Md. Code Regs. 22.01.11.03

Current through Register Vol. 52, No. 1, January 10, 2025

Section 22.01.11.03 - Statutory Reduction if Earnings Exceed Earnings Limitation

A. This regulation applies to a retiree who is subject to an earnings limitation on employment with a participating employer as set forth in State Personnel and Pensions Article, Division II, Annotated Code of Maryland.

B. On or before January 31 of each year, a participating employer shall submit to the Retirement Agency the following information for the preceding calendar year:

(1) On request, the participating employer's tax identification number;

(2) The name and Social Security number of all employees on any payroll of the employer at any time during the preceding calendar year; and

(3) The actual gross annual compensation paid to each employee during the preceding calendar year.

C. The participating employer shall submit the information to the Retirement Agency in a manner and format acceptable to the Retirement Agency.

D. On or before May 31 of each year, the Retirement Agency shall review the information received from each participating employer, the Retirement Agency's records, and any other relevant information to determine whether a retiree has received earnings from a participating employer that exceed the retiree's earnings limitation.

E. If the records referenced in §D of this regulation reflect that a retiree has received earnings that exceed the earnings limitation, the Retirement Agency shall send written notice to the retiree that shall:

(1) Reflect the:

(a) Earnings reported by the participating employer for the retiree; and

(b) Earnings limitation applicable to the retiree;

(2) Advise the retiree of the amount of the reduction in the retiree's allowance to recover the portion of the retiree's allowance paid during the preceding calendar year that exceeded the earnings limitation;

(3) Advise the retiree of the option to pay all or a portion of the excess earnings to the Retirement Agency in a lump sum on or before July 1 in order to reduce or eliminate the reduction in the retiree's allowance;

(4) State that, to the extent the retiree does not pay the excess earnings in a lump sum, the reduction in the retiree's allowance will begin on July 1 and shall continue until the overpayment is recovered to the extent permitted by law; and

(5) Notify the retiree of the procedures under Regulation .05 of this chapter for obtaining relief from the offset provisions.

F. Reduction of a Service Retirement Allowance or Vested Allowance.

(1) This section applies to the reduction of a service retirement allowance or vested allowance for a participant who is subject to an earnings limitation.

(2) Earnings Limitation.

(a) Except as provided in §F(2)(b) of this regulation, or as otherwise required by law, the earnings limitation equals an amount determined by subtracting the retiree's initial annual basic allowance from the retiree's average final compensation used to compute the individual's basic allowance.

(b) For a retiree of the Judges' Retirement System, the earnings limitation equals an amount determined by subtracting the retiree's annual retirement allowance from the compensation on which the retirement allowance is based.

(3) Except as provided in §G of this regulation or as permitted under Regulation .05 of this chapter, on July 1 of each fiscal year, the Retirement Agency shall reduce the service retirement allowance or vested allowance of each retiree who has received earnings during the preceding calendar year that exceed the applicable earnings limitation, in order to recover the full amount of the overpayment.

(4) Reduction if Earnings Exceed the Earnings Limitation.

(a) Except as provided in §F(4)(b) of this regulation or as otherwise required by law, the reduction required to enforce the earnings limitation equals the amount by which the sum of the retiree's initial annual basic allowance and the retiree's earnings exceeds the average final compensation used to compute the individual's basic allowance.

(b) For a retiree of the Judges ' Retirement System, the reduction required to enforce the earnings limitation equals the amount by which the sum of the retiree's annual retirement allowance and the retiree's earnings exceeds the amount of the compensation on which the retirement allowance is based.

(5) The Retirement Agency may not recover more than the allowance paid to the retiree during the applicable calendar year under review.

(6) Payment of Retiree Medical Insurance Premiums.

(a) The reduced allowance for a fiscal year shall be an amount at least sufficient to pay the employer-approved deduction for retiree medical insurance premiums.

(b) Any amounts not reduced from an allowance pursuant to §F(6)(a) of this regulation shall be deducted in the next year, or in future years if needed, until the difference is fully recovered.

G. Reduction of an Ordinary Disability Allowance.

(1) This section applies to the reduction of an ordinary disability allowance for a retiree who is subject to an earnings limitation, if the retiree is under normal retirement age and has exceeded the retiree's earnings limitation in the preceding calendar year.

(2) The earnings limitation equals the amount determined by subtracting the retiree's basic allowance at retirement from the sum of:

(a) The retiree's average final compensation; and

(b) $5,000, which, beginning in calendar year 2017, shall be adjusted annually by the percentage growth in the Consumer Price Index in the calendar year preceding the fiscal year, with each subsequent adjustment to be made on the amount calculated in the prior fiscal year.

(3) On July 1 of each fiscal year, the Retirement Agency shall reduce the allowance of each retiree who has received earnings during the preceding calendar year that exceeded the applicable earnings limitation.

(4) Amount of Pension Reduction.

(a) The portion of the retiree 's allowance to be reduced under this section is the retiree 's pension derived from employer contributions at retirement, before any reductions based on the retiree's election of an optional form of allowance, and without any cost-of-living adjustment.

(b) The Retirement Agency shall reduce the pension of a retiree who has been receiving an allowance for:

(i) Less than 10years, by $1 for every $2 that the retiree's current compensation exceeds the retiree's earnings limitation; or

(ii) At least 10 years, by $1 for every $5 that the retiree's current compensation exceeds the retiree's earnings limitation.

Md. Code Regs. 22.01.11.03

Regulation .03 adopted effective 49:2 Md. R. 78, eff. 1/24/2022