PERAC Wins Round Two vs. Disability Retirees

NOVEMBER 2000 -
In July, we reported on the ongoing controversy surrounding disability
retirees and the Public Employee Retirement Administration Commission
(PERAC), over the law relating to disability retirees and the
restrictions on, as well as the reporting of, their earnings while on
disability (Section 91A, Chapter 32). We emphasized that as with any
litigation, these were initial findings, then favoring the retirees,
and, therefore subject to change. Well, unfortunately for these
retirees, our words of caution came true - with round two apparently
going in PERAC's favor.

In
the case, involving Paul Theodos, the Division of Administration
Appeals (DALA) rejected PERAC's claim that moneys, distributed to
Theodos as a shareholder in a small business and not as an employee
under a W-2 form, should be considered "earnings from earned income."
DALA's decision was reviewed by the Contributory Retirement Appeal
Board (CRAB), which can then enter its own decision in the case.

CRAB
reversed DALA's decision, finding that PERAC acted properly when it
included not only earnings shown on a W-2, but also those shown as
distributions from a small business and unearned for tax purposes.
According to CRAB, "[t]he legislature intended for the administration
and enforcement of G.L.c.32 s.91A to be within the jurisdiction of
PERAC and intended to limit the jurisdiction of the Retirement Boards."

In
a related case (Brown v. Norfolk Cty. Ret. Bd.), not reported in the
July Voice, CRAB found that section 91A means "all earnings, not
earnings reduced by expenses." CRAB rejected Brown's argument that the
earnings, which he reported to PERAC, should not include employee
business expenses that he reported, as a deduction, to the IRS.

Another
case, on which we did report, appears to strengthen PERAC's power under
Section 91A. CRAB again rejected a DALA decision that a disability
retiree, who is a paraplegic, could refuse to disclose information
relating to his wife on their joint tax return. In the D'Innocenzo
case, CRAB ordered the Newton Retirement Board to withhold
D'Innocenzo's pension until he provided PERAC with the first 2 pages of
his federal tax return, as well as any Schedule Cs, showing everything
including his wife's tax information.

These
retirees do have the right to appeal the CRAB decisions to the state
court. When we went to press, the time to file an appeal had not yet
expired.

In the one
state court case, on which we did report earlier, Boston Firefighters
Union 718 was unsuccessful in persuading the court that PERAC could not
force disability retirees to file the portions of their tax returns
demanded by PERAC. According to the court, an administrative agency,
like PERAC, has considerable latitude in interpreting its enabling
statute and Section 91A supports a broad reading of PERAC's authority
to request all documents it claims are needed."

While
upholding PERAC's authority, the Court rejected the union's claims that
the agency was infringing upon the disability retiree's right to
privacy. At press time, an appeal to the state's court of appeals had
not been filed.

Again, the final word has not been issued in this controversy, as appeals are filed and more decisions are issued.

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