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Appendix A: High-3 Average Pay Computations

Example 1 - High-3 Average Pay Computation

The employee's proposed date of retirement is 5/3/2013. Find rates of basic pay in effect for the pay period 5/3/2010 to 5/3/2013. The employee's pay history is shown below.

Date of Change in Pay

Annual Pay

08/05/2012

$29,400.00

12/017/2011

$28,001.00

04/06/2011

$27,653.00

06/03/2011

$25,003.00

01/03/2010

$23,890.00

For each change in the employee's pay rate, determine the time interval that was in effect, the time factor for the interval, the annual pay in effect for the interval, and the pay earned during the interval.

  1. The first interval begins on 5/3/2013, the proposed retirement date, and ends on 8/5/2012, the effective date of the first change in annual pay. The number of days in this interval is determined by subtracting the interval begin date from the interval end date. The result is 269 days.

    5/3/2013 - 8/5/2012 = 8 months, 29 days

    (8 x 30) + 29 = 269 days

  2. The time factor for this interval is computed as Number of Days Interval / 360, PSBS assumes that a month is 30 days, so a year is equal to 360 days (30 x 12 = 360). So, for the first interval the time factor is 269 / 360. The result is 0.747222.
  3. The annual pay in effect for this time interval is $29,400.00.
  4. The pay earned for the time interval is computed as Time Factor x Annual Pay. So, for the first interval, the pay earned is 0.747222 x $29,400.00. The result is $21,968.33 estimated earnings this interval.

    Repeat steps 1 through 4 for each of the intervals in the 3-year period. See the completed chart below.

    End Date of Pay Change or Retire Date

    Begin Date of Pay Change or Retire Date

    Number of Days in Interval

    Time Factor (Number of Days in Interval / 360)

    Annual Salary in Effect

    Pay Earned (Time Factor x Basic Pay)

    05/03/2013

    08/05/2012

    269

    .747222

    $29,400.00

    $21,968.33

    08/04/2012

    12/04/2011

    238

    .66111

    $28,001.00

    $18,511.77

    12/06/2011

    04/06/2011

    241

    .669444

    $27,653.00

    $18,512.13

    04/05/2011

    06/03/2010

    303

    .841667

    $25,003.00

    $21,044.20

    06/025/2010

    05/04/2010

    29

    .080556

    $23,890.00

    $1,924.48

  5. Determine the total estimated pay earned in the 3-year period. The result is $81,960.91.
  6. Divide the total estimated pay earned by 3. If the employee does not have 3 years of salary data, use the actual length of service (total of time factors) to compute the high-3 average pay.

    $81,960.91 / 3 = $27,320 Estimated High-3 Average Pay

Example 2 - High-3 Average Pay Computation for U.S. Custom Officers covered by COPRA and Retirement Coverage Code 1

For the purposes of this statement, retirement benefits payable within the next 3 years have been estimated using a high-3 consisting of earnings including allowable overtime where possible. To estimate an eligible retirement date, PSBS assumes the tax year is 01/01 to 12/31 in this instance. By multiplying the total retirement deductions for a year by a factor of 1 divided by the retirement deduction rate (Factor Rate), the earning figure which yielded the deductions can be determined. This estimated earnings figure is used to determine an estimate of the employee's high-3.

The employee's proposed date of retirement is 10/15/2013. Find retirement deductions and rates of basic pay in effect for the 3 years ending on 10/15/2013. The employee's pay history is shown below.

Date of Change

Annual Salary

Tax Year

Total Retirement Deductions

Retirement Deduction Rate

Factor Rate

Estimated Salary Plus Overtime

01/02/2013

$40,733.00

2012

$3,744.33

.0700

14.29

$53,935.18

01/03/2012

$39,343.00

2011

$3,734.02

.0700

14.29

$53,359.15

 

 

2010

$3,397.16

.0400

14.29

$48,545.42

For each period of retirement deductions or change in pay, determine the number of days in the interval, the time factor for the interval, the estimated salary plus overtime for the year covering the interval, and the earnings accumulated during the interval.

  1. Because the 3-year window starts on 10/15/2010, the first interval begins on 10/15/2010 and ends on 12/31/2010. The number of days in this interval is determined by subtracting the begin date from the end date. The result is 75 days.

    12/31/2010 - 10/15/2010 = 75 days

  2. The time factor for the first interval is computed as Number of Days in Interval divided by 360. PSBS assumes that a month is 30 days and a year is 12 months, so one year is equal to 360 days (30 x 12 = 360). So, for the first interval,the time factor is 75 / 360. The result is 0.208333.
  3. The estimated salary plus overtime for 2010 is $48,545.42. This amount is found in the Employee History Table above. If tax year retirement deductions are not available for a time interval, use the employee's estimated salary for the interval. For example, on line 4 of the Time Factor Calculations Table below, the interval is 01/01/2013 to 10/15/2013. The salary in effect on this date is $52,395.18.
  4. The estimated salary plus overtime earned in the first interval is computed as Salary x Time Factor. So, for the first interval, the amount earned is 0.208333 x $48,545.42. The result is $10,113.61 estimated earnings in this interval.

    Repeat steps 1 through 4 for each of the time intervals in the 3-year period. See the completed chart below.

    Line Number

    Salary Interval Begin Date

    Salary Interval End Date

    Number of Days in Interval

    Time Factor

    Estimated Salary Plus Overtime

    Amount Earned This Interval

    1

    10/15/2010

    12/31/2010

    75

    0.208333

    $48,545.42

    $10,113.61

    2

    01/01/2011

    12/31/2011

    360

    1.000000

    $53,359.15

    $53,359.15

    3

    01/01/2012

    12/31/2012

    360

    1.000000

    $53,935.15

    $53,935.15

    4

    01/01/2013

    10/15/2013

    285

    0.791667

    $53,935.18

    $42,698.70

    Totals

     

     

     

    3.000000

     

    $160,106.64

  5. The total estimated salary, including allowable overtime, earned during the 3-year interval is estimated at $160,106.64. Divide this figure by 3 to determine the employee's high-3 figure. If the employee does not have 3 years of salary data, use the actual length of service (total of time factors) to compute High-3 average pay.

    $160,106.64 / 3 = $53,369 Estimated High-3 Average Pay

Example 3 - High-3 Average Pay Computation for U.S. Customs covered by COPRA and Retirement Coverage Code K or C

For the purposes of this statement, retirement benefits payable within the next 3 years have been estimated using a high-3 consisting of earnings including allowable overtime where possible. To estimate an eligible retirement date, PSBS assumes the tax year is 01/01 to 12/31 in this instance. By multiplying the total retirement deductions for a year by a factor of 1 divided by the retirement deduction rate (Factor Rate), the earnings figure which yielded the deductions can be determined. The estimated earnings figure is used to determine an estimate of the employee's high-3.

The employee's proposed date of retirement is 3/18/2013. Find retirement deductions and rates of basic pay in effect for the 3 years ending on 3/18/2013. The employee's pay history is shown below.

Date of Change

Annual Salary

Tax Year

Total Retirement Deductions

Retirement Deduction Rate

Factor Rate

Estimated Salary Plus Overtime

08/28/2011

$95,232.00

2012

$949.87

.008

125.0

$118,733.75

08/29/2010

$92,346.00

2011

$910.67

.008

125.0

$113,833.75

01/03/2010

$87,365.00

2010

$886.25

.008

125.0

$110,781.25

For each period of retirement deductions or change in pay, determine the number of days in the interval, the time factor for the interval, the estimated salary plus overtime for the year covering the interval, and the earnings accumulated during the interval.

  1. Because the 3-year window starts on 3/18/2010, the first interval begins on 3/18/2010 and ends on 12/31/2010. The number of days in this interval is determined by subtracting the begin date from the end date. The result is 282 days.

    12/31/2010 - 03/18/2010 = 282 days

  2. The time factor for the first interval is computed as Number of Days in Interval divided by 360. PSBS assumes that a month is 30 days and a year is 12 months, so one year is equal to 360 days (30 x 12 = 360). So, for the first interval, the time factor is 282 / 360. The result is 0.0783333.
  3. The estimated salary plus overtime for 2010 is $110,781.25. This amount is found in the Employee History Table above. If tax year retirement deductions are not available for a time interval, use the employee's estimated salary for the interval. For example, on line 4 of the Time Factor Calculations Table below, the interval is 01/01/2013 to 03/18/2013. The salary in effect on this date is $118,733.75.
  4. The estimated salary plus overtime earned in the first interval is computed as Salary x Time Factor. So, for the first interval, the amount earned is 0.783333 x $110,781.25. The result is $86,778.81 estimated earnings this interval.

    Repeat steps 1 through 4 for each of the time intervals in the 3-year period. See the completed chart below.

    Line Number

    Salary Interval Begin Date

    Salary Interval End Date

    Number of Days in Interval

    Time Factor

    Estimated Salary Plus Overtime

    Amount Earned This Interval

    1

    03/18/2010

    12/31/2010

    282

    0.783333

    $110.781.25

    $86,778.61

    2

    01/10/2011

    12/31/2011

    360

    1.000000

    $113,833.75

    $113,833.75

    3

    01/01/2012

    12/31/2012

    360

    1.000000

    $118,733.75

    $118,733.75

    4

    01/01/2013

    03/18/2013

    78

    0.216667

    $118,733.75

    $25,725.69

    Totals

     

     

     

    3.000000

     

    $345,071.80

  5. The total estimated salary, including allowable overtime, earned during the 3-year interval is estimated at $345,071.80. Divide this figure by 3 to determine the employee's high-3 figure. If the employee does not have 3 years of salary data, use the actual length of service (total of time factors) to compute High-3 average pay.

    $345,071.80 / 3 = $115,024 Estimated High-3 Average Pay

Example 4 - High-3 Average Pay Computation for U.S. Customs Officers covered by COPRA and Retirement Coverage Code O or Q

For the purposes of this statement, retirement benefits payable within the next 3 years have been estimated using a high-3 consisting of earnings including allowable overtime where possible. To estimate an eligible retirement date, PSBS assumes the tax year is 01/01 to 12/31 in this instance. By multiplying the total retirement deductions for a year by a factor of 1 divided by the retirement deduction rate (Factor Rate), the earnings figure which yielded the deductions can be determined. The estimated earnings figure is used to determine an estimate of the employee's high-3.

The employee's proposed date of retirement is 4/18/2013. Find retirement deductions and rates of basic pay in effect for the 3 years ending on 4/18/2013. The employee's pay history is shown below.

Date of Change

Annual Salary

Tax Year

Total Retirement Deductions

Retirement Deduction Rate

Factor Rate

Estimated Salary Plus Overtime

08/26/2012

$87,929.00

2012

$1,497.12

.013

76.92

$115,158.47

08/26/2010

$85,343.00

2011

$1,457.22

.013

76.92

$112,089.36

01/03/2010

$79,831.00

2010

$1,373.43

.013

76.92

$105,644.24

For each period of retirement deductions or change in pay, determine the number of days in the interval, the time factor for the interval, the estimated salary plus overtime for the year covering the interval, and the earnings accumulated during the interval.

  1. Because the 3-year window starts on 4/28/2010, the first interval begins on 4/28/2010 and ends on 12/31/2010. The number of days in this interval is determined by subtracting the begin date from the end date. The result is 242 days.

    12/31/2010 - 04/28/2010 = 242 days

  2. The time factor for the first interval is computed as Number of Days in Interval divided by 360. PSBS assumes that a month is 30 days and a year is 12 months, so one year is equal to 360 days (30 x 12 = 360). So, for the first interval, the time factor is 242 / 360. The results is 0.672222.
  3. The estimated salary plus overtime for 2010 is $105,664.24. This amount is found in the Employee History Table above. If tax year retirement deductions are not available for a time interval, use the employee's estimated salary for the interval. For example, on line 4 of the Time Factor Calculations Table below, the interval is 01/01/2013 to 04/28/2013. The salary in effect on this date is $115,158.47.
  4. The estimated salary plus overtime earned in the first interval is computed as Salary x Time Factor. So, for the first interval, the amount earned is 0.672222 x $105,622.24. The result is $71,016.38 estimated earnings this interval.

    Repeat steps 1 through 4 for each of the time intervals in the 3-year period. See the completed chart below.

    Line Number

    Salary Interval Begin Date

    Salary Interval End Date

    Number of Days in Interval

    Time Factor

    Estimated Salary Plus Overtime

    Amount Earned This Interval

    1

    04/28/2010

    12/31/2010

    242

    0.672222

    $105.644.24

    $71,016.38

    2

    01/10/2011

    12/31/2011

    360

    1.000000

    $112,089.36

    $112,089.36

    3

    01/01/2012

    12/31/2012

    360

    1.000000

    $115,158.47

    $115,158.47

    4

    01/01/2013

    04/28/2013

    118

    0.327777

    $115,158.47

    $37,746.30

    Totals

     

     

     

    3.000000

     

    $336,010.51

  5. The total estimated salary, including allowable overtime, earned during the 3-year interval is estimated at $336,010.51. Divide this figure by 3 to determine the employee's high-3 figure. If the employee does not have 3 years of salary data, use the actual length of service (total of time factors) to compute High-3 average pay.

    $336,010.51 / 3 = $112,004 Estimated High-3 Average Pay