Robert Parsons is appealing the June 30, 2006 decision of the Hampden County Regional Retirement Board determining that certain longevity payments made to him pursuant to the terms of a collective bargaining agreement were not "regular compensation" for the purposes computing his superannuation retirement allowance (Ex. 1). He appealed timely in accordance with the provisions of G.L. c. 32 §16(4) (Ex. 2). I heard the appeal on October 9, 2007 at the office of the Division of Administrative Law Appeals, 98 North Washington Street, 4th Floor, Boston, MA 02114. There are seven documents in evidence (Exs. 1 - 7). I marked the pre-hearing memorandum of the Petitioner as "A" for identification and the pre-hearing memorandum of the Respondent as "B" for identification. The Petitioner testified; there is one tape of the hearing.
Findings of Fact
1. Robert Parsons was a police officer for the Town of Longmeadow for 29 years until his June 30, 2006 retirement (testimony).
2. On January 25, 2006, the Public Employee Retirement Administration Commission (PERAC) voted to file an amendment to 840 CMR 15.03 with the clerks of the House of Representatives and the Senate subject to review and recommendation of the respective standing committees. (If the General Court takes no final action relative to regulations within 45 days of the date said regulations are filed, the regulations shall be deemed to be approved) (Exs. 4 and 5).
3. Mr. Parsons was covered by a collective bargaining agreement ("CBA") between the Town of Longmeadow and the International Brotherhood of Police Officers (Ex. 3).
4. The CBA was made effective from July 1, 2005 through June 30, 2008 and was ratified March 6, 2006. It contains the following provision under Article 18, Longevity Provision:
The Town will implement an option for employees with twenty (20) years of service to elect three (3) consecutive longevity payments of $3,500 each year, paid incrementally with regular payroll, in exchange for permanently giving up Article 18 longevity payments, the uniform and equipment allowance in Article 19, the personal days in Article 22, and the sick leave buyback in Article 24 of the current Agreement (Ex. 3).
5. Mr. Parsons decided to accept the new salary augmentation provision. As a result, he gave up a longevity payment of $650, a uniform and equipment allowance of $750, three days of earned time, and $3,000 of sick leave buyback (Ex. 3 and testimony).
6. On March 29, 2006, Mr. Parsons received a lump sum payment representing the portion of the new salary augmentation benefit under the CBA retroactive to July 1, 2005. Deductions for retirement were taken from the lump sum payment (Ex. 6 and testimony).
7. After receiving the lump sum payment, up until the effective date of his retirement, Mr. Parsons received regular salary augmentation payments from which retirement deductions were taken (Ex. 6 and testimony).
8. The amendments to 840 CMR 15.03 became effective April 7, 2006. The pertinent portion provides:
Any extraordinary or ad hoc payment amount shall be excluded from regular compensation. Exclusions shall include, but not be limited to: …
(c) any amounts paid as bonuses other than cost-of-living bonuses, provided that any payment to an employee or group of employees which will not recur or which will recur for only a limited or definite term will be considered a bonus, and further provided that any payments to an employee or group of employees as part of a salary augmentation plan or salary enhancement program which is provided for in an individual contract in effect on or before January 25, 2006 or in a collective bargaining agreement in effect on or before January 25, 2006, including payments under such a plan or program which will not recur or which will recur for only a limited or definite term, shall be treated as regular compensation; and further provided, that any employee who is covered by such an agreement or contract on January 25, 2006 and who begins, at any time during the life of a collective bargaining agreement or individual employment contract in effect on or before January 25, 2006, to receive benefits and make retirement contributions pursuant to a salary augmentation plan or salary enhancement program under such a collective bargaining agreement or individual employment contract, may complete the plan or program under that agreement or contract…(Ex. 4).
9. On May 30, 2006, the Hampden County Retirement Board wrote to the Public Employee Retirement Administration Commission ("PERAC") to request a legal opinion regarding the effect of the new regulations on Mr. Parsons (Ex. 6).
10. On June 30, 2006, the Hampden County Retirement Board advised Mr. Parsons that according to an oral opinion from PERAC, a plan had to be in place and a member participating in the enhanced longevity plan on or before January 25, 2006 for the payments to be considered regular compensation (Ex. 1).
11. Mr. Parsons appealed, stating in his letter of appeal:
The town was in negotiations for the fiscal year 2006 through 2008. The Union Negotiator and State Mediator assured the union that this item in the contract would be acceptable and it was a deciding factor in the signing of the contract. The Enhanced Longevity Program was in place long before the actual signing of the cont[r]act which was retroactive to July 01, 2005 (Ex. 2).
12. On December 5, 2006, PERAC responded in writing to the May 30, 2006 request of the Board, opining that "the longevity lump sum payments made in the last year of a member's employment…are not regular compensation" because the CBA in question "went into effect on March 29, 2006" (Ex. 7).
Conclusion and Order
The decision of the Hampden County Retirement Board determining that the longevity payments made to Mr. Parsons were not regular compensation is reversed.
Were it not for the new language added to 840 CMR 15.03(2), it would be undisputed that the payments to Mr. Parsons representing the salary augmentation payments would be regular compensation. The case of Nancy Christensen v. CRAB, 678 N.E.2d 863 (Mass. App.Ct.1997), discusses the parameters of regular compensation. The CBA in effect prior to the 1991 - 92 school year provided that teachers with 10 years of service received annual longevity payments up to $700. A separate contract provision granted severance pay under certain conditions for teachers who had given a year's advance notice of their intent to retire. A new CBA 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 $3,000 each. Teachers electing the $3,000 payments would not be eligible for severance pay. Christensen selected the $3,000 option and retired after one payment. The Teachers' Retirement Board treated only $700 of the $3,000 as regular compensation; the rest ($2,300) was considered to be a severance payment. The Appeals Court, however, found "no link" between the payment of $3,000 and Christensen's final year of employment. It was not "made contingent upon the termination of employment or retirement…[T]he payments are based exclusively on longevity and do not inherently operate to augment retirement pay." Christensen, p. 866.
The Christensen rationale applies in the instant appeal. Employees with 20 years of service could elect the new salary augmentation plan; there was no link to retirement. Mr. Parsons gave up certain benefits in exchange for the new provision. The regulation did not become effective until April 7, 2006. The CBA was ratified prior to that date and made effective July 1, 2005. On March 29, 2006, Mr. Parsons received a lump sum payment that was a prorated salary augmentation payment for the period July 1, 2005 to March 11, 2006. I conclude, therefore, that Mr. Parsons was covered by a CBA that was in effect on or before January 25, 2006, that he began to receive benefits and make retirement contributions pursuant to the salary augmentation plan under the CBA during the life of the CBA, and that the payments he received are regular compensation. Alternatively, the regulation is not applicable because it did not become effective until after Mr. Parsons began receiving the new longevity payments. Pursuant to the Christensen decision, these payments are regular compensation.
Based on the foregoing, the decision of the Hampden County Retirement Board is reversed. The matter is remanded to the Board for the recalculation of the pension of Mr. Parsons that will include the payments made under the salary augmentation plan as regular compensation.
DIVISION OF ADMINISTRATIVE LAW APPEALS
Kimberly A. Fletcher
First Administrative Magistrate