Ronald J. Mento, Petitioner
Public School Employees' Retirement System, Respondent
Argued: June 17, 2013
BEFORE: HONORABLE MARY HANNAH LEAVITT, Judge, ANNE E. COVEY, Judge, ROCHELLE S. FRIEDMAN, Senior Judge
ANNE E. COVEY, Judge
Ronald J. Mento (Claimant) petitions this Court for review of the Public School Employees' Retirement Board's (Board) October 1, 2012 order granting Public School Employees' Retirement System's (PSERS) Summary Judgment Motion, denying Claimant's Summary Judgment Cross-Motion, and dismissing Claimant's Administrative Hearing Request. The sole issue before the Court is whether monies paid by the Montour School District (MSD) to Claimant in lieu of health insurance coverage constitutes compensation for purposes of computing final average salary under the Public School Employees' Retirement Code (Retirement Code). We affirm.
The facts as set forth by the Board are undisputed. Claimant enrolled in PSERS effective September 1971. In April 2002, Claimant began employment with MSD as its Superintendent pursuant to a three-year employment contract. As part of his employment with MSD, Claimant elected to receive cash in lieu of health care coverage. In February 2004, MSD reported to PSERS that Claimant was on an unpaid leave of absence. MSD subsequently terminated Claimant's employment on February 19, 2004. On October 8, 2004, Claimant filed an Application for Retirement (Application) with PSERS electing an Option 3 survivor annuity and a total withdrawal of his accumulated deductions. In his Application, Claimant requested that his retirement date be delayed until September 17, 2004 to coincide with his 55th birthday. By October 18, 2004 letter, PSERS notified Claimant of his initial retirement benefit.
Based upon a Statement of Charges alleging Claimant's unprofessional conduct, an evidentiary hearing was held before MSD's Board of School Directors (School Board). On November 18, 2004, pursuant to the School Board's Adjudication and Resolution, Claimant was removed as MSD's Superintendent. Claimant appealed from the School Board's Adjudication and Resolution to the Allegheny County Common Pleas Court (trial court). In a letter dated March 16, 2005, PSERS notified Claimant that his gross monthly retirement benefit as of September 17, 2004 was $6, 064.35, based on 32.93 years of service and a final average salary of $110, 500.00.
By October 30, 2006 Order, the trial court directed MSD to calculate monies due to Claimant assuming Claimant worked to the end of his contract, and then retired under the options available to him under his contract, or applicable law, and file the same with the trial court on or before November 15, 2006. Following the parties' submissions to the trial court, the trial court issued an Order on December 4, 2006 itemizing the specific amounts payable to Claimant.
The December 4, 2006 Order directed MSD to comply with the PSERS provisions in making Claimant whole with respect to his pension contributions. It further required Claimant to be placed on Sabbatical Leave for the 2004-2005 school year, and returned to normal work status for the 2005-2006 school year. In addition, PSERS was ordered to calculate the retirement benefits MSD must pay Claimant. In accordance with MSD and Claimant's contractual agreement and the MSD Act 93 Agreement,  MSD was also responsible for Claimant's health insurance coverage.
PSERS notified Claimant by September 28, 2007 letter that: (1) his gross monthly benefit was changed from $6, 064.35 to $7, 100.51 retroactive to his effective retirement date based on a revised final average salary of $115, 047.00 and adjusted to 35.00 years of service; (2) his effective retirement date was changed from September 17, 2004 to June 30, 2006; and, (3) because his effective retirement date was altered to June 30, 2006, Claimant had been overpaid $114, 400.62 in monthly annuity payments. In a letter dated November 28, 2007, PSERS notified Claimant that his monthly retirement benefit was recomputed with a permanent actuarial reduction of $644.45 per month to account for the amount Claimant was overpaid; thereby, reducing Claimant's gross monthly benefit from $7, 100.51 to $6, 456.06. In response to an inquiry from Claimant's counsel, in a September 6, 2008 letter, PSERS provided a detailed calculation of Claimant's adjusted retirement benefit.
By October 22, 2008 letter, Claimant's counsel questioned the salary amount PSERS used to calculate Claimant's final average salary. PSERS informed Claimant's counsel in a July 1, 2009 letter that payments made in lieu of health care coverage are not retirement-covered compensation as defined under the Retirement Code and were not used to calculate Claimant's final average salary. Claimant appealed from this decision to PSERS' Executive Staff Review Committee (Review Committee) to examine PSERS' determination that the $39, 182.03 Claimant received in lieu of health insurance benefits was not retirement-covered compensation in calculating his final average salary. On August 29, 2011, the Review Committee denied Claimant's request to include the $39, 182.03 as part of his compensation. The Review Committee ruled that payments received in lieu of health care coverage are fringe benefits, which are specifically excluded from retirement-covered compensation under the Retirement Code.
On September 29, 2011, Claimant appealed from the Review Committee's decision to the Board and requested an administrative hearing seeking to include the $39, 182.03 he received in lieu of health insurance coverage as part of his final average salary. On October 7, 2011, PSERS filed its Answer to Claimant's appeal and administrative hearing request. On May 31, 2012, PSERS filed a Motion for Summary Judgment. On July 2, 2012, Claimant filed his response to PSERS' Motion as well as a Cross-Motion for Summary Judgment. On July 30, 2012, PSERS filed a Memorandum in Opposition to Claimant's Cross-Motion. On October 1, 2012, the Board granted PSERS' Summary Judgment Motion, denied Claimant's Summary Judgment Cross-Motion, and dismissed Claimant's Administrative Hearing Request. Claimant appealed to this Court.
Claimant argues that the money he received in lieu of health benefits was regular and ongoing compensation paid to him as MSD Superintendent and therefore was compensation in accordance with the Retirement Code. We disagree.
Section 8102 of the Retirement Code, 24 Pa.C.S. § 8102, defines "[f]inal average salary" as "[t]he highest average compensation received as an active member during any three nonoverlapping periods of 12 consecutive months . . . ." Section 8102 of the Retirement Code also defines "[c]ompensation" as:
Pickup contributions plus any remuneration received as a school employee excluding reimbursements for expenses incidental to employment and excluding any bonus, severance payments, any other remuneration or other emolument received by a school employee during his school service which is not based on the standard salary schedule under which he is rendering service, payments for unused sick leave or vacation leave, bonuses or other compensation for attending school seminars and conventions, payments under health and welfare plans based on hours of employment or any other payment or emolument which may be provided for in a collective ...