Memo to Participating Employers: Earnable Compensation

Oct 15, 2015
  • Employer Notices

Release Date: 10/16/2015

To:   NHRS Participating Employers
From: Mark Cavanaugh, Associate Counsel & Compliance Officer
Re: Earnable Compensation

As the New Hampshire Retirement System engages in employer audits, we continuously identify situations where payroll reported to NHRS includes compensation elements which are not considered “earnable compensation” under 100-A:1, XVII.  This can have significant repercussions to you as an employer, your employees, and your retirees, as follows:

  • It may require NHRS to refund both employer and employee contributions to the employer, requiring the employer to refund these contributions to its current or former employees.
  • It may result in a reduction to the employees’ earnable compensation, potentially reducing their anticipated pension.
  • It may result in a reduction in pensions being paid to retirees if those pension calculations included compensation which was later determined not to be qualified as earnable compensation.
  • It may result in a recoupment action for the recovery of excess pension payments paid to the retiree via monthly deductions from his or her pension annuity.

The NH Legislature amended the definition of earnable compensation in 2008, with additional modifications made in 2011.  In the past year, the NH Supreme Court validated the constitutionality of these changes.  One of the major changes to the definition of Earnable Compensation in 2008 was the removal of the blanket term “other compensation,” which essentially inverted the way the statute is interpreted. Prior to this amendment, the statute included any compensation not specifically excluded; following the 2008 change, the statute excluded any compensation not specifically included.

As a result of these legislative changes, there are now many more situations where compensation types are not includable as earnable compensation.  The statutory obligation for properly reporting earnable compensation rests with you as the employer.  In order to assist you in meeting that obligation, we have issued a number of interpretive memoranda on various elements of earnable compensation.  They can be found on our website at:

In addition, we schedule quarterly employer education sessions that include sections on employer reporting and earnable compensation.  We urge you to review the information on our website and to attend our informational sessions.  If you ever have any questions about the reporting of employee wages, please call (603) 410-3681 or email [email protected].