Sick Leave Program. Lump sum payments for unused sick leave at any time other than termination are not reportable. Lump-sum payments for compensatory time are excluded for Tier 2 and Tier 3 employees.
Fiscal Year Limits
Since 1996, the Internal Revenue Code has limited the amount of creditable compensation on which employee and employer contributions are reported. Under these guidelines, employee contributions are to be reported on the monthly detail report for all creditable compensation earned by an employee up to the maximum annual limit. The annual creditable compensation limit for fiscal year 2023-2024 is $330,000. The creditable compensation limit will increase to $345,000 for fiscal year 2024-2025, effective July 1, 2024.
Once an employee reaches the annual limit, no contributions are to be reported for the remainder of the fiscal year. However, the employer must continue to report the employee's creditable compensation for the remainder of the fiscal year using the Salary that Exceeds IRS Limit field on the monthly detail report. If an employer reports contributions in excess of the creditable compensation limit, KPPA will refund the excess contributions.