Lower Merion Township had taken the position that “employer contributions” to the policemen’s pension should not count toward their compensation. That caused the actual pension benefit for the police to be reduced.
A group of LMPD retirees sued the township in 2008, “seeking a declaratory judgment that the Township had improperly calculated their pension benefits.” They claimed that the Township contribution should have been considered as part of their salaries. In April of 2018 the trial court issued an order denying Retirees’ action for declaratory judgment, concluding that the Township ‘was NOT required to include [its] deferred compensation payments in the [Retirees’] ‘salary’ when calculating the [Retirees’] Police Pension Fund benefit.
Township deducted taxes for the contributions
However, the Lower Merion Police argued that “under the Internal Revenue Code, deferred compensation is subject to state income tax and local earned tax when it is deposited into the Deferred Compensation Plan account and subject to federal income taxation when it is distributed to the employee. The Township Contribution is reported on Retirees’ W-2 Forms and tax statements, Social Security and Medicare taxes are deducted from it, and it is included for purposes of calculating state and local tax. Thus, the Township Contribution is compensation that should be considered salary for pension purposes.”
And the appeals court agreed with them.
Bernard A. D’Amour, William C. Boegly, Francis M. Higgins, Joseph Arrell, William Albany, George Clement, Henry Hasson, James Herzog, William Raquet and John Sheehan were the retired officers who filed the complaint.
Judges Renee Cohn Jubiler ruled on the case. Judges Michael Wojcik and Bonnie Brigance Leadbetter concurred.