Court Opinion

ID: 6264152
Source: CourtListenerOpinion
Date Created: 2022-02-17 23:23:33.613347+00
Date Added: 2024-06-11T08:59:46.083017
License: Public Domain

•OPINION OF THE COURT
PAPADAKOS, Justice.
This appeal involves the American Federation of State, County and Municipal Employees, Council 13, AFL-CIO, the Joint Bargaining Committee of the Pennsylvania Social Services Union, and the Pennsylvania Employment Security Employees’ Association, Locals 668 and 675 (Appellants) against the State Employees’ Retirement Board (Board) challenging the propriety of an order issued by the Commonwealth Court which directed that various members of *365the State Employees’ Retirement System’s (System) pension contributions remain at 5% of their salary.
Appellants are the major unions who represent most Commonwealth and school employees who are entitled to retirement benefits on account of their services to the Commonwealth and its instrumentalities. Until July 21, 1983, all members of the system were required to contribute 5% of their salary to the System. Thereafter, Section 7 of Act 31 of 1983 became effective, 71 Pa.C.S. § 5505.1 (Act 31), requiring all members of the system to contribute an additional llk% of their salary to the System as member retirement contributions.
The Legislature’s attempt to extract an additional llk% from active members’ salaries who were members of the system on July 21, 1983, generated a declaratory judgment action before the Commonwealth Court. That Court ruled that Section 7 of Act 31 of 1983 was an unconstitutional impairment of the right to contract for both vested and non-vested members, and enjoined the Commonwealth from collecting pension contributions from employees who were active members of the System prior to July 22, 1983 in excess of the 5% basic contribution rate. AFSCME v. Commonwealth, 80 Pa.Commonwealth Ct. 611, 472 A.2d 746 (1984).
A direct appeal followed to this Court and, following arguments, we affirmed the order of the Commonwealth Court agreeing that the retirement benefits were a matter of contract rights which could not be changed once fixed and that these rights applied to vested and non-vested members alike as a matter of constitutional law. Association of Pennsylvania State College and University Faculties v. State System of Higher Education, 505 Pa. 369, 479 A.2d 962 (1984).
The Board, in its attempt to implement the Commonwealth Court’s order, has ceased to collect the additional iVi % contribution from all employees who were active members of the System and who were making membership contributions to the System on July 21, 1983. The Board *366contemporaneously issued a management directive ordering that the 6x/4% rate be collected from all other employees who were members of the System before July 22, 1983, but who were separated from their employment for any reason for more than 14 days and who were later reinstated or reemployed.
Dissatisfied with this practice, Appellants filed an enforcement motion with the Commonwealth Court in its original jurisdiction, arguing that the Board was improperly applying the higher contribution rate to the following System members:
1. Employees who have been suspended, terminated or discharged from employment and have subsequently been returned to employment because of an arbitration award, civil service order, court order, law suit, or settlement of a claim for reinstatement;
2. Employees who have been separated from their employment (i.e., furloughed) and subsequently returned to work pursuant to statutory or contractual provisions such as recall rights;
3. Employees who have been on extended authorized leaves of absence with or without pay;
4. Employees who have been separated from employment either voluntarily or involuntarily and who subsequently returned in a manner or method reinstating their accrued seniority rights including credit for prior service; and
5. Employees who have been separated either voluntarily or involuntarily from their employment and who have subsequently returned to active pay status but who maintained their member’s status throughout the separation period.
The Board defended its management directive as a logical interpretation of the Commonwealth Court’s order which it read as protecting only those members of the System who were actively employed on July 21, 1983. The Commonwealth Court disagreed with the Board’s interpretation of the order concluding that it applied to all employees who *367were members of the System prior to the enactment of Act 31 and who, in spite of a break in service, maintained their membership in the System by leaving their accumulated contributions in the retirement fund. AFSCME, AFL-CIO v. Commonwealth, 111 Pa.Commonwealth Ct. 81, 533 A.2d 785 (1987).
Pursuant to this interpretation, the Commonwealth Court granted all of Appellants’ requests except as regards to those individuals who terminated their status as members of the System by removing their accumulated contributions from the retirement fund.
The Board has filed a direct appeal to us from this order and the Appellants have filed a cross-appeal on behalf of those individuals who withdrew their contributions. We now affirm.
The fundamental issue presented to us in this appeal has been made to seem very difficult, but, in reality, is quite simple. The Board believes that continuous employment ■with the Commonwealth is the condition by which statutorily conferred retirement benefits are fixed. The Board argues that employment is such a pre-requisite pointing to the Commonwealth Court’s original order which specifically directed that employees who were members of the System were to continue paying the 5% retirement contribution rate. The Board reasons that all other individuals by implication are subject to the new contribution rate. The fallacy with this argument is that the original case only involved actively employed individuals. Therefore, it was not at all unusual for the Commonwealth Court order to enjoin only the collection of the new contribution rate from current employee members of the System.
In clarifying the applicability of its original order, the Commonwealth Court properly looked to the Retirement Code to answer the Board’s underlying misinterpretations of the prior order. All retirement rights, including the basic compensation rate, are fixed by the Retirement Code and here lies the heart of this case. The Code defines the *368term “member” to include “active member, inactive member, annuitant or vestee.” 71 Pa.C.S. § 5102.
Each group is specifically defined as follows:
“Active member.” A State employee, or a member on leave without pay, for whom pickup contributions are being made to the fund.
“Inactive member.” A member for whom no pickup contributions are being made but who has accumulated deductions standing to his credit in the fund and who is not eligible to become or has not elected to become a vestee or has not filed an application for an annuity. “Annuitant.” Any member on or after the effective date of retirement until his annuity is terminated.
“Vestee.” A member with ten or more eligibility points who has terminated State service and has elected to leave his total accumulated deductions in the fund and to defer receipt of an annuity.
The Code also provides that in no case shall any member’s retirement contribution rate be greater than 5% so long as he does not elect additional coverage or membership in another class of service. 71 Pa.C.S. § 5102.
As can readily be seen, all members of the System up until July 21, 1983, were statutorily guaranteed that no more than 5% of their salary would ever be deducted as their basic contribution rate for as long as they maintained their status as a member in the same class of service. Continuous employment is nowhere referred to as a pre-requisite for membership in the class or system and, in reality, is but one possibility. A member can also be one who belongs to a service class, (Class A) for example, and who maintains his membership by being an annuitant, vestee or by keeping his contributions in the System. In all of these cases, membership is maintained even though the member is not working for the State. If that member returns to active service in the same service class (Class A), his contribution rate has been fixed at 5% and stays at that rate because he never changed his status as a member or his class of service.
*369The State obviously elected to offer retirement benefits to members in the broadest possible terms and has specifically contracted with the members of the System to take no more than 5% in retirement contributions from these members for as long as they remain members of the System. Such a. guarantee protects members from the myriad occurrences of life which can disrupt continuous service with the State including furloughs, voluntary and involuntary quits, and civil service reinstatements.
Additionally, where a member of the System terminates service with the State for any reason, he must make one of the following choices: 1) withdraw all of his contributions, thereby discontinuing his status as a member; 2) choose to vest if he has 10 retirement points; 3) choose to receive an annuity if he has over 3 retirement points, but less than 10 retirement points; or 4) keep his contributions in the System by doing nothing. (71 Pa.C.S. § 5907).
In all of the above options, except the first, membership status in the System is maintained since these individuals chose to keep their money in the State System with the assumption that, in return for so investing their funds, all the rights assured to those members by the Code will remain unchanged in the event that service on an active basis in the same service class is reestablished. On the other hand, the employees who upon severance chose to withdraw their contributions have clearly terminated their membership status and cannot expect to maintain any rights upon return to the System, except to buy back former State time at the old rate. 71 Pa.C.S. § 5504. Their new service will be subject to the rules in effect when they re-enter State service. When we examine the various categories by referring to continuous membership in the State System instead of continuous employment with the State, it becomes obvious that the Commonwealth Court was correct in granting relief to the various categories as it did.
Those employees who are fired or laid off and reinstated because of a civil service order, court order, arbitration award, settlement agreement or recall procedure (Catego*370ríes 1 and 2) are inactive members and are protected if they left their accumulations in the retirement fund. Employees on paid or unpaid leave are active members as long as they continue making contributions or keep their accumulations in the fund (Category No. 3). Category 5 employees are also protected because they kept their accumulations in the fund. Only Category 4 employees were correctly denied relief because they withdrew their accumulations, thereby voluntarily choosing to terminate their continuous membership status with the system and losing any rights they formerly had.
One very interesting feature of this analysis is that even fired employees are protected if they are rehired by the State at a later time as long as they keep their contributions in the System. However, if they are worthy enough to be reconsidered for State employment, it is not inconsistent that the State would want to extend to them these same protections. Many employees are involuntarily terminated when their employers’ term of office expires and if they are rehired at a later time, they, too, would be protected because they remained members of the System.
The order of the Commonwealth Court is affirmed.
LARSEN, J., files a concurring and dissenting opinion.