New rules for overtime

  • Published: May 22, 2012
  • Counties should have received this memo from the Retirement Systems of Alabama regarding new rules related to including overtime compensation in retirement contributions made to the RSA.  This change is the result of legislation passed during the 2012 Regular Session of the Legislature, which allows for overtime payments to be included as “earnable compensation,” but not to exceed 120 percent of an employee’s annual base compensation.  See Act 2012-302.

    The new law was enacted to “overrule” a recent AG’s Opinion which held that overtime amounts paid to an employee could not be included in employee contributions made to the RSA because the definition of “earnable compensation” did not include overtime.  The new law does cap the amount of overtime which may be included at 20 percent above an employee’s annual base compensation to avoid abuses in overtime use aimed at increasing an employee’s contributions to RSA during his or her last few years of employment.

    This means that a person making an annual salary of $50,000 could report $10,000 of overtime to the RSA in a year.

    The new law specifically provides that “earnable compensation” does not include subsistence payments made to an employee.  Therefore, any such payments made to deputies or other personnel should not be included when calculating contributions made to the RSA.

    The new Act took effect on May 9, 2012, so these changes should be implemented immediately. Please contact the ACCA office if you have any questions about the new law or how to implement it.

    –Mary Pons