The Ohio Police and Fire Pension Fund (OP&F) has responded to an opinion by Portsmouth City Auditor Trent Williams that the bonus holiday pay paid to members of the Portsmouth Fire Department is not pensionable.
Williams said the issue is 120 hours that is paid to fire department employees that is over and above the holidays that the firefighters work.
“The way we look at it is it’s a bonus,” Williams said. “If they’re already working on the holiday, the pension is being paid on that day that they are being paid for, we’re not understanding how that could be paid as pensionable wages again after it’s already paid once as pensionable wages. That’s what it comes down to.”
That opinion is not shared by OP&F.
In a letter to Williams, regarding the pensionability of the additional 120 hours cash out provided for under the “Holidays” section of the collective bargaining agreement between the city and the Firefighter’s Union, Mary Beth Foley, General Counsel, for OP&F, asks why her previous letter that asked the city to explain why it has concluded that it is not responsible for forwarding pension contribution on those payments, has received no response.
Foley cites Ohio Revised Code Section 742.32 and 742.35 which she says requires employers to timely submit employee and employer contributions to OP&F, as well as reports of contributions.
“The employee contributions must be deducted from the employee’s ‘salary,’ which is defined in Ohio Revised Code Section 742.01 as ‘all compensation, wages, and other earnings paid to an employee by reason of employment,” Foley said in her correspondence. “‘Terminal pay,’ which is not included in the calculation of salary, is defined in Ohio Revised Code Section 742.01(K)(2) as including payments deferred more than one year compensating the employee for holidays worked.” (emphasis added).
Foley goes on to say the Fund’s manual contains the same information.
“Thus, the city’s assertion that the payments are terminal pay is without merit,” Foley said. “You have indicated most employees cash out the leave in the year it is earned.”
Since the city has been paying the additional 120 hours of holiday pay to its employees within one year of when it was earned, Foley says OP&F has determined that those payments are pensionable under their statutory and rule provisions. Therefore, the city must submit contributions to OP&F for the additional holiday pay that has been paid or statutory penalties will be assessed.
Foley said the OP&F staff has calculated the total amount of contributions due for two of the city’s employees and their members who have requested an account audit. She said the information was enclosed with the letter.
“The city will need to revise reports of contributions and pay pension contributions on the additional holiday pay for these employees, as well as any other employees who were paid the additional holiday pay in the year in which it was earned,” Foley said. “As you may know, for incorrect reporting, OP&F is required to provide a 30-day notice of cure before imposing penalties and interest. In light of the multiple years involved and the good faith discussions with the city, OP&F is providing this letter as a courtesy notice so that the city has an opportunity to compile the information.”
Foley calls for the city to provide revised reports and submit pension contributions on the additional holiday pay hours to OP&F with the possibility of interest and penalties to be accrued by the city.
Williams told the Daily Times, the amount should not exceed $200,000, but City Manager Derek K. Allen said he expects it to be around $500,000.
The Daily Times requested an opinion from Portsmouth City Solicitor John Haas.
“I am awaiting a date from the Pension Fund for them to explain to me why my interpretation of their handbook and the original opinion of the Fund representative is incorrect. At this point, I am unable to figure out why the 120 hours are pensionable under their rules. Furthermore, the Fund will need to explain to the City how we are to calculate the amount dating back to 2003 when time records have been long destroyed for many of those years. Additionally, there are instances wherein the City may be required to pay pension twice for the same day which I understand violates the Fund’s rules. There are initial questions as to whether it is owed and then, if owed, many more practical questions about how to accomplish the calculations if the City owes it.”
Haas said the problem is the wording in the 2003 and subsequent contracts, which he says everyone agrees is unclear.
“The IAFF takes the position it is Holiday pay because it is in the Holiday section of the contract,” Haas said. “The City Auditor takes the position it was really a bonus because the 120 hours were payable prior to any holidays, worked or not, in a given calendar year. In fact, if a fire department employee worked January 1, asked for the 120 hours on January 2, and quit January 3, the 120 hours were due the employee.”