Understanding Final Average Salary Caps for PSRS and PEERS
Your Final Average Salary — the average of your three highest consecutive years of salary — is a key part of your retirement benefit calculation. To keep benefits fair and prevent “salary spiking” at the end of a career, state law limits on how much your PSRS/PEERS salary can increase during those years. These limits are called “salary caps.”
PSRS Salary Cap
For PSRS members, salary increases during your Final Average Salary period are limited to 10% per year. If your salary increases more than 10% from one year to the next, the excess amount will not count toward your Final Average Salary.
Raises that may trigger a cap:
- Pay for extra duties, overloads, additional courses, or district-sponsored “career ladder” programs
- Assuming extra duties without a position change
The cap does not apply to increases due to:
- A genuine change in position or employer
- Raises required by state law
- Districtwide salary schedule adjustments for previously unrecognized education-related service
PEERS Salary Cap
For PEERS members, a 20% cap applies to salary increases during your Final Average Salary period.
Just like PSRS, this cap does not apply to increases resulting from:
- A genuine change in position or employer
- Raises required by state law
- Districtwide salary schedule adjustments for previously unrecognized education-related service
Why These Rules Matter
If you take on extra duties or receive a large raise near retirement, your actual salary may be higher than what counts toward your Final Average Salary. Understanding these rules and the exceptions can help you plan and avoid surprises.
Questions?
If you’re unsure whether a raise qualifies as an exception, contact our Member Services team at (800) 392-6848.