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
Auditor Suzanne M. Bump | Paul V. Doane | James M. Machado | Donald R. Marquis | Robert B. McCarthy | Gregory R. Mennis

Joseph E. Connarton, Executive Director

February 9, 2011

Mr. David N. Kornwitz, Chairperson
Wellesley Retirement Board
Wellesley Town Hall
525 Washington Street
Wellesley, MA 02482

REFERENCE: Report of the Examination of the Wellesley Retirement Board  for the three-year period from January 1, 2006 through December 31, 2008.

Dear Mr. Kornwitz:

The Public Employee Retirement Administration Commission has completed a follow-up review of the findings and recommendations contained in its audit report of the Wellesley 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 recommendation cited in that report. The examination addressed one specific finding and recommendation included in the audit report for the period referenced above. The results are as follows:

The Audit Report cited a finding that certain pay types are excluded from compensation qualified for retirement contributions. The report specifically cited stand-by pay and beeper pay for employees of the housing authority. The recommendation cited the pay types as “ordinary, normal, recurrent, repeated; and of indefinite duration” per 840 CMR 15.03 as defined at the time of the report.  

Follow-up Result:  Inquiries made during the follow-up audit process disclosed that the DPW stand-by pay is a service required by its employees but applied during seasonal anomalies related to weather and similar emergency situations. This compensation is correctly excluded from retirement qualified contributions.

Inquiries made during the follow-up audit process disclosed that the Water Division stand-by pay is a service required by its employees and applied to any qualified employee every pay period. This would appear to fall within the requirements of Chapter 21 of the Acts of 2009 which states, "...compensation received exclusively as wages by an employee for services performed..." and PERAC Regulation 840 CMR 15.03 that defined "wages" as "pre-determined, non-discretionary, guaranteed payments.....because of the character of the work".

Inquiries made during the follow-up audit process disclosed that the housing authority beeper pay is a service required by its employees and applied to any of the four qualified employees every pay period.  In both the Housing and Water Division, these services are being conducted by at least one of the employees every week. These services would appear to be pre-determined, non-discretionary and are performed because of the character of the work.

The Board remains of the opinion that only the stand-by pay received by the Municipal Light Plant employees satisfies the statutory and regulatory definitions of regular compensation during the audit period.  Moreover, although not covered by the most recent audit, the Board believes that pursuant to the amended statutory and regulatory definitions of regular compensation pursuant to Chapter 21 of the Acts of 2009, only those payments made to MLP employees satisfy the requirement that the payments be "predetermined," "non-discretionary" and "guaranteed."  Accordingly, the Board will not be changing its position regarding this matter. This finding is not resolved.

The Commission finds that the Board is not in compliance with the accounting and management standards established by the Public Employee Retirement Administration Commission, in regulation 840 CMR 25.00. In particular, with the determination cited in this letter concerning their interpretation of Chapter 21 of the Acts of 2009 as well as 840 CMR 15.03. PERAC auditors may conduct an additional follow-up.

Sincerely,

Joseph E. Connarton
Executive Director

Return to PERAC Home Page