Court Opinion

ID: 9640046
Source: CourtListenerOpinion
Date Created: 2023-08-22 16:56:12.561663+00
Date Added: 2024-06-11T18:10:25.773118
License: Public Domain

CONCURRING AND DISSENTING OPINION BY
Judge PELLEGRINI.
Because it has been clearly, palpably and plainly demonstrated that the exclusion of certain classes of members being allowed to convert Class A service credit to Class AA service has a rational basis, I respectfully dissent from that portion of the majority’s decision finding that Section 5306(a.l)(3) of Act 91 violates the equal protection clauses of both the Pennsylvania and United States Constitution. Moreover, the majority’s rationale will open the floodgates to many other challenges that will call into question the continuing viability of Act 92, both constitutionally and financially.
James R. Kelley (Claimant) became a member of the State Employees Retirement System (SERS) on May 22, 1974, when he was elected as a Senator in the Pennsylvania General Assembly. Claimant continued to serve as a Senator until November 30, 1988. During that time, Claimant’s SERS benefits were categorized as Class A. Claimant later served as a judge of the Commonwealth Court of Pennsylvania from June 21, 1990 to December 31, 2001. While serving as a Judge, he elected to become a Class E-l member.3 Just before his retirement, the General Assembly enacted Section 5306(a.l)(3) of Act 9, 71 Pa.C.S. § 5306(a.l)(3), allowing state employees who were Class A active members on June *118530 and July 1, 2001, to elect to become members of Class AA for their past and future State service only if they were not a member of another class that was already receiving higher benefits which included Class E-l forjudges.4 Additionally, under Section 5306(a.2)(l), only active members of the General Assembly as of June 30, 2001 or July 1, 2001, could elect to obtain Class AA credit provided that Class credit was not or could not have been elected.5
When Claimant retired, he applied for an annuity subject to a reservation for Class AA or for his years of service as a Senator. SERS denied his request to change the class of his service credit while a Senator, and Claimant appealed to the State Employees Retirement Board which affirmed. Claimant then appealed to this Court.6 Determining that 71 Pa.C.S. § 5306(a.l)(3) excluded Claimant and, inferentially, all other members of classes similarly excluded by that provision, the majority reverses, finding that there was no rational basis to exclude Claimant from receiving the same credit as active members of the General Assembly and, therefore, that provision of Act 9 violates the equal protection clauses of the United States and Pennsylvania Constitutions.
The majority reasons that the articulated purpose of Act 9 is to correct the contribution return for the past 20 + years during which time state employees have received only 4% interest on contributions that they made to the Retirement Fund which have been eclipsed by the average rate of return. Because Claimant was similarly situated to other members of the Retirement Fund who were in the same *1186position, the majority concludes there was no rational basis for treating him differently than those other members, and he should be allowed to share with state employees the 20 years of higher-than-expected returns on contributions. It holds that:
By deciding not to allow Claimant to share in the higher-than-expected returns earned on his money, the legislature, in effect gave additional earnings on Claimant’s Class A contributions to other state employees. Such a result is not reasonably related to accomplishing the articulated purpose of Act 9.
(Opinion at 1182.) In other words, the majority is espousing that the purpose of the legislation is to give money back to those employees who made contributions on what was earned at that higher-than-expected return. I disagree with the majority because I believe its equal protection analysis is fatally flawed.
The core flaw in the majority’s argument is that it looks to the reason behind the enactment of the legislation which is entirely different from the reason why the General Assembly made the classifications at issue. First, the majority assumes that the amount raised is sufficient to allow all other individuals to be allowed to convert service or receive increased benefits. While the rate of return may have been greater than expected, that does not necessarily mean that there were sufficient funds to give every member of every class increased pension benefits. The General Assembly, in excluding those classes, made the finding that there was only sufficient funds for Class A members, who did not belong to another class that already received increased benefits, to receive that increase. The General Assembly’s exclusion of Class E-l (judges), Class C (state police and enforcement officers), Class D-8 (legislators), or Class E-2 (district justices) members is valid because all of those classes already receive pensions at a higher rate than other state employees. This alone is a rational basis for the difference in the classification.
Second, limiting Class AA membership to current Class A members is not irrational because to hold otherwise would mean that giving rights or excluding rights to individuals who are not members of a class itself would be irrational. In Donahue v. Public School Employees Retirement System, 834 A.2d 655 (Pa.Cmwlth.2003), aff'd, 580 Pa. 14, 858 A.2d 1162 (2004), cert. denied, 543 U.S. 1122, 125 S.Ct. 1099, 160 L.Ed.2d 1070 (2005), we held Act 9 did not discriminate against persons who retired before the Act’s effective date of July 1, 2001, because it did not afford them the same increase in retirement benefits provided to those persons still employed and contributing to the respective retirement systems. While we stated the distinction was valid because current members contributed at an increased rate, the underlying basis was that there was a rational basis of treating active employees differently than retired employees because retired employees could not make a contribution. The same rational basis exists for treating current Class A employees differently from Class E-l employees; otherwise, it would call into question those classifications themselves.
Third, in a similar vein is the majority’s conclusion that the higher-than-expected return on contributions has to be allocated to those individuals whose contributions made those returns possible. It would be illogical to limit increased benefits to only current members and not retired members. Over the 20 years mentioned in the preamble, as mentioned by the majority as the basis for its rational class analysis, a substantial amount of those contributions were made by members who retired at the lower Class A rate, some even the day *1187before the legislation was enacted. It was the interest on their contributions that funded, in part, the increased pensions. To paraphrase the majority’s reasoning, by deciding not to allow retired members of those classes to share in the higher-than-expeeted returns on their money, the General Assembly gave those additional earnings on their contributions to other state employees, and such a result is not reasonably related to the purpose of Act 9.7
Fourth, under the majority’s reasoning, Class E-l (judges), Class C (state police and enforcement officers), Class D-3 (legislators), or Class E-2 (district justices) members should also receive increased pensions because even though their pensions are higher, most pay a significantly higher rate of contribution, and those higher contributions received a higher-than-expected of return than expected. Again, to paraphrase the majority’s reasoning, by deciding not to allow members of those classes to share in the higher-than-expected returns on their money, the General Assembly gave those additional earnings on their contributions to other state employees, and such a result is not reasonably related to the purpose of Act 9.
Fifth and finally, the majority ignores that classifications are to be presumed constitutional, and we are instructed to look for ways to hold the legislation constitutional — not go out of our way to strike down the legislation. In Probst v. Department of Transportation, Bureau of Driver Licensing, 578 Pa. 42, 849 A.2d 1135, 1144 (2004), our Supreme Court stated:
In applying the rational basis test, we have adopted a two-step analysis. First, we determine whether the challenged statute seeks to promote any legitimate interest or public value. If so, we then determine whether the classification adopted in the legislation is reasonably related to accomplishing that articulated state interest or interests. In undertaking this analysis, we are free to hypothesize reasons the legislature might have had for the classification, and will not declare a genuine classification void even if we might question the soundness or wisdom of the distinction. Furthermore, we keep in mind that because presumption of constitutionality attaches to any lawfully enacted legislation, the burden is upon the party attacking a statute to rebut the presumption of constitutionality by a clear, palpable, and plain demonstration that the rational basis test is not met. (Citations omitted.)
849 A.2d at 1144.
The majority has only considered what made Act 9 possible and has not examined the possible reasons that would justify the legislation, resulting in the opening of floodgates to other claims. Because Claimant has not clearly, palpably and plainly demonstrated that there is not a rational basis for disallowing other class members to convert their previous Class A *1188service to Class AA service, I respectfully dissent.
Judge LEADBETTER joins in this concurring and dissenting opinion.

. 71 Pa.C.S. § 5306(a.l)(3).

. Act of May 17, 2001, P.L. 26, No. 9, 53 P.S. §§ 5101-5956.

.Class E-l is only available to judges and allows them to contribute at a greater percentage than Class A members. It also provides a higher multiplier (in Claimant's case, 1.50) than Class A members (1) which, in turn, results in a greater payment to the member.

. 71 Pa.C.S. § 5306(a.l)(3) provides:
Provided that an election to become a Class AA member is made pursuant to section 5306.1 (relating to election to become a Class AA member), a State employee, other than a State employee who is a State police officer on or after July 1, 1989, who on June 30, 2001, and July 1, 2001, is:
(i) a member of Class A, other than a member of Class A who could have elected membership in a Class C, Class D-3, Class E-l or Class E-2;
shall be classified as a Class AA member and receive credit for Class AA State service performed after June 30, 2001, upon payment of regular member contributions for Class AA service and, subject to the limitations contained in paragraph (7), shall receive Class AA service credit for all Class A State service, other than State service performed as a State police officer or as a State employee in a position for which the member could have elected membership in Class C, Class D-3, Class E-l or Class E-2, performed before July 1, 2001. (Emphasis added.)

. That section provides:
A person who:
(i) becomes a member of the General Assembly and an active member of the system after June 30, 2001; or
(ii) is a member of the General Assembly on July 1, 2001, but is not an active member of the system ...
and who was not a State police officer on or after July 1, 1989, shall be classified as a Class D-4 member and receive credit as a Class D-4 member for all State service as a member of the General Assembly upon payment of regular member contributions for Class D-4 service and, subject to the limitations contained in subsection (a.l)(7), if previously a member of Class A or employed in a position for which Class A service could have been earned, shall receive Class AA service credit for all Class A State service, other than State service performed ... for which a class of service other than Class A or Class D-4 as or could have been elected or credited. (Emphasis added.)

.The Claimant also sought Class D — 4 service credit. Because the majority found that Claimant is not entitled to credit for Class D-4, I concur only in that portion of the majority’s opinion. I join with the majority where it holds that there was no impairment of contract claims made out under Article I, Section 17 of the Pennsylvania Constitution.

. The majority’s reasoning calls into question Donahue, where we held that Act 9 may limit participation in a class where the Act requires the payment of increased contributions as consideration for future receipt of enhanced benefits. See Section 5306(a.2) of Act 9, 71 Pa.C.S. § 5306(a.2). Even though the majority points out that Act 9 requires increased contributions as the basis of its distinction, once the purpose of Act 9 is defined, the majority’s conclusion to pay out the higher-than-expected rate of return on contributions erodes that distinction and it becomes meaningless because retired members cannot make contributions — by definition, they are making no earnings on which to make contributions. However, higher-than-expected earnings on their contributions in part are funding the increases in pensions authorized by Act 9.