PERAC Memo #15 - 2004: Boston Retirement Board v. Contributory Retirement Appeal Board et al., 441 Mass. 78 (2004)
Boston Retirement Board v. Contributory Retirement Appeal Board et al., 441 Mass. 78 (2004)
View original on MA State Library →Summary
This memo reports the SJC's decision affirming PERAC's definition of "earned income" under G.L. c. 32, §91A, confirming that distributions from a closely held corporation constitute earned income when a disability retiree contributes labor, management, or supervision to their production. The Court also upheld PERAC's authority to issue such interpretive guidance without formal rulemaking and confirmed PERAC's statutory power under §21(4) to review and reverse local board determinations. Boards should continue applying PERAC's established §91A earned income standard (per Memo #64/1998) when evaluating disability retirees' outside earnings, understanding that PERAC's determinations on such matters are legally enforceable.
Full Text
Memorandum 15 /2004
M E M O R A N D U M
TO: All Retirement Boards
FROM: Joseph E. Connarton, Executive Director
RE: Boston Retirement Board v. Contributory Retirement Appeal Board et al.,
441 Mass. 78 (2004)
DATE: March 8, 2004
The Massachusetts Supreme Judicial Court has affirmed PERAC’s definition of earned income for the purposes of G.L. c. 32, § 91A. As provided in PERAC Memorandum #64/1998, distributions from a closely held corporation where a disability retiree provides some labor, management or supervision in the production of the distribution are considered earned income. The Court ruled, “PERAC's definition of ‘earned income’ is a reasonable interpretation of the statute on its face, thereby suggesting that it is consistent with legislative intent.”
Justice Cowin, for the unanimous Court, wrote “[t]he purpose of § 91A is to prevent the overpayment of retirement benefits to individuals who are, by their labor, management, or supervision, earning a significant amount of money while simultaneously receiving a disability allowance. PERAC's definition furthers this purpose because it prevents disability retirees such as [the retiree] from circumventing the statute by labeling such earnings as something other than what they are.”
The Court further ruled on PERAC’s ability to make determinations regarding the retirement systems without going through the lengthy regulation process. “PERAC's memorandum is not a ‘regulation’ within the meaning of G. L. c. 30A, § 1 (5), and therefore did not require formal rule making procedures. PERAC circulated the memorandum after receiving inquiries from local boards concerning the definition of ‘earned income.’ Thus, the memorandum was issued only to clear up an ambiguity and fill in gaps for determining what constitutes ‘earned income’ pursuant to § 91A.”
Lastly, on the issue of PERAC’s ability to review decisions of retirement boards, the Court ruled that G.L. c. 32, § 21(4) empowers PERAC to approve any determinations of any board in order to effectuate the statute’s purposes. The power to approve is a broad grant of review authority, and “necessarily implies the lesser power to ‘disapprove’ or ‘reverse’ a local retirement board's determination. PERAC's directive reversing the retirement board's determination … was a proper exercise of PERAC's authority pursuant to G. L. c. 32.”
This decision represents an important step in assuring that retirees faithfully comply with the provisions of G.L. c. 32, § 91A. If you have further questions or concerns, please contact this office.