Yearly payments in lieu of unused vacation days can’t add to a state pension calculation, the Massachusetts Supreme Judicial Court has ruled.
The decision prevents a retired police officer from collecting about $2,700 a year in additional pension – and also stops other public employees in Massachusetts who might have benefited from a comparable boost.
The state Supreme Judicial Court found that payments in lieu of unused vacation time do not qualify as “regular compensation” because they are “elective rather than naturally recurring” and are “salary enhancements … for a limited or definite term.”
Joseph O’Leary, a captain in the Lexington Police Department, took payments in lieu of 10 unused vacation days each year between January 1, 2008 and January 31, 2015, in accord with a collective bargaining agreement between the town and the union representing town police captains and lieutenants. Then he retired.
The question for the court was: Do those payments count toward O’Leary’s pension calculation?
State pensions are based on the average of the top three years of a public employee’s “regular compensation,” which is usually thought of as base salary. The maximum percentage based on age and years of service is 80 percent.
O’Leary’s lawyer argued that since state statutes don’t specifically exclude including yearly payments in lieu of vacation days when figuring “regular compensation” to calculate a pension, such payments should be included.
The lawyer, John M. Becker, of the Boston law firm Sandulli Grace, noted in a brief that “regular compensation” for police officers in Massachusetts includes not just base salary but also education incentive, longevity pay, specialty stipends, shift differentials, and holiday pay. (Not included as “regular compensation” are overtime, in-kind payments, and lump-sum payments for unused sick days or vacation days at the time of retirement, because they are specifically excluded by statute.)
But a lower-court judge found that O’Leary’s paid vacation days look more like overtime pay than regular compensation.
“Much as employees who work hours they are not required to work are traditionally paid ‘overtime’ rates of 1 ½ times their regular wages, O’Leary was, essentially, paid double time for working those 10 days he was not required to work but elected to do so,” wrote Superior Court Judge Jackie Cowin in a decision dated September 26, 2019.
Without the pay-as-you-go unused vacation money figured in, O’Leary stood to have a pension of $83,677.92 a year, but with it the pension would have been $86,677.92, according to a brief in the case filed by the Public Employee Retirement Administration Commission.
That’s a difference of $2,719.80 per year.
The pension dispute split state agencies that deal with pensions. The Public Employee Retirement Administration Commission supported O’Leary’s bid to increase his pension, while the Contributory Retirement Advisory Board opposed it.
Kimberly Budd, the chief justice of the Massachusetts Supreme Judicial Court, wrote the opinion.
Excerpt from brief filed by the Public Employee Retirement Advisory Board of Massachusetts in O’Leary vs. Contributory Retirement Appeal Board.
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