PSERS Final Average Salary Calculation: 3-Year vs 5-Year FAS Rules by Membership Class

Your FAS Is the Biggest Number in Your Pension Formula

The Final Average Salary is one of three numbers that determine your defined benefit pension: FAS × Multiplier × Years of Service = Annual Pension. A higher FAS means a higher pension for every year of your career, compounding over a lifetime of monthly checks.

Getting the FAS calculation wrong — or misunderstanding what counts toward it — can lead to retirement planning decisions based on a number that doesn't match what PSERS will actually use.

The 3-Year Rule: Classes T-C, T-D, T-E, and T-F

For members in these classes, PSERS calculates FAS using the highest average compensation earned during three non-overlapping periods of four consecutive calendar quarters. In practical terms, this means your highest three school years of salary.

The periods are measured in calendar quarters (January–March, April–June, July–September, October–December), not fiscal years, and they cannot overlap. PSERS selects the three four-quarter periods that produce the highest average — they don't have to be consecutive, though for most members they are the final three years of service when salaries are at their peak.

A few things that can affect this calculation:

Supplemental pay and stipends — if your district pays stipends for department chair duties, coaching, curriculum development, or summer work, ask PSERS whether each payment qualifies under the Retirement Code. Employer reporting alone does not make a payment creditable.

Part-time or reduced-schedule years — if you went to part-time for a year or two, that year's lower salary could still be included in the FAS calculation if PSERS uses it as one of your three highest periods. Members who anticipate part-time years should plan to have at least three full-time years near the end of their career to protect their FAS.

Salary spikes — a promotion or large raise in your final year of service can significantly boost your FAS because it has to average across only three years. Under the three-year rule, one exceptional year has an outsized impact.

The 5-Year Rule: Classes T-G and T-H

Act 5 of 2017 changed the FAS calculation for hybrid-plan members hired on or after July 1, 2019. Instead of three non-overlapping periods, PSERS uses the average of your five highest calendar years of compensation.

The shift from three years to five years dilutes the effect of late-career salary increases. A member who receives a significant raise in their final year sees a smaller FAS boost under the five-year rule because that high salary is averaged across five years instead of three.

Here's an example: A member earns $65,000, $68,000, $70,000, $73,000, and $85,000 in their final five years.

• Under the 3-year rule (using the three highest): ($70,000 + $73,000 + $85,000) ÷ 3 = $76,000 FAS
• Under the 5-year rule: ($65,000 + $68,000 + $70,000 + $73,000 + $85,000) ÷ 5 = $72,200 FAS

That $3,800 FAS difference, multiplied by the class multiplier and years of service, compounds into a meaningful pension reduction over a full retirement.

What Counts as Compensation

Not everything you earn from your school employer is included in the PSERS FAS calculation. Generally, PSERS includes:

• Base salary and wages from your regular position
• Longevity pay and step increases
• PSERS-creditable supplemental payments as reported by your employer

PSERS excludes bonus and severance payments and other remuneration that is not based on the standard salary schedule. For unused sick leave or vacation payouts, confirm whether the specific payment qualifies with PSERS; do not assume it counts just because it appears in payroll records. Employer-paid benefits like health insurance premiums are not salary.

The key is whether compensation qualifies under the Retirement Code, using wages reported by your employer. Your Annual Statement of Account (available through the MSS portal) shows the wages PSERS has recorded for each year. If a year looks wrong, flag it with your employer's payroll office and PSERS before you get close to retirement — fixing wage discrepancies after separation is much harder.

Protecting Your FAS in the Years Before Retirement

If you're within five years of retirement, your current salary decisions directly affect your FAS. A few practical considerations:

Avoid voluntary pay reductions in your final years if possible. Dropping to part-time, taking an unpaid leave, or stepping down from a higher-paying administrative role into a classroom position can pull down your FAS.

Maximize creditable supplemental pay by taking on compensated roles (department chair, district committee work, summer program coordinator) that your employer reports to PSERS.

Verify your salary history now. Log into the MSS portal and compare your PSERS-credited wages against your actual pay records for at least the last five years. Catching errors while you're still employed gives you time to work with your employer's payroll department to submit corrections.

The Pennsylvania PSERS Retirement Guide includes a FAS verification worksheet and detailed guidance on optimizing your final average salary within your membership class rules.

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