DocketNumber: No. 05-P-695
Citation Numbers: 67 Mass. App. Ct. 123
Judges: Berry
Filed Date: 8/16/2006
Status: Precedential
Modified Date: 6/25/2022
The Contributory Retirement Appeal Board (CRAB) and the Public Employee Retirement Administration Commission (PERAC) appeal from a decision of the Superior Court reversing, in part, a CRAB decision requiring the plaintiff, William Gorman, to reimburse the Commonwealth for a portion of the disability pension payments Gorman received in 1998 and 1999. General Laws c. 32, § 91 A,
At issue is whether CRAB correctly determined that Gorman’s earned income for purposes of G. L. c. 32, § 91 A, was the amount of wages stated in box 1 of his W-2 form,
1. Background. Gorman is a retired State police officer receiving a disability pension from the Commonwealth. Following his retirement, Gorman commenced employment with Walters State Community College in Morristown, Tennessee (Walters State).
Pursuant to G. L. c. 32, § 91 A, a pensioner, such as Gorman,
Based on these filings, PERAC calculated that Gorman’s 1998 and 1999 earned income exceeded the allowable amounts under § 91A by $10,101.87 and $8,202.78, respectively, and PERAC directed the State Board of Retirement to inform Gorman that he was responsible for returning approximately $18,000 in excess retirement payments for the two years.
Gorman appealed PERAC’s decision to CRAB, which referred the matter to the Division of Administrative Law Appeals (DALA). After a hearing, the DALA agreed with Gorman, finding that the unreimbursed travel expenses should not have been counted as part of Gorman’s earned income. PERAC filed objections to the DALA’s findings, and CRAB reversed, siding with PERAC. CRAB held that the term “full amount of earnings from earned income,” as used in § 91 A, “means all earnings, not earnings reduced by expenses that the retiree claims for income tax purposes.” It noted that if the payments had
2. The CRAB construction of G. L. c. 32, § 91A, “earned income.” We consider whether CRAB’s interpretation of earned income for purposes of § 91A— essentially as being equivalent to Gorman’s reported wages without deduction for claimed expenses — is reasonable. Decisions of administrative agencies are afforded great deference, but “[w]here an agency determination involves a question of law, it is subject to de nova judicial review.” Flemings v. Contributory Retirement Appeal Bd., 431 Mass. 374, 375 (2000). Nevertheless, “[wjhere an agency’s interpretation of a statute is reasonable, the court should not supplant it with its own judgment.” Boston Retirement Bd. v. Contributory Retirement Appeal Bd., 441 Mass. 78, 82 (2004), citing Flemings, supra at 375.
The term “earnings from earned income” in § 91A is not defined. However, in 1998, PERAC issued a memorandum in which it defined “earned income” as “implying] some labor, management or supervision in production thereof” (the first clause). PERAC elaborated that for an individual operating a business for profit, earned income would include “[pjrofits derived from the operation of a business through some labor, management or supervision of production of such profits . . . regardless of how a retiree categorized such income for income tax or other purposes” (emphasis supplied) (the second clause). PERAC Memo #64/1998 (hereinafter referred to as PERAC #64 memorandum).
The PERAC #64 memorandum and the holding in Boston Retirement Bd., supra, addressed profits derived from a pensioner’s operation of a business. In this case what is at issue are employee wages, not business profits. However, as applied to pension distribution overages under § 91 A, the analysis in the PERAC #64 memorandum is pertinent to wages, not just business profits. Indeed, both parties in this appeal cite the memorandum as authority and rely on it. We agree that the PERAC #64 memorandum informs the resolution of this appeal.
With the PERAC #64 memorandum as backdrop, the parties frame the analytic debate in this appeal in terms of whether Gorman’s unreimbursed travel expenses should be considered under the first or second above-quoted clause of the PERAC #64 memorandum. Gorman argues that payments for his unre-imbursed travel expenses do not fall within the first clause because they are not derived from “labor, management or supervision in production thereof” and, thus, cannot be considered part of his earned income. CRAB argues that because the expenses were included as income on Gorman’s tax forms, they are countable under the second clause of the PERAC #64 memorandum as earned income, “regardless of how [Gorman] categorized such income for income tax or other purposes.”
For these reasons, CRAB’s determination that counting Gorman’s W-2 declared wages as earned income is a reasonable interpretation of § 91A and is in accord with the purposes underlying the pension recoupment standards set forth in that section. See Boston Retirement Bd., 441 Mass. at 82 (court will not supplant with its own judgment the construction of a statute adopted by the administrative agencies charged with enforcing that statute). The judgment of the Superior Court is reversed insofar as it held that CRAB erred in including the plaintiff’s unreimbursed travel expenses as earned income. A new judgment shall enter affirming CRAB’s decision.
So ordered.
General Laws c. 32, § 91A, as appearing in St. 1996, c. 306, § 50, provides, in relevant part:
*124 “Every person pensioned or retired under any general or special law for disability . . . shall in each year . . . file with [PERAC] a statement . . . certifying the full amount of his earnings from earned income during the preceding year. Such pensioned or retired person shall annually submit to [PERAC] all pertinent W-2 forms, 1099 forms, other requested tax forms and proof of income, and any other documentation requested by [PERAC], ... If such earnings exceed an amount which when added to the member’s retirement allowance is greater than the amount of regular compensation which would have been payable to such member if such member had continued in service in the grade held by him at the time he was retired plus the sum of five thousand dollars, said member shall refund the portion of his retirement allowance . . . equal to such excess . . . .”
Section 91A was amended in 2004 by St. 2004, c. 149, § 85, but the portions of the statute pertinent to this appeal were not changed.
Box 1 of the W-2 form states the amount of wages, tips, and other compensation paid to an employee in a given calendar year.
Basically, the current annual salary for the pensioner’s last position, plus $5,000.
This combined total also includes deductions for deferred compensation. Those deductions are not at issue in this appeal.
PERAC later incorporated the substance of the PERAC #64 memorandum into its regulations. See 840 Code Mass. Regs. § 10.14(4)(2004), which provides as follows:
“The term ‘earnings from earned income’ [in § 91A] shall mean income that implies some labor, management or supervision in the production thereof, not income derived from ownership of property. . . . Profits*127 derived from the operation of a business through some labor, management or supervision of such profits are earned income, regardless of how a retiree categorized such income for income tax or other purposes.”
“Annual gross earned income” is defined as “income earned by a retired member under any provision of this chapter, and referring to compensation earned for performing personal services actually performed, including wages, salaries, fees, commissions or gratuities, or similar income, during each calendar year.” G. L. c. 32, § 1, as inserted by St. 1982, c. 630, § 6. The court in Boston Retirement Board determined that “ ‘earned income,’ pursuant to § 91A, and ‘[a]nnual gross earned income,’ in § 1, are not one and the same.” Boston Retirement Bd, 441 Mass. at 82. Nevertheless, the court found that PERAC’s interpretation of “earned income” in its #64 memorandum was consistent with the definition found in § 1. Ibid.