Middlesex County Retirement System

Regular Compensation

Regular compensation is the amount of earnings upon which a member pays retirement contributions.  Regular compensation will be used in determining a member’s final average salary, which is one of the factors used in calculating a retirement allowance. Compensation must comply with statutory and regulatory requirements in order to be pensionable.

Regular compensation generally includes:

  • the annual rate of compensation in a member’s salary schedule,
  • educational incentives,
  • longevity payments made for length of service,
  • premiums for holidays and shift differentials for police and fire,
  • payments for rendering instructional training,
  • hazmat pay for police and fire,
  • on call or standby pay,

Regular compensation generally excludes:

  • amounts paid for hours worked beyond the member’s normal work schedule (i.e., overtime),
  • amounts paid as bonuses other than cost-of-living bonuses,
  • payments which will not recur , and payments which will recur for only a limited or definite term (i.e., salary augmentation plan),
  • amounts paid for unused vacation, sick leave, or other leave,
  • severance pay,
  • amounts paid as early retirement incentives,
  • any payments made as a result of giving notice of retirement,
  • amounts paid for housing and lodging,
  • amounts paid for travel,
  • amounts paid for clothing, uniform, tool allowances,
  • amounts paid for annuities,
  • amounts paid for expense payments,
  • amounts paid for automobile usage, 
  • amounts paid for insurance premiums or for not participating in the employer’s health insurance plan.

For those members establishing or re-establishing membership after January 1, 2011, the maximum amount of pensionable earnings that will be used in determining a member’s final average salary is 64% of the federal earnings limitation codified in section 401(a)(17) of the Internal Revenue Code. In 2023, the limit is $345,000. Accordingly, the maximum amount of pensionable earnings for members entering the system after January 1, 2011, is $220,800 (64% of $345,000), with a maximum retirement benefit of $176,640 (80% of $220,800).