[DAS_Centralized_PERS_Services_Team] Settlement Agreements & PERS Accounts

Tue Sep 3 13:46:47 PDT 2019

HR Partners,

DAS CPERS is responsible for reviewing all settlement agreements statewide to determine if the settlement payment should be PERS subject, and to ensure that the employee's PERS account is updated to reflect the terms of the agreement. We rely on payroll & HR to forward copies of all signed agreements to us for review.

We often receive settlements agreements containing language that conflicts with PERS statute. We also see inconsistencies in how agencies enter settlement payments in OSPA. These issues almost always result in additional work and unforeseen costs to agencies.  The intent of my email today is to provide you with some information about settlement agreements that may help prevent future issues.

To begin, here is some information to consider:
*        Language in an agreement does not override statute. If the language in the agreement is in conflict with PERS statute, the statute will override the agreement.
*        With regards to settlements, PERS statute states the following language (referencing ORS238.008):
o   Salary includes retroactive payments of wages made to an employee to correct a clerical error.
o   Salary includes retroactive payments of wages made to an employee pursuant to a judgment, administrative order, arbitration award, conciliation agreement or settlement agreement that resolves a dispute or claim based on the employee's rights under employment or wage law or under a collective bargaining agreement.
o   Retroactive payments described in this subsection shall be allocated to and deemed paid in the periods of the employee's active or inactive membership in which the work was done or in which the work would have been done.
o   The employee shall receive retirement credit for the periods to which the payment is allocated.

With this statute language in mind, when a settlement payment is for "wages" or " back pay" it WILL almost always be PERS subject.  If the settlement does not specify what the payment is for, PERS will review and determine if the payment is PERS subject.

PERS Subject Payments:
Here are some examples of settlement payment scenarios that ARE PERS Subject:
*        The agency is bringing the employee back to work, removing the termination date and making the employee whole.
*        The agency is not bringing the employee back to work or changing the termination date, but does make a payment to the employee for back pay.
Anytime a payment is made using the terms "back pay", "retroactive pay", "salary" or "wages" it will likely be determined to be PERS subject.

Non-Subject Payments:
Here are some examples of payment scenarios that may be considered NOT PERS Subject:
*        A payment is made to an employee for non-economic damages, such as for pain and suffering
*        A non-wage payment made by Risk Management
*        Severance pay

When the payment is intended not to be PERS subject, the payment cannot be called "back pay", "retroactive pay", "salary" or "wages" . We have seen terms like "lump sum payment", "payment to settle dispute" and "funds" that were appropriate.

In the event that the settlement agreement is determined to be PERS subject the employee's account will be adjusted to include the payment, and the agency will be invoiced for the additional contributions and earnings.  This is true even if the employee has retired or withdrawn their PERS account.

Here are some problematic scenarios we've seen that I'd like to specifically address:
1.      The agency listed a net pay amount in the settlement agreement. When back pay or salaried wages are being paid in a settlement agreement please list a gross amount, or as a specified timeframe that will then be calculated by payroll, not a net pay amount.

2.      The agency made a payment directly to the employee "in lieu of PERS contributions". This is highly discouraged and results in the agency being billed for contributions a second time when the payment is posted to the employees PERS account. If the payment is for wages it needs to be paid through OSPA as subject wages and the appropriate PERS contributions will be deducted and sent to PERS. If the employee has withdrawn or retired, PERS will pay the employee what is owed on their account. PERS contributions should not be paid directly to the employee by the agency.

3.      The agency processed the payment in OSPA using a non-subject pay code. When this occurs CPERS still needs to review the settlement agreement. If we determine that the payment should have been PERS subject then the wages will be posted to the employees account and the agency will be invoiced for the associated contributions and interest. There are very few cases where non-subject pay codes would be used and if you are ever unsure, please don't hesitate to contact me.

If you have any questions about this email, or would like assistance with the terms of a settlement in process, please contact me. I am always happy to assist.

Thank you,

Shauna Tobiasson | Senior CPERS Analyst | DAS-EGS-CPERS
Ph: 503-378-6372 | shauna.m.tobiasson at oregon.gov
Website: http://www.oregon.gov/DAS/Financial/payroll/Pages/index.aspx

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