Compensation Subject to SDRS Contributions
To ensure a consistent application across all employers, the term, compensation, for SDRS purposes is defined in South Dakota Codified Law (SDCL) 3-12-47.6. As you establish, or revise, your compensation schedules for your employees, you should consider state law. It is important to note that the law pertaining to compensation for SDRS purposes doesn't restrict your employee compensation practices; however, SDRS contributions may only be made on compensation that is includable in accordance with the law.
Compensation includes all payments for services rendered by an employee. All earnings and wages, salaries, fees, tips, and other W-2 compensation must be reported regardless of the source of the funds. If your unit has the final authority to hire, direct, and fire the employee, that employee's compensation must be reported, even if it is funded by another entity, such as the federal government.
Besides the employee's regular salary, examples of other compensation include:
- Overtime pay
- Vacation pay and sick pay (exception: lump-sum payouts of leave balances at termination)
- Back pay for services performed in a prior period
- Longevity pay
- Compensation paid after death
- Tax-sheltered annuities, including contributions to IRC Section 125, 401, 403, 408, 457, and 414(h)(2) plans
If you ever question whether payments should or should not be reported to SDRS, please contact the SDRS office toll-free at 1-888-605-SDRS (7377).