PERAC Memo #17 - 2018: Implementation of the Vernava Decision
Implementation of the Vernava Decision
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This memo supersedes Memo #12/2018 and implements the SJC's Vernava decision (478 Mass. 832), which held that sick and vacation leave supplemental to Workers' Compensation is not "regular compensation" for determining the effective date of accidental disability retirement under G.L. c. 32, § 7. PERAC recommends payroll departments create a separate pay code for such supplemental payments and continue withholding deductions; if the member ultimately retires under § 7, those deductions must be refunded without interest. For already-retired members, recalculation is triggered only by a self-identification request from the retiree, and boards are cautioned that recalculation may be detrimental (not beneficial) in some cases.
Full Text
M E M O R A N D U M
TO: All Retirement Boards
FROM: Joseph E. Connarton, Executive Director
RE: Implementation of the Vernava Decision
DATE: April 9, 2018
This memorandum is intended to supersede PERAC Memorandum No. 12 of 2018, which was issued on February 20, 2018.
Introduction
On February 13, 2018, the SJC issued the Vernava decision (a copy of which is attached to this memo), rejecting the long-held position of PERAC, and PERA before it, that vacation and sick time taken in conjunction with Workers' Compensation benefits should be considered regular compensation, and adopting the argument advanced by the Swampscott Retirement Board in litigating this matter.
Limitations
The decision will have no applicability to any member retiring under any section of Chapter 32 other than Section 7. This is because the SJC severely limited the ambit of its decision in footnote 3, which provides in its entirety as follows:
Our interpretation of "regular compensation" in this case is limited to the receipt of supplemental pay in connection with workers' compensation benefits, for the purpose of determining an employee's effective date of retirement under G. L. c. 32, § 7. We need not address the effective date of retirement for public employees who are not receiving workers' compensation, such as those who voluntarily retire and use their supplemental pay before doing so.
Implementation as to Members Who Have Not Yet Retired
The limiting language of footnote 3 presents a challenge in determining whether or not a supplemental payment is regular compensation at the time it is received, because many members may receive Workers' Compensation at certain times during their careers, but may or may not ultimately retire pursuant to the provisions of G.L. c. 32, § 7. Thus, a person who was out on Workers' Compensation mid-career who subsequently retires for superannuation will have those payments counted as regular compensation.
PERAC's recommendation is that payroll departments create a new pay code to utilize when a supplemental payment is being taken in conjunction with Workers' Compensation and withhold regular retirement deductions from such supplemental payments. If the member ultimately retires under G.L. c. 32, § 7, those payments would not be considered regular compensation and the deductions would need to be refunded to the member without interest.
Retroactivity as to Previously Retired Members
In the case of John McIntire, petitioner, 458 Mass. 257, 261 (2010), the SJC held that statutory interpretations are retroactive since the statute has had the same meaning since its enactment. The Vernava decision is therefore retroactive to January 1, 1946. However, since recalculating every accidental disability retirement allowance since 1946 is not practical, PERAC recommends an alternative: for an individual already retired for accidental disability to self-identify to the retirement board. Once a member becomes aware of the Vernava decision and requests recalculation, the Board would then be required to act. Once a retiree requests recalculation, that request cannot be withdrawn.
The Impact on the Allowances of Retirees
Recalculating the benefit in accord with the Vernava decision may sometimes be detrimental to a retiree. With supplemental Workers' Compensation payments excised from regular compensation, allowances calculated under Section 7 will be based upon a rate of compensation in effect in the (perhaps distant) past. Boards are cautioned that this change will be harmful to some retirees and helpful to others.