Section ETF 20.12 - Payments considered Wisconsin retirement system earnings(1)(a) The purpose of this section is to establish the circumstances under which some or all payments made as a remedy for an employment dispute may be treated as earnings for Wisconsin retirement system purposes and to state the elements required for such treatment.(b) This section applies to court orders and compromise settlements having an effective date which is on or after May 16, 1996.(c) This section does not apply to retroactive or other wage payments made to all eligible employees in a bargaining unit under a collective bargaining contract.(2) Definitions. (a) "Compromise settlement," for purposes of this section, means a written, binding agreement between a participating employer and a current or former participating employee of that employer, to settle a wage claim or a dispute involving an involuntary suspension or termination of participating employment. For purposes of this section only, the department shall treat a final order issued by the Wisconsin employment relations commission or an arbitration award under a collective bargaining agreement, for which all appeal opportunities have expired without an appeal being filed, as a compromise settlement. (b) "Effective date" of the court order or compromise settlement, for purposes of this section, means the date an order of the court, the Wisconsin employment relations commission, or an arbitrator is issued or, when the matter is resolved by a compromise settlement signed by the parties rather than a final order, the date on which the compromise settlement in its final form is first signed by all of the parties.(3) Except as provided in this section, no payment resulting from a court order or compromise settlement may be considered as earnings for Wisconsin retirement system purposes. The department may decline to act on a court order or compromise settlement which does not contain all of the information required under this section or is otherwise defective.(4) Subject to all provisions of this section, the department shall treat as earnings for Wisconsin retirement system purposes a payment made under a court order or compromise settlement by a participating employer to an employee or former employee provided all of the following conditions are met: (a) The payment is one of the following: 1. Retroactive wages paid to a participant for a period following an involuntary termination of the employee's participating employment by that participating employer, which are paid under court order or the terms of a compromise settlement which also expunges the previously reported termination.2. Retroactive wages paid to a participant for a period during which the participating employee was involuntarily placed on unpaid leave or suspension by that participating employer.3. Additional wages properly due to a continuously participating employee from that participating employer for hours of service actually rendered and previously reported to the department.4. Additional wages properly due to a continuously participating employee from that participating employer for hours of service actually rendered but not previously reported to the department.(b) The employee or former employee is living on the effective date of the court order or compromise settlement.(c) The court order or compromise settlement is in writing and is signed and dated by the issuing authority or by the parties to the agreement.(d) The court order or compromise settlement specifies the wages to be paid to the employee for each annual earnings period and the associated hours of service actually rendered by the employee or that would have been rendered but for the disputed suspension or termination. Note: "Annual earnings period" is defined by s. 40.02(3), Stats.
(e) The employer reports the wages and hours of service to the department under a transaction code designated by the department for actions resulting from court orders and compromise settlements. At the department's request, the employer shall report wages and hours of service in sufficient detail to enable the department readily to calculate the wages and hours for each payroll period during the period under dispute and shall distinguish between additional wages, if any, paid for hours of service previously reported to the department, and wages and hours of service not previously reported. Note: Employer reporting is described in detail in ET-1127, WRS Administration Manual, which is available from the Department at no charge.
(f) If the dispute concerns a termination of participating employment or if the amount of wages reported under par. (e) exceeds the employee's current basic rate of pay multiplied by 80, the employer submits with the transaction report the original court order or compromise settlement or a complete copy thereof. The department may require submittal of the court order or compromise settlement associated with a smaller wage payment. If the employer fails to submit the transaction report and the court order or compromise settlement, if required, within 90 days after the effective date, the employee, the collective bargaining agent, or the issuing court or agency may submit a complete copy of the court order or compromise settlement to the department for purposes of requesting employer reporting.(g) The employer remits required contributions on the wages, or that portion of the wages which the department treats as earnings, including interest computed under s. 40.06(5), Stats., and s. ETF 10.635.(h) If the remedy includes payment of wages for a period following a disputed termination of participating employment, the court order or compromise settlement does all of the following: 1. Directs the employer to rescind the termination date previously reported to the department and, if the employee is not to be reinstated, specifies the date on which the employee-employer relationship terminated, which date shall be treated as the termination date for Wisconsin retirement system purposes. This date may not be later than the effective date of the court order or compromise settlement.2. Directs the employer to pay the employee all wages from the rescinded termination date to the date the employee returns to work or the new termination date reported under subd. 1. as if the employee had been continuously employed throughout the period under the conditions of employment prevailing prior to the termination, except that the court order or compromise settlement may direct that wages be reduced by amounts earned from other sources and may identify a period of suspension for which wages are not paid.(5) The department may not consider any of the following payments as earnings: (a) A payment that results from resolution of a dispute over the employer's failure to hire a person. Any payment in such cases shall be considered by the department as a damage award. This paragraph does not exclude retroactive wages related to a participating employer's failure to hire a participating employee of that employer for another position, provided the court order or compromise settlement also directs that the employee's basic pay rate be permanently increased.(b) A payment directed by a court order or compromise settlement if either the specified hours of service or associated wages exceed the creditable service and earnings which would have been properly reported for the employee if the employee had been continuously employed through the period at issue under the conditions of employment prevailing prior to the dispute.(c) A payment directed by a court order or compromise settlement which purports to pay earnings in one annual earnings period which actually result from employment during another annual earnings period or a combination of annual earnings periods.(d) A payment for actual or constructive services rendered, or deemed to have been rendered, after termination of employment.(e) A payment directed by a court order or compromise settlement which is excluded from earnings under s. 40.02(22) (b), Stats., including all of the following: 1. A payment which is other than wages or salary for personal services actually rendered to that participating employer by the participating employee, or which would have been rendered but for the disputed termination or suspension;2. A payment, including a wage payment, made in return for, or in order to secure, the employee's resignation or termination from participating employment, whether immediately or at some specified time in the future, or to secure release from an unexpired contract of employment, including the employee's voluntary waiver of grievance rights under a collective bargaining contract. This subdivision does not prevent a remedy from including both a wage payment and a payment to secure the employee's agreement to other conditions, provided the court order or compromise settlement specifies the portion of the total payment that represents wages.3. A lump sum payment for accumulated vacation, sick leave, or compensatory time, unless the payment is broadly applicable to the employees of the employer regardless of age, length of service or likelihood of employment termination.4. A payment for damages, attorney fees, interest or penalties included in the court order or compromise settlement, regardless of whether the amount of the payment reflects previous salary levels.5. A payment based on a change in the method of computing the base compensation of the employee during the last 5 years of employment, unless resulting from application of a broader change permitted under s. 40.02(22) (b) 10., Stats.6. A payment made in lieu of fringe benefits normally paid for or provided by the employer.(6) The department may not consider as earnings a payment for wages for a period during which the employee was an annuitant, or a payment made to a person whose Wisconsin retirement system account was closed by receipt of a benefit under s. 40.25(1), or (2), Stats., on or before the effective date of the court order or compromise settlement. This subsection shall not be construed to affect a reinstatement as provided under s. 40.25(5), Stats.(7)(a) Except as provided in par. (b), if the court order or compromise settlement directs that the retroactive earnings to be paid first be reduced by amounts earned from other sources, the department shall determine the earnings to be credited in each annual earnings period based on the unreduced amount, subject to the limitations of section of the internal revenue code and to sub. (5) (b). The department may determine the hours of service to be credited in each annual earnings period from data available to the department or by dividing the unreduced amount otherwise treatable as earnings in accord with this section for each affected annual earnings period by the rate of pay the department determines applied during the period under dispute.(b) If the employee has other participating employment during the disputed period, the department shall reduce the amount of earnings and service it credits under the court order or compromise settlement by the earnings and service resulting from the other participating employment. Example: An employee who normally earns $12.00 per hour in a full-time position works half-time in another participating position for $10.00 per hour during the disputed termination. In each week, the employee earns $200.00 and 20 hours of service. If the employee is made whole for wages and benefits under the compromise settlement and receives back wages of $480.00 per week for the period of termination, the department will credit only an additional $280 in earnings and an additional 20 hours of service for each week.
(c) In cases of part-time participating employment, the department may increase the service and earnings credited under par. (b) if the employee submits satisfactory evidence showing that the total earnings and service credited during the disputed period, if properly reported, would have been greater than those prevailing before the dispute.(8) Regardless of when payment to the employee actually occurs and regardless of whether payment is reported as taxable income in the year payment was made or by revising reports of taxable income for previous years, any payments considered as earnings under this section shall be treated for the purposes of the Wisconsin retirement system as earnings in the annual earnings period in which the earnings should normally have been paid.(9)(a) Except as limited by sub. (10), resolution of any employment dispute between a participating employer and participating employee may include making additional contributions to the participant's account.(b) The department shall respond to reasonable requests by a participant or a participating employer to estimate the amount of additional contribution necessary to fund a benefit equivalent to a hypothetical Wisconsin retirement system benefit.(10)(a) Regardless of the terms of a court order or compromise settlement, if the department finds that a contribution exceeds the limits on contributions to qualified pension plans established by the internal revenue code and regulations promulgated thereunder, as determined by the department, the department shall refuse to accept the contribution. If any excess contribution is accepted in error, the department shall refund or credit it as provided in s. 40.08(6), Stats.(b) In order to establish the amount of an employee's reportable income for a specified year, as necessary to compute contribution limits, and in order to verify that payments requested to be considered as earnings under this section were reported as taxable income, the employee shall furnish to the department upon request proof of all taxable compensation received and all retirement contributions made to all retirement plans during each year at issue.Wis. Admin. Code Department of Employee Trust Funds ETF 20.12
Cr., Register, July, 1997, No. 499, eff. 8-1-97; correction in (6) made under s. 13.93(2m) (b) 7, Stats., Register, July, 1999, No. 523.