ALBANY, N.Y. (Legal Newsline) - Raises given to Port Authority of New York and New Jersey executives after the Sept. 11, 2001, terrorists attacks can’t count toward their pension benefits, New York’s highest court has ruled.
The executives were exempted from a 2002 early retirement program designed to cut costs and avoid layoffs following the Sept. 11 attacks.
Instead, the agency’s chief administrative officer recommended that the executive director offer the executives “a compensation adjustment program” that provided pay raises ranging from 4.5% to 11% of their salaries. It was described as a “retention program.”
However, the New York Comptroller’s Office determined that those raises could not be included in the executive’s final pension calculations, which are based on average yearly salaries.
A state hearing officer found that the Port Authority had given “each of the applicants additional compensation to increase their final average salaries so that their pensions would equal what their pensions would have been had they been eligible for the retirement incentive and taken it in December 2002.”
The executives challenged the Comptroller’s ruling, arguing that the raises were intended to encourage the executives to delay retirement, not as a way to pad their pensions.
But the New York Court of Appeals on Feb. 11 agreed with the Comptroller and dismissed the executive’s case.
“Government pensions are based on employees’ regular average salaries,” the court ruled.
It cited a 1971 New York law which exempts from pension calculations “any additional compensation paid in anticipation of retirement.”
The law was adopted “to curb abuses of the retirement system, specifically the practice of including certain compensation to enhance final average salary,” the court ruled.
It said substantial evidence supports the conclusion that the executive raises, by design, were awarded “in anticipation of petitioner employees’ retirement within the meaning of the statute.”
The agreements signed by the executives directly referred to the raises as a “parity benefit” that was roughly equivalent to the early retirement benefits offered to other employees in 2002, the court ruled.