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HomeMy WebLinkAbout07-014 QUINNOPINION OF THE COMMISSION Anthony B. Quinn, Esquire 711 Pleasant Avenue Wyndmoor, PA 19038 Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Donald M. McCurdy Paul M. Henry Raquel K. Bergen Nicholas A. Colafella DATE DECIDED: 6/12/07 DATE MAILED: 6/29/07 07 -014 Dear Mr. Quinn: This Opinion is issued in response to your advisory request dated March 26, 2007. I. ISSUE: Whether the Public Official and Employee Ethics Act (the "Ethics Act "), 65 Pa.C.S. § 1101 et seq., would require a school director to disclose on his Statement of Financial Interests as a direct or indirect source of income: (1) Social Security survivor benefits paid to the school director, as a representative payee for his children, upon the death of the school director's spouse; or (2) a life insurance benefit paid to the school director under a policy covering the school director's spouse where the policy was funded totally by the school director. II. FACTUAL BASIS FOR DETERMINATION: You are a School Director for the Springfield Township School District. You request an advisory opinion from this Commission based upon the following submitted facts. You and your wife, who passed away in June 2006, had three children together. Except for the time that you and your wife lived together, she had been steadily employed during her lifetime, as a result of which she had become eligible for Social Security benefits. Your oldest child was eighteen years old and still in high school when your wife passed away. This child received Social Security survivor benefits for the month of June 2006 that were paid directly to her. Your two younger children have been receiving Quinn, 07 -014 June 29, 2007 Page 2 monthly Social Security survivor benefits that are paid to you as their representative payee. These benefits are being collected based upon your wife's employment history /Social Security record. In 2006, you received a payment under a life insurance policy that covered your wife. The policy was funded totally by you. You note that under Section 1105(b) of the Ethics Act, 65 Pa.C.S. § 1105(b), you are required to disclose on your Statement of Financial Interests direct or indirect sources of income. You further note that governmentally mandated payments or benefits are excluded from the definition of "income." Based upon the above submitted facts, you pose the following specific inquiries: 1. Whether the Social Security survivor benefits paid to you as a representative payee for your children would be considered "income" as that term is defined by the Ethics Act or "governmentally mandated payments or benefits" excluded from the definition of "income "; 2. Whether the Social Security survivor benefits would be considered a direct or indirect source of income in the nature of an annuity that was not funded by your own contributions; and 3. Whether the life insurance benefit paid to you under the aforesaid policy funded totally by you would be considered "income" as that term is defined by the Ethics Act. By letter dated May 10, 2007, you were notified of the date, time and location of the public meeting at which your request would be considered. III. DISCUSSION: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, this Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfully disclosed all of the material facts. As a School Director for the Springfield Township School District, you are a public official subject to the provisions of the Ethics Act, including the requirements for filing Statements of Financial Interests. Section 1104(a) of the Ethics Act provides: § 1104. Statement of financial interests required to be filed (a) Public official or public employee. -- Each public official of the Commonwealth shall file a statement of financial interests for the preceding calendar year with the commission no later than May 1 of each year that he holds such a position and of the year after he leaves such a position. Each public employee and public official of the Commonwealth shall file a Quinn, 07 -014 June 29, 2007 Page 3 65 Pa.C.S. § 1104(a). Section 1105 of the Ethics Act, which sets forth the substantive disclosure requirements for Statements of Financial Interests, provides in part as follows: § 1105. Statement of financial interests (b) Required information. —The statement shall include the following information for the prior calendar year with regard to the person required to file the statement: 65 Pa.C.S. § 1105(b)(5). statement of financial interests for the preceding calendar year with the department, agency, body or bureau in which he is employed or to which he is appointed or elected no later than May 1 of each year that he holds such a position and of the year after he leaves such a position. Any other public employee or public official shall file a statement of financial interests with the governing authority of the political subdivision by which he is employed or within which he is appointed or elected no later than May 1 of each year that he holds such a position and of the year after he leaves such a position. Persons who are full -time or part -time solicitors for political subdivisions are required to file under this section. (5) The name and address of any direct or indirect source of income totaling in the aggregate $1,300 or more. However, this provision shall not be construed to require the divulgence of confidential information protected by statute or existing professional codes of ethics or common law privileges. The term "income" is defined in the Ethics Act as follows: § 1102. Definitions "Income." Any money or thing of value received or to be received as a claim on future services or in recognition of services rendered in the past, whether in the form of a payment, fee, salary, expense, allowance, forbearance, forgiveness, interest, dividend, royalty, rent, capital gain, reward, severance payment, proceeds from the sale of a financial interest in a corporation, professional corporation, partnership or other entity resulting from termination or withdrawal therefrom upon assumption of public office or employment or any other form of recompense or any combination thereof. The term refers to gross income and includes prize winnings and tax - exempt income. The term does not include gifts, governmentally mandated payments or Quinn, 07 -014 June 29, 2007 Page 4 benefits, retirement, pension or annuity payments funded totally by contributions of the public official or employee, or miscellaneous, incidental income of minor dependent children. 65 Pa.C.S. § 1102. A straightforward application of the above provisions establishes that reportable direct or indirect sources of income totaling in the aggregate $1,300 or more must be included on the Statement of Financial Interests form prescribed by this Commission. However, the Ethics Act specifically excludes from the definition of "income " - -and consequently from the related disclosure requirements at Section 1105(b)(5) of the Ethics Act -- "governmentally mandated payments or benefits" or "retirement, pension or annuity payments funded totally by contributions of the public official or employee." 65 Pa.C.S. § 1102. Having established the above general principles, we shall address your specific inquiries. In response to your first specific inquiry, you are advised that the Social Security survivor benefits paid to you as a representative payee for your two younger children would be considered governmentally mandated payments or benefits excluded from the above definition of "income." See, 42 USCS § 402; cf., In re: Nomination Petition of Benninghoff, 578 Pa. 402, 852 A.2d 1182 (2004) (noting that benefits such as workers' compensation and unemployment compensation benefits, public assistance and the like would be examples of governmentally mandated benefits). Accordingly, you would not be required to list the Social Security Administration as a direct or indirect source of income on your Statement of Financial Interests. Your second specific inquiry need not be addressed given the above response to your first specific inquiry. Before addressing your third specific inquiry, we make the following initial observations. First, in promulgating the Ethics Act, the General Assembly declared that the Ethics Act is to be liberally construed to promote complete financial disclosure in accordance with the requirements of the Ethics Act. 65 Pa.C.S. § 1101.1. Second, insurance is by its nature a contract. Black's Law Dictionary defines the term "life insurance" as "[a]n agreement between an insurance company and the policyholder to pay a specified amount to a designated beneficiary on the insured's death." Black's Law Dictionary at 945 (8 ed. 2004). There are many different forms of insurance, but insurance is always, to some extent, an investment. In response to your third specific inquiry, you are advised as follows. Pursuant to Section 1102 of the Ethics Act, the definition of income specifically excludes, in pertinent part, "retirement, pension or annuity payments funded totally by contributions of the public official or employee." 65 Pa.C.S. § 1102. The life insurance benefit you received under the policy covering your spouse and totally funded by you clearly was not a retirement or pension payment, and the submitted facts do not suggest any basis for concluding that the life insurance benefit was an annuity payment rather than a lump sum death benefit. See, Bayer's Estate, 345 Pa. 308, 313 -314, 26 A.2d 202, 205 (1942) (stating that in the case of life insurance, for annual premiums payable to the company ... the company will pay a specified sum at the insured's death; whereas the converse is true of the annuity contract, for in that transaction the annuitant pays the single Quinn, 07 -014 June 29, 2007 Page 5 sum in consideration of which the company makes annual payments to him. "). Therefore, under the submitted facts, you are advised that to the extent the death benefit that you received was in the amount of $1,300 or more, then the insurer would be considered a reportable direct or indirect source of income for purposes of disclosure on your Statement of Financial Interests. We parenthetically note that the definition of the term "income" under the Ethics Act includes tax - exempt income, such that the fact that proceeds paid under a life insurance contract might not be considered taxable income for federal tax purposes would not alter this advisory Opinion. Our response to your third specific inquiry is limited to addressing the narrow question posed and does not address scenarios where a beneficiary receives payment under an insurance policy funded by the insured or a third party. The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. IV. CONCLUSION: A school director is a "public official" subject to the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1101 et seq. ( "Ethics Act "), including the requirements for filing Statements of Financial Interests. Social Security survivor benefits paid to the school director as a representative payee for his children upon the death of his spouse would be considered "governmentally mandated payments or benefits" excluded from the definition of the term "income" as set forth in the Ethics Act, 65 Pa.C.S. § 1102. Accordingly, the school director would not be required under Section 1105(b)(5) of the Ethics Act to list the Social Security Administration as a direct or indirect source of income on his Statement of Financial Interests. Where: (1) a death benefit received by the school director as the beneficiary of a life insurance policy covering the school director's spouse would be in the amount of $1,300 or more; and (2) the policy would have been funded totally by the school director, for purposes of financial disclosure under the Ethics Act, the insurer would be considered a reportable direct or indirect source of income of the school director. Act. The propriety of the proposed conduct has only been addressed under the Ethics Pursuant to Section 1107(10) of the Ethics Act, the person who acts in good faith on this Opinion issued to him shall not be subject to criminal or civil penalties for so acting provided the material facts are as stated in the request. This letter is a public record and will be made available as such. Finally, a party may request the Commission to reconsider its Opinion. The reconsideration request must be received at this Commission within thirty days of the mailing date of this Opinion. The party requesting reconsideration must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code § 21.29(b). By the Commission, Quinn, 07 -014 June 29, 2007 Page 6 Louis W. Fryman Chair