contribution rates

PERAC has set the regular interest rate for 2026 at 0.1% per G.L. c. 32, § 22(6)(b), based on the average rates paid on individual savings accounts at a representative sample of at least 10 financial institutions. This rate applies to accumulated total deductions and accrued interest for refunds and retirements processed during calendar year 2026, and will also be credited on December 31, 2026 for outstanding balances as of December 31, 2025.

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.

For members who joined a Massachusetts retirement system after January 1, 2011 (Tier 2 members), regular compensation used in benefit calculations is capped at 64% of the federal IRC § 401(a)(17) limit. With the 2026 federal limit set at $360,000, the 2026 Massachusetts cap for post-2011 members is $230,400. Boards must apply this limit when calculating retirement allowances for affected members.

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 has set the regular interest rate for 2019 at 0.1% per G.L. c. 32, §22(6)(b), based on the average rates paid on individual savings accounts at a representative sample of at least 10 financial institutions. This rate applies to accumulated total deductions and accrued interest for refunds and retirements processed during calendar year 2019, and will also be credited on December 31, 2019 for outstanding balances as of December 31, 2018.