(a)  If subsequent to January 1, 1991, a member sustains a loss of salary due to a deferral of salary or a reduction of salary in order to avoid shutdowns or layoffs, or because of a retrenchment of state or local finances, then in calculating the service retirement allowance of the member, the amount of salary deferred and/or the amount of the reduction of salary shall not reduce the amount of annual compensation of the member for the purpose of establishing his or her highest three (3) consecutive years of compensation. This provision is subject to subsection (c).

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(b)(1)  For purposes of subsection (a), reduction of salary means:

(i)  The actual dollar amount which represents the difference between the employee‘s salary prior to the voluntary reduction of salary and the employee’s salary after the voluntary reduction of salary; or

(ii)  The actual dollar amount which represents the difference between the employee’s salary prior to the renegotiation and/or alteration of an existing collective bargaining agreement and the employee’s salary after the renegotiation and/or alteration of an existing collective bargaining agreement.

(2)  Reduction of salary also means the voluntary or negotiated reduction in the number of hours that an employee works in a pay period and for which he or she is paid.

(c)  An employee who has sustained a reduction in salary in accordance with subsection (a) shall pay, prior to retirement, to the retirement board an amount equal to the difference between the amount of contribution the employee would have paid on his or her salary prior to the reduction in salary and the amount that the employee actually contributed plus interest.