The Massachusetts Supreme Judicial Court has clarified that a retirement board should not consider sick leave or vacation benefits that an injured employee received as a supplement to workers’ compensation payments when determining the employee’s retirement date.
The court said that such supplementary payments are not part of “regular compensation” that state laws say should be used in figuring retirement dates. The high court also said this “regular compensation” definition is to be applied broadly and retroactively by retirement boards.
In a 2018 (Vernava) case, the court had found that where an employee receives accrued vacation or sick leave pay in conjunction with workers’ compensation benefits, such supplemental pay is not “regular compensation” because the injured “employee has ceased providing services to the employer.”
In this latest case, (Worcester Regional Retirement Board & Others Vs. Public Employee Retirement Administration Commission), the court addressed whether this definition of “regular compensation” should apply to all types of retirements and whether it applies retroactively.
PERAC, the regulatory agency overseeing the 104 retirement systems had, issued a memorandum advising retirement boards on the scope of the Vernava “regular compensation” decision maintaining that it applied solely to calculations of an employee’s effective date of accidental disability retirement and did not apply to other retirements such as those related to ordinary disability or superannuations (pensions).
However, the state’s high court has now clarified that its past ruling on “regular compensation” is not as narrow as PERAC interpreted it.
“Because our interpretation of ‘regular compensation’ in Vernava did not depend on the specific retirement provision under which the issue arose, we conclude that this construction applies consistently across uses of the term, thereby applying to superannuation, ordinary disability, and accidental disability retirement, and does so retroactively,” the court concluded.
The high court rejected a PERAC request that the rule, if applied broadly, apply only to future calculations and not to past benefits, even though PERAC argued that might mean loss of benefits for some retirees.
The justices said that PERAC did not offer a specific estimate of how many existing retirees would be rendered ineligible for benefits due to retroactive recalculation. PERAC offered only that “at least hundreds” of retirees had received supplemental pay in conjunction with partial incapacity workers compensation. The court suggested that retirement boards may exercise discretion to waive recalculations that would result in the total loss of retirement benefit eligibility for some existing retirees.
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