COMMONWEALTH OF MASSACHUSETTS

Suffolk, ss. Division of Administrative Law Appeals


Gerard Burke, et al.,

Petitioners

v. Docket Nos. CR-07-293; 294; 296; 298;
315; 316; 360; 362
State Board of Retirement,

Respondent

Appearance for Petitioners:

Thomas R. Kiley, Esq.

Cosgrove, Eisenberg & Kiley, PC
One International Place, 10th floor
Boston, MA 02110

Appearance for Respondent:

Crystal Chow, Esq.

State Board of Retirement
One Ashburton Place, 12th floor
Boston, MA 02108

Administrative Magistrate:

Maria A. Imparato, Esq.

CASE SUMMARY

Pursuant to William Bulger v. Contributory Retirement Appeal Board, 447 Mass. 651 (2006), the cash housing allowances paid to eight college presidents in the three years prior to their retirements were regular compensation for purposes of calculating their retirement allowances. The State Board of Retirement's failure to include them in the calculation of their retirement allowances was an error that must be corrected under G. L. c. 32, s. 20(5)(c)(2). The Board's decision to refuse to correct the error for those who retired prior to July 2, 2002 was erroneous as inconsistent with the clear language of the statute.

DECISION


Gerard Burke and the other named Petitioners filed timely appeals of the decision of the State Board of Retirement ("Board") to deny the request of each to have the cash housing allowance he received as a college president treated as regular compensation for purposes of calculating each retirement allowance because each retired prior to July 2, 2002.

I held a hearing on the consolidated appeals on June 19, 2008 at the office of the Division of Administrative Law Appeals, 98 North Washington Street, Boston. I admitted documents into evidence. (Exs.1 and 2 in each case , and Exs. 3, 4, and 5 in all cases) Both counsel offered argument on the record. There is one tape cassette of the hearing. I left the record open to July 17, 2008 for stipulations of fact with respect to each individual Petitioner. I marked the stipulations I received on July 3, 2008 Exhibit 6. I marked the stipulations I received on July 17, 2008 Exhibit 7. The record closed on July 17, 2008.

FINDINGS OF FACT

Procedural History

1. By letter of July 2, 2002, the General Counsel of the Office of the Community College Counsel ("OCCC") asked the Public Employee Retirement Administration Commission ("PERAC") whether a housing allowance was subject to retirement deductions. (Ex. 3)

2. By letter of July 19, 2002, PERAC referred the inquiry to the Board. (Ex. 3)

3. By letter of September 4, 2002, OCCC requested an opinion from the then Executive Director of the Board about whether a cash housing allowance received by a community college president was considered regular compensation. (Ex. 3)

4. By letter of September 18, 2002, the Board informed OCCC that it did not consider the cash housing allowance to be regular compensation. (Ex. 3)

5. By letter of June 27, 2003, the President of Mount Wachusett Community College, Daniel Asquino, requested to meet with the Executive Director of the Board who was then Ellen Philbin. (Ex. 3)

6. By letter of July 3, 2003, the new Executive Director of the Board, Nicola Favorito, responded to President Asquino's request for a meeting. (Ex. 3)

7. By letter of August 12, 2003, President Asquino thanked Executive Director Favorito and Board staff for meeting with him and several other community college presidents on August 8, 2003. (Ex. 3)

8. By letter of September 9, 2003, the retired President of Fitchburg State College, Vincent J. Mara, requested that the Board include his housing allowance in the calculation of his retirement allowance, in view of the fact that "the recently retired president of the University of Massachusetts … seeks to include his housing allowance as part of his retirement base." (CR-07-293, Ex. 1, Tab 3H)

9. By letter of October 2, 2003, the Board denied Mr. Mara's request "because the Board has determined that such amounts would not be included as 'regular compensation' for purposes of retirement calculations under M.G.L. c. 32." (CR-07-293, Ex. 1, Tab 3I)

10. On November 9, 2006, the Supreme Judicial Court issued its decision in the case of William M. Bulger v. Contributory Retirement Appeal Board, 447 Mass. 651 (2006), holding that a monthly cash housing allowance received by the plaintiff as remuneration for his service as President of UMass was regular compensation for purposes of calculating his retirement allowance. (CR-07-293, Ex. 1, Tab 3J)

11. In March 2007, the Board had received sixteen requests from eleven former and five then-current university and college presidents seeking inclusion of their housing allowances as regular compensation based on the decision in Bulger. In March 2007, Executive Director Favorito presented a memorandum to the Board outlining options as to how to apply the Bulger decision to the presidents who had already retired. The memo identified July 2, 2002 as a possible cut off date based on the fact that General Counsel from the Office of Community Colleges on that date sent a letter to PERAC seeking an opinion about whether cash housing allowances were regular compensation. (CR-07-293, Exs. 1, 6)

12. At its meeting of March 29, 2007, the Board adopted a policy to allow the inclusion of the cash housing allowances provided to college and university presidents as regular compensation for those college and university presidents (1) who are members of the State Employees' Retirement System; (2) who retired on or after July 2, 2002; (3) who have submitted requests to the Board for the inclusion of said housing allowance, and have been reviewed and approved by the Board; and (4) who submit payment of any applicable retirement contributions and interest related to the housing allowance. (Ex. 3)

13. In April 2007, the Board sent a Memorandum to all University, State College, and Community College Human Resource Directors notifying them of the Board's policy with respect to cash housing allowances and non-cash maintenance allowances. The memo explains that for those college presidents who meet the criteria of the Board's policy, "the retirement allowance would be adjusted retroactively to the effective date of retirement after the Board receives the applicable retirement contributions and interest related to the receipt of the cash housing allowance." (Ex. 3)

CR-07-293

14. Gerard Burke, Ph.D., d.o.b. 5/7/1936, retired for superannuation on June 30, 1998, with 32 years of creditable service. He is married and has elected Option A. He receives a monthly retirement allowance in the gross amount of $6,243.06. (Exs. 1, 2, 7)

15. Dr. Burke's retirement allowance is based on his average annual rate of regular compensation during the three-year period from July 1, 1995 to June 30, 1998. (Ex. 7)

16. During that three-year period, Dr. Burke was President of Massasoit Community College from July 1, 1995 through May 31, 1996 and received a monthly housing allowance check in the amount of $750.00. (Ex. 7)

17. In calculating Dr. Burke's superannuation retirement allowance in 1998, the Board did not include the monthly $750.00 housing allowance payments as regular compensation. Dr. Burke did not challenge its non-inclusion prior to the Supreme Judicial Court's decision in Bulger. (Exs. 1, 6)

18. The housing allowance paid to Dr. Burke was determined by his employer, the Board of Trustees of Massasoit Community College pursuant to policies adopted by the Massachusetts Board of Regents of Higher Education. The payments commenced in the spring of 1993, but were retroactive to October 1, 1992. The retroactive payment for the six month period of October 1992 through March 1993 falls outside of the three year period relevant to the calculation of Dr. Burke's superannuation retirement allowance. (Exs. 1, 6)

19. By letter of December 29, 2006, Dr. Burke requested that his retirement allowance be recalculated to include his cash housing allowance. (Ex. 2)

20. By letter of April 3, 2007, the Board denied Dr. Burke's request to include as regular compensation for the purpose of calculating his retirement allowance the amount of the cash housing allowance he received while serving as President of Massasoit Community College because he retired prior to July 2, 2002. (Ex.1, Tab 4; Ex. 2)

21. Dr. Burke appealed by letter of April 13, 2007. (Ex. 1, Tab 5; Ex. 2)
CR-07-294

22. Peter Mitchell, Ph.D, d.o.b. 10/15/1934, retired for superannuation on April 19, 1998, with 16 years of creditable service. He has elected Option C. He receives a monthly retirement allowance in the gross amount of $3,299.85. (Exs. 1, 2, 6)

23. The average annual rate of regular compensation on which the calculation of Dr. Mitchell's superannuation retirement allowance is based was determined by his service as Acting Chancellor of the Massachusetts Higher Education Coordinating Council from November 1992 to September 1993, and the two plus years ending on April 10, 1998 when he served as President of the Massachusetts Maritime Academy. (Exs. 1, Tab 4; 6)

24. At Massachusetts Maritime Academy Dr. Mitchell received a monthly cash housing allowance of $1,250.00. He received a monthly cash housing allowance of $1,600.00 during the eight months he served as Chancellor in 1993. No deductions were taken from those checks, but each year he received a form from the Academy identifying the payment as income and he paid federal and state income taxes on that income. (Exs. 1, Tabs 3, 4, 5; 6)

25. In calculating Dr. Mitchell's housing allowance in April 1998, the Board did not include his monthly housing allowance as regular compensation. Dr. Mitchell did not challenge its non-inclusion prior to the Supreme Judicial Court's decision in Bulger. (Exs. 1, 6)

26. The housing allowance paid to Dr. Mitchell was determined by his employer, the Higher Education Coordinating Council and then the Board of Trustees of the Massachusetts Maritime Academy pursuant to policies adopted by the Massachusetts Board of Regents of Higher Education. The housing allowance while at the Academy was paid from the date of Dr. Mitchell's appointment on February 5, 1994 to the end of his term on April 9, 1998. (Exs. 1, Tab 4; 6)

27. By letter of November 14, 2006, Dr. Mitchell requested that his retirement allowance be recalculated to include his housing allowance as regular compensation. (Ex. 2)

28. By letter of April 3, 2007, the Board denied Dr. Mitchell's request to include as regular compensation for the purpose of calculating his retirement allowance the amount of the cash housing allowance he received while serving as Chancellor and then as President because he retired prior to July 2, 2002. (Ex. 2)

29. Dr. Mitchell appealed by letter of April 17, 2007 (Ex. 2)
CR-07-296

30. Eileen Farley, d.o.b 5/27/1936, retired for superannuation on June 20, 2000 with more than 30 years of creditable service. She is married and has elected Option A. She receives a monthly retirement allowance in the gross amount of $8,210.94. (Exs. 1, 2, 6)

31. Ms. Farley's retirement allowance is based on her average annual rate of regular compensation during the three-year period from July 1, 1997 through June 30, 2000. (Exs. 1, 6)

32. Throughout the three-year period, Ms. Farley was President of Bristol Community College and received a monthly housing allowance check in the amount of $1,250.00. No deductions were taken from that check, but each year she received a form from the College identifying the payment as income and paid federal and state income taxes on that income. (Exs. 1, 6)

33. In calculating the retirement allowance due Ms. Farley in 2000, the Board did not include the monthly $1,250.00 housing allowance as regular compensation. Ms. Farley did not challenge its non-inclusion prior to the Supreme Judicial Court's decision in Bulger. (Exs. 1, 6)

34. The housing allowance paid to Ms. Farley was determined by her employer, the Board of Trustees of Bristol Community College, pursuant to policies adopted by the Massachusetts Higher Education Council. Ms. Farley received a housing allowance of $750.00 beginning in the spring of 1993, retroactive to October 1, 1992. Her monthly housing allowance payments were increased to $1,250.00 by vote of the Board of Trustees of Bristol Community College on June 3, 1996, to be effective July 1, 1996. (Exs. 1, Tab. 4; 6)

35. By letter of November 28, 2006, Ms. Farley requested that her retirement allowance be recalculated to include her cash housing allowance as regular compensation. (Ex. 2)

36. By letter of April 3, 2007, the Board denied Ms. Farley's request to include as regular compensation the amount of the cash housing allowance she received while serving as President of Bristol Community College because she retired prior to July 2, 2002. (Ex. 2)

37. Ms. Farley appealed by letter of April 17, 2007. (Ex. 2)

CR-07-298

38. Kalyan Ghosh, Ph.D., d.o.b. 2/28/1938, retired for superannuation on June 15, 2002, with ten years of creditable service. He is married and has elected Option C. He receives a monthly retirement allowance in the gross amount of $5,067.00. (Exs. 1, 2, 6)

39. Dr. Ghosh's retirement allowance is based on his average annual rate of regular compensation for the three-year period from June 15, 1999 to June 15, 2002. (Exs. 1, 6)

40. Throughout the three-year period, Dr. Ghosh was President of Worcester State College and received a monthly housing allowance check in the amount of $1,500.00. No deductions were taken from that check, but each year Dr. Ghosh received a form from the College identifying the payment as income and paid federal and state income taxes on that income. (Exs. 1, 6)

41. In calculating Dr. Ghosh's retirement allowance in June 2002, the Board did not include the monthly $1,500.00 housing allowance as regular compensation. Dr. Ghosh did not challenge its non-inclusion prior to the Supreme Judicial Court's decision in Bulger. (Exs. 1, 6)

42. The housing allowance paid to Dr. Ghosh was determined by his employer, the Board of Trustees of Worcester State College, and approved by the Massachusetts Higher Education Coordinating Council. Dr. Ghosh's housing allowance increased from $1,000.00 on July 31, 1992, to $1,250.00 effective October 1, 1992, and to $1,500.00 effective July 1, 1998. (Exs. 1, 6)

43. By letter of February 6, 2007, Dr. Ghosh requested that his retirement allowance be recalculated to include his housing allowance as regular compensation. (Ex. 2)

44. By letter of April 3, 2007, the Board denied Dr. Ghosh's request to include as regular compensation for the purpose of calculating his retirement allowance the amount of the cash housing allowance he received while serving as President of Worcester State College because he retired prior to July 2, 2002. (Ex. 2)

45. Dr. Ghosh appealed by letter of April 17, 2007. (Ex. 2)

CR-07-315

46. Adrian Tinsley, Ph.D., d.o.b. 7/6/1937, retired for superannuation on June 15, 2002, with 20 years of creditable service. She is not married. She receives a monthly retirement allowance in the gross amount of $7,799.65. (Exs. 1, 2, 6)
47. Dr. Tinsley's retirement allowance is based on her average annual rate of regular compensation for the three-year period from June 15, 1999 to June 15, 2002. (Exs. 1, 6)

48. Throughout that three-year period, Dr. Tinsley was President of Bridgewater State College and received a monthly housing allowance in the amount of $1,250.00. No deductions were taken from that check, but each year Dr. Tinsley received a form from the College identifying the payment as income and paid federal and state income taxes on that income. (Exs. 1, 6)

49. In calculating Dr. Tinsley's retirement allowance in June 2002, the Board did not include the monthly housing allowance of $1,250.00 as regular compensation. Dr. Tinsley did not challenge its non-inclusion prior to the Supreme Judicial Court's decision in Bulger. (Exs. 1, 6)

50. The housing allowance paid to Dr. Tinsley was determined by her employer, the Board of Trustees of Bridgewater State College, and approved by the Massachusetts Higher Education Coordinating Council. Dr. Tinsley's housing allowance increased from $1,000.00 per month in March 1989 to $1,250.00 in May 1993 and remained at that level until she retired on June 15, 2002. (Exs. 1, 6)

51. By letter of March 19, 2007, Dr. Tinsley requested that the Board recalculate her retirement allowance to include her housing allowance as regular compensation. (Ex. 2)

52. By letter of April 4, 2007, the Board denied Dr. Tinsley's request to include as regular compensation for the purpose of calculating her retirement allowance the amount of the cash housing allowance she received while serving as President of Bridgewater State College because she retired prior to July 2, 2002. (Ex. 2)
53. Dr. Tinsley appealed by letter of April 17, 2007. (Ex. 2)

CR-07-316

54. George Traicoff, d.o.b. 5/16/1932, retired for superannuation on June 30, 1999, with 26 years of creditable service. He is married and has elected Option A. He receives a monthly retirement allowance in the gross amount of $6,133.05. (Exs. 1, 2, 6)

55. Mr. Traicoff's retirement allowance is based on his average annual rate of regular compensation for the three-year period from July 1, 1996 through June 30, 1999. (Exs. 1, 6)

56. Throughout that three-year period, Mr. Traicoff was President of North Shore
Community College and received a monthly housing allowance that changed in each fiscal year as follows: FY 1997 - $15,000; FY 1998 - $13,750; FY 1999- $16,250. No deductions were taken from those checks, but each year he received a form from the College identifying the payments as income and paid federal and state income taxes on that income. (Exs. 1, 6)

57. In calculating Mr. Traicoff's retirement allowance, the Board did not include the monthly housing allowance as regular compensation. Mr. Traicoff did not challenge its non-inclusion prior to the Supreme Judicial Court's decision in Bulger. (Exs. 1, 6)

58. The housing allowance paid to Mr. Traicoff was determined by his employer, the Board of Trustees of North Shore Community College, pursuant to policies adopted by the Massachusetts Higher Education Coordinating Council. (Exs. 1, 6)

59. By letter of January 29, 2007, Mr. Traicoff requested that the Board recalculate his retirement allowance to include his housing allowance as regular compensation. (Ex. 2)

60. By letter of April 4, 2007, the Board denied Mr. Traicoff's request to include as regular compensation for the purpose of calculating his retirement allowance the amount of the cash housing allowance he received while serving as President of North Shore Community College because he retired prior to July 2, 2002. (Ex. 2)

61. Mr. Traicoff appealed by letter of April 19, 2007. (Ex. 2)

CR-07-360

62. William O'Neil, Ed.D., d.o.b. 3/26/1936, retired for superannuation on April 1, 1997, with more than 30 years of creditable service. He is married and has elected Option C. He receives a monthly retirement allowance in the gross amount of $4,914.37. (Exs. 1, 2, 6)

63. Dr. O'Neil's retirement allowance is based on his average annual rate of regular compensation from March 28, 1994 to March 28, 1997. (Exs. 1, 6)

64. Throughout that three-year period, Dr. O'Neil was President of Massachusetts College of Art and Design (MassArt) and received a monthly housing allowance in the amount of $1,250.00. No deductions were taken from that check, but each year Dr. O'Neil received a form from the College indentifying the payment as income and paid federal and state income taxes on that income. (Exs. 1, 6)

65. In calculating Dr. O'Neil's retirement allowance in April 1997, the Board did not include the monthly housing allowance of $1,250.00 as regular compensation. Dr. O'Neil did not challenge its non-inclusion prior to the Supreme Judicial Court's decision in Bulger. (Exs. 1, 6)

66. The housing allowance paid to Dr. O'Neil was determined by his employer, the Board of Trustees of MassArt, and approved by the Massachusetts Higher Education Coordinating Council. Dr. O'Neil became interim President in 1986 and President of the college the following year. His housing allowance was increased from $1,000.00 to $1,250.00 effective October 1992 and remained at that level until his retirement. (Exs. 1, 6)

67. By letter of April 26, 2007, Dr. O'Neil requested that the Board recalculate his retirement allowance to include his housing allowance as regular compensation. (Ex. 2)

68. By letter of May 2, 2007, the Board denied Dr. O'Neil's request to include as regular compensation for the purpose of calculating his retirement allowance the amount of the cash housing allowance he received while serving as President of MassArt because he retired prior to July 2, 2002. (Ex. 2)

69. Dr. O'Neil appealed by letter of May 7, 2007. (Ex. 2)

CR-07-362

70. Philip Vairo, Ed.D., d.o.b. 8/4/1933, retired for superannuation on August 6, 1997, with 17 years of creditable service. He is married and has elected Option A. He receives a monthly retirement allowance in the gross amount of $2,795.79. (Exs. 1, 2, 6)

71. Dr. Vairo's retirement allowance is based on his average annual rate of regular compensation during the three-year period from August 6, 1988 to August 6, 1991. (Ex. 1, 6)

72. Throughout that three-year period, Dr. Vairo was President of Worcester State College and received a monthly housing allowance in the amount of $1,000.00. No deductions were taken from that check, but each year he received a form from the College identifying the payment as income and paid federal and state income taxes on that income. (Exs. 1, 6)

73. In calculating Dr. Vairo's retirement allowance in August 1991, the Board did not include the monthly housing allowance as regular compensation. Dr. Vairo did not challenge its non-inclusion prior to the Supreme Judicial Court's decision in Bulger. (Exs. 1, 6)

74. The housing allowance paid to Dr. Vairo was determined by his employer, the Board of Trustees of Worcester State College, pursuant to policies adopted by the Massachusetts Board of Regents of Higher Education. The $1,000.00 monthly housing allowance was voted by the Board of Trustees on September 2, 1987 following receipt of an August 19, 1987 memorandum from Chancellor Franklin Jenifer of the Board of Regents of Higher Education authorizing an increase in the housing allowance for eligible State College Presidents to a maximum of $1,000.00 per month. State College Presidents who were provided with a residence were not eligible for the housing allowance. (Exs. 1, 6)
75. By letter of March 30, 2007, Dr. Vairo requested that the Board recalculate his retirement allowance to include his housing allowance as regular compensation. (Ex. 2)

76. By letter of May 1, 2007, the Board denied Dr. Vairo's request to include as regular compensation for the purpose of calculating his retirement allowance the amount of the cash housing allowance he received while serving as President of Worcester State College because he retired prior to July 2, 2002. (Ex. 2)

77. Dr. Vairo appealed by letter of May 9, 2007. (Ex. 2)

CONCLUSION AND ORDER

The decision of the State Board of Retirement is reversed. The Board shall recalculate the retirement allowances of Gerard Burke, Peter Mitchell, Eileen Farley, Kalyan Ghosh, Adrian Tinsley, George Traicoff, William O'Neil and Philip Vairo to include their cash housing allowances as regular compensation after each Petitioner pays to the Board the deductions that would have been withheld from their respective housing allowances, with interest. The recomputed retirement allowances shall be calculated in accordance with G. L. c. 32, s. 20(5)(c)(2) to account for payments that should have been made since each Petitioner's date of retirement.

Regular Compensation

G. L. c. 32, s. 1 provides in pertinent part:

'Regular compensation' … shall mean the salary, wages or other
compensation in whatever form, lawfully determined for the individual
service of the employee by the employing authority, not including
bonus, overtime, severance pay for any and all unused sick leave, early
retirement incentives, or any other payments made as a result
of giving notice of retirement …

A superannuation retirement allowance is based on the member's age, his years of creditable service, and his annual average rate of regular compensation received during any period of three consecutive years of creditable service, or during the last three years of creditable service preceding retirement, whichever is greater. (G. L. c. 32, s. 5(2)(a)) The Supreme Judicial Court has held that a monthly cash housing allowance paid to a University President is regular compensation for purposes of calculating his retirement allowance. Bulger v. Contributory Retirement Appeal Board, 447 Mass. 651 (2006).

By March 2007, after the decision in Bulger, the Board received requests from eleven former, and five then-current university and college presidents seeking inclusion of their housing allowances as regular compensation based on that decision. There is no evidence in the record and the Board has not argued that the housing allowances at issue in these appeals are different in any material respect from the housing allowance at issue in Bulger. Nevertheless, the Board decided, as a matter of policy, not to include these payments for individuals who had retired before July 2, 2002.

At its meeting on March 29, 2007 the Board considered three options: (1) to apply the housing allowance retroactively to individual retirement dates, after payment of retirement contributions from college presidents; (2) to apply the housing allowance to those who retired on or after July 2, 2002, the date the PERAC received a written inquiry from the General Counsel of the Office of the Community College Counsel, after payment of retirement contributions from college presidents; or (3) to apply the housing allowance prospectively only. The Board voted to apply the housing allowance only to those who retired on or after July 2, 2002. The Board outlined its policy in a memorandum of April 2007. Those state college, community college and university presidents who may have their retirement allowances recalculated to include their cash housing allowances are those who are members of the State Employees' Retirement System; who retired on or after July 2, 2002; who have submitted requests to the Board for the inclusion of the housing allowance; who have received the Board's approval; and who submit payment of any applicable retirement contributions and interest related to the housing allowance.

The Board argues that this policy is reasonable and generous. The Board argues that: (1) the instant Petitioners lack standing to have their retirement allowances recalculated because none of them raised the issue prior to retirement, thereby waiving their right to raise the issue post-retirement; (2) any post-retirement change to these pensions would be harmful to the system as a whole; and (3) nothing in the Bulger decision suggests that the decision should be applied retroactively. The Board's arguments are without merit.

Standing and failure to raise the issue prior to retirement

The Petitioners did not waive the right to have the Board correct errors in calculation of their retirement allowances, as the Board is required to do under G. L. c. 32, s. 20(5)(c)(2).

Section 20(5)(c)(2) provides that:

[w]hen … an error is made in computing a benefit and, as a result, a
member or beneficiary receives from the system more or less than the
member or beneficiary would have been entitled to receive … had
the error not been made, the …error shall be corrected and as far as
practicable, …future payments shall be adjusted so that the actuarial
equivalent of the pension or benefit to which the member or beneficiary
was correctly entitled shall be paid.

This paragraph is not discretionary and does not afford a retirement board the option of deciding, as a matter of policy, not to correct an error in calculation of a benefit made in the past. Under this section, the error is required to be corrected, regardless of whether or not the member requested the correct calculation or even knew of the mistake at the time it was made. The import of the Bulger decision was to establish that the Board's long-standing practice of not considering university presidents' housing allowances to be regular compensation for purposes of calculating the annuity savings deductions and benefit levels was erroneous as a matter of law under Chapter 32 as it existed at the time each of these Petitioners retired. Accordingly, for each of the Petitioners, an error was made in the calculation of his or her benefit.

Even if this were not true, the Board's decision in each of these cases was erroneous because the July 2, 2002 cut-off is arbitrary and capricious.
Although these Petitioners did not raise the issue of their housing allowances prior to retirement, there is no evidence that the college presidents who retired after July 2, 2002 ever raised the issue prior to retirement, yet the Board has decided to honor their post-retirement requests for inclusion of their housing allowance. The Board's policy grants those who retired after July 2, 2002 the right to make the request now, and does not require a showing that the request was made prior to retirement. This clearly demonstrates the arbitrary nature of the Board's decision. If the Board deems those who retired after July 2, 2002 who did not raise the housing allowance issue prior to retirement not to have waived their rights, then those who retired before July 2, 2002 without raising the housing allowance issue prior to retirement have not waived their rights either.

The Board argues that choosing July 2, 2002 as a cut-off date is a reasonable decision because that was the date that the General Counsel of the Office of the Community College Counsel requested an opinion from PERAC about housing allowances. "It is the Board's understanding that this correspondence was the first time the issue of whether a housing allowance would be included as regular compensation for retirement purposes was raised by any University, State or Community College President." (Ex. 2, p. 9)

There is evidence that the issue was raised prior to 2002. In 1999, Maurice O'Shea, President of Bunker Hill Community College from 1973 to 1999, spoke with a Board retirement counselor prior to his retirement and asked whether his housing allowance would be considered in his retirement calculation. The retirement counselor told him that his cash housing allowance would not be included. Maurice O'Shea v. State Board of Retirement, CR-07-295 (DALA, March 12, 2009). This suggests that the Board was aware in 1999 that college presidents received a cash housing allowance, and that Board policy was not to treat the housing allowances as regular compensation.

Furthermore, the issue of standing is governed by G. L. c. 32, s. 16(4) which extends the right to appeal the Board's decision to the Contributory Retirement Appeal Board ("CRAB") to "any person when aggrieved by any action taken or decision of the retirement board." These Petitioners are aggrieved by the Board's decision to deny them a financial benefit and they therefore have standing to appeal to CRAB.

Harm to the System

The Board contends that allowing the Petitioners who retired prior to July 2, 2002 to have their retirement allowances recomputed would do harm to the system, citing two cases that hold that post-retirement option changes are not allowable and would do harm to the "actuarial soundness" of the retirement system. Olga DiVittorio v. State Board of Retirement, CR-06-28 (DALA, 2006), citing Joseph Olsen v. State Board of Retirement, CR-1136 (CRAB, 1978). These cases are not relevant to the case at hand. Option selection is governed by statute (G. L. c. 32, s. 12), and there is no statutory provision allowing for post-retirement option changes. Moreover, option selection is a matter of the Petitioner's choice. The instant Petitioners had no choice in determining what would be included in their retirement calculation because regular compensation is defined by G. L. c. 32, s. (1) and determined by the Board.

The Board is required under G. L. c. 32, s. 20(5)(c)(2) to correct errors in computing a benefit, as previously discussed, without regard to the actuarial consequences of the correction.

The Bulger decision should not be applied retroactively

The Board argues that nothing in the Bulger decision mandates that its holding be applied retroactively to those already retired. This is a specious argument, in view of the fact that the Board voted to apply the case retroactively to those who retired after July 2, 2002. Furthermore, the Bulger case is not a new law. It is an interpretation of a statutory provision that the Board has historically misinterpreted. The Board must now correct its error with respect to all Petitioners who have been harmed by the Board's error.

The decision of the Board is reversed. The retirement allowances of all named Petitioners must be recalculated to include the cash housing allowances as regular compensation, after each Petitioner pays to the system the retirement deductions, plus interest, that should have been withheld. The recomputed retirement allowances shall be calculated in accordance with G. L. c. 32, s. 20(5)(c)(2) to account for payments that should have been made since each Petitioner's date of retirement.

SO ORDERED.


DIVISION OF ADMINISTRATIVE LAW APPEALS

/s/ Maria A. Imparato

Administrative Magistrate


DATED: 3/12/09