The question in this case is whether retention payments made to executives employed by the Port Authority of New York and New Jersey (the “Port Authority”) after September 11, 2001, should be included in the executives’ final average salaries in calculating their retirement benefits.
For a member of the State and Local Employees Retirement System, retirement benefits are based on the member’s “final average salary” (FAS), which is computed as the average salary earned by the member during any three consecutive years which provide the highest average salary. See Retirement & Social Security Law § 443(a). By statute, however, a member’s FAS may not include “any additional compensation paid in anticipation of retirement.” Id. § 431(3).
Petitioners in this case are a group of executives hired by the Port Authority to help stabilize and operate the agency after September 11. In 2002, the Legislature authorized a temporary retirement incentive; the Port Authority elected to participate in that program but determined that petitioners were ineligible. The Port Authority thus authorized additional payments to petitioners to ensure that they would be able to “achieve [an] equivalent level of pension benefit” as those who were eligible to participate in the incentive program.
Several petitioners retired and were paid retirement benefits based on a FAS that included the additional payments. But in 2012, when some other petitioners retired, the Retirement System determined that the additional payments should not be included in a retiree’s FAS and adjusted each petitioner’s benefits accordingly. The executives challenged that determination, but a hearing officer and then the Comptroller sustained the decision to exclude the additional payments from the retirees’ FAS.
A divided panel of the Third Department reversed. The majority concluded that the additional payments should be included in petitioners’ final average salary because those payments had been “made to delay petitioners’ retirements, not to artificially inflate their [FAS] in anticipation of retirement.” In the majority’s view, the payments were not “in anticipation of retirement” because “there was no actual retirement date anticipated” when the additional payments were authorized and paid.
The dissenters would have sustained the Comptroller’s determination. In their view, the additional payments were intended to put petitioners in the same position as they would have been in if they had been eligible to participate in the temporary retirement incentive program. To the dissenters, this showed that the additional payments were made “in anticipation of retirement” and were thus properly excluded from petitioners’ FAS. The dissenters would also have held that adjustment of benefits was not unconstitutionally retroactive because, at the time petitioners joined the retirement system, they had no vested right to have their FAS include payments like the additional payments.
The Comptroller appealed to the Court of Appeals as a matter of right.
Return to the case page for Matter of Bohlen v. DiNapoli.