actuarial

This memo addresses a specific anti-spiking calculation scenario for union members subject to both G.L. c. 32, § 106 (vacation buyback) and collectively bargained salary schedules. Collectively bargained increases are exempt from the anti-spiking rules under § 5(2)(f), but vacation buybacks are not. PERAC provides a step-by-step worked example showing how to separate these components: first calculate allowable regular compensation excluding collectively bargained increases, then add them back. Any previously retired member whose pay spiked due to a vacation buyback should have their compensation reviewed under this guidance. PERAC is offering virtual sessions on request.

PERAC announces the 2026 federal limits that apply to Massachusetts retirement system members under Chapter 46 of the Acts of 2002, which brought state law into compliance with IRC requirements. The 2026 Section 401(a)(17) compensation limit is $360,000, and the Section 415 benefit limit is $290,000 per year for members retiring at age 65 (reduced for those retiring before 62). These limits are indexed annually and affect only the highest-paid employees; most members are unaffected.

At its December 17, 2025 meeting, the Commission voted to continue the existing practice of allowing PERAC staff to approve non-invasive medical test reimbursements up to $100.00 per disability case, per 840 CMR 10:10(3) and 10:15(1)(c). Any tests ordered by a Regional Medical Panel that exceed this amount still require advance Commission approval before being ordered. This annual notice confirms no change to the $100 threshold for 2026.

PERAC is requesting boards submit actuarial data for active members, retirees/survivors, and disability retirees as of December 31, 2025, by March 31, 2026 via the PROSPER portal in standard PERAC record format. Boards scheduled for a 2026 actuarial valuation by PERAC should already have received a separate request. After submission, boards will receive data analysis reports through PROSPER identifying errors and questionable items requiring review or correction.

PERAC Memo #23/2026 explains the COLA Reserve Fund and Enhanced COLA created by the FY27 budget (Chapter 137 of the Acts of 2026, Sections 22–27 and 32–38). Both are mandatory for the State and Teachers' Retirement Systems and are local options for every other system. The Enhanced COLA is an annual increase of $100, $200 or $300 for members retired 10–14, 15–19 or 20-plus years as of June 30 (no rounding), paid with the regular COLA and added to the permanent base. A retiree qualifies if they retired before July 1, 2020, their allowance is below 80 percent of the system's average *salary* (not average allowance) per the most recent valuation, and — for superannuation retirees only — they had at least 20 years of creditable service. Option C and Section 9, 12, 100 and 101 survivors qualify if the member would have, measured on the survivor's own allowance. In any calendar year the system's market return beats its assumed rate, 7.5 percent of the excess is credited to the COLA Reserve Fund, an accounting account invested with the rest of the system's assets. No Enhanced COLA is paid until the actuary certifies the fund covers the full actuarial cost of the adopted tier(s); the money then moves to the Pension Reserve Fund and the benefit is paid in July, even in a year the regular COLA is not granted. For local systems the Reserve Fund can only be adopted together with the Enhanced COLA and can only fund it; once the adopted tiers are paid, the whole balance is transferred and the fund goes dormant. At the state level any surplus stays in the fund and accrues toward $1,000 COLA base increases. For local systems, each tier is a separate paragraph of G.L. c. 32 § 103 — (k), (l) and (m) — needing its own vote by the retirement board and then by the local legislative body (for county and regional systems, the advisory council), along with a vote to establish the COLA Reserve Fund. Tiers may be adopted in any order or together, but tiers adopted together must be fully funded together before any is paid. Adoption cannot be revoked. PERAC will add a GL account for the fund to its Chart of Accounts and Annual Statement template.

PERAC is requesting boards complete the FY27 appropriation questionnaire through PROSPER to allow PERAC to calculate the amounts that governmental units must appropriate under G.L. c. 32 §§ 22D, 22(6A)(b), or 22F. Boards will receive the completed FY27 appropriation letter back through PROSPER once reviewed; PERAC will no longer distribute the letter to other interested parties — the board is responsible for forwarding it. Five-year projections are no longer included in the memo but remain in the system's funding schedule.

PERAC announces the 2019 federal limits applicable to Massachusetts retirement system members under Chapter 46 of the Acts of 2002, which brought state law into compliance with IRC requirements. The 2019 Section 401(a)(17) compensation limit is $280,000, and the Section 415 benefit limit is $225,000 per year for members retiring at age 65 (generally reduced for retirement before age 62). These limits are indexed annually and affect only the highest-paid employees; most members are unaffected.

PERAC announces the 2019 regular compensation limit for members who joined a retirement system after January 1, 2011. Under Section 23 of Chapter 131 of the Acts of 2010, regular compensation for these members is capped at 64% of the federal 401(a)(17) limit. Since the 2019 federal limit is $280,000 (per PERAC Memo #3/2019), the 2019 limit for post-2011 members is $179,200.

PERAC requests that retirement boards submit actuarial data for active members, retirees/survivors, and disability retirees as of December 31, 2018, by March 31, 2019, in the standard PERAC record format. Data should be submitted via the Interchange File Transfer website to PER-edoc-Actuary@per.state.ma.us. Boards scheduled for a 2019 PERAC actuarial valuation will have received a separate request. After submission, boards will receive data analysis reports to assist in reviewing and correcting any errors identified.

PERAC transmits the 2019 worksheets for calculating buybacks/make-ups and cumulative interest factor sheets. Calculations under G.L. c. 32, §§ 4(1)(g½), 4(1)(l), 4(1)(l½), 4(1)(l¾), 4(1)(n), 4(1)(n½), 4(1)(p), 4(1)(r), 4(1)(s), and 4(2)(c) use buyback interest exclusively. Calculations under §§ 3(3), 3(4), 3(4A), 3(5), 3(6)(c), 3(6)(d), and 3(8)(b) are subject to Chapter 176 of the Acts of 2011 and may use either buyback or actuarial interest (see PERAC Memo #23/2012). Two repayment worksheets exist for each interest type due to differing investment return assumptions.

PERAC requests that retirement boards submit appropriation data by October 31, 2019, necessary to furnish governmental units with the amounts to be appropriated for FY21 under their funding schedules per G.L. c. 32, §22D, §22(6A)(b), or §22F. The questionnaire is available on the PERAC website and should be submitted electronically through the PERAC website; hard copy submissions are also accepted. Boards should contact John Boorack at 617-666-4446, ext. 935 with questions.