Eldridge Bay Retirement System

Regular Compensation

Your retirement contributions and your pension are both based on your regular compensation: the part of your pay that the law counts toward retirement. Not every dollar you are paid is regular compensation. The definition is in MGL Chapter 32 § 1, and 840 CMR 15.03 says regular compensation has the meaning given there.

Why it matters

  • Contributions. Your contribution is a percentage of your regular compensation, withheld from each paycheck (MGL Chapter 32 § 22(1)(b)). See Eligibility and Enrollment.
  • Your pension. The salary base in your benefit formula is your highest average regular compensation over 3 consecutive years (5 for members who joined on or after April 2, 2012) (MGL Chapter 32 § 5(2)). See Superannuation Retirement and Plan Your Retirement.

What counts

For pay since July 1, 2009, regular compensation is pay received exclusively as wages for the work you do for your employer. Wages are your base salary or other base compensation (§ 1). In practice that means your regular salary or hourly pay. Cost-of-living bonuses also count (§ 1).

Police officers, firefighters, corrections officers, and fire-alarm signal operators and repairers also have money paid for holidays counted as regular compensation (§ 1).

What does not count

The law lists what is left out of wages (§ 1). Common examples:

  • Overtime
  • Commissions
  • Bonuses (other than cost-of-living bonuses)
  • One-time lump-sum payments in place of unused vacation or sick leave
  • Termination, severance and dismissal payments
  • Early-retirement incentives, and any payment made because the employer knows you are retiring
  • Pay from salary enhancement plans that recur only for a limited or defined term
  • Housing, lodging, travel and clothing allowances, car-use and job-related expense payments, tuition, and other payments in kind
  • Insurance premiums, welfare benefits, annuities and dependent-care assistance

Pay from before July 1, 2009 is judged under an earlier version of the definition (§ 1), which also leaves out bonuses, overtime, severance pay for unused sick leave and early-retirement incentives.

The limit on pensionable pay

Two limits in § 1 cap the amount of pay that can count in any calendar year:

  • Regular compensation cannot include pay above the annual federal limit on compensation that may be taken into account in a retirement plan (the limit under 26 U.S.C. § 401(a)(17)). The exact limit that applies depends on when you became a member.
  • For anyone who becomes a member after January 1, 2011, the cap is 64 percent of that federal limit.

The federal limit changes every year, so the dollar amount does too. PERAC publishes each year's figure for members who joined after January 1, 2011 (for example, PERAC Memo #4/2026). Contact the retirement office for specifics.

Check your own records

Your pay is reported to the board by your employer. If you think an item of pay is being counted, or left out, incorrectly, ask your employer's payroll office and the retirement office early, because errors are far easier to fix while you are still working. Contact the retirement office for specifics.