December 23, 2021
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Public School Employees' Retirement System
PA Supreme Court Rules in Favor of PSERS in Retirement Compensation Case
HARRISBURG – The Pennsylvania Supreme Court unanimously ruled Wednesday that the Public School Employees’ Retirement System correctly calculated a retired principal’s retirement benefit by excluding a separate financial settlement he had received from his employer.
The High Court’s ruling
reversed a lower court decision that had ordered PSERS to include the principal’s $15,000 age-discrimination settlement as retirement-covered “compensation.”
In 2010, Principal Raymond J. Whalen filed a federal Equal Employment Opportunity Commission complaint and later a federal lawsuit against Wyoming Valley West School, alleging he was passed over for pay raises younger principals were receiving, the court record states. In 2014, the district agreed to pay Whalen $15,000 for the “full and final release of all claims of every nature and kind whatsoever …” if he agreed to retire. PSERS then calculated his “final average salary” retirement benefit without the legal settlement under the Retirement Code’s compensation definition: “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 … which is not based on the standard salary schedule under which he is rendering service.”
Commonwealth Court reversed PSERS decision, finding that the district and principal intended the settlement to cover Whalen’s back pay, and PSERS should have taken their intent into consideration in making its calculation. PSERS appealed because Commonwealth Court’s ruling would have artificially inflated Whalen’s benefit to the detriment of the Fund. The Supreme Court sided with PSERS, saying the Code’s compensation definition is more important than intent.
“The mere fact that the parties’ called the $15,000 payment retirement-covered compensation is irrelevant,” Justice David N. Wecht wrote. Citing a previous ruling from Georgia, Wecht added: “You can call a camel an elephant but that won’t make its hump disappear. Labels do not change substance.”
About the Pennsylvania Public School Employees’ Retirement System
PSERS, founded in 1917, began operations in 1919 to oversee a statewide defined benefit pension plan for public school employees. PSERS' role expanded upon the passage of Act 5 of 2017 to include oversight of two new hybrid benefit options consisting of defined benefit and defined contribution (DC) components and a stand-alone DC plan. As of June 30, 2021, PSERS had total net assets of $72.5 billion and a membership of about 248,000 active, 243,000 retired school employees and 27,000 vested inactive members.