An accelerated payout plan added $1,250 a month - and an $80,000 problem
Splitting vacation and sick leave payouts into installments does not make them pensionable. That is the appellate court’s ruling handed down on October 16.
Seven retired Illinois State Board of Education (ISBE) employees argued that because their accumulated leave was paid out bimonthly rather than in a single check at retirement, those payments should count as regular compensation in pension calculations. The Appellate Court of Illinois disagreed, affirming the State Employees’ Retirement System (SERS) in a first-of-its-kind ruling.
The dispute traced to a provision in the employees’ collective bargaining agreement. Workers nearing retirement could lock in an irrevocable departure date two or three years out. In return, unused vacation and sick days would be liquidated across remaining paychecks instead of paid in one sum at the end.
One retiree’s case anchored the appeal. He retired on December 31, 2011, after 32 years. By triggering the accelerated plan around January 2009, he liquidated 75 vacation days and 58.6 sick days - adding roughly $1,250 a month to his salary. SERS estimated the resulting pension overpayment at $80,000 over a decade.
The problem surfaced in late 2021 when SERS found ISBE had been reporting the accelerated payments as “base pay.” SERS recalculated pensions, cut annuities, and demanded repayment of overpayments.
The retirees had dictionary definitions on their side. A “lump...
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