SJC decision regarding retirement date changes PERAC practice

A recent decision by the Supreme Judicial Court determined the effective date of retirement for public employees receiving workers’ compensation benefits together with supplemental pay.

In Public Employee Retirement Administration Commission v. Contributory Retirement Appeal Board and others, the SJC held that the effective date of retirement is six months before the filing of an accidental disability application, changing the longstanding practice by PERAC of using the date on which an employee last received regular compensation for employment, which PERAC interpreted to include supplemental pay.

The case arose from the town of Swampscott, where 27-year Public Works employee Robert Vernava sustained injuries on the job on June 30, 2010, and began receiving workers’ compensation benefits the same day. Vernava also received two hours of sick and vacation pay per week while he was out on disability.

On Feb. 1, 2012, the town filed an application, which was approved by the Swampscott Retirement Board, to retire Vernava involuntarily for accidental disability. Vernava received workers’ compensation benefits and his sick and vacation payments until July 7, 2012.

Under state law [Ch. 32, Sect. 7(2)], the effective date of an employee’s accidental disability retirement is the latest of the following: the date the injury occurred, the date six months prior to the filing date of the written application for retirement, or the date on which the employee last received regular compensation. The SJC decided that the sick and vacation pay that Vernava received while he was unable to work was not “regular compensation” when used to supplement workers’ compensation benefits. Reasoning that supplemental pay falls under the list of exceptions to regular compensation listed in Chapter 32, Section 1, the court held that supplemental pay is a substitute for an employee’s regular salary and not payment for work performed.

The SJC did not address the issue of the effective date of retirement for public employees who are not receiving workers’ compensation, focusing the application of its decision on specific instances where employees are receiving workers’ compensation and supplemental payments.

Following the decision, PERAC issued Memo 17-2018 to explain how the decision will be applied. PERAC recommends creating a new pay code to use when a supplemental payment is being taken with workers’ compensation, and withholding regular retirement deductions from those supplemental payments. If a member retires for accidental disability, the payments would not be considered regular compensation and the deductions would need to be refunded to the member without interest.

PERAC has interpreted the decision to be effective retroactive to the date of the enactment of Chapter 32, which was Jan. 1, 1946, but PERAC deemed it impractical to recalculate every accidental retirement allowance since that date. Instead, PERAC recommends that individuals who retired for accidental disability self-identify to their retirement boards to have their allowance recalculated. Once a request for recalculation is made, however, it cannot be withdrawn.

The SJC decision might not be the final word on this issue, however. PERAC’s interpretation of the court’s decision is undergoing a court challenge that will be decided in the coming months.