The Petitioner has not met his burden of proving that he is entitled to the inclusion of payments made to him in lieu of health insurance premiums in his regular compensation for retirement purposes.
Pursuant to M.G.L. c. 32, § 16(4), the Petitioner, Carter Terenzini, is appealing from the January 21, 2016 decision of the Respondent, Worcester Regional Retirement Board (WRRB), denying his request to include payments made to him lieu of health insurance premiums as regular compensation for retirement purposes. (Exhibit 1.) The Petitioner’s timely appeal was received on February 4, 2016. (Exhibit 2.) A hearing was scheduled to be held on January 16, 2018 at the offices of the Worcester Registry of Deeds, 90 Front Street, Worcester, MA.
On January 8, 2018, the parties filed a Joint Motion for Submission in Lieu of Hearing. The motion was allowed. The Petitioner’s submission was received on August 3, 2018. (Attachment B.) The Respondent’s submission was received on August 6, 2018, thereby closing the record. (Attachment C with Exhibits 1-13.)
Exhibit No. Document Description
- -WRRB January 21, 2016 denial letter
- -Petitioner’s timely appeal February 3, 2016
- -February 11, 2008 letter to WRRB from Assistant Town Accountant Lynne Poretti
- -The Petitioner’s Medical Reimbursement Pensionable Income Payroll from July 1, 2005 through January 31, 2008
- -The 2006 to 2008 Town Administrator’s Contract
- -The Petitioner’s two Notifications of Separation from Service
- -The Petitioner’s Deduction Posting Detail from January 31, 2008 to April 30, 2008
- -The Petitioner’s Estimated Retirement Allowances dated August 18, 2010 and March 7, 2013
- -The WRRB’s August 3, 2015 letter to the Petitioner with his corrected Estimated Retirement Allowance
- -The WRRB’s August 12, 2015 letter to Petitioner
- -The Petitioner’s November 1, 2015 letter to WRRB
- -The Petitioner’s Application for Voluntary Superannuation Retirement dated November 1, 2015 with Choice of Retirement Option Form at Retirement
- -The Public Employment Retirement Administration Commission’s (PERAC) December 22, 2015 letter to the WRRB approving Petitioner’s retirement allowance
FINDINGS OF FACT
The parties incorporated by reference the facts to which they agreed in their January 8, 2018 Motion for Submission in Lieu of a Hearing. Based upon the Agreed Facts set forth in Attachment A, I hereby render the following findings of fact:
- This is an administrative appeal to the Division of Administrative Law Appeals (DALA) from the WRRB’s decision to deny the Petitioner, Carter Terenzini’s request to include compensation he received in lieu of him declining to receive the Town of Spencer’s (Town’s) health insurance benefit as regular compensation. [Attachment A (1).]
- The Petitioner, Carter Terenzini, was employed as the Town of Spencer Administrator from July 1, 1999 to April 4, 2008, when he resigned. [Attachment A(2).]
- Pursuant to his 2006 to 2008 Town Administrator’s Contract, the Petitioner received “the sum of 70% of the town’s otherwise incurred cost of such a health benefit plan for each monthly period that the Town shall have avoided such otherwise incurred cost.” [Attachment A (3).]
- In a letter dated February 11, 2008, Assistant Town Accountant Lynne Porretti informed the WRRB that the Town “should have been deducting contributions from him (Petitioner) for ‘additional pensionable compensation’ he was receiving for not taking the Town’s health insurance’.” As a result, the WRRB included the additional compensation as regular compensation. [Attachment A (4).]
- In its estimated retirement calculations on August 10, 2010 and March 7, 2013, the WRRB included as regular compensation the compensation that the Petitioner received in lieu of accepting the Town’s health insurance benefit. [Attachment A (5).]
- On August 5, 2015, the WRRB recalculated the Petitioner’s retirement allowance and excluded the compensation that he had received in lieu of declining the Town’s health insurance benefit from his regular compensation. [Attachment A (6).]
- On November 1, 2015, the Petitioner filed his Application for Voluntary Superannuation Retirement with the WRRB, and he requested that the WRRB recalculate his retirement allowance to include the compensation that he received in lieu of declining the Town’s health insurance benefit as regular compensation. [Attachment A (7).]
- On December 22, 2015, PERAC approved the Petitioner’s retirement allowance that did not include the additional compensation he had requested. [Attachment A (8).]
- On January 21, 2016, the WRRB voted to deny the Petitioner’s request. (Exhibit 1.)
- The Petitioner’s timely appeal was received on February 4, 2016. (Exhibit 2.)
The Petitioner is not entitled to prevail in this appeal. The WRRB is correct in its contention that, as a matter of law, the value of health insurance or any payment made to an employee in lieu of the employer paying its portion of health insurance premiums is not regular compensation. It does not constitute wages for services performed in the course of the employee’s employment for the employer. “Wages” is defined in G.L. c. 32, § 1 are:
[T]he base salary or other base compensation of an employee paid to that employee for employment by an employer; provided, however, that “wages” shall not include, without limitation, overtime, commissions, bonuses other than cost of living bonuses, amounts derived from salary enhancements or salary augmentation plans which will recur for a limited or definite term, indirect, in kind or other payments for such items as housing, lodging, clothing allowances, annuities, welfare benefits, lump sum buyouts for workers’ compensation, job related expense payments, automobile usage, insurance premiums, dependent care assistance, 1-time lump sum payments in lieu of or for unused vacation or sick leave or the payment for termination, severance, dismissal or 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 money paid for holidays shall be regarded as regular compensation, amounts paid as early retirement incentives or any other payment made as a result of the employer having knowledge of the member’s retirement, tuition, payments in kind and all payments other than payment received by an individual from his employing unit for services rendered to such employing unit, regardless of federal taxability. (Emphasis added.)
The Petitioner is not entitled to prevail in this appeal. The Supreme Judicial Court and the Massachusetts Appeal Court have clearly and repeatedly stated that for a payment to be considered regular compensation, the payment must be for services rendered. See Boston Association of School Administrators & Supervisors v. Boston Retirement Board. 383 Mass. 336, 341 (1981) and Rotondi v. Contributory Retirement Appeal Board, 463 Mass. 644 (2012). In Rotondi, supra, the Court concluded that the Appellant’s request to consider the value of his insurance premiums as regular compensation.
Apart from the obvious fact that health insurance premiums are not paid to the employee, as is virtually every recognized form of ‘regular compensation,’ health care costs fluctuate and have increased greatly over time. They are not ‘fixed’ compensation and cannot serve as a practical basis for calculating an employee’s retirement allowance or initially.
Rotondi, supra, at 654, citing Pelonzi v. Retirement Board of Beverly, 451 Mass. 475 (2008) and 840 CMR 15.03(1)-(2), that was promulgated in 2009 and became effective on June 30, 2009.
Ergo, compensation in lieu of an employee benefit is not regular compensation. See Parente v. State Board of Retirement, 80 Mass. App. Ct. 747, 751 (2011). In Parente, supra, the issue before the Appeal Court was whether the employee’s annual allowance for expenses, travel per diem allowance, and the taxable value of her State House parking space could be considered regular compensation. The Appeal’s Court affirmed the decision of the Contributory Retirement Appeal Board that held that such payments were properly excluded from regular compensation:
Although we do not disagree that the annual allowance may be recurrent, regular and ordinary, these reasons alone do not required us to seem it ‘regular compensation’ under G.L. c. 32, § 1…Even though Section 1 does state ‘other compensation in whatever form,’ the statute further qualifies that the compensation must be for the ‘individual service of the employee by the employing authority. Parente, supra.
An analysis of the case law in conjunction with the facts in this case leads to the conclusion that health insurance is a benefit, not remuneration for services performed. The benefit is granted to the employee through either a personal by-law, individual employment contract or a collective bargaining agreement. The Supreme Judicial Court has held that “benefits” are not regular compensation. Pelonzi, supra, at p. 482.
According, the WRRB’s decision denying the Petitioner’s request to have the additional compensation he received quid pro quo in lieu of health insurance premiums Included in his regular compensation is affirmed.
Division of Administrative law Appeals,
Administrative Magistrate DATED: December 7, 2018