State court says take-home vehicles not 'regular compensation'

Danielle Ameden

For years, Milford Police Chief Thomas O'Loughlin has been paying taxes on the town-owned SUV he drives home at night. Taking advantage of a job benefit, he has also been counting his personal use of the vehicle as regular compensation.

Like other officials in towns and cities across Massachusetts, he has a formulaic amount - for him, it's $6.26 per week - deducted from his weekly paycheck and put into his retirement fund. When it's calculation time, his pension would have gotten a boost from that regular compensation.

But the practice was quashed last month by the state Supreme Judicial Court in a decision that has put local retirement boards into tailspins.

It appears active employees such as O'Loughlin can have their contributions refunded, but the big question is what the ruling means for retirees who paid in and have been collecting on the benefit.

"It's always uncomfortable to go and ask for money back from a pension," said Thomas Gibson, chairman of the Middlesex Retirement System, which works with towns including Hudson, Ashland, Hopkinton and Holliston.

"This was always a dicey proposition from the beginning," he said.

In terms of how to handle the court decision, local retirement boards and regional retirement systems say they are anxiously awaiting direction from PERAC, state Public Employee Retirement Administration Commission.

"We find ourselves in a predicament where we've been doing this for a number of years... now what do we do?" said Barbara Auger, town treasurer in Milford.

The court case centered around Beverly firefighter Kenneth C. Pelonzi, who retired as the city's commissioner of public safety on a $6,835 monthly pension that included $327 based on his personal use of a city-owned '96 Chevy Blazer.

PERAC had approved of Pelonzi's pension and the concept of vehicle value being counted as part of an employee's regular compensation.

"The court was quite clear - the court did not agree with us, which happens sometimes," said Barbara Phillips, PERAC's general counsel.

"It wasn't like we were going to fall on our swords," she said. "We're going to implement the court's decisions."

While PERAC had sent out a "news flash" about the court decision, John Pyne, ex-officio of the Milford Retirement Board, said it's still unclear how towns should respond.

"The issue will be in collecting the overpayment - the retroactive overpayment to retires," Gibson said.

In Milford, retired Fire Chief John Taddei currently collects pension paychecks based in part on the money he paid in to count his vehicle as regular compensation.

Pyne noted PERAC had not sent word by last week whether, for instance, retirees could be grandfathered in.

Gibson said his system had been watching for the May 21 court decision, which has generated a lot of interest.

"In today's economic climate, there is a lot of pension envy out there," said Gibson, who is also an attorney for the Framingham Retirement Board.

Phillips advised the best immediate course of action for towns is to stop taking the payments from active employees.

In Milford, active employees include O'Loughlin, Deputy Police Chief Rob Marino, Fire Chief John Touhey and Highway Surveyor Shelly Leclaire.

O'Loughlin said he will be fine with a refund of the money he's paid in, rather than having it calculated into his pension.

"It's not a windfall issue," said O'Loughlin. "It's just not that much money when all is said and done."

The benefit was never an option in some communities.

In Bellingham, a town that belongs to the Norfolk County Retirement Board, the idea was never brought up, said Marilyn Mathieu, the town's chief financial officer.

When Framingham Police Chief Steven Carl took the rank in 2001, he paid about $4 a week based on his vehicle value toward a retirement account, he said.

"I paid in probably the first two years as chief," said Carl.

Now, with the benefit done, Carl said he will eventually get around to requesting his money back.

As an active employee, he can do that and not affect his pension.

But for the retirees who paid in for years and now face paycheck cuts?

"It's devastating," Carl said.

Danielle Ameden can be reached at 508-634-7521 or