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Your Final Average Compensation
Your final average compensation (FAC) is an important key in your pension calculation - it is the average annual salary earned for your last 2 years of service (YOS) with the Michigan State Police. Earnings used to calculate your FAC are gross earnings, before deferred compensation or other income withholding.
Increasing your FAC will increase your pension amount. The best way to do that, of course, is to accept that pay raise or promotion you deserve. Another is to work overtime if it's available. Taking your annual leave as a payout, rather than using it before you retire, could also boost your FAC and thereby your pension amount.
Types of compensation included in your FAC
The types of pay used to calculate your FAC can include:
- Regular salary paid for the last 2 YOS, including, but not limited to, that salary you contribute toward your state deferred compensation plan.
- Overtime, shift differential, and shift differential overtime paid during last 2 YOS.
- Gross pay adjustments paid affecting the last 2 YOS, including emergency response compensation and up to 80 hours of compensatory time.
- Up to a maximum of 240 hours of accumulated annual leave paid at the time of retirement separation.
- Deferred hours under Plan B of the fiscal years ending Sept. 30, 1981, and Sept. 30, 1982, that are paid at the time of retirement separation.
- Longevity pay equal to 2 full years.
- Bomb squad pay paid during the last 2 YOS.
- On-call pay paid during the last 2 YOS.
- Banked leave time and furlough hours that fall within your FAC period will be treated as if you had worked and been paid when the hours were scheduled.
Note: Section 401(a)(17) of the IRS code can affect the FAC, and therefore the pension payments, of certain highly compensated individuals who were hired after Oct. 1, 1996. The rule places a limit on the maximum compensation allowed for retirement benefit computations. Any wages you earn above this limit, which is set by IRS each year, may not be included in your pension calculation. In 2022 the limit is $305,000.