Psba v. Psers

Citation: 804 A.2d 737

Court: Commonwealth Court of Pennsylvania; August 12, 2002; Pennsylvania; State Appellate Court

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The Pennsylvania School Boards Association (PSBA) filed a petition against the Public School Employees' Retirement System (PSERS) regarding a newly adopted Statement of Policy that permits teachers to purchase credit for pre-membership part-time service, potentially increasing their pension benefits. PSBA seeks declaratory and injunctive relief to block this policy, arguing it unlawfully imposes financial burdens on school districts and lacks support in the Retirement Code. The court's opinion, authored by Judge Leavitt, outlines the historical context: before 1975, only full-time teachers could participate in the retirement system, but the 1975 Retirement Code expanded eligibility to part-time teachers based on specific service thresholds. PSERS previously maintained that part-time service below these thresholds was not eligible for credit. However, in 1999, PSERS reversed its stance, allowing the purchase of credit for such service, provided the purchase is optional and does not obligate employers to contribute. Following the introduction of this policy, PSBA initiated litigation, resulting in an agreement for PSERS to pause the processing of related applications until a court decision was made. Ultimately, the court denied PSBA's request for relief.

Discovery was completed, and a Stipulation of Facts was filed on September 13, 2001. Following this, PSERS submitted an application for summary relief on September 19, 2001, and PSBA filed a cross-application for summary relief on November 12, 2001. The primary legal question is whether Section 8303(c) of the Retirement Code allows members to purchase credit for part-time school service of less than 80 days or 500 hours in a fiscal year. This necessitates a detailed examination of Section 8303(c) and related provisions.

Section 8303(c) of the Retirement Code outlines the purchase of credit for previous school service or creditable nonschool service, stating that active members may acquire credit and receive eligibility points based on their service length. The section specifies that 'previous school service' encompasses any service by a school employee in a Commonwealth school district before their membership in the system, without limitations on whether the service was part-time or full-time.

The interpretation of 'service' is broad, as articulated in other sections of the Retirement Code, where membership is defined as a subset of 'school employees.' PSERS interprets Section 8303(c) to allow members to purchase credit for any pre-membership service rendered as a school employee, aligning with the legislative definition provided. The interpretation indicates that the General Assembly did not intend to restrict the purchase of credit solely to service performed as a member. This interpretation is affirmed by the legal authority of PSERS.

The General Assembly did not specify 'previous school service as a member' in Section 8303(c) or define 'previous school service' in Section 8102. Therefore, the established definitions must be adhered to in interpreting Section 8303(c). The Pennsylvania School Boards Association (PSBA) challenges this interpretation, asserting that credit for part-time school service can only be purchased for service performed as a member. PSBA presents three main arguments: 

1. The heading and final clause of Section 8303(c) limit the purchase to member-rendered service.
2. Other provisions in the Retirement Code restrict creditable service to that performed as a member.
3. A prior court ruling limited 'previous school service' to that exceeding 80 days or 500 hours.

In addressing these points:

- The prefix and final clause of Section 8303(c) do not convincingly limit 'previous school service' to creditable member service, as the Statutory Construction Act indicates that headings are not controlling unless the statutory language is ambiguous. Here, 'previous school service' is defined, making it clear.
- The term 'creditable' is interpreted broadly, allowing for service less than 80 days and 500 hours to be credited when the employee becomes a member.
- The final clause pertains to reinstatement of previously credited service and does not address the purchase of uncredited service, suggesting that while new members must purchase all previously credited service, purchasing pre-membership part-time service is optional.

Overall, the arguments presented by PSBA do not support their interpretation of Section 8303(c), and the court finds the statutory language aligns with PSERS's interpretation.

The Retirement Code allows the purchase of credit for various types of service, including military time, maternity leave, and part-time teaching service prior to membership. However, the Pennsylvania School Boards Association (PSBA) interprets the code in a manner that creates inequities by permitting the purchase of credit for out-of-state school service while denying it for part-time service in Pennsylvania schools. This interpretation is inconsistent with Section 8324, which establishes a formula for purchasing credit for nonschool service, and Section 8304(b)(3), which includes out-of-state public school service as creditable. PSBA’s stance unfairly disadvantages members who have served exclusively in Pennsylvania schools.

Furthermore, PSBA's argument that Section 8303(c) can be supported by other sections of the Retirement Code lacks substance, as PSERS’ interpretation finds stronger backing throughout the code. PSBA references Section 8503(c), which outlines the process for purchasing credit for previous service, but misinterprets the phrase "amount which would have been paid" as relating only to member service. This overlooks the clause "when necessary," indicating that the issuance of statements regarding the cost of service purchases may not always apply, such as in cases of optimal service credit purchases. PSERS effectively argues that its interpretation aligns consistently with the Retirement Code, particularly regarding the purchase of credit for pre-membership service, as the relevant phrases appear uniformly across different sections.

Section 8304 of the Retirement Code delineates strict criteria for what constitutes 'creditable' non-school service, while imposing no explicit restrictions on 'previous school service.' This indicates legislative intent for all 'previous school service' to be purchasable post-membership in the retirement system. Section 8505 further elaborates on members' rights to purchase 'previous school or creditable nonschool service' and mandates that the Pennsylvania School Employees Retirement System (PSERS) inform new members about their total 'previous school service and creditable nonschool service.' 

Section 8323, titled 'Previous school service,' requires contributions for 'school service not previously credited,' suggesting that credit can be earned independent of current membership status. The term 'creditable school service' is not explicitly defined in the code, appearing only in the title of Section 8323. This section outlines how members can compute payments for various school service types, which include previously credited service and service not previously credited, among others. 

PSERS interprets the law to support the privileges of membership while acknowledging that membership is necessary for purchasing credits. Section 8303(c) confirms that pre-membership part-time service in Commonwealth schools is eligible for credit purchase. The PSBA argues that a prior ruling (Board of School Directors for Tredyffrin/Easttown School District v. The Public School Employees' Retirement Board) establishes that only service qualifying for membership is 'creditable' part-time service. However, the court disagrees, distinguishing the Tredyffrin case as focused on the ability of part-time employees to purchase service credits prior to the 1975 enactment of the new Retirement Code, asserting that membership was expanded in 1975 to include part-time employees who could then purchase credits for their prior service.

The Court ruled in Tredyffrin that a member's service rendered to a school district qualifies for retirement credit, rejecting the Pennsylvania School Boards Association's (PSBA) argument to the contrary. It was determined that Section 8327 of the Retirement Code removes the requirement for employer contributions when school employees purchase credit for part-time service performed before the 1975-1976 school year. The Court affirmed that members can purchase credit for all school service, including pre-membership service, without necessitating employer contributions. Consequently, Section 8303(c) of the Retirement Code allows PSERS members to buy credit for pre-membership school service if it is under 80 days and 500 hours in any fiscal year. Summary Judgment was granted in favor of PSERS against PSBA, confirming the right of PSERS members to credit for all part-time service before membership. Judge Simpson did not participate in this decision. The order issued on August 12, 2002, granted PSERS' Application for Summary Relief and denied that of PSBA.

Preliminary Objections were filed by the Board on April 6, 1999, seeking to remove PSERS from the case and to dismiss claims regarding a fiduciary duty owed by the Board to PSBA. On May 17, 2000, the court denied the request to remove PSERS, ruling that PSBA lacked standing to claim a fiduciary duty under the Retirement Code. An agreement addressing preliminary injunctive relief was approved by the court on April 20, 1999, and the case caption was amended to name PSERS as the sole respondent, removing the Philadelphia Federation of Teachers, Local 3 AFT AFL-CIO. The court confirmed the intervention of the Philadelphia Federation of Teachers and the Pennsylvania State Education Association, which supported PSERS, via order on June 18, 1999.

The Commonwealth Documents Law defines a 'Statement of policy' as any document issued by an agency outlining substantive or procedural rights and obligations, excluding adjudications or regulations. PSERS informed all public school employers and members about the 1999 Policy, which is also available on its website. Additionally, the Retirement Code defines "previous school service" as service as a school employee, including summer school, and specifies that a "school employee" is anyone working for a governmental entity in public school-related roles for regular remuneration, excluding independent contractors or fee-based workers, as outlined in 24 Pa.C.S. 8102.

Mandatory membership in the retirement system is required for all school employees upon employment, with specific exceptions outlined in Section 8301 of the Retirement Code. Exceptions include: 

1. Employees of the Department of Education and certain educational institutions if they are already members of another retirement system.
2. Per diem or hourly employees working less than 80 full-day sessions or 500 hours annually, and annuitants returning under specific provisions.
3. Government employees supervising federally funded classes between December 22, 1965, and July 1, 1975, while they continue in that service.
4. Part-time employees with an individual retirement account under the Employee Retirement Income Security Act of 1974.

Employees in the first two categories cannot opt for membership, while those in the third and, if eligible, fourth categories can elect membership, which is effective from their original eligibility date until service termination.

Legislative definitions are authoritative, and statutory interpretation can evolve over time, as indicated by PSBA's argument that past interpretations should not be deemed infallible. The General Assembly's lack of response to a specific policy since its adoption does not imply approval. 

Section 1924 of the Statutory Construction Act emphasizes that expressed exceptions in statutes limit their application and that statutory titles and headings serve as aids in interpretation but do not dictate meaning. Section 8304 outlines the types of nonschool service for which members can purchase credit, and PSBA's interpretation requiring additional language is challenged on the basis that the legislature's specific language choices should not be expanded beyond what is expressly stated. 

Finally, creditable nonschool service is limited to service in public educational institutions outside Pennsylvania or U.S. territories, as specified in 24 Pa.C.S. 8304(b)(3).

Creditable nonschool service contributions for Class T-C members are calculated by applying the member's basic and normal contribution rates to their total compensation from the first year of subsequent credited school service, multiplied by the years of nonschool service being purchased, plus statutory interest. Exceptions exist where members pay only the employee's share for certain creditable nonschool services. Limitations on creditable nonschool service include service in public schools outside Pennsylvania and specific historical community college service prior to July 1, 1965. The Pennsylvania State Employees' Retirement System (PSERS) has interpreted Section 8303(c) to align with Section 8302, ensuring part-time employees receive credit for actual service rendered. Creditable nonschool service is strictly enumerated and includes specific roles such as military service, federal education administrators, and maternity leave under defined conditions. Section 8323 outlines contributions for reinstating previously credited school service or sabbatical leave, requiring amounts equivalent to what would have been accumulated with regular contributions and interest. The 1999 policy alleviates employer costs since districts are not liable for the employer's share during purchased time, despite some administrative challenges. An actuarial analysis indicated an unfunded liability of $77.4 million against a system asset total of approximately $50 billion, with minimal impact on employer contribution rates. Financial implications are not considered a statutory construction factor.