Faculty at the University of Pittsburgh with contracts for 8-, 9-, or 10-month appointments may elect to have their contract salary evenly distributed over a 12-month period provided they fall within the annual salary limit established under Section 401(a)(17) of the Internal Revenue Code.
Section 401(a)(17) of the Internal Revenue Code does not permit deferral pay year types for faculty with annual salaries that exceed $350,000. Therefore, the annual salary limit in 2025 for faculty with less than annual contracts is $350,000 for all deferral pay year types.
You may download our faculty pay worksheet (XLSX) for assistance with calculating salary and deferred pay amounts based on appointment length, appointment details, contract dates, and annual salary.
How do I know if I am eligible under Section 401(a)(17) to elect the 12 month distribution of my pay?
September 1st Start Date:
If your contract is 8-months (September – April) and you elect to receive your pay over 12 months, your contract salary cannot exceed $350,000.
- $350,000/8 = $43,750 $350,000/12 = $29,166.67
- For the months of September through April, you will have earned $350,000 ($43,750 x 8) but have been paid $233,333.33 ($29,166.67 x 8). Therefore, you will have deferred $116,666.67 to be paid during the months of May through August.
If your contract is 9-months (September – May) and you elect to receive your pay over 12 months, your contract salary cannot exceed $350,000.
- $350,000/9 = $38,888.89 $350,000/12 = $29,166.67
- For the months of September through May, you will have earned $350,000 ($38,888.89 x 9) but have been paid $262,500 ($29,166.67 x 9). Therefore, you will have deferred $87,500 to be paid during the months of June through August.
If your contract is 10-months (September – June) and you elect to receive your pay over 12 months, your contract salary cannot exceed $350,000.
- $350,000/10 = $35,000 $350,000/12 = $29,166.67
- For the months of September through June, you will have earned $350,000 ($35,000 x 10) but have been paid $291,666.67 ($29,166.67 x 10). Therefore, you will have deferred $58,333.33 to be paid during the months of July and August.
August 15th Start Date:
If your contract is 9-months (August 15th – May 15th) and you elect to receive your pay over 12 months, your contract salary cannot exceed $350,000.
- $350,000/9 = $38,888.89 $350,000/12 = $29,166.67
- For the months of August through May, you will have earned $350,000 ($38,888.89 x 9) but have been paid $272,222.22 of regular salary earnings ($29,166.67 x 8 for September-April and $19,444.44 x 2 for August 2025 and May 2026)
- You will have deferred $77,777.78 to be paid during the months of May through August ($29,166.67 x 2 for June-July and $9,722.22 x 2 for May 2026 and August 2026)
If your contract is 10-months (August 15th – June 15th) and you elect to receive your pay over 12 months, your contract salary cannot exceed $350,000.
- $350,000/10 = $35,000 $350,000/12 = $29,166.67
- For the months of August through June, you will have earned $350,000 ($35,000 x 10) but have been paid $297,500 of regular salary earnings ($29,166.67 x 9 for September-May and $17,500 x 2 for August 2025 and June 2026)
- You will have deferred $52,500 to be paid during the months of June through August ($29,166.67 for July and $11,666.67 x 2 for June 2026 and August 2026)
What are the additional requirements to elect to receive deferred pay if I am eligible?
- The faculty member must make a written election to the department to annualize the contract salary. For example, a faculty member with an 8-month contract would elect to spread the 8 months over 12 months, also known as 8/12 pay year type.
- The election must be made before the start of the academic year.
- The election is irrevocable and cannot be changed after the academic year begins.
- The annual salary must not exceed the federally established maximum. For 2025, the limit is $350,000.
- No form is necessary for the election and it does not have to be filed with the IRS.
In the event the federally established limit is exceeded at the onset or in anticipation that the limit will be exceeded, the faculty member must elect to be paid as worked, such as 8/8, 9/9, or 10/10.
The annual salary limit of $350,000 is still applicable for the deferral pay year types regardless of the faculty start date. Please see our announcement for more information on pay schedules for faculty with August 15th start dates.