April 12, 2012
TO: Region One Board of Education
Re: April 4, 2012 Public Budget Hearing – Superintendent’s Tax Sheltered Annuity (the annuity)
My primary residence is Sharon, CT. I was employed by the Region One School District for over 19 years, from September 1991 through October 31, 2010. My position was assistant business manager handling employees’ payroll, benefits, governments’ reporting and fund accounting. I prepared and transmitted the CT Teachers Retirement Board (CTRB) report every month of every year for almost twenty years.
I have been keeping up with the Board of Education (the board) public meetings and budget hearing shown on CATV6.com. I am concerned about the false information that was given at the hearing regarding the board paid annuity for the superintendent.
The superintendent’s annuity began in the amount of $3,000 as an additional compensation approximately 10 years ago when she was assistant superintendent. I understand that she told the then current superintendent that her single health coverage was a “bargain” for the board and the board consequently agreed to contribute $3,000 to her tax sheltered annuity as an additional cash benefit. The amount became $4,000 effective July 1, 2004 when she became the superintendent and later increased to $7,000. Effective July 1, 2009, however, the dollar amount was changed to 6% of the base salary in accordance with the contract addendum made available to me. For the fiscal year ending June 30, 2011 an annual electronic “accounts payable” payment of $8,727 was made directly to her designated financial institution during the summer of 2010 before my retirement as the assistant business manager of Region One.
The business manager indicated at the hearing that the superintendent’s annuity had always been part of her base salary and had been reported as pensionable income to CTRB. He also said that the board paid annuity had always been paid to the superintendent and thus through a payroll deduction deferring the amount by the superintendent in accordance with the salary reduction agreement. He mentioned that other public schools may issue an “accounts payable” check for their board paid superintendent’s annuity and mail it directly to a financial institution, but if it was done in this fashion that the annuity could not be included for CTRB purposes. He stated that in the case of the superintendent’s board paid annuity
Region One did not make the payment through an “accounts payable” check sent directly from Region One to her financial institution, but through a payroll deduction.
Contrary to the business manager’s statements at the hearing, from fiscal years 2003-2011 the Region One business office ALWAYS cut an “accounts payable” check for the superintendent’s annuity once a year and mailed it directly to the financial institution she selected. During my tenure, the annuity payment was never processed through the payroll as an elective deferral deduction. The annuity payment was made directly to superintendent’s selected financial institution as an “employer’s 403(b) pension contribution.” Therefore, she couldn’t have elected to defer in accordance with the salary reduction agreement, as the annuity was never included in her base salary for CTRB purposes during my tenure. In fact, we withheld Social Security and Medicare taxes from the non-payroll annuity check by creating a dummy pay code and deduction code, “Taxable Benefit Annuity” (TBA) in our payroll system. This mechanical device was necessary for the purpose of withholding Social Security and Medicare taxes in order for us to follow the general ruling of any income not reportable to CTRB, is reportable to the Social Security Administration.
None of the superintendent’s contracts and addendums made available to me during my tenure as assistant business manager indicated the annuity as “a component of the base salary.” In fact, all of the contracts and addendums clearly indicated the annuity as an “additional compensation.”
The business manager implied at the hearing that CTRB has a different set of rules regarding a board paid annuity for administrators. To my knowledge there is one set of rules that apply to all CTRB members just as the same Social Security rules apply to all income earned by the people belonging to the Social Security system.
In March of 2006 when the superintendent and I were alone at the lunch table she said the following to me: “I understand, if I change the wording in my contract, I could include the annuity for CTRB purposes.” I did not respond. A few days later she repeated that statement to me again. I did not respond verbally, but responded in writing a few days before the public budget hearing of that year indicating that it would be inappropriate to do so as she had suggested.
In early August of 2006 the superintendent and the business manager asked me to include the annuity in the September 2006 CTRB report as pensionable income. I asked her to follow the proper procedure, get the entire Board’s approval and show the correct figure in the budget and then perhaps it could be done. She indicated to me she did not want to follow that procedure.
In August of 2006 the business manager and I attended a CTRB workshop in Hartford. During the question and answer session Chief Accountant, Louis Lacavolle made it very clear that any superintendent’s annuity check sent directly to a financial institution from the employer in prior years cannot be included for CTRB purposes.
In September of 2006 the superintendent and the business manager met with Region One auditor, Christopher King when he was in the office conducting the annual audit. They met without me first and then I was asked to join them. The business manager told me that the auditor had indicated that we could report the board paid superintendent’s annuity to CTRB. Naturally, I corrected the business manager’s statement citing the reasons why we couldn’t do that under the current conditions of the contract. The auditor asked the superintendent for the contract, which she had in her hand, so that he could review the language. She declined to give him the contract to review. At some point before this meeting ended the business manager walked out. At the conclusion of the meeting I asked Mr. King to present the case to CTRB based on the copy of the contract that I had been given. The next day I mailed Mr. King the copies of the contracts available in the personnel file and also the paperwork substantiating that the” accounts payable” checks had been cut and sent directly to the superintendent’s chosen financial institution. In January of 2007 Mr. King reported to the business office that CTRB did not approve her annuity as includable/pensionable income.
In March of 2009 I wrote a memorandum to the Board of Education with copies to the superintendent and business manager asking them to consider following the proper procedure in order to include the superintendent’s board paid annuity for CTRB purposes. I felt the business manager was signaling me to resurrect the annuity issue of 2006 as he began forwarding me several emails from other school district business managers discussing their superintendent’s board paid annuity for CTRB purposes. I did not want to be in the same position as I was during 2006. I also felt the timing was right to make the change because the superintendent did not receive a pay increase for the fiscal year 2009- 2010.
In April of 2009, the superintendent met with me, the business manager, the non-certified employees union representative and the local union president apparently because I sent the March, 2009 memorandum to the board members without the superintendent’s approval. During the course of the meeting the superintendent raised the annuity issue indicating that she knew she could “include my annuity for CTRB purposes, but I’m not going to this year.” The business manager mentioned that the superintendent had a long way to go before retiring and was not going to include her annuity as part of the base salary for CTRB purposes at that time. I told them that CTRB contributions have certain mandatory guidelines and that you could not go for years excluding a board paid annuity as part of the base salary and then
several years before an anticipated retirement suddenly include it as part of the base salary. The business manager, as I understand it, sent an email memorandum to the board dated April 2, 2009 indicating that the superintendent did not include the annuity as pensionable income for CTRB purposes.
I do not know how the administration is handling the annuity for the current year (fiscal year 2011-2012), but it is very hard for me to believe that the CTRB administrator would approve the annuity as includable income, as the business manager implied at the hearing, unless he or she didn’t get all the pertinent facts.
The business manager also mentioned at the hearing that the case was reviewed by the board’s previous and current attorneys, Messrs. Meuser and Brochu who approved the annuity as reportable income to CTRB. It does not make sense to me that the administration would consult the two attorneys regarding this matter, as if suddenly the administration doesn’t know the difference between the base salary and the board’s paid annuity that had been an additional compensation (non-elective tax sheltered annuity) in all prior years. Please refer to the CTRB Employer’s Manual page 8-11 for the exact guidelines which is available on their website.
I have written this communication because I am absolutely convinced that it is my personal obligation to inform the Board of Education of the actual facts regarding this issue. It would be inappropriate for the history of the superintendent’s board paid annuity to be altered for the purpose of inflating the superintendent’s State Teachers’ pension base.
Choo K. Singer
Copies to: Superintendent Patricia Chamberlain, Business Manager Sam Herrick, Asst. Business Manager Sue Bremer, All Board Committee, Christopher King, CPA, Attorneys; Craig Meuser and Gary Brochu, Judge Manning, former Board Chair & the Members of the Community present at the public hearing