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Pursuant to G. L. c. 32, § 16(4), the Petitioner, Salvatore G. Ciampa, is appealing the determination made by the Respondent, PERAC, that he had excess earnings for the calendar year 2006 pursuant to the G. L. c. 32, § 91A calculations PERAC performed on his 2006 earned income. PERAC's determination was endorsed by the Revere Retirement Board at its November 14, 2007 hearing. (Ex. 2) Mr. Ciampa filed a timely appeal of PERAC's determination after this hearing. (Ex. 1) Mr. Ciampa decided to waive hearing before the Division of Administrative Law Appeals (DALA) pursuant to 801 CMR 1.01(10)(c), and to submit his case on a documentary record and legal arguments. ("A") The case was assigned to me on December 11, 2007. The parties were instructed to file background documents, agreements of fact, and legal arguments by January 11, 2008. ("B") An extension was granted to February 3, 2008, when the record closed.
Mr. Ciampa had a prior appeal against PERAC on excess earnings he was found to have for the year 2004, CR-05-1303 (DALA dec. 1/8/06; no CRAB dec.). Administrative notice has been taken of that Decision, which contained findings of fact on some background information about Mr. Ciampa. ("C")
Exhibit 1 - 11/14/07 letter of appeal.
Exhibit 2 - Excerpt of the 11/14/07 meeting of the Revere Retirement Board discussing the Board's agreement to recoup excess earnings for 2006 based on PERAC's calculations.
Exhibit 3 - 11/14/07 letter of the Revere Retirement Board to PERAC on Mr. Ciampa's challenge to PERAC's determination that he had excess earnings - inclusion of funds from 2006 put into a 401 K retirement account.
Exhibit 4 - Mr. Ciampa's Annual Statement of Earned Income for 2006 filed with PERAC.
Exhibit 5 - Mr. Ciampa's federal tax form 1040 for 2006.
Exhibit 6 - Mr. Ciamps'a W-2 forms received for 2006.
Exhibit 7 - 10/15/07 letter of PERAC to Mr. Ciampa stating that he had excess earnings to recoup.
Exhibit 8 - 10/12/07 Excess Earnings Report on Mr. Ciampa, background document.
Exhibit 9 - Mr. Ciampa's earnings reported for 2006 from Deep Sea
Systems International, Town of Falmouth, and Oceaneering
Exhibit 10 - 10/18/07 letter of the Revere Retirement Board to Mr. Ciampa concerning his 2006 Annual Statement of Earnings, notice of the Board's 11/14/07 hearing about it, and PERAC's calculations.
1. Salvatore Ciampa, d.o.b. 11/16/41, had a career from 1970 as a Revere Fire Fighter. Effective August 1, 2003, he retired on superannuation from the Revere Retirement System. ("A" & "C".)
2. On or about July 29, 2003, Mr. Ciampa filed for accidental disability retirement benefits. Effective July 12, 2004, he was awarded the benefits. ("A" & "C".)
3. During 2006, Mr. Ciampa received his accidental disability retirement allowance of $41,097.31. He also had earnings from employment he held during 2006. He received W-2 forms for 2006 showing that he received: $18,188.25 from Deep Sea Systems International of Cataumet, MA; $2,709.51 from Oceaneering International, Inc. of Morgan City, LA; and $277.50 from the Town of Falmouth. (Exs. 6, 7, 8 & 9.)
4. Mr. Ciampa filed his G. L. c. 32, § 91A Annual Statement of Earned Income for 2006 with PERAC. He provided for support of his statement, his 2006 federal tax form 1040 which he filed jointly with his wife, and his W-2 forms for 2006. (Exs. 4, 5 & 6)
5. By 2006, the base salary for the job Mr. Ciampa held upon retiring from the Revere Fire Department had reached $54,933.17. (Exs. 7 & 8.)
6. PERAC performed a G. L. c. 32, § 91A calculation to determine if Mr. Ciampa had any excess earnings for 2006 using the amount of Mr. Ciampa's 2006 retirement allowance, the amounts shown as total earnings on his 2006 W-2 forms, and the 2006 base salary for his Revere Fire Fighter position. PERAC concluded that Mr. Ciampa had excess earnings of $6,740.14. ("A". Exs. 7, 8 & 9.)
7. PERAC instructed the Revere Retirement Board that Mr. Ciampa had excess earnings to be recouped. The Revere Retirement Board wrote to Mr. Ciampa by letter of October 18, 2007 to report on PERAC's Section 91A calculations. The Board instructed Mr. Ciampa to pay $6,740.14 to the Revere Retirement System. The Board also explained to Mr. Ciampa that he had the right to a hearing before the Revere Retirement Board on the excess earnings calculation. He was informed that this hearing would be held on November 14, 2007. ("A". Ex. 10.) The Board explained:
It appears that much of the calculated amount owed was due to PERAC's inclusion of $4,466.54 in retirement deferrals as wages from Oceaneering International. (Ex. 10)
8. The Revere Retirement Board held a hearing on November 14, 2007. Mr. Ciampa appeared and contended that PERAC should not have included his "voluntary deferrals to a retirement account as wages … that PERAC's inclusion of such deferrals varied from the treatment of such deferrals by the Department of Revenue and the Internal Revenue Service." The Board responded in writing to Mr. Ciampa "that it is bound to withhold the specified amount [$6,740.14], that it was his right to appeal." (Ex. 2)
9. Mr. Ciampa filed a timely appeal to the Contributory Retirement Appeal Board (CRAB) on November 14, 2007. (Ex. 1)
10. The Revere Retirement Board wrote to PERAC on November 14, 2007 about Mr. Ciampa's hearing on his excess earnings for 2006. The Board explained that Mr. Ciampa contested inclusion of his 401k retirement plan contributions as earned income for 2006. (Ex. 3)
Because he is a disability retiree having earnings from employment in 2006, Mr. Ciampa is subject to G. L. c. 32, § 91A. This provision instructs:
If … earnings exceed an amount which when added to the member's retirement allowance is greater than the amount of regular compensation which would have been payable to such member if such member had continued in service in the grade held by him at the time he was retired plus the sum of five thousand dollars, said member shall refund the portion of his retirement allowance for such preceding year equal to such excess and until such refund is made, his … retirement allowance shall be held as security therefore.
The calculations made by PERAC and endorsed by the Revere Retirement Board were properly done. Mr. Ciampa is not able to avoid the reach of Section 91A and exclude the earnings he voluntarily placed in a 401k plan. PERAC's regulation at 840 CMR 10.14(4) supports this determination. This regulation reads in pertinent part:
[T]he term "earnings from earned income" … [in Section 91A] shall mean income that implies some labor, management or supervision in the production thereof, not income derived from ownership of property ….
Mr. Ciampa received W-2 forms for work he performed in 2006. All the total earnings listed on those W-2 forms is earned income for purposes of Section 91A even if he ends up placing some or all of those earnings into a 401k retirement account so that he does not have those funds available to him. Mr. Ciampa is concerned that this interpretation of the reach of Section 91A is at odds with how the Internal Revenue Service and the Massachusetts Department of Revenue treat deferrals of funds into retirement accounts. There is no provision within Section 91A which calls for treating such deposited funds as deferred income and not earnings to report. The case law supports a need to include all the 2006 earnings from employment Mr. Ciampa received in the Section 91A calculation. In Gorman v. CRAB, 67 Mass. App. Ct. 123 (2006), a Section 91A case, a retiree sought to exclude his unreimbursed travel expenses from the calculation, arguing that his W-2 income amount should be reduced by the amount of those expenses. The Appeals Court did not find merit in his claim, and explained:
The determination of tax liabilities, including but not limited to taxable income adjusted for deductions or credits on Federal and State income tax returns, does not control the calculation of pension overpayments and recoupment under s. 91A. Id. at 124.
The Appeals Court provided further support for inclusion of the overall total income reported on W-2 forms in the Section 91A calculation as follows:
It is reasonable for PERAC and CRAB to rely on a pensioner's statement of income as shown on a W-2 form, and these governmental pension agencies cannot be called upon to conduct a tax-based analysis of what part of these "[w]ages, tips, [and] other compensation" as stated on an employee's W-2 tax form … may or may not be subject to deduction under the Federal Internal Revenue Code … or State law …. Nor do we see anything in these tax code provisions that compels the conclusion that earned income for G. L. c. 32, s. 91A, calculations can only reasonably be construed if linked
to adjustments to wages …. Further consistent with this analysis is that s. 91A refers to the "full amount of . . . earnings from earned income." G. L. c. 32, s. 91A …. "Full" means, in this context, the entire amount, without accounting for possible adjustments or deductions. Id at 128.
For purposes of Section 91A, there is no difference between Mr. Gorman's claim to exclude unreimbursed expenses from earned income and Mr. Ciampa's claim to exclude voluntary contributions from his earned income into a 401k plan.
For the foregoing reasons, PERAC's calculation of excess earnings for 2006, is affirmed. Mr. Ciampa must pay to the Revere Retirement Board the amount of excess
earnings determined for 2006.
DIVISION OF ADMINISTRATIVE LAW APPEALS
Sarah H. Luick, Esq.
DATED: April 18, 2008