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Johnson v. Div. of Retirement and Benefits (3/12/93), 848 P 2d 263
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NOTICE: This opinion is subject to
formal correction before publication in the
Pacific Reporter. Readers are requested to
bring typographical or other formal errors to
the attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska
99501, in order that corrections may be made
prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
BERNARD GARY JOHNSON, )
) Supreme Court No. S-4906
Appellant, )
)
v. ) Superior Court No.
) 3AN-90-5804 CIVIL
PUBLIC EMPLOYEES RETIREMENT )
BOARD and STATE OF ALASKA, )
DIVISION OF RETIREMENT AND ) O P I N I O N
BENEFITS, )
)
Appellees. ) [No. 3937, March 12, 1993]
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
J. Justin Ripley, Judge.
Appearances: Bradley D. Owens, Jermain,
Dunnagan & Owens, P.C., Anchorage, for
Appellant. John B. Gaguine, Assistant
Attorney General, Juneau, for Appellees.
Before: Moore, Chief Justice,
Rabinowitz, Burke, Matthews, and Compton,
Justices.
RABINOWITZ, Justice.
I. INTRODUCTION
This appeal concerns the Public Employees' Retirement
System (PERS), a "defined benefit"system that provides its
members with benefits upon retirement. The specific question
presented in this appeal is whether "credit"derived from Section
7 of chapter 89, SLA 1989, which reimplemented the Retirement
Incentive Program, may be used to meet an age requirement of AS
39.35.370.
II. FACTS AND PRIOR PROCEEDINGS
Bernard Gary Johnson began employment as a natural
resources manager for a department of the State of Alaska on
October 26, 1972. Johnson's department is a PERS employer. At
the time of his November 1, 1990 retirement, Johnson's age was 51
years and three months. He had slightly over 21 years of
credited PERS service, consisting of approximately 18 years of
State of Alaska service and 3.681 years of military service.
Before he began his PERS covered employment, Johnson
worked for approximately 2.5 years, between 1969 and 1972, for
the Alaska State Housing Authority (ASHA). At the time that
Johnson worked there, ASHA was not a PERS participating employer.
ASHA began participation in PERS in 1981. Under the terms of
ASHA's participation in PERS, past ASHA employees were not
invited to participate.
In 1986, the legislature passed chapter 26, SLA, which
enacted the Retirement Incentive Program (RIP). This program was
designed to save state revenues by encouraging eligible employees
to take early retirement.1
On
June 2,
1989, the
legislatur
e
reimplemen
ted the
RIP
program,
noting
that its
purpose
was "to
realize
sufficient
economies
to offset
the cost
of
administra
tion and
benefits
to state
agencies
and other
employers
resulting
from the
award of
retirement
credits
and to
result in
a net
reduction
in
personnel
services
costs to
the state
or other
employers
during a
period of
declining
revenue."
Section 1,
ch. 89,
SLA 1989.
Sections 2 and 7 of Chapter 89, SLA 1989 are
particularly important. They state as follows:
Section 2. RETIREMENT INCENTIVE
PROGRAM.
. . . (g) A participant in the
retirement incentive program receives a
credit of three years. The three years must
be applied in the following order until
exhausted:
(1) to meet the age or service required
for eligibility for normal retirement under
AS 14.25.110 or AS 39.35.370, as appropriate;
(2) to meet the age required for early
retirement under AS 14.25.110 or AS
39.35.370, as appropriate;
(3) to reduce the actuarial adjustment
required for early retirement under AS
14.25.110 or AS 39.35.370, as appropriate,
(4) as years of credited service for
calculating retirement benefits.
Section 7. POLITICAL SUBDIVISION OR
PUBLIC ORGANIZATION EMPLOYMENT.
Notwithstanding other provisions of law, a
vested member who is a state employee and is
participating in the retirement incentive
program may receive credit for employment
with a political subdivision or public
organization before the political subdivision
or organization became an employer under the
system for purposes of determining
eligibility for retirement under AS 14.25.110
or AS 39.35.370, as appropriate. The member
may not receive credit for those years under
this subsection for purposes of determining
benefits. In order for a state employee to
receive credit under this subsection, the
employee's participation in the program must
contribute to the overall cost savings of the
agency.
In September 1989, Johnson wrote to the Deputy Director
of the Division of Retirement and Benefits, Robert F. Stalnaker,
for confirmation of his view that his ASHA service could be used
in conjunction with his Section 2(g) "credit"to increase his
retirement age to 55, which would then entitle him to a full
normal retirement.2 The Deputy Director responded that only the
three RIP incentive years could be used to meet either age or
service requirements, and that neither RIP nor AS 39.35.370
"allow a member to substitute service credit for age or
vice-versa . . . to meet RIP eligibility."3 The Acting Director
of the Division subsequently confirmed this decision.
Johnson retired on November 1, 1990, the last day on
which he could have taken RIP retirement under the terms of the
statute. In February 1990, Johnson appealed the Division's
decision to the Board. The Board issued Decision 90-4 affirming
the Division's decision. The Board stated:
According to the Division the foregoing
statutes preclude use of pre-participation
service in any fashion to increase benefits,
once eligibility has been established . . .
The statutes are plain on their face in
providing that pre-participation service may
not be credited for "purposes of determining
benefits," and the Division's interpretation
is reasonable. . . . If Mr. Johnson is
already eligible for RIP, even though for the
less remunerative early retirement, before
application of any preparticipation service,
utilization of pre-participation service is
not "for purposes of determining
eligibility."4
Johnson requested reconsideration. The Board
reconfirmed its decision on June 13, 1990. Johnson appealed to
the Superior Court, which upheld the Board's Decision 90-4 in an
opinion dated December 6, 1991. Johnson appeals from the
Superior Court decision.
III. STANDARD OF REVIEW
This case requires interpretation of the phrase "credit
for employment"as well as interpretation of the overall intent
and integrity of the RIP program; questions of statutory
interpretation. "`[W]here . . . the issues to be resolved turn
on statutory interpretation, the knowledge and expertise of the
agency is not conclusive of the intent of the legislature in
passing a statute.'" Union Oil Co. v. State, Dep't of Revenue,
560 P.2d 21, 23 (Alaska 1977) (footnote omitted), quoted in
Flisock v. State, Div. of Retirement and Benefits, 818 P.2d 640,
642-43 (Alaska 1991). "The substitution of judgment standard is
applied where the questions of law presented do not involve
agency expertise or where the agency's specialized knowledge and
experience would not be particularly probative as to the meaning
of the statute." Tesoro Alaska Petroleum Co. v. Kenai Pipe Line,
746 P.2d 896, 903 (citations omitted) (Alaska 1987).
IV. DISCUSSION
A. Overview
Johnson argues that he should be able to use his ASHA
"credit" under Section 7 in the same manner as he can use his
Section 2(g) "credit,"namely, to increase his age for retirement
purposes. This combination of credits would put him over the 55
year eligibility threshold for normal retirement benefits.
As we analyze the various arguments of the parties the
primary question raised in this appeal is whether Johnson's inter
pretation of "credit for employment" for the purpose of
determining eligibility for retirement is consistent with Section
7?
B. Did the PERS Board err in its
interpretation of Section 7 of Chapter 89,
SLA 1989?
Johnson argues that Section 7 does not expressly allow
or prohibit application of the credit for employment to a
retiring member's age for purposes of determining eligibility for
retirement. According to Johnson any prohibition against
application of the section 7 employment credits to age must come
from an interpretation of section 7's prohibition against the use
of employment credits for purposes of determining benefits. More
specifically Johnson contends that:
If this interpretation is correct, the
legislature really must have intended that
employment credits could only be used for
purposes of determining the years of service
requirements, not "for purposes of
determining eligibility for retirement under
AS 39.35.370,"as Section 7 clearly provides.
Of course, Section 7 does not expressly
support this interpretation. Thus, the
state's and the superior court's analysis is
not supported by any "plain meaning"in the
language of Section 7.
(Emphasis in original.)
The state counters by arguing that credit which can be
used to increase an employee's retirement age is distinctly
different from the "credit for employment" provided for in
Section 7. More specifically the state asserts that:
Section 7 allows "credit"for employment
with political subdivisions. Nowhere in the
PERS statutes, AS 39.35, is "credit" for
employment ever mixed or combined with age
for purposes of determining eligibility for
benefits or for computing the amount of
benefits. See AS 39.35.370 (PERS member can
retire at age 60 with five years of service
(55 for early retirement), or can retire at
any age with 30 years of credited service (20
for peace officers and firefighters)). The
only times that "credit" has even been
allowed to adjust an employee's age upwards
for retirement purposes is under the sections
of the two RIP statutes (section 2(g) of the
1989 act, and section 5(c) of the 1986 act)
relating to the three "bonus"years. . . .
Therefore, the plain language of section 7
supports the administrator's interpretation.
(Emphasis in original, footnote omitted.)
Our review of the relevant statutory language, and in
particular of Section 7, has convinced us that the phrase "credit
for employment" as used in Section 7 was not intended to be
combined with age to determine a member's eligibility for retire
ment benefits. First, as the State notes, the only instances
where the legislature has explicitly allowed credit for
employment to be combined with age for determining eligibility
for benefits are found in section 2(g) of the 1989 RIP Act, and
section 5(c) of the 1986 RIP Act. Second, we think it an
unsupportable construction of the phraseology "credit for
employment"to conclude that this language was intended to allow
the ASHA credit employment years in question to be added to age,
as opposed to credited years of employment, in determining
Johnson's eligibility for benefits. In short, we hold that
Section 7 employment credits were intended to, and can only be
used to, determine years of service requirements in the overall
determination of a member's eligibility for retirement.
AFFIRMED.
_______________________________
1. See Section 1, ch. 26, SLA 1986.
2. Under the early retirement program, Johnson would
receive approximately $200 a month less in benefits than he would
receive under the normal retirement program.
3. Although the current version of AS 39.35.370 requires
that an employee be 55 to qualify for early retirement, and 60 to
qualify for normal retirement, the relevant ages for Johnson are
50 and 55, respectively, as his relevant age requirements were
established by an earlier statute. Since Johnson was hired
before July 1, 1986, he was entitled to take normal retirement at
age 55 and early retirement at age 50. Section 57, ch. 82, SLA
1986. The relevant language of former AS 39.35.370 is as
follows:
Retirement benefits (a) A terminated
employee is entitled to a normal retirement
benefit (1) at age 55 with at least five
years credited service, or (2) with at least
20 years of credited service as a peace
officer or fireman, or (3) with at least 30
years of credited service for all other
employees. (b) A terminated employee is
eligible for an early retirement benefit at
age 50 with at least five years credited
service.
4. The Board noted under Johnson's interpretation, the
following situation could arise: "[A] person of the same age as
Mr. Johnson with the same number of service years with the same
salary, but who was employed solely in PERS-covered service,
would be eligible for lower benefits than would Mr. Johnson. It
is not logical to suppose that pre-participation service should
give a prospective retiree greater benefits under RIP than would
the same years of service all of which were otherwise creditable.
This supports the Division's reading of Section 7." The Board
also stated that it "does not accept Mr. Johnson's contention
that his interpretation is valid because retirement under his own
interpretation of the law still yields a net cost savings.
Obviously the greater retirement cost of higher monthly benefits
to Mr. Johnson produces lower cost savings than otherwise.
Suggesting that greater benefit payments are justified so long as
'some' savings is incurred does not follow."
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