Overview of the Public Employee Retirement Administration Commission

This section describes the makeup and responsibilities of Public Employee Retirement Administration Commission.

Background

The Public Employee Retirement Administration Commission (PERAC), established by Chapter 306 of the Acts of 1996, is responsible for the oversight and regulation of the 104 public retirement systems in Massachusetts. PERAC provides a variety of daily oversight functions to retirement boards. Its various units (see Appendix A) approve benefit calculations; review disability applications; review investment procurement, contracts, and vendor disclosures; and conduct retirement system actuarial valuations.¹ In addition, PERAC performs field examinations and desk reviews of the records of all public retirement systems at least once every three years. PERAC also provides training as well as legal and technical assistance to retirement boards.
 

104  The number of public retirement systems in Massachusetts for which PERAC is responsible for oversight and regulation.

PERAC has promulgated regulations (Section 10 of Title 840 of the Code of Massachusetts Regulations) governing disability retirement procedures that retirement boards must follow. As part of its oversight under these requirements, PERAC schedules medical examinations and is responsible for final approval of every disability case.

According to its enabling statute, PERAC falls under, but is not subject to, the Executive Office for Administration and Finance; it is thus an independent agency. As of September 2017, PERAC had 54 employees. Its headquarters are at 5 Middlesex Avenue in Somerville.

Commission Composition and Duties

In accordance with Section 49 of Chapter 7 of the Massachusetts General Laws, PERAC is directed by seven unpaid commissioners. The Governor² appoints three members and the State Auditor appoints three members;³ these six members choose a seventh member as chair, as well as an executive director, who plans and oversees the administrative functions of the agency. As of September 2017, the commission was directed by the following members:

• Philip Y. Brown, Esq., chair
• Kathleen M. Fallon, designee, appointed by the Governor
• Timothy Dooling, designee, appointed by the State Auditor
• James M. Machado, public safety representative, appointed by the Governor
• Jennifer F. Sullivan, investment professional, appointed by the Governor
• Kate Fitzpatrick, Massachusetts Municipal Association representative, appointed by the State Auditor
• Robert B. McCarthy, American Federation of Labor and Congress of Industrial Organizations designee, appointed by the State Auditor

The commissioners, who meet once per month, vote on internal and external policies and procedures, promulgate regulations, adopt an annual operating budget, and recommend legislation. They have also established several subcommittees (see Appendix B) that meet regularly to review and concentrate on specific areas of policies/procedures.

Medical Panel Examinations

Pursuant to Chapter 32 of the General Laws, any member of a public retirement system in Massachusetts who applies for disability retirement benefits must be examined by three independent doctors who specialize in the applicant’s area of disability. The doctors are referred to as a medical panel. For an applicant to receive disability retirement benefits, at least two of the three panel physicians must agree that s/he cannot perform the essential duties of his/her particular job and that the disability is likely to be permanent. In the case of an application for accidental disability retirement, at least two of the three panel physicians must also certify that the injury is job-related. PERAC is statutorily responsible for scheduling and paying for these medical appointments.

In addition to completing a thorough physical examination, the medical panel reviews the medical information provided by the applicant’s retirement board, completes appropriate certificates, and submits a written narrative report to PERAC in support of its conclusions. PERAC reviews each narrative report and certificate to ensure that every question has been answered and that the physicians have complied with PERAC’s procedures and requirements. After its review, PERAC forwards the completed narrative report and certificates to the applicant’s retirement board.

PERAC Final Approval of Disability Applications

On receipt of the medical panel report and other evidence, the applicant’s retirement board makes its decision about whether to grant disability retirement benefits. If the retirement board approves the application, it sends the application to PERAC for final action. If the board denies the application, it advises the applicant of his/her right to appeal the decision.

According to statute, PERAC must approve every disability application before it becomes effective. Upon receipt, PERAC has 30 days to review an application; if the application is not reviewed, it is automatically approved. Each application is reviewed by two PERAC attorneys in the PERAC Legal Unit. The Legal Unit either approves the application, or remands it to the retirement board if it finds that the board’s decision was “(1) made upon unlawful procedure, (2) unsupported by substantial evidence, (3) arbitrary and capricious, or (4) a result of fraud or misrepresentation,” as set forth in Section 21(1)(d) of Chapter 32 of the General Laws.

According to its executive director, PERAC processes between 500 and 600 disability applications annually. The total number of approved disability cases averaged approximately 526 per year during the last five years.

PERAC Disability Retirement Approvals in Calendar Years 2013–2017*

Retirement Type	2013	2014	2015	2016	2017
Accidental†	486	483	462	412	418
Ordinary‡	83	81	72	83	53
Total Approved	569	564	534	495	471

*     Statistical information was provided by PERAC management.

†      Accidental disability retirement benefits are for applicants who are permanently and totally disabled from performing the essential duties of their positions because of job-related injuries or exposure to job-related hazards.

‡      Ordinary disability retirement benefits are for applicants who are permanently and totally disabled from performing the essential duties of their positions for any reason independent of their work.

Disability Benefit Calculations

Under Section 21(3) of Chapter 32 of the General Laws, PERAC is required to approve the amounts of retirement allowances granted by retirement boards.¹ After PERAC approves a retirement board’s decision to grant disability retirement benefits, the board performs the initial benefit calculation and sends it to PERAC for approval along with required information used to determine the amount (such as the applicant’s annuity savings account information and payroll records) before the board makes the first payment to the applicant. PERAC reviews the information and performs its own calculation. PERAC discusses any calculated benefit amounts that do not match the initial calculations with the retirement board that provided them to determine the reason for the discrepancy. All discrepancies are resolved before PERAC generates an approval letter. Once the benefit amount is approved, PERAC generates an approval letter and sends it to the retirement board, notifying the board that PERAC has approved the benefit and its amount.

1.    The PERAC website defines “actuarial valuation” as follows: “The valuation is a ‘snapshot’ picture of how well the plan is funded at that time. The valuation compares the plan’s liabilities (current and future payments to be made upon retirement, death, disability, or termination of employment) with the plan’s assets (both employer and employee contributions credited with investment earnings).”

2.    Of the three members appointed by the Governor, one is the Governor or his/her designee, one is a representative of a public safety union, and one is an expert in the investment of funds.

3.    Of the three members appointed by the State Auditor, one is the State Auditor or his/her designee, one is the president of the Massachusetts American Federation of Labor and Congress of Industrial Organizations or his/her designee, and one is a representative of the Massachusetts Municipal Association. Generally accepted government auditing standards require that organizations be free from organizational impairments to independence with respect to the entities they audit. This disclosure is made for informational purposes only, and this circumstance did not interfere with our ability to perform our audit work and report the results thereof impartially.

4.    The state’s two largest retirement systems, the Massachusetts State Employees’ Retirement System and the Massachusetts Teachers’ Retirement System, are allowed to calculate their own benefits using automated systems approved by PERAC.

Date published:	June 28, 2018