MEMORANDUM #42, 2009

Commonwealth of Massachusetts | Public Employee Retirement Administration Commission
Five Middlesex Avenue, Suite 304, Somerville, MA 02145
Ph 617 666 4446 | Fax 617 628 4002 | TTY 617 591 8917 | www.mass.gov/perac
Domenic J. F. Russo, Chairman | A. Joseph DeNucci, Vice Chairman
Mary Ann Bradley | Paul V. Doane | James M. Machado | Donald R. Marquis | Robert B. McCarthy
Joseph E. Connarton, Executive Director

M E M O R A N D U M

TO:                  All Retirement Boards

FROM:            Joseph E. Connarton, Executive Director

RE:                  Regulations Dealing with New Definition of Regular Compensation

DATE:             October 28, 2009

Sections 1, 2 and 3 of Chapter 21 of the Acts of 2009 changed the definition of regular compensation for payments received by members of retirement systems after July 1, 2009.  Attached are regulations proposed by the Commission to implement these changes. 

We are beginning the regulation process and will disseminate a schedule for hearings and comments very soon.  The promulgation process is very lengthy and will likely not be completed before June 2010.  Until that time, the Commission has voted to continue to treat payments that were regular compensation prior to the enactment of Chapter 21 of the Acts of 2009 as regular compensation unless specifically excluded by the provisions of Section 3 of Chapter 21 of the Acts of 2009.  These specific exclusions are:

• overtime;
• commissions;
• bonuses other than cost-of-living bonuses;
• welfare benefits;
• lump sum buyouts for workers’ compensation;
• job-related expense payments;
• insurance premiums;
• dependent care assistance;
• 1-time lump sum payments in lieu of or for unused vacation or sick leave or the payment for termination, severance, dismissal;
• any amounts paid as premiums for working holidays, except in the case of police officers, firefighters and employees of a municipal department who are employed as fire alarm signal operators or signal maintenance repairmen money paid for holidays shall be regarded as regular compensation;
• amounts paid as early retirement incentives or any other payment made as a result of the employer having knowledge of the member’s retirement;
• tuition;
• payments in kind; and
• all payments other than payment received by an individual from his employing unit for services rendered to such employing unit, regardless of federal taxability.

Please note, however, notwithstanding any special or general law to the contrary, any amount, benefit or payment included in the definition of “regular compensation” by law or by regulation prior to July 1, 2009 and included in any applicable collective bargaining agreement or individual contract for employment in effect on May 1, 2009, shall continue to be included in the definition of “regular compensation” during the term of that collective bargaining agreement or contract; provided, however, that any such amount, benefit or payment received after June 30, 2012 shall not be considered regular compensation.  These payments are:

• amounts derived from salary enhancements or salary augmentation plans which will recur for a limited or definite term;
• indirect, in-kind or other payments for such items as housing, lodging, travel;
• clothing allowances;
• annuities; and
• automobile usage.

The Commission will provide additional information and guidance as the regulatory process goes forward.

If you have questions, please contact this office.

Enclosure

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