Opinion ID: 2546975
Heading Depth: 3
Heading Rank: 1

Heading: Arrearage Indebtedness

Text: The Bartleys' challenge to the determination of their arrearage indebtedness turns largely on the division's interpretation of AS 14.25.060. When the Bartleys first joined the TRS in 1991, AS 14.25.060 provided, in relevant part: (a) If a member first joined the service before July 1, 1990, and has military service or Alaska Bureau of Indian Affairs (BIA) service, or if a member joined the system before July 1, 1978, and has creditable outside service, the member is indebted to the system as follows: (1) At the time of first becoming a member of the system, the arrearage indebtedness is seven percent of the base salary multiplied by the total number of years of creditable outside, military, and Alaska BIA service. The administrator shall add compound interest at the rate prescribed by regulation to the arrearage indebtedness beginning July 1, 1963, or at the time the member first becomes eligible to claim the service, whichever is later, to the date of payment or the date of retirement, whichever occurs first. .... (b) If a member joins the system on or after July 1, 1978 and has creditable outside service, the member may claim this service. If claimed, the member is indebted to the system as follows: (1) The arrearage indebtedness is the full actuarial cost of providing benefits for the service being claimed. Compound interest at the rate prescribed by regulation shall be added to the arrearage indebtedness beginning the date the actuarial cost is established to the date of payment or the date of retirement, whichever occurs first. .... (d) If a member first joined the system on or after July 1, 1990, and has military service or Alaska BIA service, the member's indebtedness shall be determined under (a) of this section except that the percentage multiplier is 8.65 percent.[ [3] ] Here, the division calculated arrearage indebtedness for the Bartleys' prior BIA service using subsection .060(d)'s 8.65% multiplier; the division calculated the arrearage for their outside service under the full actuarial cost method set out in subsection .060(b)(1). In affirming the division's and board's determinations that these provisions applied to the Bartleys' case, the superior court reasoned: Alaska Statute 14.25.060(a) applies to determine arrearage indebtedness with respect to two types of non-TRS service: (1) military or BIA service when the member first joined the service before July 1, 1990 and (2) outside service when the TRS member joined the system before July 1, 1978. This subsection, however, is modified by subsection (d), which raises the percentage multiplier to 8.65 percent for military or BIA service if a member first joined the system on or after July 1, 1990. In the superior court's view, [b]ecause the Bartleys performed the BIA service before 1990 they are entitled to have their arrearage indebtedness for that service calculated using a percentage multiplier, rather than actuarial cost. But because they did not join the TRS system until after July 1, 1990, the correct multiplier is 8.65 percent. Following the same approach, the court concluded that subsection .060(b)(1) governed the Bartley's arrearage indebtedness for outside service and that the Bartleys' outside teaching service therefore did not qualify as creditable service governed by subsection .060(a)(1). The Bartleys challenge the board's and superior court's interpretation of AS 14.25.060, maintaining that it conflicts with the plain meaning of subsection .060(a). They assert that, by requiring seven percent of the base salary to be multiplied by the total number of years of creditable outside, military, and Alaska BIA service, [4] subsection.060(a) necessarily prohibits service splittingin other words, treating outside service and BIA service differently. We agree that the challenged interpretation conflicts with the plain meaning of AS 14.25.060(a). The express terms of subsection.060(a) apply to the Bartleys' situation because the Bartleys previously served in the Alaska Bureau of Indian Affairs and first joined the service before July 1, 1990. [5] The formula spelled out in this subsection requires an eligible claimant's entire arrearage indebtedness to be calculated at the rate of seven percent of the base salary multiplied by the total number of years of creditable outside, military, and Alaska BIA service. [6] In the Bartleys' case, subsection.060(d) partly modifies subsection .060(a): because the Bartleys first joined the TRS the systemafter July 1, 1990, subsection (d) substitutes a multiplier of 8.65% for the 7% multiplier specified in subsection (a). In all other respects, however, subsection (d) leaves subsection (a)'s method of calculating arrearages unchanged, expressly requiring the member's indebtedness ... [to] be determined under (a) of this section except that the percentage multiplier is 8.65 percent. [7] As the Bartleys correctly point out, the plain language of subsection .060(a) requires the same multiplier to be used in calculating arrearages for all creditable non-TRS service: At the time of first becoming a member of the system, the arrearage indebtedness is seven percent [or 8.65 percent if subsection .060(d) applies] of the base salary multiplied by the total number of years of creditable outside, military, and Alaska BIA service.  [8] The superior court ruled that subsection.060(d)'s reference back to subsection .060(a) applied only to the Bartleys' prior BIA service in other words, that their arrearages for creditable BIA service should be calculated under subsection .060(a) except that the percentage multiplier is 8.65 percent. [9] By contrast, the superior court reasoned, the Bartleys' indebtedness for their outside service had to be calculated by the actuarial cost method set out in subsection .060(b) because that subsection best described the Bartleys' situation: subsection .060(b) expressly requires arrearages to be determined by the full actuarial cost of providing benefits [i]f a member joins the system on or after July 1, 1978, and has creditable outside service. [10] Yet as already pointed out above, the plain language of subsection.060(d) militates against this interpretation because it designates subsection .060(a) as the proper method of calculating arrearages for the member's indebtedness without expressly limiting that indebtedness to periods of military or BIA service. Of course, the plain meaning of a statute does not always control its interpretation, for we have recognized that legislative history can sometimes alter a statute's literal terms. But under Alaska's sliding-scale approach to statutory interpretation, the plainer the language of the statute, the more convincing contrary legislative history must be. [11] Here, we find no legislative history contrary to the plain meaning of AS 14.25.060. In fact, the version of this provision that immediately preceded the one applicable to the Bartleys' case reinforces the plain meaning of AS 14.25.060(d), as we described it above. Before 1990, AS 14.25.060 set only two rates that could be used in calculating a new TRS member's arrearage indebtedness for prior creditable non-TRS service. [12] The first rate was spelled out in former subsection.060(a). That provision specified that the arrearage indebtedness is seven percent of the base salary multiplied by the total number of years of creditable outside, military, and Alaska BIA service. [13] Former subsection.060(a) applied this rate to two distinct sets of TRS members: those with creditable military service or Alaska Bureau of Indian Affairs (BIA) service, regardless of when they joined the TRS; and those with creditable outside service, but only if they joined the system [the TRS] before July 1, 1978. [14] The second arrearage rate set out in former AS 14.25.060 was described in subsection .060(b)(1), which required arrearage indebtedness to be calculated at the full actuarial cost of providing benefits for the service being claimed. [15] By its own terms, subsection.060(b)(1) applied this rate only [i]f a member joins the system on or after July 1, 1978 and has creditable outside service. [16] Moreover, because former subsection.060(a)(1) entitled any member with creditable military or BIA service to have the seven-percent rate applied in calculating arrearages for all prior creditable servicethat is, military, BIA, and outside service [17] the full-actuarial-cost method set out in former subsection .060(b)(1) implicitly excluded members with creditable outside service who were also entitled to claim either BIA or military service at seven percent under subsection.060(a)(1)in other words, under former subsection .060(a)(1), subsection (b)(1)'s full-actuarial-cost provision would not apply to TRS members claiming creditable outside service and military or BIA service or those claiming only creditable outside service who joined the TRS before July 1, 1978. An opinion issued by the Attorney General in 1982 confirms this plain-language interpretation of the pre-1990 version of AS 14.25.060: AS 14.25.060, as amended in 1977, divides the TRS membership into two groups, as follows: (1) those who either have military service or Alaska Bureau of Indian Affairs service, or who joined the system before July 1, 1978 and have creditable outside service of any kind, and (2) those who joined the system on or after July 1, 1978 and have creditable outside service.[ [18] ] As the Attorney General interpreted the pre-1990 provision, the first group of members it defined had a vested right to have their arrearage indebtedness calculated under the non-actuarial method set out in subsection.060(a): The statute in question, AS 14.25.060, extends this protection to those persons who either were former members on July 1, 1978, or who claim credit for military or Alaska BIA service. [19] In the Attorney General's view, the statute would never subject these members to service splittingthat is, it would never require a TRS member who had a right to pay arrearages at seven percent for creditable BIA or military service to pay at the higher, full-actuarial-cost rate for concurrently claimed outside service: A person in the first group must pay seven percent of his or her base salary for each year of creditable outside service. A person in the second group must pay full actuarial cost for all creditable outside service. It is our opinion that the statutory classification is unambiguous and does not permit you to require any person who either was a member of the system before July 1, 1978 or who claims military or BIA service credit to pay the full actuarial cost of creditable outside service.[ [20] ] In 1990, however, the legislature amended the TRS statutes to increase new TRS members' annual TRS contributions from seven percent to 8.65 percent beginning January 1, 1991. [21] The change triggered the need to adopt a corresponding increase in the arrearage-indebtedness rate for TRS members first joining the system after the 1990 contribution increase. This new class of TRS members could properly be charged for arrearages at the same increased rate they would pay for their annual TRS contributions8.65 percenteven if they had prior military or BIA service that entitled them to escape paying for arrearages based on full actuarial cost. The legislature addressed the need to define the arrearage rate for this newly created class by amending former AS 14.25.060(a) and adding a new subsection to AS 14.25.060, subsection .060(d). [22] The amendment to subsection.060(a) changed the definition of TRS members qualifying to have their arrearage indebtedness calculated at seven percent by excluding TRS members with creditable military or Alaska BIA service who first joined that service on or after July 1, 1990, the effective date of the legislation enacting the 1990 TRS contributions increase. [23] In turn, the newly added subsection .060(d) dealt with all members originally included in subsection.060(a) who had a vested right to claim prior creditable service at a non-actuarial rate but whose contribution rate was not frozen at seven percent. Specifically, subsection.060(d) defines this new group to include all TRS members with creditable military or BIA service who first joined the TRS on or after the 1990 amendment's effective date, July 1, 1990; [24] the subsection requires these members to pay arrearages at the increased rate of 8.65 percent, but continues to exempt them from full actuarial costs by mandating that the member's indebtedness shall be determined under [subsection .060](a) except that the percentage multiplier is 8.65 percent. Although subsection .060(d) does not explicitly mention outside service, this omission proves inconsequential. Under both the current and prior versions of subsection .060(a), only two ways exist for a TRS member with prior creditable outside service to escape paying full actuarial costs for arrearages: (1) by joining the TRS before July 1, 1978, which would vest the member with the right to a seven-percent arrearage rate as of 1978; or (2) by tying the outside-service claim to a claim for military or BIA service, which would peg the arrearage rate for the member's outside service to the rate that would govern the concurrent claim for military or BIA service. Hence, no TRS member claiming credit for prior outside service alone could ever be charged for arrearage indebtedness at the 8.65 percent rate set out in subsection .060(d). We recognize that it is possible to construct a contrary meaning for subsection.060(d). Because that subsection specifically mentions only military service and BIA service, and does not mention creditable outside service, a question potentially arises whether that subsection's reference to the member's indebtedness was intended by the legislature to be limited to military or BIA service. Although the answer to that question is not necessarily self-evident from the text of subsection.060(d), the legislative history we discuss above convinces us that the legislature did not intend, when it enacted subsection.060(d) in 1990, to limit the cross-reference to subsection .060(a) to military or BIA service, and thus did not intend to exclude creditable outside service from application of the 8.65% interest rate. In summary, then, the legislative history of section .060 reinforces the plain language of the current provision's subsection .060(d). We thus conclude that the statute's plain meaning applies here. When subsection.060(d) applies to part of a member's claim, the subsection's language requires that the member's entire arrearage indebtedness must be calculated following the method set out in subsection .060(a), except that the 8.65% multiplier adopted in subsection.060(d) replaces subsection .060(a)'s seven-percent multiplier. Because neither subsection.060(a) nor subsection .060(d) permits split calculation of arrearage indebtedness for claims mixing prior outside service with military or BIA service, the board's decision to calculate the Bartleys' outside service arrearages under subsection .060(b) must be reversed. These arrearages must be recalculated under the method set out in subsection.060(a)(1), except that an 8.65% rate must apply.