New Laws Make Changes to SDRS By Rob Wiley, Executive Director South Dakota Retirement System After recent conversations, I thought it may be helpful to provide some additional input regarding the SDRS legislation passed during the 2017 Legislative Session. We have heard from municipalities, school districts and other employers relating to the changes in the definition of compensation and final average compensation for purposes of the South Dakota Retirement System. As a response to those concerns, I offer this short explanation. SDRS recognized that some employers were interpreting the compensation statute differently. The 2017 legislation related to compensation was designed to clarify and reinforce what the SDRS Board of Trustees has always considered the intent of the law. For example: • The phrase in South Dakota Codified Law 3-1247.6, “payments for insurance coverage of any kind or any other employee benefit by an employer on behalf of an employee or an employee and dependents”, has always been considered to include payments in lieu of insurance coverage, or in lieu of any other benefit. • Likewise, “any amount paid in a one-time lump
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sum payment or over a period of time and based on or attributable to retirement or an agreement to retire in the future” includes additional compensation in lieu of a retirement incentive payment and/or unrelated to position or workload changes paid near or at the end of an employee’s career. These amounts are therefore attributable to retirement and excluded from compensation for SDRS purposes. As noted, since the passage of this legislation, SDRS has been receiving calls from employers that have been making contributions that are contrary to the definition of compensation for SDRS purposes. SDRS is helping employers comply with the law. Any employer having questions is encouraged to contact SDRS. Penalties for non-compliance were included in the law and SDRS has implemented new audit procedures to identify noncompliance. However, we do not expect to pursue any penalties for employers that self-report during the coming months. Our focus is on accurate and correct reporting and assisting in any payroll corrections that may be required. It is essential that all SDRS employers meet the requirements of the law so a consistent and equitable benefit can be provided.
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