In the June 2020 HR Update, we discussed the impact of a layoff of an employee (position eliminated due to shortage of funds, etc.) on MOSERS benefits. We have recently received several questions concerning the impact of furlough days on an employee’s retirement.

 – Furlough days are treated as an approved leave that is not illness-related. Pension benefits may be impacted as described below.

A Furlough of One FULL Pay Period or MORE

 – If a furlough period lasts one or more full pay periods, an employer should submit a Leave of Absence/Back to Work form indicating the approved leave to MOSERS. Upon an employee’s return to work, an employer should submit a new Leave of Absence/Back to Work form to MOSERS.

Impact:

• An employee does not earn service or salary credit during a furlough period that is one FULL pay period or longer.
• This could result in lower credited service towards retirement.
• It could also delay when the employee becomes eligible for retirement.
• During the furlough period, the employee is responsible for paying any premiums due for life insurance and/or long-term disability coverage directly to MOSERS to continue coverage. MOSERS will work with the employee to arrange the direct bill process. Upon an employee’s return to work, premiums will revert to being paid via payroll.

A Furlough of LESS than One Pay Period

 – If a furlough period lasts less than one pay period, an employer should not submit a leave of absence form to MOSERS.

Impact:

• An employee does earn service credit and salary credit during a furlough period that lasts less than one pay period.
• An employee does earn salary credit during a furlough period, but the salary credit is based on actual pay during the period. As a result, if the employee receives a reduced salary, this could result in a lower final average pay (FAP) if the leave occurs during the employee’s highest 36 consecutive months of pay.
• A lower FAP will reduce the employee’s retirement benefit.

  Please inform your employees of the difference in these scenarios if you are providing options concerning furlough days.

  If you have further questions, please contact Juanita Libbert juanita@mosers.org, Cindy Barbarick cindyb@mosers.org, or Shelley Lehmann shelleyl@mosers.org.