HB 2432 would prohibit the use of overtime or any other amounts received by a public retirement system member as payment for time worked in excess of the member’s normal work schedule from being included in the member’s final average salary calculation. The prohibition would only apply to a member hired on or after September 1, 2013.

For public retirement systems which currently allow for the use of overtime in the member’s calculation of final average salary, HB 2432 would likely reduce, for employees hired after September 1, 2103, the final average salary used to determine a member’s retirement annuity. Over time, lower annuity payments would reduce the system’s future liabilities and could improve the actuarial soundness of some public retirement systems which currently include overtime in the final average salary calculation.  However, this provision could reduce the amount of employee contributions from new members in public retirement systems which currently allow overtime to be calculated in a member’s final average salary. So for systems in which overtime is accrued equally over a member's career, the bill could have a slight negative actuarial impact on a retirement system. For systems in which more overtime is accrued near retirement as part of the final average salary, there would likely be a net positive actuarial impact.