Case ID: ad_272/html/0185-01.html
Source: Caselaw Access Project
Author: {"author": "Foster, J. Hill, P. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

In the Matter of Philip F. Wexner et al., Petitioners, against New York State Employees’ Retirement System et al., Respondents.
    Third Department,
    May 7, 1947.
    
      
      Philip P. Wexner in person for Philip F. Wexner and Sidney Schindler, attorneys, petitioners.
    
      Nathaniel L. Goldstein, Attorney-General (Wendell P. Brown, Solicitor General, John G. Crary, Jr., Assistant Attorney-General of counsel), for respondents.
   Foster, J.

This controversy is submitted upon an agreed statement of facts. It concerns the transfers of petitioners from the New York City Employees’ Retirement System to the New York State Employees’ Retirement System. Prior to September 27, 1943, petitioners were employees of the City of New York and members of the city retirement system. On that date they became State employees, as unemployment insurance referees, and were transferred to the State retirement system. When thus transferred their accumulated contributions and pension reserves in the city system were transferred to the State system. In the case of petitioner Wexner, his contributions and interest amounted to $1,667.96, with a pension reserve of $1,248.77; for petitioner Schindler the corresponding amounts transferred were $702.65 and $498.98. Upon entry into the State system both petitioners elected to contribute on the basis of retirement at the minimum age of sixty years. The State system thereupon fixed the rate of contribution in Wexner’s case at 6.21% of his salary, and in Schindler’s case at 6.03% of his salary; and the rate of interest to be paid on these contributions was held to be at 3% per annum, that being the interest rate in effect for those who joined the system after June 30,1943. The rates of contributions were aetuarially fixed upon the basis of petitioners’ respective ages at the time of their transfers. So far as these matters were concerned no consideration was given to tbeir prior membership in the city system.

Petitioners contend generally that their status in the State system should be the same as though they had become members thereof on the respective dates they became members of the city system. Specifically they ask for an order declaring that their contribution rates, and the interest on contributions, should be computed as though they had been members of the State system prior to July 1, 1943, and on the dates of their respective membership in the city system. Those who were members of the State system prior to July 1, 1943, have interest credited upon their contributions at the rate of 4% per annum, and those who became members after that date are only entitled to 3% (Civil Service Law, § 50, subd. 11). If petitioners are correct their rates of contributions, computed upon the basis of their ages when they joined the city system, would be, in the case of Wexner 4.68% instead of 6.21%, and in the case of Schindler 4.68% instead of 6.03%.

The answer to this controversy must rest on the.proper interpretation to be given section 73 of the Civil Service Law, which permits transfers of memberships to the State system from some other retirement system. Before discussing this section, however, it is well to note that the State retirement division has two fundamental divisions: (a) the accumulated contributions of a member, with interest added either at 4 or 3%, depending upon the date of entry, and from which an annuity may be paid; (b) an accumulation of funds contributed by the employer from which a pension, fixed by the member’s final average salary and years of service, may be paid. The combination of an annuity and a pension thus provided for is commonly called a retirement allowance (Civil Service Law, § 63).

The transfer of membership from another system, operating on a sound financial basis and subject to the supervision of the State Insurance Department is .permitted, governed and controlled wholly by the provisions of section 73 of the Civil Service Law. There is no other section dealing with this matter. Speaking of such a transfer this section says: “ Upon his entry into such other system, he shall be- admitted without regard to his previous membership in the first retirement system and without credit for prior service except as hereinafter provided.” (Emphasis supplied.) Thus a transferee to the State system acquires no rights or privileges arising out of his membership in a previous system except those' specifically provided for in the section.

The rights and provisions provided for on transfer are these: (1) the employee is permitted to deposit in the State system, and receive credit therefor, the total amount of his contributions withdrawn from the first retirement system; (2) as to the contributions made by the employer in the first system, these shall be computed actuarially and the result so obtained shall be considered as the pension reserve of the transferee’s account in the first system. When this reserve is transferred to the State system the statute goes on to say that the employée: < £ $ * * shall then be given such status and be credited with such service in the second retirement system as he was allowed in the first retirement system * * * Petitioners construe this languagé to establish their status in the State retirement system both as possible annuitants as well as potential pensioners. This construction would entitle them to the 4% rate of interest on their contributions made after joining the State system although their transfer to this system did not take place until after June 30, 1943; and their rates of contributions would be fixed as if they had been members of the State system from the time they joined the city system. The comptroller has held to the contrary, that they are only entitled to the 3% rate of interest on their contributions made after joining the State system, because their transfers to that system took place after June- 30,1943; and that their rates of contribution must be fixed as of the date of their entry into the State system, based upon mortality tables and the regular rate of interest then in effect, regardless of their previous service in the city system. We believe the comptroller’s construction. is correct. The language upon which petitioners rely as to their “ status ” refers simply to the pension reserve transferred from the first system to the second. It simply means, as related to petitioners,' that for pension purposes they must be allowed credit for their actual years of service in the prior system, and no more. It has nothing to do with an annuity fund.

A comparison of this part of the section, as it read prior to 1931, and its present wording, supports this assertion. Prior to the amendment of 1931 (L. 1931, ch. 299), it provided that upon a transfer of a pension reserve a member should “ then be given such status and be credited with such service in the second retirement system as shall impose a liability on that system in addition to the liability which it would otherwise undertake equal to the reserve so transferred.” (L. 1926, ch. 684.) Under that former provision, and for pension purposes, allowance to the transferee for previous service was limited to the actuarial equivalent of the pension fund transferred, and credit was not necessarily given for the actual years of service. Under the present provision the actual years of service are allowed irrespective of the size of the pension reserve transferred.

As to the rate of contributions to be made by petitioners to the annuity fund after joining the State system, and the interest to be paid thereon, the section is silent. Since these matters are not covered by the section it is only logical to conclude that as to them the transferee is to be regarded as a new entrant. And, moreover, there is the limiting sentence, previously quoted, to the effect that one transferring to the State system shall be admitted without regard to previous membership in the first retirement system, and without credit for prior service except as provided for. It follows that the general scheme otherwise embodied in the statutó must control, and under this a person does not become a member of the State system until his actual entry, and the applicable contributions and interest rates thereafter to be paid must be determined in each case as of the date of his membership. This construction has been followed as a matter of uniform practice by the authorities administering the State system for many years, and such an established practice must be given considerable weight in appraising the language of the section relied on.

Such an interpretation is also somewhat fortified by a reading of section 53 of the Civil Service Law. Under that section, paragraph (c) of subdivision 5, a person may become a member of the State system who is not a member of any actuarially sound retirement system but who has previous allowable service. To get credit for such previous service he must make contributions therefor, that is, he must make back payments; but in such a case his future rate of contribution and the interest to be paid thereon is nevertheless fixed as of the date he joins the system. It is significant that the privilege thus accorded is not available under this section to one who has the privilege of a transfer from some other retirement system under section 73. The reason for such denial is apparently this: if a member of another system was permitted to join the State system under section 53 there would be no requirement for the transfer of his pension reserve from the first system, and the State system would lose the benefit thereof. Otherwise there would be no distinction between a transferee -with allowable back service and a new entrant with the same kind of service, except that in lieu of making back payments to the annuity fund the transferee would simply transfer his annuity fund from the first system to the second. The apparent purpose of section 73 was to obtain for the State system the benefit of the pension reservo accumulated on the member’s behalf in another system. That purpose is accomplished by denying the benefits of section 53 to any person to whom the transfer privilege under section 73 is available. But so far as future contributions to the annuity branch of the system is concerned, and the interest to be added thereto, both a new entrant and a transferee stand on the- same footing. These matters are to be determined as of the date of membership in the State system.

The proceeding should be dismissed, without costs.

Hill, P. J.

(dissenting). This matter involves the transfer óf petitioners from the New York City to the State retirement system.. On September 27, 1943, they were appointed referees under the Unemployment Insurance Law. The controversy with the Comptroller of the State, ex-officio administrative head of the New York State Employees’ Retirement System as to the amount of contributions and interest to be credited, is submitted to this court upon an agreed statement of facts. (Civ. Prac. Act, § 548.)

Petitioner Wexner, on August 5, 1936, was first appointed a court attendant in the Supreme Court, Kings County and on that date became a member of the New York City Employees’ Retirement System; petitioner Schindler, on January 23, 1939, was appointed a court attendant of the Municipal Court of the City of New York and became a member of the city system. At the time of their court appointments they were each thirty-three years of age and 6.65% of their salaries was deducted by the city retirement system, they having elected to contribute on the basis of retirement at the minimum age of fifty-five years. When they were appointed to the State positions, the city retirement system transferred to the State system on behalf of Wexner $1,667.96 contributions and interest, and reserve $1,248.77, and on behalf of Schindler the corresponding amounts transferred were $702.65 and $498.98. Petitioners then elected to contribute on the basis of retirement at the minimum age of sixty. Thereafter the State system deducted 6.21% of Wex-' ner’s salary, he being then forty years of age, and from Schindler’s salary 6.03%, he being then thirty-seven years of age. No consideration was given to the earlier membership in the city system.

Prior to July 1, 1943, under the State retirement system, persons of the age of thirty-three years (petitioners’ ages at the time of the city appointments) were required to contribute 4.68%, and the interest was computed at the rate of 4% per annum. After June 30, 1943, for those joining the system the contributions were increased and interest computed at 3% per annum instead of 4%. (Civil Serv. Law, § 50, subd. 11.)

It is petitioners’ contention that their contributions to the State system should be fixed at the rates contributed by State employees who entered the service at the time they entered the city service, and that interest should be computed at 4%, the rate applicable to persons who joined the State service prior to July 1, 1943. Section 73 of the Civil Service Law is cited in support of this contention. It reads in part: Any member of any retirement system operating on a sound financial basis and subject to the supervision of the insurance department of the state may transfer his membership to the New York state employees’ retirement system * * *. In order to effect a transfer, he must give notice to the administrative head of the retirement system of which he is a member, prior to his withdrawal from such system, of his intention to enter such other retirement system * * *. Upon his entry into such other system, he shall be admitted without regard to his previous membership in the first retirement system and without credit for prior service except as hereinafter provided. He shall be permitted to deposit in the second retirement system the total amount of his contributions withdrawn from the first retirement system and upon such deposit within one year. * * * he shall then be given snch status and be credited with such service in the second retirement system as he was allowed in the first retirement system

Petitioners argue that their membership in the State system is but a continuation of their membership in the city system, and that they should have all the rights in the former which they would have had by joining it respectively on August 5, 1936, and January 23, 1939, when they joined the city system. That Wexner’s contribution of 6.21% of his salary and Schindler’s contribution of 6.03% of his salary should be reduced in each instance to 4.68%, the amount deductible prior to July 1, 1943, under the State retirement system for employees thirty-three years of age for retirement at the minimum of sixty years, and that compound interest at 4% should be figured on all contributions. That the failure of the State to do this is in violation of the quoted portion of section 73 of the Civil Service Law which requires that they shall be given the same “ status ” in the second system (the State) as they held in the first system (the city). That under the determination of the comptroller Wexner’s status is that of an employee who joined the system at forty years of age, and Schindler that of one who joined the system at thirty-seven years of age, while in fact they joined the first system when they were each thirty-three years of age. They call attention to the fact that their contributions to the city system were substantially in excess of the amounts which they would have been required to pay to the State system had they joined the latter when they were thirty-three years of age, and that the entire amount of these contributions and interest has been transferred to the State system. The reason for at least a portion of the excess was their election when joining the city system to contribute as required for retirement at the minimum age of fifty-five, while their contributions when they transferred to the State system were upon the basis of retirement at sixty.

It is difficult to understand the force of the argument first advanced in opposition by the State, which seems to intimate that there is a difference between the retirement allowances under the two systems. Bach system is subject to the supervision of the Insurance Department of the State, and each contemplates a retirement allowance consisting of an annuity derived from the accumulated contributions of the members, with compound interest, and a pension fixed by the final average salary and allowable years of service, paid out of funds contributed by the employer, and each of the systems at all times here involved was on a sound financial basis. A further State argument is that the practice followed in connection with petitioner’s transfer has been followed by State officials in the past. The latter argument loses force as the statute under which the State officials act has been amended several times within the period here involved, and the people of the State within a like time have added a new section to the Constitution (art. V, §7) which reads: After July first, nineteen hundred forty, membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired.” Some of the amendments following the adoption of the foregoing may have been enacted to give it effect.

On behalf of petitioners it is further argued that an employee of the Supreme Court of the State of New York is a State official, and while it is not necessary to determine as to an employee of the Municipal Court of the City of New York, arguments might be advanced on Schindler’s behalf along the same line. Matter of Bacom v. Conway (294 N. Y. 245) does not deal with the question here presented, but some of the language of the opinion is appropos. (e ‘ 3. “ City-Service ” shall mean service, whether appointive or elective, as an official, clerk or employee of the city or state of New York * * * so far as such service is paid for by the city of New York * * * ’ (emphasis supplied). To the same effect are the provisions in the New York Administrative Code, which define city service in dealing with the city retirement system. (Administrative Code, §§ B3-1.0, B3-3.0.) It seems clear that it was convenience of administration of both the city and the State retirement systems which dictated the inclusion of such State employees, as interveners in the city retirement system. It was more logical as well as more practical, when a State employee received compensation from a city, to have him join the city retirement system and to have the city then make the necessary contribution than to have the city make the necessary salary deduction, and remit such deduction to the State so that the latter might then add its contributions to the State retirement system. The salaries of interveners were chargeable to the city in which such commission has jurisdiction, * * * ’ (Public Service Law, § 14) although they were State employees, and thus, quite properly, the contributions to the retirement system into which the interveners were cast, were also to be made by that city.” (Pp. 252-253.)

Petitioners are entitled to the relief which they seek to make effective the statute earlier quoted (§73) and to give them “ such status ” and to credit them with “ such service in the second retirement system as * * * allowed in the first retirement system ”.

Petitioners are entitled to a judgment fixing their contribution rates and interest as though they had become members of the New York State retirement system prior to July 1, 1943, and on the dates of their respective membership in the New York City retirement system.

Heffernan, Brewster and Russell, JJ., concur with Foster, J.j Hill, P. J., dissents in an opinion.

Judgment for respondents dismissing proceeding,- without costs.