As many of our members are school staff and work less than 12 months a year, the question of how working extra over the summer affects your future pension is a common one.
First, a quick note about how non-12-month school staff earn service credit. Because of the shortened work year, these ASRS members earn more service per month (.111 credit per month) than a traditional 12-month employee (.083 credit per month). This is to make sure that non-12-month members earn a full year’s worth of service between the start and end of their school year.
This brings us to how much service credit is earned over the summer by working “extra.” If you’ve already earned your full years’ worth of service credit for the fiscal year, working the summer won’t award you any additional service credit. Due to state statute (§ 38-739), ASRS members are not allowed to earn more than one year of credited service in any fiscal year. So, if you’re wanting to hit retirement eligibility sooner by working over the summer and earning extra credit, that’s unfortunately not how it works.
The second part of working over the summer is about the additional salary. Will working the summer and boosting your yearly income give you a larger benefit when you retire?
Maybe.
It really comes down to how close to retirement you are. If you’re early in your career and more than 10 years away from retirement, working summer school won’t impact your pension benefit. As mentioned in our Pension Benefit Formula article, your benefit is calculated using only the last 10 years of your contribution history… and even then, our calculations are based on your highest consecutive 36 or 60 months’ salary within that ten-year period, depending upon your enrollment date. If you work summer school and then work another 11-plus years, that summer school won’t get included in our calculations.
This isn’t all to say that working over the summer can’t help your pension benefit; in the correct circumstances, it can help increase your lifetime monthly benefit. But it’s important to understand the rules around how service credit is earned and how Average Monthly Compensation (AMC) is utilized to calculate your benefit.
To learn more:
