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
Philip Y. Brown, ESQ, Chairman
Auditor Suzanne M. Bump | Kate Fitzpatrick | Elizabeth Fontaine | John B. Langan | James M. Machado | Robert B. McCarthy
Joseph E. Connarton, Executive Director
November 20, 2015
Mr. Francis E. Murphy, III, Chairman
Cambridge Retirement Board
100 Cambridge Park Drive
Cambridge, MA 02140-2369
REFERENCE: Report of the Examination of the Cambridge Retirement Board for the three -year period from January 1, 2010 through December 31, 2012.
Dear Mr. Murphy:
The Public Employee Retirement Administration Commission has completed a follow-up review of the findings and recommendations contained in its audit report of the Cambridge Retirement Board for the most recent period referenced above. We conduct these visits as a regular part of the oversight process. They are designed to ensure the timely implementation of corrective action for the recommendations cited in that report. The results are as follows:
1. The Audit Report cited a finding that the City of Cambridge Water Department provides premium compensation to employees who work holidays that coincide with their regular shift assignment. For holidays that occur during a regular weekday, the premium is equivalent to time and a half and for holidays that occur during a weekend day, the premium is equivalent to double time and a half. The Retirement Board has been aware of these premium compensation arrangements for an extended period, and they voted to allow both of these premiums to qualify as regular compensation on the advice of their Board counsel.
Follow-up Result: As the Code of Massachusetts Regulations, CMR 15.03 3(f) states, “wages” shall not include, without limitation...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…”, the Board voted to refund the contributions withheld from this type of pay to the eight active members and the one retired member affected by this change. Letters were sent to these respective members explaining the change in the law adopted in 2009, and that the Retirement System was prohibited from withholding deductions from the premium that was paid. In addition, the Water Department was notified and retirement deductions are not being taken from this type of compensation paid. This finding is resolved.
2. The Audit Report cited a finding that the Cambridge Housing Authority’s payroll vendor was not calculating the additional 2% contribution for compensation in excess of $30,000 correctly on an annualized basis. The deduction formula did not accurately reflect the exclusion applied to wages under the $30,000 control point. An additional exclusion was applied to Code “T” pay (ST/OT Straight OT). Since this type of pay was already excluded from the formula for calculating the additional 2% contribution, a duplicate exclusion that further reduced the 2% contribution calculation. The Retirement Board has not been receiving the accurate 2% contributions from employees of the Housing Authority.
Follow-up Result: The Cambridge Housing Authority was notified of the error on the 2% contribution calculations. The ADP payroll vendor was contacted, and a full review of all employees’ 2% contributions were re-calculated correctly. The under payments, totaling $8,378, were made by the respective members, and all member accounts now have the correct 2% contribution being withheld. This finding is resolved.
The Commission wishes to acknowledge the effort demonstrated by the staff of the Cambridge Cambridge Retirement Board to correct the deficiencies cited in the most recent examination of the system.
Thank you for your continued cooperation in this important matter.
Joseph E. Connarton,
cc: Cambridge Retirement Board Members