SJC Hands Rare Defeat To Chief – Personal Use Of Town Vehicle Does Not Count Toward Retirement

The Supreme Judicial Court has ruled that a public employee’s personal use of a municipal vehicle, which also is used for official purposes, does not count as “regular compensation” for purposes of retirement. The decision ( is Pelonzi v. Retirement Board of Beverly, SJC-10098 (May 21, 2008.

The retirement allowance of public employees generally is based upon a percentage of the “regular compensation” paid to employees. “Regular compensation” generally includes base wages and other wage enhancements, such as specialty stipends and shift differentials, and excludes (contrary to media reports) overtime and details. Over the years, the Public Employee Retirement Administration Committee has held changing positions on whether the personal-use value of an employer-supplied vehicle qualifies as “regular compensation.”

In the case of Bulger v. Contributory Retirement Appeal Bd., 447 Mass. 651 (2006), the SJC ruled that housing payments paid to former UMass President William Bulger counted as “regular compensation” and ordered that these payments be figured into his retirement allowance. This decision naturally led many persons to conclude that all knowing personal use of a company vehicle qualified as “regular compensation.” The SJC’s decision now disabuses legal practitioners of this notion and reminds us that William Bulger’s case exists in a special class by itself.

The court agreed that “the personal use value of the city-supplied automobile [qualified] as a “regular” benefit, in the sense that it was recurring and not incurred as a bonus or in lieu of payment for special services.” This same benefit, however, did not qualify as “compensation . . . for the individual service” of the employee as that phrase is defined under General Laws Chapter 32, §1. Under the SJC’s analysis, a benefit qualifies as compensation apparently to the degree that the employee doesn’t need the benefit. To wit, Bulger didn’t really need a housing allowance, so it really serves as a financial incentive to him. Whereas, vehicles for public safety executives are “required by the fundamental nature” of the job. As the SJC wrote, “Employers routinely supply employees with other noncash job related accessories and benefits (e.g., cellular telephones, personal computers, facsimile machines, parking spaces) to enable their employees to perform their jobs more efficiently, and may authorize the personal use of these benefits as a matter of convenience.”

Therefore, personal-use value of a company car is unlikely to count toward public employee retirement in Massachusetts unless the employee can show that a written agreement with the employer provided a company vehicle as an enticement for the employee to improve his or her performance and that the employer could take away the vehicle (for either personal or official purposes) as a result of underperformance.

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