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HomeMy WebLinkAbout85-003 MarcelloDouglas B. Marcello, Esq. Mancke, Lightman & Wagner Suite 1300 Payne- Shoemaker Building P.O. Box 1082 Harrisburg, PA 17108 -1082 Re: Pension plan; Auditors' action Dear Mr. Marcello: I. Issue: II. Factual Basis for Determination: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 March 7, 1984 OPINION OF THE COMMISSION 85 -003 As solicitor for Southampton Township, hereinafter, the Township, you ask our advice as to the propriety of the establishment by the Supervisors of a pension system and the method of the inclusion of the Supervisors in this system. The Township is a township of the Second Class and is, therefore, subject to the provisions of the Second Class Township Code, 53 P.S. 65101 et. seq. The Township is governed by a three - person Board of Supervisors. In accordance with the Code, 53 P.S. 65514, the supervisors may be appointed as roadmaster, superintendents, laborers, etc. and, in fact, all three Township Supervisors have, traditionally been so appointed. Each Supervisor so appointed should, in accordance with the Code, 53 P.S. 65515 receive as "compensation" for his service(s) an amount to be fixed "for the current year" by the auditors. See also 53 P.S. 65545. We note you do not indicate whether the Supervisors so appointed work on the roads on a full -time basis. You state or agree with the previous solicitor for the Township (Sally Winder) that the Supervisors established -a pension system, hereinafter, the plan or system, in 1973. This plan was set up for the Supervisors who acted as road workers and consisted of annuity contracts purchased from and with Township funds. These annuity policies were issued under a "Township group designation with the policies being issued in the names of the individual Douglas R. Marcello, Esq. March 7, 1985 Page 2 supervisor," according to Ms. Winder's letter of May 29, 1984. A policy was purchased for each supervisor, as he became a member of the Board. You have provided no details as to the nature of the pension plan itself or the resolution, ordinance, guidelines or rules by which any Supervisors or other employees of the Township become eligible for or vest under this plan. You have provided us with several items for our consideration. First, you provided copies of the minutes of the meetings of the Township auditors from 1980 to 1984. These minutes mention the Supervisors' pension as follows: 1) 1/8/80: "A motion was made by John McCorriston and second by Rill Wolfe to approve the retirement program of the supervisors. This retirement is with Tri -State Insurance of Lancaster. Motion approved. Note this is $1500 per year retirement." 2) 1/6/81: "On a Oyler /Wolfe motion if the Supervisors ever want to change their benefit package the Board of Auditors must approve that. On a McCorriston /Wolfe motion the auditor approved the Supervisors retirement, hospitalization, and health and accident programs." 3) 1/5/82: "A motion by Wolfe to keep the benefit package the same was seconded by Goshour. Supervisors receive retirement, hospitalization and health and accident programs. There was some discussion on the retirement fund of $1500.00 per year being low in comparison to other townships. If supervisors ever want to change their benefit package their choice must be approved by the board of Auditors." Douglas B. Marcello, Esq. March 7, 1985 Page 3 4) 1/4/84 "The next issue for discussion was the supervisors benefit package. The supervisors feel it is low compared to other townships and they are unhappy with the hospitalization coverage. They were concerned also about their sick /accident policy which they look at as income protection. Mr. McCulloch suggested checking with some local agencies to see if better coverage and rates can be found. Since the Township has its own insurance, Mr. Oyler suggested checking with Agway. It was discussed also if the auditors must approve the entire benefit package or just the retirement. There was a motion made that supervisors were authorized to check into the part of the benefit package that includes the hospitalization and sick /accident only. The retirement will remain the same. They will contact the auditors with findings for final approvement of any change, if any. Will also check to see if auditors approval is actually necessary. Motion was passed by Lynch /Wolfe." 5) 1/4/84: "The Benefit Package was then discussed. Hospitalization, Sick /Accident, Life and Retirement were analyzed. Mr. McCulloch made reference to Sally Winder's letter that the retirement fund was voted in before he became a member of the Board in 1976. He was willing to go with another plan. Due to the perplexity (Sic) of the rules on the retirement fund, the auditors on a motion by Wolfe /Jones decided to table this fund until further investigation can be done. The Hospitalization / Sick /Accident and Life ($1,000) for working Supervisors hired as an employee will be paid by the Township. To be eligible for these benefits the employee must work a minimum of 80 accumulated hours. If this minimum is not met, that employee will reimburse the Township for premiums already paid. This motion carried by Wolfe /Jones. A question was raised by Mr. McCulloch that what if the 80 accumulated hours could not be met due to heart attack, stroke or other form of disability, Douglas R. Marcello, Esq. March 7, 1985 Page 4 5) Cont'd. would insurance not be paid? A motion was made for an amendment to the insurance coverage motion after discussing Mr. McCulloch's question. This Lynch /Jones motion stated that the 80 hours may be waived if an employee becomes totally disabled and a written certificate is issued from individuals physician. With no further discussion, the motion and the amendment carried on an employees eligibility for insurance." The facts further indicate that the plan originally consisted of three annuity contracts purchased with township funds. The annual premiums were paid a follows: 1976 $1,250.00 1980 $1,750.03 1977 $1,250.00 1981 . . . . . .$1,750.00 1978 $1,250.00 1982 $1,750.0t; 1979 $1,750.00 1983 $1,750.00 In February 1984 these policies were surrendered and the cash value obtained therefrom, $13,712.50, was used as a lump sum initial premium for the purchase of a deferred annuity policy. This policy listed William McCullough, a Township Supervisor, as the annuitant, and the owner of the policy as the Township. In addition to the foregoing, you have also provided the affidavits of several of the township auditors. These affidavits indicate that the plan was approved by the Board of Auditors and that there was "no dollar amount of the retirement payments indicated in the approval." The affidavits provided constitute all of the auditors for the years 1982 -1984 inclusive. You have provided the affidavit of only one auditor for the years 1980 and 1981. No affidavits were submittedd for any year before 1980„ Douglas R. Marcello, Esq. March 7, 1985 Page 5 IV. Discussion: There is no doubt that pension program or benefits constitutes deferred compensation which must he fixed by the auditors for Supervisors who serve the Township as roadworkers, laborers, etc. See Hoak and McCutcheon v. State Ethics Commission, Pa. Cmwlth. , 466 A. 2d 283 (1983). As in Hoak, the actions of a Supervisor to secure and benefit from a pension program paid for by the Township are questionable under the Ethics Act where the plan is established and /or continued without the oversight and approval of the Township auditors. In this case, the Supervisors adopted this program in 1973. You have given us no minutes or any evidence whatsoever to support the premise that the auditors approved this program for the working Supervisors as of 1973. Indeed, the evidence is to the contrary. The minutes you provided from 1980 to present address the pension issue. The lack of any similar evidence of auditor review and approval of this program prior to 1980 suggests that the auditors, from 1973 to 1979 neither reviewed nor approved the working Supervisors' participation in this plan prior to 1980. Likewise, even in 1980, the minutes of the auditors simply reflect approval of pension benefits for working Supervisors to the extent of $1500.00 per year. The minutes do not indicate, that the Supervisors, in general, or Mr. McCullough, in particular, should be eligible for, at Township expense, a funded retirement program beyond the $1,500 per year mentioned in the auditors' minutes. There is no express approval, nor did the auditors actually or apparently authorize the funding of Mr. McCullough's 1984 policy by payment of an "initial premium" of $13,712.50. You have, however, presented the affidavits of several of the township auditors which, in part appear to indicate that the $1,500 premium payment was not the limit of the expenditure approved by the auditors. Additionally, while there is no specific mention of the 1984 "Rollover" in the minutes of the Board of Auditors 1984 meeting, there is mention of the fact that the township would be seeking alternative pension coverage, thus evidencing an intent to convert the then existing annuities. Upon these facts the Commission has resolved that Mr. McCullough's participation in the plan must be limited to the extent that auditor approval has been evidenced. Specifically, auditor approval, as set forth in the minutes and affidavits, was obtained in 1980 and all subsequent years. While there is a question as to the funding limit approved, the Commission will rely on the auditor affidavits which indicate that the $1,500 figure was not the funding limit. Douglas R. Marcello, Esq. March 7, 1985 Page 6 There is,however,no approval evidence from 1973 to 1979 inclusive. Rased upon the lack of evidence, the Commission has no alternative but to find that said plan, during the aforementioned time period, was unauthorized and thus not consistent with the Ethics Act and Hoak decision. Cf opinion 84 -008, Kiniry (auditor affidavits obtained for entire period of plan). Conclusion: As a result, Mr. McCullough may participate in the pension plan only if such plan is modified so as to reflect the status of the plan had it been orginally implemented in 1980. In this respect it is submitted that the township may take appropriate action to make such modification of the pension plan. Upon such modification all funds in excess of the premiums paid during the period starting in 1980 shall be returned to the township treasurer. In the alternative, Mr. McCullough may reimburse the township for premiums paid during the unauthorized period, 1973 to 1979. Records submitted to the Commission, as previously outlined, indicate such payments starting in 1976 and totaling, $5,500. Pursuant to Section 7(9)(i), this opinion is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any civil or criminal proceeding, providing the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance of the advice given. This letter is a public record and will he made available as such. Finally, any person may request within 15 days of service of the opinion that the Commission reconsider its opinion. The person requesting reconside- ration should present a detailed explanation setting forth the reasons why the opinion requires reconsideration. JJC /sfd 1' the Com.issio HER: ,R B. COMNER C airman