Career Incentive Payments not Regular Compensation

Upon retiring from public service, a member of the Massachusetts Public Employee Retirement System is entitled to a superannuation retirement allowance that is based on the member’s average annual rate of regular compensation for his last three years of employment or for his three highest paid consecutive years of service. Regular compensation is generally considered to be an employee’s base salary.

Because of the above-described retirement formula, disputes sometimes arise regarding what is considered “regular compensation” for retirement purposes. A series of decisions have progressively narrowed the definition of regular compensation. For example, in the recent case of Burke v. Teachers Retirement Board, certain payments that Ms. Burke received were determined to be “career incentive payments” and, therefore, not regular compensation.

Ms. Burke was a member of the Massachusetts Teachers’ Retirement System Pursuant to her contact with the Mystic Valley Regional Charter School, she was to receive payments for remaining in her position and the total amount of these payments was based on her staying employed with the Charter School. Ms. Burke claimed that the payments were longevity payments and, therefore, countable towards her regular compensation calculation for retirement purposes.

Certain bonuses are considered regular compensation and not countable towards retirement. Likewise, 807 CMR 6.02 (2)(e) explicitly excludes “amounts paid as a career incentive which do not become part of the member’s base salary” from calculations of regular compensation.

It was determined that the payments made to Ms. Burke for fulfilling her yearly contracts with MVRCS were paid as career incentives and are not part of her base salary. For payments to be included as longevity payments for purposes of regular compensation calculation, they must be paid on a non-contingent basis.

These payments do not meet the “non-contingent” requirement of a longevity payment because they are contingent upon the teacher’s fulfillment of the yearly school contract. Ms. Burke received these payments on the condition that she continued working beyond certain dates that were specified in her contracts. These payments would have to be returned to MVRCS along with payment of liquidated damages if Ms. Burke did not work past the required dates. The payments themselves were not based solely on Ms. Burke’s number of years of service. Rather, the payments were made if Ms. Burke remained employed with MVRCS throughout each of her yearly contracts. These payments were intended as an incentive to retain Ms. Burke’s employment throughout the school year and are not part of her base salary.