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Pursuant to G.L. c. 32 §16(4), the Petitioners, John Dempsey, Barbara Shea, and Carol Schraft, are appealing the September 20, 2006 decision of the Respondent, Teachers' Retirement System (TRS), denying their request to have the full payments made to them as extended longevity buyout options (ELBO) considered as regular compensation in the calculation of their superannuation retirement benefits (Exhibit 1 ). The appeals were timely filed in accordance with the provisions of G.L. c. 32 §16(4).
A hearing pursuant to G.L. c. 7 §4H was held on March 20, 2008 at the offices of the Division of Administrative Law Appeals, 98 N. Washington Street, Boston, MA. Various documents were entered into evidence at the hearing (Exhibits 1 - 18). The Pre-hearing Memorandum submitted on behalf of the Petitioners was marked as "A" for identification. The Respondent's Pre-hearing Memorandum was marked as "B" for identification. Maureen Flynn, the payroll administrator for the Brookline Public School System for the past forty-four years, testified on behalf on the Petitioners. The record in this case was left open until May 3, 2008 for the filing of written closing memoranda including responses to specific questions posed by the Magistrate at the conclusion of the testimonial portion of the hearing.
Based on the testimony and evidence presented, I make the following findings of fact:
1. The Petitioners, John Dempsey, Barbara Shea, and Carol Schraft, were all employed as Principals in separate elementary schools in the Brookline, MA Public School System (stipulation of the parties).
2. John Dempsey and Barbara Shea retired effective July 1, 2006. Carol Schraft retired effective October 21, 2006 (stipulation of the parties).
3. In 2003, each of the Petitioners signed an individual employment contract outlining the terms and conditions of his/her employment with the Brookline, MA Public School System (stipulation of the parties).
4. Prior to 2003, the Petitioners, as Principals, were covered by the same Collective Bargaining Agreement as teachers in the Brookline Public Schools and had the same work schedule as teachers, i.e., approximately ten months a year (testimony of Maureen Flynn).
5. Commencing 2003, Principals were required to work a full fifty-two weeks a year. At the same time, the Principals, including the three Petitioners, were given separate contracts from the teachers (testimony of Maureen Flynn).
6. Included for the first time in the contracts signed by the three Petitioners in 2003 as Principals was a provision (Article 19) providing for an Elective Longevity Buyout (ELBO) of $8750 per year for a period of three consecutive years to certain eligible Principals, for a total ELBO payment of $26,250 (Exhibit 4, testimony of Maureen Flynn).
7. The ELBO payment was intended to compensate the Petitioners for the increase in their work schedule from approximately ten months a year to a full fifty-two weeks a year (testimony of Maureen Flynn).
8. In order to be eligible for the ELBO provided for in Article 19 of the contract, the Petitioners had to have completed twelve years of continuous service in the Brookline Public School System (Exhibit 4).
9. Article 19 also provides that an application for ELBO payment must be submitted prior to February 1st immediately preceding the year when ELBO payments are scheduled to begin. In addition, once the Petitioners elected to receive the ELBO payments, other longevity payments specified in the contract ceased (Exhibit 4).
10. Each of the Petitioners applied for and received the ELBO payments of $8750 per year commencing at the conclusion of the 2003-2004 school year and continuing until their retirement at the end of the 2005-2006 school year (stipulation of the parties).
11. The contract signed by the teachers in the Brookline Public School System also had a provision for ELBO payments. The ELBO payment to teachers was included as regular compensation in the calculation of their superannuation retirement benefit (testimony of Maureen Flynn).
12. In their applications for superannuation retirement benefits, the Petitioners included the $8750 ELBO payment as regular compensation (Exhibits 3).
13. On September 20, 2006, the Teachers' Retirement System sent the Petitioners written notification that the ELBO payments that they received are not included as regular compensation in the calculation of their retirement benefit (Exhibit 1).
14. The Teachers' Retirement System further stated in this letter of September 20, 2006 that while it "believes that the amount of your ELBO provisions exempts it from the 'grandfather' provision , [it] is willing to include up to $6000 per year in ELBO payments in regular compensation. If you accept this offer, we will adjust your three year salary average to include $6000/year of your ELBO payments in regular compensation…If you decline this offer and would rather file an appeal claiming the entire amount of your ELBO earnings as regular compensation, we will continue to exclude the entire amount of your ELBO payments from your three-year average, pending the outcome of your appeal…" (Exhibit 1).
15. The Petitioners filed timely appeals of the decision of the Teachers' Retirement System with the Contributory Retirement Appeal Board (Exhibit 2).
At the conclusion of the hearing, I ordered Counsel for the Teachers' Retirement System to submit a written clarification of the TRS's decision letter of September 20, 2006. Specifically, I requested that the TRS address the issue as to whether it intended to penalize the Petitioners for exercising their rights to appeal the decision of the TRS concerning the calculation of their individual superannuation retirement benefit. In addition, in light of the fact that Counsel for the TRS acknowledged at the hearing that he was unaware that the ELBO payments were initiated at the same time that the Petitioners' work schedule increased to a full fifty-two weeks, I requested that the TRS address the issue as to whether the fact that the Petitioners were required to work a lengthened school year affected its position concerning the designation of the ELBO payments.
In response to this order, the Teachers' Retirement System submitted a written statement dated April 29, 2008 in which it affirmed that it would include $6000 of the total ELBO payment as regular compensation even if it were to prevail in this appeal. The Teachers' Retirement System also indicated in this written response that it arrived at the $6000 figure by doubling the annual longevity payment that the Appeals Court found acceptable in the case of Christensen v. CRAB, 46 Mass. App. Ct. 229 (1999).
With respect to the second question posed, the Teachers' Retirement System acknowledged that the ELBO provision granted an increase in salary; however, it found no evidence that the increase was related to the lengthened school year. Thus, the Teachers' Retirement System asserted that the excess ELBO payment ($8750 less $6000 or $2750 per year) should not be included as regular compensation in the calculation of the Petitioners' superannuation retirement benefit.
After reviewing the testimony and evidence presented in this case, I conclude that the Petitioners are entitled to have the full amount of the ELBO payment or $8750 per year for three years included as regular compensation in the calculation of their superannuation retirement benefit.
PERAC regulation 840 CMR 15.03 promulgated on April 7, 2006 provides that ad hoc, non-permanent salary enhancements such as ELBO payments shall be excluded from regular compensation. This regulation specifically "grandfathered" members who had such ELBO payments included in a contract that was in effect on or before January 25, 2006.
In this case, the three Petitioners received ELBO payments of $8750 per year for three years as a result of employment contracts that were in effect on or before January 2006.
The Teachers' Retirement System does not dispute that $6000 of the $8750 per year ELBO payment made to the three Petitioners constitutes regular compensation. Rather, the Teachers' Retirement System argues that the additional $2750 per year was excessive and constitutes an "extreme spike in salary" such that it should not be included as regular compensation in the calculation of their superannuation retirement benefit. In support of its position, the Teachers' Retirement System cites Christensen, as well as Boston Association of School Administrators & Supervisors v. Boston Retirement Board, 383 Mass. 336 (1981).
In Christensen, prior to the 1991-92 school year, teachers in Lexington with 10 years of service received annual longevity payments up to $700. A separate contract provision granted severance pay for unused sick leave to teachers with at least 15 years of service and 150 days of sick leave who had given a year's advance notice of their intent to retire. A new contract became effective for the 1991-92 school year. Teachers could choose either the existing $700 annual longevity payment or three consecutive annual longevity payments of $3000 each. Teachers electing the $3000 payments would not be eligible for severance pay for unused sick leave.
Christensen selected the $3000 option and retired after one such payment. The Teachers' Retirement Board only considered $700 of the $3000 to be regular compensation; the rest ($2300) was considered to be a severance payment. The Appeals Court then found "no link" between the payment of $3000 and Christensen's final year of employment. It was not "made contingent upon the termination of employment or retirement. Rather, the payments were based exclusively on longevity and do not inherently operate to augment retirement pay."
In Boston Association of School Administrators & Supervisors v. Boston Retirement Board, 383 Mass 336 (341), the Supreme Judicial Court held that there must be a "safeguard against the introduction into the computations of adventitious payments to employees which could place untoward, massive, continuing burdens on the retirement systems."
Notwithstanding the arguments made by the Teachers' Retirement Board, I conclude that the payments made to the Petitioners, all long-standing dedicated elementary school Principals in the Brookline Public School System, were neither excessive nor overly burdensome. For the 2003-2004 school year, the Petitioners, for the first time, negotiated employment contracts separate and distinct from the teachers' contracts. The longevity provision included in these new contracts awarded the Petitioners $8750 in ELBO payments per year. At the same time, the Petitioners' work schedule was changed from approximately ten months a year to a full twelve months or fifty-two weeks a year. Petitioner Shea's salary for the 2003-2004 school year without the ELBO payment was approximately $100,000.
The Teachers' Retirement System's argument that the additional $2750 per year, representing the difference between the $8750 ELBO payment and the $6000 that the TRB agrees is regular compensation, is inconsistent and illogical, especially in light of the amount of the Petitioners' annual salaries and the fact that they were required for the first time to work twelve months rather than ten months per year.
Moreover, the TRS failed to explain how it derived the $6000 figure as the appropriate amount to be included as regular compensation from the ELBO payment. The TRS merely recited that it doubled the amount of longevity payments that the Appeals Court approved in Christensen. However, Christensen referenced a $3000 longevity payment made to Lexington, MA Public School teachers made during the 1991-1992 school year, eleven years prior to the determination of the ELBO payment in the current case. Here, the TRS did not provide evidence showing that the additional $2750 per year in salary paid to the Petitioners constituted an "extreme spike in salary" or that it would place a massive burden on the retirement system to have that amount included as regular compensation in the calculation of the Petitioners' retirement benefit.
In light of the foregoing, I order that the decision of the Teachers' Retirement System in this case be reversed. I further order that the Teachers' Retirement System recalculate the Petitioners' superannuation retirement benefits to include as regular compensation the $8750 ELBO payments they received during their last three years of employment as Principals in the Brookline Public School System.
Joan Freiman Fink, Esq.
Dated: July 17, 2007