COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. DIVISION OF ADMINISTRATIVE LAW APPEALS
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:
Melinda E. Troy, 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, Thomas George, is appealing the February 26, 2007 decision of the Respondent, State Board of Retirement, not to include his monthly allowance for expenses in the calculation of his 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 April 10, 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 his own behalf. The testimony of Mark Finnerty, the Director of Legislative Payroll Benefits, who testified on behalf of the State Board of Retirement in the matter of Marie J. Parente v. State Board of Retirement, CR-07-187 on March 11, 2008, was incorporated by reference into the current appeal. 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, Thomas George, d.o.b. 5/2/38, served as a State Representative in the Massachusetts Legislature from January 1997 through December 2004 (stipulation of the parties).
2. H was a member of the State Retirement System during this time (stipulation of the parties).
3. In or about November of 2004, the Petitioner filed an application for superannuation retirement benefits, said retirement to be effective January 6, 2005 (Exhibit 5).
4. Throughout his tenure as a State Representative, the Petitioner was paid $600 per month, or $7200 per year, for expenses. That amount was deposited directly into his account each month in accordance with the provisions of G.L. c. 3 §9B (testimony of the Petitioner).
5. The check for the monthly allowance for expenses was not included with his bi-weekly regular pay and was not part of the payroll system. The Petitioner received a Form 1099 "Miscellaneous Income" each year reflecting his $7200 annual expense allowance (testimony of the Petitioner).
6. On November 15, 2006, the Petitioner sent the State Board of Retirement a written request to include his monthly expense allowance as part of his regular compensation for the purposes of calculating his retirement benefit (Exhibit 3).
7. On February 26, 2007, the State Board of Retirement sent the Petitioner written notification denying his request to include his monthly allowance for expenses as regular compensation for retirement purposes (Exhibit 1).
8. 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 his retirement allowance recalculated to include as regular compensation his monthly allowance for expenses.
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 his monthly allowance for expenses was regular and recurrent, it should be classified as regular compensation. In support of his 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 his actual expenses incurred in performing his 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 his annual allowance for expenses should be considered regular compensation as he 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.
At the outset of the hearing, the State Board of Retirement raised the issue as to whether the Petitioner waived his right to request that his monthly expense allowance be included as regular compensation since he failed to raise that issue at the time he retired from state service. However, since I have concluded that the Petitioner was not entitled to include his monthly expense allowance as regular compensation, I decline to address the issue of the timeliness of the Petitioner's appeal.
Based on the foregoing, I conclude that the Petitioner's monthly allowance for expenses does not constitute regular compensation for retirement purposes. Since no retirement deductions were taken from the monthly expense allowance, 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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