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State backs Plymouth in double-dipping pension case

Massachusetts State House in Boston.Essadras M Suarez/Globe Staff

Retired public employees who go on to earn consulting fees from Massachusetts government entities cannot skirt the rules against pension double-dipping by simply creating a corporation for their new firms, a state retirement appeals panel has ruled.

The decision, by the state’s Contributory Retirement Appeal Board, stems from a dispute in the town of Plymouth. But it could have a broad impact on those profiting from services they provide to cities and towns after they retire.

A former finance director in Plymouth, Michael Daley, launched a firm that made hundreds of thousands of dollars consulting to municipalities, but also started taking his $808-a-month pension check in 2006 when he retired at age 55.

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In 2010, Plymouth, which was paying Daley his pension, began taking issue with the consulting payments from other municipalities, and a long dispute ensued.

The fight was complicated when the state watchdog agency charged with overseeing public pension funds, the Public Employee Retirement Administration Commission, sided with Daley, and Daley relied on PERAC’s advice to refuse to provide documents repeatedly requested by Plymouth.

PERAC said Daley had to be an “employee” of an outfit earning money from states and cities to be barred from taking pay at the same time he received his pension.

Independent contractors were only barred from double dipping until 2009 — three years after Daley retired, PERAC said.

But the Retirement Appeal Board last week affirmed an earlier panel’s ruling that the two-decades-old law against double-dipping is broad: “The general prohibition is clear — it applies to any service rendered to a public entity in the Commonwealth.’’

Daley’s lawyer, Nicholas Poser, said in a statement, “Mr. Daley intends to appeal the decision to the Superior Court, where he expects he will prevail.” He also said PERAC will continue to support Daley’s position that he is not subject to post-retirement earnings limits.

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A PERAC executive said he had not yet had time to read the decision, which was signed Thursday. Parties can appeal the decision to the state Superior Court within 30 days.

The law is designed so that public workers can’t retire with a pension and then go to work for the government again and earn more than if they had kept the original job. Under that formula, Daley had to earn less than $74,600 a year, as previously reported by the Globe.

The Plymouth Retirement System says Daley earned $351,000 more than the limit from 2007 to 2010. His firm, Financial Advisory Associates Inc. of Buzzards Bay, provides services predominantly to municipalities, school districts, and retirement boards around the Commonwealth.

Thomas Kelley, chairman of the system, is pressing to collect those “excess earnings’’ but the pension appeal board agreed with an earlier ruling that the system can recover only the retirement benefits paid out to Daley during the 2007-2010 period.

Kelley said he is confident the decision will withstand a further appeal. The ruling, he said, means, “The corporate veil can’t be used to subvert the earnings law.’’


Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.