COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. DIVISION OF ADMINISTRATIVE LAW APPEALS
Marie J. Parente,
State Board of Retirement,
Appearance for Petitioner:
Suzette A. Ferreira, Esq.
189 Main Street - 3rd Fl.
Post Office Box 170
Milford, MA 01757
Appearance for Respondent:
Crystal Chow, Esq.
State Board of Retirement
One Ashburton Pl. - Rm. 1219
Boston, MA 02108
Joan Freiman Fink, Esq.
Pursuant to G.L. c. 32 §16(4), the Petitioner, Marie J. Parente, is appealing the February 26, 2007 decision of the Respondent, State Board of Retirement, not to include her monthly allowance for expenses, her travel per diem reimbursement, and the value of her parking space as regular compensation in the calculation of her superannuation retirement benefit (Exhibit 1). The Petitioner's letter of appeal was timely filed pursuant to G.L. c. 32 §16(4).
A hearing pursuant to G.L. c. 7 §4H was held on March 11, 2008 at the offices of the Division of Administrative Law Appeals, 98 North Washington Street, Boston, MA. Various documents were entered into evidence at the hearing (Exhibits 1 - 22). The Petitioner's Pre-hearing Memorandum was marked as "A" for identification and the Respondent's Pre-hearing Memorandum was marked as "B" for identification. The Petitioner testified in her own behalf. Mark Finnerty, the Director of Legislative Payroll Benefits, testified on behalf of the State Board of Retirement. The record in this case was left open until May 15, 2008 for the filing of written closing memoranda.
FINDINGS OF FACT
Based on the testimony and evidence presented, I make the following findings of fact:
1. The Petitioner, Marie J. Parente, d.o.b. 5/22/28, served as a State Representative in the Massachusetts Legislature from February of 1981 through December of 2006 (stipulation of the parties).
2. She was a member of the State Retirement System during this time (stipulation of the parties).
3. On November 7, 2006, the Petitioner filed an application for superannuation retirement benefits, said retirement to be effective in January of 2007 (Exhibit 10).
4. In this application for retirement benefits, the Petitioner requested that, in addition to her salary, her allowance from the Commonwealth of Massachusetts for expenses, travel per diem reimbursement, and the value of her parking space be included as regular compensation in the calculation of her retirement benefit (Exhibit 10).
5. Throughout her tenure as a State Representative, the Petitioner was paid $600 per month, or $7200 per year, for expenses. That amount was deposited directly into her account each month in accordance with the provisions of G.L. c. 3 §9B (testimony of the Petitioner).
6. The check for the monthly allowance for expenses was not included with her bi-weekly regular pay and was not part of the payroll system. The Petitioner received a Form 1099 "Miscellaneous Income" each year reflecting her $7200 annual expense allowance (testimony of Mark Finnerty).
7. In addition, the Petitioner received a travel per diem reimbursement for mileage, meals, and lodging in accordance with the provisions of G.L. c. 3 §9B. The statute provides that the amount of this travel per diem reimbursement varies based on the distance that the individual member has to travel. As the State Representative from the Town of Milford, the Petitioner received a per diem allowance for mileage, meals, and lodging of $26 per day (testimony of the Petitioner).
8. The Petitioner also received a free parking spot at the State House in Boston (testimony of the Petitioner).
9. On December 4, 2006, the Petitioner sent the State Board of Retirement a request to review whether she may include her travel expenses as well as other expenses as regular compensation for retirement purposes (Exhibit 4).
10. No retirement deductions were taken from the payment that the Petitioner received for her monthly allowance for expenses and her travel per diem reimbursement (stipulation of the parties).
11. On December 15, 2006, the State Board of Retirement sent the Petitioner a response to her inquiry relative to the status of her travel allowance, indicating that it was in the process of gathering additional information on the matter (Exhibit 5).
12. By letter dated December 16, 2006, the Petitioner sent the State Board of Retirement documentation from the State Treasurer's Office dated February 21, 2003 stating that the value of her parking spot was $1,260 for both federal and state tax purposes (Exhibit 6).
13. On February 26, 2007, the State Board of Retirement sent the Petitioner written notification denying her request to include the following as regular compensation: (1) monthly allowance for expenses; (2) travel per diem reimbursement; and (3) the value of her parking space (Exhibit 1).
14. On March 5, 2007, the Petitioner filed a timely appeal of this denial with the Contributory Retirement Appeal Board (Exhibit 2).
After careful review of the testimony and evidence presented in this case, I conclude that the Petitioner is not entitled to have her retirement allowance recalculated to include as regular compensation the following: (1) monthly allowance for expenses; (2) travel per diem reimbursement; and (3) the value of her parking space.
G.L. c. 32 §5(2) provides that a superannuation retirement allowance shall be based on the average annual rate of regular compensation received by such member during the member's last three years, or the highest paid three years, of creditable service (emphasis supplied). Regular compensation is defined by G.L. c. 32 §1 as "salary, wages or other compensation…lawfully determined for the individual service of an 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 .. ." (emphasis supplied). Regular compensation is further defined in Public Employee Retirement Administration Commission (PERAC) regulation, 840 CMR 15.03 (1)(a), which provides that in order to be considered regular compensation, a payment must "be made as remuneration for services actually rendered." In Boston Assn. of Sch. Administrators and Supervisors v. Boston Retirement Board, 383 Mass. 336, 419 N.E. 2d 277, 280 (1991), the Supreme Judicial Court opined that the term regular compensation "refers to remuneration geared to work or services performed; moreover regular as it modifies compensation, imports the idea or ordinariness or normality as well as the idea of recurrence."
(1) Monthly Allowance for Expenses
In accordance with the provisions of G.L. c. 3 §9B, the members of the General Court receive an annual allowance of $7200 for travel, meals, and lodging. The members receive $600 per month, payable on the first day of each session and the first business day of each month thereafter, until the total amount of $7200 has been paid. The monthly allowance checks are issued separately by the Department of the State Treasury and are not included with the member's regular bi-weekly pay check.
In or about March of 1953, a Special Commission was created to review the issues relative to travel and expense allowances for members of the General Court as the general consensus was that these members were entitled to an additional annual payment since they had expenses above and beyond the expenses normally incurred by employees in private industry. This Special Commission noted that "it is the unanimous intent of the Commission that the members should be reimbursed their actual travel, hotel and living expenses only, and to assure that this is accomplished, have recommended that payment be made by the treasurer only upon the submission by the member of a voucher wherein he certifies that he actually travelled as stated, and used the hotel and meals as authorized" (Exhibit 15). The report of the Commission subsequently led to the promulgation of G.L. c. 3 §9B in 1953 as "An Act to Establish Travel Allowances for the Members of the General Court And to Reimburse Them For Such Of Their Expenditures As Are Singularly and Solely Incidental to the Adequate Performance of Their Official Duties" (Exhibit 15).
The Petitioner argues that since her monthly allowance for expenses was regular and recurrent, it should be classified as regular compensation. In support of her position, the Petitioner cites the case of William Bulger v. CRAB, 856 N.E. 2d 799 (2006), where the housing allowance paid to the Plaintiff as President of the University of Massachusetts was determined to be regular compensation in the calculation of his superannuation retirement benefit. In Bulger, supra at 806, the Supreme Judicial Court held that "the expression `regular compensation' points to recurrent or repeated amounts of compensation not inflated by extraordinary ad hoc payments. [M]oreover `regular' as it modifies `compensation,' imports the idea of ordinariness or normality as well as the idea of recurrence [citations omitted]."
Notwithstanding the Petitioner's argument, the fact that the monthly allowances were recurring does not render them regular compensation. See Cooke v. Contributory Retirement Appeal Board, (Suffolk County Superior Court, CA Number 06-0632; March 22, 2007), where the Court held that despite the fact that the Plaintiff received a portion of an institutional allowance on a recurrent and regular basis, the payment did not qualify as regular compensation since he "never received the institutional allowance as remuneration for services he performed as a university employee." Moreover, the Bulger case, supra, may be distinguished from the present case. In Bulger, the Court noted that both Mr. Bulger and his employer recognized that the housing allowance was not intended to be used for housing but instead was meant as an economic inducement for President Bulger to remain employed at the University of Massachusetts. In this case, the monthly allowances were meant to reimburse the Petitioner for her actual expenses incurred in performing her duties as a State Representative.
Both DALA and CRAB have held that monthly travel payments for transportation, mileage, meals, hotel accommodations, parking, and tolls, are considered to be ordinary and reasonable expenses associated with fulfillment of the requirements of a certain position and are not payment for services. Thus, these monthly travel payments are not considered to be regular compensation. See William Turner v. Teachers' Retirement Board, CR-00-1009 (DALA dec. 5/25/02; no CRAB dec.), where it was held that the travel allowance Mr. Turner received in his position as Superintendent of Schools for the Narragansett Regional School District was not considered regular compensation for purposes of calculating his superannuation retirement benefit. See also Judith Riordan v. Teachers' Retirement Board, CR-02-564 (DALA dec. 3/10/04; no CRAB dec.) where the payments made to the Petitioner, the Superintendent of Schools for the East Bridgewater Public School System, for travel and telephone costs were excluded from regular compensation as they were paid as a reimbursement for a necessary cost of employment.
The Petitioner further claims that her annual allowance for expenses should be considered regular compensation as she had to include it as gross income for income purposes. The1099 Miscellaneous Income Tax form issued to the Petitioner indicates that the annual allowance of $7200 is "nonemployee compensation." The Massachusetts Department of Revenue (DOR) follows the definition used by the U.S. Department of the Treasury Internal Revenue Service (IRS) that gross income is "all income from whatever source derived." 26 U.S.C. §61(a). Notwithstanding the fact that the federal definition of regular compensation is broad in scope, regular compensation as the term is defined in G.L. c. 32 §1, the retirement statute, does not include reimbursement for expenses.
(2) Travel Per Diem Reimbursement
The per diem reimbursement payment that the Petitioner received for traveling from her residence in Milford, MA to the State House in Boston, MA does not constitute regular compensation for the purposes of calculating her superannuation retirement benefit.
G.L. c. 3 §9B also provides for a travel per diem reimbursement for mileage, meals, and lodging to each member of the General Court. This per diem, ranging from $10 to $100 per day, varies depending on the member's place of residence. In order to receive this per diem reimbursement, each member of the General Court is required to submit a "Per Diem Request Form." The member then receives a separate check from the Department of the State Treasurer for the travel per diem reimbursement as this amount is not included in the member's regular bi-weekly pay check.
DALA and CRAB have held that such reimbursements for travel, mileage, and lodging, etc. do not qualify as regular compensation for retirement purposes. In Richard Rooney v. State Board of Retirement, CR-07-291 (DALA dec. 6/15/07; no CRAB dec.), the payments that were made to Mr. Rooney, an employee of the Department of Transitional Assistance, for travel and mileage were determined to be reimbursement for in-state transportation expenses, and not payment for service. As such, the reimbursement made to Mr. Rooney was not considered as regular compensation in the calculation of his superannuation retirement benefit. In the current case, the travel per diem reimbursements made to the Petitioner were not payments for her service as a State Representative; rather, they constituted reimbursement for her expenses for travel and mileage. In Cooke v. Contributory Retirement Appeal Board, supra, the Suffolk Superior Court considered the issue raised by a member of the State Retirement System as to whether a stipend paid by the National Institute of Heath for living expenses during the period of a fellowship constituted regular compensation in the calculation of his superannuation retirement benefit. The Superior Court held: "As these funds were specifically earmarked for a specific purpose and not `lawfully determined for the individual service of the employee' as specified under G.L. c. 32, s. 1, they fell outside the scope of `regular compensation' as defined in the statute."
(3) Value of the Petitioner's Parking Space
The value of the Petitioner's parking space does not constitute regular compensation as the parking space was not provided to her as remuneration for services actually rendered. Rather, the parking space was provided to her as a benefit "that would enable the plaintiff to perform [her] job more effectively" by affording her a place to park at night. See Kenneth C. Pelonzi, et al. v. Retirement Board of Beverly, et al., Docket No. SJC-10098, May 21, 2008. In Pelonzi, the Supreme Judicial Court held that the personal use of a motor vehicle furnished by the City of Beverly to Mr. Pelonzi, the Commissioner of Public Safety and Chief of the Fire Department, does not qualify as regular compensation for purposes of calculating his retirement allowance. The Supreme Judicial Court in Pelonzi, supra, reasoned that the use of the automobile would help Chief Pelonzi perform his job more effectively and that the automobile was not meant to compensate him for his services to the City but rather to assist him with his professional responsibilities. The Court further noted that "employers routinely supply employees with other noncash job related accessories and benefits (e.g., cellular telephones, personal computers, facsimile machines, parking spaces) to enable their employees to perform their jobs more efficiently…" (emphasis supplied) Id. See also Margaret Patz v. State Board of Retirement, CR-07-297 (DALA dec. 6/12/08; no CRAB dec.), where the value of a parking space provided to the Petitioner, a Systems Analyst at the Criminal History Systems Board, was determined not to be regular compensation for the purposes of computing her retirement allowance.
The Petitioner argues that since she was required to pay taxes on the value of her parking space, the value of that space should be considered regular compensation. However, the fact that one is required to pay taxes on a benefit does not render it compensation as that term is defined in G.L. c. 32 §1. The IRS every year establishes a qualified parking exclusionary amount that is excluded from the employee's gross income, 26 U.S.C. §132 (f)(2)(B). Likewise the Commonwealth's Bureau of State Office Building (BSB) conducts an annual survey of parking rates to determine the fair market value per month for qualified parking in the State House. If the BSB determines that the fair market value of an employee's parking space is in excess of the IRS's set exclusion, that excess is then taxable. In this instance, the value of the Petitioner's parking space for the years 2004-2006 was in excess of the exclusion set by the IRS. As such, she was taxed on the excess amount and not taxed on the entire value of her parking space.
Based on the foregoing, I conclude that the following payments made to the Petitioner are not regular compensation to be used in the calculation of her retirement benefit: (1) monthly allowance for expenses; (2) travel per diem reimbursement; and (3) the value of her parking space. Since no retirement deductions were taken from the allowances and the parking space, there is no need for a recalculation of the Petitioner's retirement allowance.
DIVISION OF ADMINISTRATIVE LAW APPEALS
Joan Freiman Fink, Esq.
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