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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Alford v. State, Dept. of Administration, Div. of Retirement and Benefits (10/16/2008) sp-6315

Alford v. State, Dept. of Administration, Div. of Retirement and Benefits (10/16/2008) sp-6315, 195 P3d 118

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


CAMPBELL, DICK CHITTY, ) Supreme Court No. S- 12644
SHUMWAY, SCHUYLER STEVENS,) Superior Court No. 3AN-05- 11441 CI
Appellants, )
v. ) O P I N I O N
STATE OF ALASKA, ) No. 6315 October 16, 2008
Appellee. )
Appeal    from     the
          Superior Court of the State of Alaska,  Third
          Judicial   District,  Anchorage,   Peter   A.
          Michalski, Judge.

          Appearances:  Donna C. Willard,  Law  Offices
          of   Donna   C.   Willard,   Anchorage,   for
          Appellants.   Virginia  B.  Ragle,  Assistant
          Attorney   General,  and  Talis  J.  Colberg,
          Attorney General, Juneau, for Appellee.

          Before:    Fabe,  Chief  Justice,   Eastaugh,
          Carpeneti, and Winfree, Justices.  [Matthews,
          Justice, not participating.]

          WINFREE, Justice.

          The   appellants  (early  retirees)  are   members   or
surviving  beneficiaries  of  members  of  the  Public  Employees
Retirement  System (PERS) who took early retirement before  1977,
returned  to  work  in public service, and later  retired  again.
Asserting    constitutional   and   statutory   violations    and
unreasonable  statutory  interpretation,  they  now  contest  the
manner  in  which  the Division of Retirement and  Benefits  (the
Division)  calculated  their retirement benefits,  including  the
Divisions  decision  to recapture pension benefit  payments  made
during their early retirement.
          We  conclude that the Divisions methodology (1) did not
violate  the anti-diminution provision of article XII, section  7
of  the Alaska Constitution; (2) did not violate AS 39.35.520(b)s
prohibition  against  adjustments; and (3)  was  reasonable.   We
therefore affirm.
     A.   Facts
          Calculation  of  PERS benefits when a  public  employee
retires,  returns to work, and then retires again is governed  by
AS  39.35.150.   Since  July  1,  1977,  subsection  .150(a)  has
provided that upon subsequent retirement, an employee is entitled
to  receive  an additional pension based on the credited  service
and  average monthly compensation earned during the period of re-
employment.1   The  second  pension is added  to  the  reinstated
pension for the previous employment period.2
          Before  July  1,  1977, AS 39.35.150 consisted  of  two
subsections.3  Former subsection .150(a) provided:
               (a) If a retired employee is re-employed on a
          regular full-time basis by an employer, no pension
          payments  may  be made during the  period  of  re-
          employment.   During the period of  re-employment,
          deductions  from salary may be made at the  option
          of  the retired employee for contributions to  the
          retirement  fund as provided in sec. 160  of  this
          chapter.   Upon the subsequent retirement  of  the
          retired  employee,  he is entitled  to  receive  a
          pension   based  on  his  credited   service   and
          compensation  before  the  date  of  his  previous
          retirement.   If  a  previously  retired  employee
          makes  contributions to the fund  during  his  re-
          employment,  his additional credited  service  and
          compensation  during the period  of  re-employment
          shall   be   included  to  determine   his   final
          retirement benefit.[4]
Former  subsection  .150(b)  dictated  how  the  Division  should
account  for early retirement benefits previously received  by  a
               (b)  In  the  case  of  re-employment  of  an
          employee  who  retires under sec.  370(c)  [normal
          retirement]  or  380  [early retirement]  of  this
          chapter,  the  pension payable upon the  employees
          subsequent  retirement shall  be  reduced  by  the
          actuarial equivalent of early retirement  benefits
          previously received by the employee.[5]
Actuarial equivalent was then defined as:

          equality   in  value  of  the  aggregate  expected
          payments  under  two different  forms  of  pension
          payments,   considering  expected  mortality   and
          interest  earnings on the basis of tables  adopted
          from time to time by the board.[6]
          In  1980 the Attorney Generals office issued an opinion
stating that the July 1, 1977 amendment changed the clear meaning
of  AS 39.35.150 and advised the Division to calculate retirement
benefits  differently  depending on the  employees  re-employment
date.   For  retired members re-employed after July 1, 1977,  the
Division  was  advised to apply the new law to calculate  pension
benefits.  For retired members re-employed before July  1,  1977,
the Division was advised to calculate a single pension based upon
the  total  years of credited service, using the average  monthly
compensation  for the entire period as defined in  AS  39.35.680,
reduced by the actuarial equivalent of benefits received under an
earlier  pension,  as provided by AS 39.35.150  before  the  1977
          In  1981  the  Attorney Generals  office  affirmed  its
earlier  opinion.  The same year, we decided Hammond v. Hoffbeck,
clarifying PERS members constitutional rights under article  XII,
section  7  of the Alaska Constitution.8  We held there  that  an
employees constitutional right to retirement benefits under  PERS
vests  immediately upon an employees enrollment in  that  system,
and  that  changes  in  the retirement system  that  disadvantage
employees must be offset by comparable new advantages.9
          Throughout the 1980s and 1990s, the Division  continued
to  calculate  second  retirees benefits by  applying  the  newly
enacted  section  .150.  The Attorney Generals  office  issued  a
third  opinion  in  1999,  advising  the  Division  to  calculate
benefits in accordance with its 1980 and 1981 decisions, as  well
as  Hammond.  In short, the Attorney General advised the Division
to   apply  former  section  .150  when  calculating  the  second
retirement benefit for any member who had been in the PERS system
before July 1, 1977, if doing so would result in a more favorable
benefit for the retiree.
          The  Division  later identified more than  one  hundred
potentially  affected second retirees or surviving beneficiaries.
To determine which version of section .150 would result in a more
favorable benefit to them, the Division calculated benefits under
both  the  pre-  and post-amendment statutes.   But  because  the
Division had been calculating benefits under the new law for more
than  twenty  years, it did not have any guidelines in  place  to
apply  subsection .150(b) of the old law.  Based on the  statutes
plain meaning, the Division interpreted the phrase reduced by the
actuarial  equivalent  of  early retirement  benefits  previously
received to include all the benefits that they received under the
early retirement provision up to the date that they went back  to
work.   When  the  Division used this method, it found  that  few
early retirees would receive increased benefits because they  had
been retired with an early benefit for so long that the actuarial
          reduction wiped out any increase they would have received.
          Because  the plain meaning application often failed  to
yield  an  advantageous result for members,  the  Division  chose
instead  to  apply the old law liberally in the  second  retirees
favor by calculating the early retirement component as the amount
[the  retiree]  received while in early retirement  status  until
reaching  age  55,  the  normal retirement  date.10   Under  this
approach,  the  Division  first calculated  the  second  retirees
benefits  under  subsection .150(a), then reduced  their  monthly
pension  payments only by the amount of early retirement benefits
they received before reaching age fifty-five.  This resulted in a
monthly payment larger than the payment calculated under the  new
          The  Division  offered to pay the second  retirees  the
back payments and additional ongoing benefits resulting from  the
recalculation, but because of a potential statute of  limitations
defense, it conditioned payment on the recipients waiver  of  any
claim  to  interest  on  the  back payments.   Affected  retirees
litigated the waiver requirements.  The superior court ruled that
the  waivers  were defective and voidable, any  of  the  retirees
could seek to void the waiver, but the Division then could assert
its statute of limitations defenses.11  The Division agreed to pay
the  interest  and  the  parties  settled  the  litigation.   The
settlement  agreement required class members  to  pursue  pension
calculation disputes within two years of October 21, 2002.
          The  Division awarded each eligible second  retiree  or
surviving  beneficiary  a  lump sum  payment  or  an  actuarially
increased   benefit  as  compensation  for  past   underpayments,
interest,   and  increased  benefits.   Each  also  received   an
increased  monthly benefit going forward.  But,  as  required  by
subsection   .150(b),   the  Division  also   began   recapturing
retirement benefits disbursed to those who originally  had  taken
early retirement, including the early retirees in this case.   As
a  result, while the early retirees received an increased benefit
from the recalculation of the retirement benefit for their second
round  of  employment, their original monthly benefits also  were
decreased  to some extent to account for the actuarial equivalent
recapture requirement of subsection .150(b).
          The  early retirees contacted the Division in May  2003
in an attempt to avoid subsection .150(b)s recapture requirement.
The Commissioner ultimately rejected the early retirees arguments
and  denied  their  request  to be exempted  from  the  recapture
requirement.   In  November 2003 the Division granted  the  early
retirees permission to appeal to the Board.
     B.   Proceedings
          In  early  September 2004 the early retirees  presented
several  arguments  to the Board in support of  their  contention
that  they should not be subject to the former subsection .150(b)
recapture   requirement.   They  argued   that   the   recapture:
(1)  violated  the  anti-diminution  provision  of  Article  XII,
section   7   of  the  Alaska  Constitution;  (2)   violated   AS
35.39.520(b),  which prohibits the Division from  making  certain
adjustments  to  a  retirees pension; and (3) impinged  on  their
vested right to elect early retirement under article XII, section
7  of the Alaska Constitution and Hammond v. Hoffbeck.  They also
made   other   arguments  in  favor  of  waiving  the   recapture
requirement,  including an allegation that the Division  breached
its fiduciary duty by initially miscalculating their pensions and
failing  to  advise  them of the effects of early  retirement  on
their pensions.  Finally, they maintained that they were entitled
to hardship waivers of the recapture under AS 39.35.522.
          In  late December 2004 the Board upheld the Commissions
decision,  concluding  that  although  Hammond  mandates  that  a
retiree is entitled to the best benefits system available  during
the  retirees  tenure  in a PERS-covered position,  it  does  not
permit a retiree to choose among the most advantageous provisions
of  each applicable system.  The Board therefore decided that the
early retirees were entitled to the more advantageous of the  new
law or the old law, not a combination of the two.  The Board also
concluded  that the subsection .150(b) recapture requirement  was
not  an impermissible adjustment within the meaning of subsection
.520(b),  and  that  the  Divisions  mathematical  and  actuarial
methodology   for  calculating  recapture  of  early   retirement
benefits was reasonable.
          The  early  retirees  appealed to the  superior  court,
which  affirmed the Boards decision in February 2007.  The  early
retirees now appeal from the superior courts decision.
          When  the superior court acts as an intermediate  court
of  appeal  in an administrative matter, we independently  review
and directly scrutinize the merits of the boards decision.12  When
reviewing  constitutional  questions, we  apply  our  independent
judgment.13   We also exercise our independent judgment  when  we
review  questions of law that do not involve agency  expertise.14
In  exercising our independent judgment, we adopt the rule of law
that  is  most  persuasive  in light of  precedent,  reason,  and
          We  review  questions of law involving agency expertise
by applying the reasonable basis test under which we defer to the
agencys statutory interpretation unless it is unreasonable.16  We
review  administrative  factual  findings  to  ensure  they   are
supported  by substantial evidence.17   Substantial  evidence  is
such  relevant  evidence as a reasonable  mind  might  accept  as
adequate to support the Boards conclusion.18
     A.   The  Divisions  Methodology Did Not Violate  the  Anti-
          Diminution Provisions of Article XII, Section 7 of  the
          Alaska Constitution.
          Article  XII,  section  7  of the  Alaska  Constitution
          provides that [m]embership in employee retirement systems of the
State   or   its   political  subdivisions  shall  constitute   a
contractual  relationship.   Accrued benefits  in  these  systems
shall not be diminished or impaired.19  It also mandates that  no
law impairing the obligation of contracts . . . shall be passed.20
          In  Hammond v. Hoffbeck, employees who entered the PERS
system  before  1976 contested the constitutionality  of  a  1976
statutory amendment reducing the amount of, and eligibility  for,
disability and death benefits under PERS.21  We held that:  (1) an
employees constitutional right to retirement benefits under  PERS
vests  immediately upon an employees enrollment in that system;22
(2)  changes  in  the retirement system disadvantaging  employees
must be offset by comparable new advantages;23 and (3) an employee
must  be allowed to choose which system he or she desires to come
under if the state does not provide an offsetting advantage.24  We
concluded  that  the 1976 amendment disadvantaged some  employees
rights  to  the best death and disability benefits available  but
did   not   provide   any   offsetting   advantages.25    Because
determination  of  whether  vested  benefit  rights   have   been
diminished must be made on a case-by-case basis by each  affected
individual rather than by the state,26 we directed the  state  to
give  the  affected  employees notice and a  reasonable  time  to
choose which system they desire[d] to come under.27
          In Sheffield v. Alaska Public Employees Association, we
considered  whether the Board properly calculated the  appellants
early  retirement  benefits using actuarial  factors  adopted  by
regulation  after they started working for the state, when  doing
so  reduced  the amount of early retirement benefits compared  to
payments  calculated under the actuarial factors  effective  when
they  were  initially hired.28  We affirmed the  superior  courts
decision  that article XII, section 7 of the Alaska  Constitution
prohibited the reduction in benefits.29  We held that Hammond did
not limit the requirement of offsetting advantages to changes  in
the PERS system effected by the legislature; rather, the contract
an  employee  enters into with the state for benefits encompasses
the practical effect of the whole complex of provisions.30
          We  reaffirmed the rule that a determination of whether
vested rights to benefits have been diminished must be made on  a
case-by-case basis and accompanied by corresponding advantages to
that  employee.31  As  in Hammond, we stated  that  the  decision
ultimately   rested  with  the  employee:   If  the  PERS   board
repeatedly  revises the tables during the course of an  employees
employment,  we think the employee should be permitted  to  elect
which of those tables will apply to the computation of his or her
PERS early retirement benefits.32
          The   early  retirees  first  argue  that  Hammond  and
Sheffield  mean  that  they may pick and choose  among  statutory
provisions  to  obtain the best combination  of  benefits.   They
point to the portion of the Boards decision that states: [Article
XII,  section 7 of the Alaska Constitution] has been  interpreted
by the Alaska Supreme Court to preclude subsequent diminutions in
benefits.    A   corollary  to  this   principle   is   that   an
employee/retiree is entitled to the best benefits under PERS that
arise during an employees career following the initial hire  into
          a position held by PERS.  The early retirees interpret the best
benefits  under PERS that arise during an employees  career  very
broadly to include any conceivable combination of factors, giving
them the ability to pick and choose among the subsections of  the
various  versions  of section .150 in effect during  their  state
          The  early  retirees also argue that  the  mathematical
calculations  the  Division  used  to  determine  their   pension
payments resulted in a reduced pension benefit, violating article
XII, section 7.  Specifically, they assert that they are entitled
to  actuarial equivalence between their early (first)  retirement
and   normal   (second)   retirement  pensions,   and   that   in
recalculating their pensions under former subsection .150(b), the
Division  failed  to meet that requirement.  The  early  retirees
present  their  own  actuarial  equivalence  calculations   using
appellant  Schuyler  Stevenss pension as an  example.   Based  on
their math, Stevens now receives a base pension amount less  than
what  he  would have received if he had stayed retired and  never
returned  to work.  They argue that the Division never adequately
explained how it arrived at the early retirement adjustment  that
it  calculated for each of them and question the manner in  which
the state arrived at the early retirement factor.
          The  Division  argues  that the case  law  interpreting
article  XII,  section  7  of the Alaska  Constitution  does  not
entitle  the  early  retirees  to  pick  and  choose  among   the
provisions of former AS 39.35.150 when invoking the right to have
that  statute  applied to the calculation of their benefits.   It
asserts that former subsections .150(a) and (b) are not severable
from  one  another; rather, if the appellants demand the benefits
of  former  subsection .150(a), they also must accept  the  costs
inherent  in  the application of former subsection .150(b).   The
Division   argues  that  it  adequately  explained  its   benefit
calculations  in  letters  and  in  worksheets  provided  to  the
appellants,   by   making  the  Divisions  actuarial   consultant
available to the appellants, and through testimony at the hearing
before the Board.
          We   conclude   that  application  of   the   recapture
requirement  of  subsection  .150(b)  does  not  result   in   an
unconstitutional diminution of benefits.  Hammond  and  Sheffield
direct  that  PERS  members are entitled  to  the  best  benefits
available   and  that they are entitled to choose those  benefits
for themselves  but are not so broad as to allow members to sever
statutory provisions from one another and mix and match  some  or
all  of  a statutory provision from one era with that of another.
The  early  retirees additional retirement benefits under  former
subsection  .150(a) were diminished only to the extent  that  the
Division  accounted  for repayment of early  retirement  benefits
under former subsection .150(b).  They still enjoy a net increase
over  what  they  would  receive under  the  new  version  of  AS
39.35.150.   The Board therefore properly declined to  sever  and
disregard subsection .150(b) when calculating retirement benefits
under former AS 39.35.150.  We affirm the Boards decision in this
          We  also conclude that the Divisions calculations  were
reasonable.   Because the meaning of actuarial  equivalent  falls
within  the  unique expertise of the PERS Board,33 we review  the
Boards  decision  under  the reasonable basis  test.   The  Board
concluded  that  the mathematical and actuarial methodology  that
the  Division  used  when it calculated the  recapture  of  early
retirement  benefits was reasonable.  The Board  noted  that  the
definition  of  actuarial equivalent or actuarial adjustment  was
not  a  model  of clarity,34 but that it was persuaded  that  the
Division had rendered a reasonable interpretation.  It also noted
that the Divisions interpretation equalized early retirement with
normal retirement receipts and employed both a mortality table as
well  as  an  interest factor.  In contrast, the  early  retirees
proposed  calculations admittedly were approximate  and  did  not
include   a   factor  to  account  for  post-retirement   pension
adjustments.   Moreover,  the interpretation  that  the  Division
ultimately adopted  defining early retirement as the time between
the age at which the person took early retirement and reached age
fifty-five  favored the early retirees.
          The  Divisions calculations were supported by and based
on  a  quantifiable  mathematical basis:  actuarial  equivalence,
interest,  and  mortality.  The Division applied a definition  of
actuarial equivalent that favored the early retirees.  The  plain
meaning application required the Division to recoup nine  to  ten
years  of  early  retirement benefits  from  some  of  the  early
retirees while the Divisions interpretation required it to recoup
approximately  four years of benefits in the  most  severe  case.
The  Divisions  interpretation of  actuarial  equivalent  is  not
unreasonable given these facts.  We affirm the Boards decision on
this issue.
     B.   The   Division  Did  Not  Violate  Subsection  .520(b)s
          Prohibition  Against  Adjustments  by  Applying  Former
          Subsection .150(b); Therefore, an Undue Hardship Waiver
          Was Inappropriate.
          Former  AS 39.35.520, in effect when the early retirees
took   final  retirement  and  the  Division  recalculated  their
benefits, governs adjustments of a PERS members benefit  payments
when  an  error  is made in computing a benefit  and  the  member
received  more  or less than the amount to which he  or  she  was
entitled.   It  provides  that  as  far  as  practicable,  future
payments  shall be adjusted so that the actuarial  equivalent  of
the  pension or benefit to which the employee or beneficiary  was
correctly entitled shall be paid.35  It thus requires PERS members
to  repay  funds that they received but to which  they  were  not
entitled.36   But  under  former  subsection  .520(b),   downward
adjustment to recover benefits cannot be made if:
          (1) the incorrect benefit was first paid two years
          or  more  before  the  member or  beneficiary  was
          notified of the error;
          (2)  the  error  was not the result  of  erroneous
          information supplied by the member or beneficiary;
          (3)   the  member  or  beneficiary  did  not  have
          reasonable  grounds to believe the amount  of  the
          benefit was in error.[37]
          Former  subsection .520(d) requires a member  who  owes
the  system money to pay interest on the amount owed if it is the
result  of  erroneous  information  supplied  by  the  member  or
beneficiary, or the member or beneficiary had reasonable  grounds
to  believe  the  amount of the benefit was in  error.38   Former
subsection .522(a) permits the Board to grant a member  a  waiver
of  adjustments  if the adjustment will, in the  Boards  opinion,
cause  the member undue hardship and if the circumstances satisfy
several other criteria.39
          In  this  case, the Board concluded that  although  the
former subsection .150(b) recapture requirement reduced the early
retirees monthly pensions, it was not an adjustment prohibited by
subsection   .520(b)  because  it  was  merely  the   result   of
application of the old law:
          [T]he  only  adjustment   to  the  extent  that  a
          recalculation  occurred  was the computation  made
          under  Old  Law  AS  39.35.150  pursuant  to   the
          settlement  in the Turner case. Payments  made  to
          the  appellants included application  of  Old  Law
          subsection   (b)  provision  relating   to   early
          retirement benefits.  The fact that subsection (b)
          provided  a  lower amount to the appellants  as  a
          consequence  of  the Divisions application  of  AS
          39.35.150  in  its entirety does not constitute  a
          further  adjustment  within  the  meaning  of   AS
          39.35.520  nor is it barred by AS 39.35.520.   The
          Division  is  not seeking to adjust  the  Old  Law
          payouts  made;  rather  the  issue  is  the   base
          computation under Old Law AS 39.35.150.
          The  early  retirees argue that the Division  made  two
adjustments  to  their  pension payments within  the  meaning  of
subsection .520(b): one when it recalculated their pensions under
former  subsection .150(a), and the other when it  reduced  their
pensions under former subsection .150(b) to account for the early
retirement  benefits  they received.  They assert  that  even  if
subsection .150(b) applies to them, subsection .520(b)s  two-year
statute  of limitations bars the state from recovering the  early
retirement  benefits  it disbursed to them no  later  than  1988.
Alternatively,  the  early  retirees  argue  that  even  if   the
subsection  .520(b) statute of limitations does  not  bar  former
subsection .150(b)s recapture requirement, the Board should  have
waived  the recapture under former subsection .522(a) because  it
posed an undue hardship.
          The  early  retirees further argue  that  even  if  the
Division  properly  reclaimed their  early  retirement  benefits,
subsection  .520(d)  precludes the Division  from  charging  them
interest  on  the  disbursed  early  retirement  benefits.   They
contest  the  inclusion of a seven percent interest rate  in  the
actuarial  calculations used to arrive at  the  amount  of  early
retirement  funds  owed to the Division.  Finally,  they  contend
          that they should have been given an opportunity to pay off the
early  retirement  indebtedness in a lump  sum  to  avoid  paying
          The  Division  argues  that  section  .520  applies  to
recovery  of  benefits only when the PERS system has  overpaid  a
members  benefit  as  a result of changes or errors  in  records,
contributions, or benefit computations.  It claims that the early
retirees monthly benefits increased simply because of the  former
subsection .150(a) recalculation, and therefore section .520 does
not apply.  The Division further counters that it considered only
gross early retirement benefits, without interest, in determining
the  amount  of  early  retirement  benefits  subject  to  former
subsection   .150(b)s  recapture  requirement.    Regarding   the
interest  rate  included  in  the  actuarial  calculations,   the
Division  responds that it used the most advantageous factors  in
effect  during the appellants employment, and that the basis  for
actuarial  factors  is derived from 2 Alaska Administrative  Code
(AAC)  35.329,   which explains the basis of the assumptions  for
the   reduced  benefit  actuarial  adjustment  factors  from  the
relevant periods, and sets the interest rate at six percent.40  It
concludes  that  members receive the benefits due  them  when  it
applies   an   actuarial  factor  that  is  based  on   mortality
information and an interest assumption.
          We  conclude that the recalculation of member  benefits
under   subsection  .150(a)  was  not  an  adjustment  triggering
subsection .520(b).  Assuming for the sake of argument  that  the
Division  erred when it calculated pensions during the 1980s  and
1990s  using  the new law, and that the early retirees  therefore
incorrectly  received  lower  pension  payments,  the  error  was
corrected  as  required by subsection .520(a) when  the  Division
recalculated their benefits under the old law.  Once the Division
applied  subsection  .150(a) to recalculate  the  early  retirees
pensions,  it  was  neither a change  or  error  in  the  records
maintained  by  the system, nor an error [] made in  computing  a
benefit  when the Division applied subsection .150(b) to  account
for   early  retirement  benefits  already  paid.   Rather,   the
application   of  subsection  .150(b)  was  merely  the   natural
extension  of  applying  former subsection  .150(a).   The  Board
correctly   concluded  that  the  changes  resulting   from   the
application  of  former section .150 were not an adjustment  that
required  the recovery of benefits under subsections .520(a)  and
          We  also  conclude  that  the early  retirees  interest
arguments are unavailing; no evidence suggests that the  Division
imposed interest based on subsection .520(d).  Before the  Board,
the  Division  explained that it calculated the amount  of  early
retirement  benefits received by each appellant up to age  fifty-
five  without including interest, but that an interest assumption
was  embedded in the actuarial factor applied to that  amount  to
determine the final ongoing monthly benefit.  Division Retirement
Manager  Kathy  Lea  stated  that it  was  a  standard  actuarial
practice to embed seven percent interest in the actuarial  factor
to  reflect  the time value of money; 2 AAC 35.329  dictates  the
interest rates and guidelines for the actuarial calculation.  For
          these reasons, we conclude that the Division reasonably
incorporated  an  interest factor into the calculations  used  to
determine  the early retirees monthly early retirement  recapture
          Finally,  the  early  retirees  maintain  that  several
inequitable  factors required the Board to waive the  application
of  subsection  .150(b).  They contend that a subsection  .150(b)
waiver  is  justified  because of:   (1)  the  effects  of  early
retirement recapture on their federal income taxes; (2) the  fact
that  they did not receive pension payments while they  were  re-
employed; (3) the unjust enrichment of the retirement system, and
(4)  the harm visited on them because the Division did not advise
them  of the ramifications of returning to work.  Because we have
held that the application of former subsection .150(b) is not  an
adjustment  under  subsection .520(a),  the  early  retirees  are
therefore not entitled to an undue hardship waiver under  section
.522.   We  affirm  the Boards conclusion that a  waiver  is  not
appropriate in the early retirees case.
     C.   The  Early  Retirees Remaining Claims Are Not  Properly
          Before  Us.The early retirees argued to the Board,  and
          now  argue  to  us,  that  the  Division  breached  its
          fiduciary  duty to them by failing to advise the  early
          retirees  of  the  nature and effect of  the  Divisions
          calculations.    The  Board  stated  it   was   without
          jurisdiction   to  provide   damage   relief   to   the
          appellants,41  and neither the Board nor  the  superior
          court addressed this claim.  The early retirees do  not
          argue  that  they  can  be  awarded  damages  in  these
          proceedings,   but  suggest  the  alleged   breach   of
          fiduciary duty during the Divisions calculations caused
          them  financial harm through adverse tax  consequences.
          The early retirees retain the right to seek damages  in
          a   separate   suit   before  a   court   with   proper
          Appellants Yvonne Alford and Evadine Turner also  raise
independent arguments not directly related to the section .150(a)
recalculation, but related to other components of the calculation
of   their  retirement  benefits.   The  record  regarding  their
individual claims is not developed, nor is there any decision  or
ruling regarding them from which to appeal.  Their claims are not
properly  before us,42 but they also retain the right  to  pursue
their claims in an appropriate forum.
          We  AFFIRM  the  Boards denial of  the  early  retirees
     1    AS 39.35.150(a) (1977).

     2    Id.

     3    Former AS 39.35.150 (1974).

     4    Former AS 39.35.150(a) (1974) (emphasis added).

     5    Former AS 39.35.150(b) (1974).

     6     Former  AS  39.35.680(1) (1960).  The  definition  now
appears in AS 39.35.680(2) and is substantively the same, but has
been re-titled actuarial adjustment.

     7     The State of Alaska Public Employees Retirement System
Board  adopted this interpretation in its November 1980 decision,
In the Matter of the Appeal of Walter L. Kubley.

     8     Hammond  v.  Hoffbeck, 627 P.2d 1052, 1056-57  (Alaska
1981);  see  also Sheffield v. Alaska Pub. Employees Assn,  Inc.,
732 P.2d 1083, 1085 (Alaska 1987).

     9     Hammond,  627 P.2d at 1056, 1057; see also  Sheffield,
732  P.2d at 1085 (holding that the state cannot make changes  to
the  retirement  system  that will diminish  a  members  benefits
without providing an offsetting advantage).

     10     The applicable statute provided that early retirement
age was fifty.  See former AS 39.35.380 (1975).

     11    Turner v. State of Alaska, Dept of Admin., Div. of Ret.
& Benefits, No. 3AN-01-06171 Civ. (Alaska Super., April 2, 2002).

     12     Alyeska Pipeline Serv. Co. v. DeShong, 77 P.3d  1227,
1231 (Alaska 2003).

     13    McMullen v. Bell, 128 P.3d 186, 190 (Alaska 2006).

     14    Id.;  see also Lopez v. Admr, Pub. Employees Ret. Sys.,
20  P.3d  568, 570 (Alaska 2001) (Questions of law not  involving
agency  expertise are reviewed under the substitution of judgment

     15    Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).

     16    Lopez, 20 P.3d at 570.

     17    Alyeska Pipeline, 77 P.3d at 1231.

     18    Lopez, 20 P.3d at 570 (citation omitted).

     19    Alaska Const. art. XII,  7.

     20    Alaska Const. art. I,  15.

     21    Hammond, 627 P.2d at 1053-55, 1059.

     22    Id. at 1057.

     23    Id.; see also Sheffield, 732 P.2d at 1085 (holding that
the  state cannot make changes to the retirement system that will
diminish  a  members  benefit  without  providing  an  offsetting

     24    Hammond, 627 P.2d at 1058-59.

     25    Id. at 1059.

     26    Id.

     27    Id. at n.13.

     28    Sheffield, 732 P.2d at 1084.

     29    Id. at 1084, 1089.

     30    Id. at 1087 (citation omitted).

     31    Id. (emphasis in original).

     32    Id. at 1089 n.13.

     33     See  former AS 39.35.040 (listing Boards  powers  and
duties when it heard appellants case).  The Board has since  been
abolished.  See Ch. 9,  132, SLA 2005.

     34    See former AS 39.35.680(1) (1960).

     35    Former AS 39.35.520(a) (1960).

     36    Id.

     37    Former AS 39.35.520(b) (1984).

     38    Former AS 39.35.520(d) (1986).

     39    Former AS 39.35.522(a) (1980).

     40    2 AAC 35.329(c), (d) (2007).

     41    The powers and duties of the PERS Board are defined in
former  AS 39.35.040, which did not permit the Board to  consider
breach of fiduciary duty claims.  See former AS 39.35.040 (2004).

     42    This court ordinarily will not consider an issue raised
for the first time on appeal.  McMullen, 128 P.3d at 190.

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