Opinion ID: 2712872
Heading Depth: 2
Heading Rank: 1

Heading: the retirement ordinance

Text: The Macomb County Retirement Ordinance explicitly provides the retirement commission with discretion to adopt actuarial calculations that apply to the retirement system: “The Retirement Commission shall from time to time adopt such mortality and 52 Detroit Police Officers Ass’n, 391 Mich at 63. 15 other tables of experience, and a rate or rates of regular interest, as are necessary in the Retirement System on an actuarial basis.”53 When an employee selects the joint and survivor option to allow a beneficiary to receive monthly retirement allowance payments after the employee’s death, the ordinance requires the monthly payments to be reduced so that the joint and survivor option is “the actuarial equivalent” of the straight life benefit.54 The ordinance does not define the term “actuarial equivalent.” Because “actuarial equivalent” is a term of art, we must assume that the Macomb County Retirement Commission intended the term to have its technical meaning.55 Black’s Law Dictionary defines “actuarial equivalence” as “[t]he amount of accrued pension benefits to be paid monthly or at some other interval so that the total amount of benefits will be paid over the 53 Macomb County Retirement Ordinance, § 15. 54 Section 26(a) of the Macomb County Retirement Ordinance provides: Prior to the receipt of his/her first monthly retirement payment but not thereafter, a member may elect to receive his/her retirement allowance as a straight life retirement allowance payable throughout his/her life or he/she may elect to receive the actuarial equivalent, at that time, of his/her straight life retirement allowance in a reduced retirement allowance payable throughout his/her life and nominate a beneficiary. . . . The beneficiary then would receive payments on his or her survival of the employee on the basis of the particular provisions of the five options listed. Moreover, § 22(b) allows a union represented member to “elect to receive his/her retirement allowance under an option provided in Section 26 in lieu of a straight life retirement allowance.” 55 See MCL 8.3a (“[T]echnical words and phrases, and such as may have acquired a peculiar and appropriate meaning in the law, shall be construed and understood according to such peculiar and appropriate meaning.”); Gora v City of Ferndale, 456 Mich 704, 711; 576 NW2d 141 (1998) (“The rules governing the construction of statutes apply with equal force to the interpretation of municipal ordinances.”). 16 expected remaining lifetime of the recipient.”56 This definition makes clear that an actuarially equivalent monthly benefit must be calculated to allocate benefits over a projected period of time, that is, the life expectancy of the recipient(s). The Attorney General reached a similar conclusion in the opinion that prompted the commission’s original action to adopt a female-only actuarial table. When defining the phrase “actuarially equivalent” in the statutory election of early retirement benefits, the Attorney General stated that the term meant a “‘benefit of equal value’” to its comparison plan “‘when computed upon the basis of such mortality and other tables as may be adopted by the retirement board.’”57 We believe that the Attorney General’s construction accurately describes this technical term and thus we adopt it as our own. Furthermore, we hold that this definition of “actuarial equivalent” is unambiguous in the context of the ordinance. The ordinance itself makes clear that the county must present the joint and survivor options to a retiring employee in a way that estimates that the employee and his or her beneficiary are projected to receive an equal amount of total benefits from a joint and survivor option as the employee would receive from the straight life option. Moreover, it is also clear from the evidence in this case that the parties had this same understanding of the term’s meaning. GRS’s report states that the proposed actuarial table is “designed to have the same present value, on average, as the straight life 56 Black’s Law Dictionary (8th ed), p 39. 57 OAG, 1981-1982, No 5846, p 31, quoting King Co Employees’ Ass’n v State Employees Retirement Bd, 54 Wash 2d 1; 336 P2d 387, 391 (1959) (emphasis omitted). 17 normal form of payment” and states that the 100% female blend is not actuarially equivalent to the straight life payment. Indeed, the charging parties’ own expert witness testified that “[a]ctuarially equivalent to me means equal” and “[i]dentical in value.”58 For these reasons, we conclude that the dissenting judge of the panel correctly determined that actuarial equivalence requires “optional benefits that include payments to a survivor be equal in value to the straight-life benefit on the basis of statistical data regarding mortality and other factors such as the rate of interest.”59 58 In concluding that the term “actuarial equivalent” is ambiguous, the Court of Appeals majority erroneously focused on a different statement by the charging parties’ expert witness that distinguished actuarial equivalence from the valuation of benefits: “‘[A]ctuarially equivalent is usually a term used in a plan document to set the optional forms to another optional form. The valuation of those optional forms is a different matter, whole different assumption set.’” Macomb Co, 294 Mich App at 164 (emphasis omitted). However, the extratextual evidence that the Court of Appeals majority used to define the ordinance’s term did not refute the plain meaning of the term. The expert noted that actuaries use gender-based actuarial tables when valuing future expected outlays for the purposes of valuing its pension obligations on the open market. He testified that “to value these benefits, they would value them as an open market valuation,” which takes a recipient’s sex into account, unlike the method used to define the recipient’s benefits. Thus, it is unremarkable for an expert to say that the county’s own valuation of its pension obligations uses a different set of assumptions than its calculation of the pension benefits that are due its employees. This internal calculation is a more precise projection of its future pension funding obligations because, unlike the calculation of benefits due an employee, the county’s internal calculation of its obligations can factor the differences in life expectancy between men and women. 59 Macomb Co, 294 Mich App at 177 (MARKEY, P.J., dissent). Judge MARKEY interpreted the term “actuarial equivalent” by looking to the separate definitions of the terms “actuary” and “equivalent.” However, as stated, the phrase “actuarial equivalence” is a term of art and as such has independent significance, as evidenced by its use in many similar retirement plans. See, e.g., Dunn v Bd of Trustees of Wayne Co Retirement Sys, 160 Mich App 384, 394; 407 NW2d 657 (1987) (“An employee pension . . . shall be the 18