Retirement Calculations Do Not Include Allowances

Thomas E. Fratinardo and Joseph Self, Jr. were police officers for different jurisdictions in Hawai’i. During their employment, in addition to their salaries, they received car, uniform, and firearm allowances. The car allowance was a fixed payment of $488 per month provided to police officers who were required by the employer to purchase and regularly use their private automobiles for official duty. The uniform and firearm allowances were also fixed payments and were paid monthly at a fixed rate.

When Fratinardo and Self retired, the Hawai’i Employee Retirement System did not include the allowances in the calculation of their “compensation” for purposes of the System’s retirement formula. The officers challenged the System’s decision in the Hawai’i Court of Appeals.

The Court upheld the System’s calculations. The Court started with the proposition that the retirement statutes did not define “compensation.” The Court acknowledged that the officers and the System each offered reasonable interpretations of “compensation,” it was clear that the term was not unambiguous. In such cases, the Court found, “the uniform practical construction of a statute by those charged with carrying out the statute is entitled to much weight. The System is the agency designated to administer the State’s retirement system.

“Acting in that capacity, the System’s uniform practical construction for decades has been to exclude the car, uniform, and firearm allowances from its definition and calculation of compensation. That consistent interpretation has apparently never been formally challenged before the officers’ claim. Furthermore, the officers do not dispute that their employers never made contributions to the System based on the allowances, and the statements of earnings and deductions issued by the employers to the officers indicated the allowances were excluded from retirement deductions. Therefore, the officers had no reasonable basis to expect retirement benefits based on the allowances. We conclude the System’s uniform construction of ‘compensation’ should not be overturned.”

Fratinardo v. Employees’ Retirement System of State of Hawai’i, 2013 WL 319284 (Hawai’i App. 2013).