Final paycheck

Severance pay, governed by HR Rule 5.2j, is the lump sum payment of some unused paid leave. You are eligible to receive severance pay if you resign in good standing and meet service requirements.

Other leave and time off balances and stability pay for retirees may also be disbursed.

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Severance pay calculation

Your paid leave program determines your severance pay. The base salary at the time you resign is used to calculate your severance payment.

Vacation / sick leave program calculation

  • Severance pay = (unused vacation hours x hourly salary) + (eligible unused sick leave hours) x (hourly salary) up to a lifetime maximum of 800 hours.
  • If you previously left county employment, see your payroll contact to determine how many severance hours remain in your lifetime limit.
  • Unused sick leave hours are included in severance pay if you have eight years of service (subject to the term of your labor agreement).

Paid time off (PTO) program calculation 1

Use this formula if you were hired before October 16, 2005, and converted to PTO from the vacation / sick leave program.

  • Severance pay = (unused PTO hours X hourly salary) up to a maximum of 480 hours + (eligible unused sick leave hours retained when you converted to PTO) up to a lifetime maximum of 800 hours
  • If you previously left county employment, see your payroll contact to determine how many severance hours remain in your lifetime limit.

Paid time off (PTO) severance pay calculation 2

Use this formula if you were hired after October 16, 2005, and are in a non-union position, OR you were hired on or after January 1, 2010 and chose the PTO option.

  • Severance pay = (unused PTO hours X hourly salary) up to a maximum of 480 hours. There is no lifetime maximum number of unused PTO hours for which you can be paid as severance.

Severance pay options

The county cannot offer financial advice. You may review these options with a financial advisor before choosing. Payroll deductions in arrears are taken from severance pay (e.g., medical premiums).

Option 1: receive your severance pay

  • Pay will be issued two weeks after your last regular paycheck
  • Pay is taxable in the year received
  • Pay will be delivered by the same method as your regular paycheck

The following amounts are withheld from severance pay. Note that severance pay is not a wage.

  • Federal income tax at the rate of 25% of the taxable gross
  • State income tax at the rate of 6.25% of the taxable gross
  • FICA/Medicare withholding (if it applies) at the rate of 7.65% (6.2% for FICA, 1.45% for Medicare)

Option 2: defer your severance pay

  • If you participate in the county's deferred compensation plan, you may defer some or most of your severance pay and postpone federal and state tax liability.
  • If you don't currently participate in a deferred compensation plan, you can sign up prior to retirement to defer severance pay.
  • FICA and Medicare taxes, if applicable, must still be deducted.

How to defer your severance pay

First, contact the deferred compensation plan directly to find out the amount you can defer and/or to set up an account and select investment option(s).

Second, email Cheryl Arntson at cheryl.arntson@hennepin.us that you are retiring and want to defer your severance pay.

Stability pay as part of retirement

You are eligible for pro-rated stability pay governed by HR Rule 5.2j at the time you retire if you have at least five years of benefit-eligible service (i.e., 20 hours per week or more) AND are eligible for annuity benefits from a county-approved retirement program (e.g., PERA) at the time you retire.

Stability pay cannot be deferred, and you must identify on your resignation form (DOC) that you are leaving due to retirement. If you do not indicate retirement, stability pay will not be issued.

The stability pay calculation is pro-rated based on the number of pay periods you are on paid status the year you retire. For example, if you retire in the first pay period in June, your pro-rated stability pay will be about half of what it would have been had you worked through the pay period including December 1.

How it is paid

  • Pay will be issued two weeks after your last regular paycheck
  • Pay will be delivered by the same method as your regular paycheck
  • Pay is taxable in the year received

The following amounts are withheld from stability pay:

  • Federal income tax at the rate of 25% of the taxable gross
  • State income tax at the rate of 6.25% of the taxable gross
  • FICA/Medicare withholding (if it applies) at the rate of 7.65% (6.2% for FICA, 1.45% for Medicare); 2015 is yet to be determined
  • PERA deduction rates are available on the PERA website

Other leave and time off balances

  • Unused compensatory time, deferred holiday time, and banked Special Leave without Pay hours are not part of the severance check but may be paid to you in a separate check issued two weeks after your final paycheck.
  • Exempt, non-organized employees are subject to the Uniform Compensatory Time / Overtime Plan.
  • Exempt employees covered by a union contract are subject to the terms and conditions of their contracts.
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