Birnbaum v. New York State Teachers' Retirement System
| Decision Date | 25 June 1958 |
| Citation | 176 N.Y.S.2d 984,5 N.Y.2d 1,152 N.E.2d 241 |
| Parties | , 152 N.E.2d 241 Eliot BIRNBAUM et al., on Behalf of Themselves and All Other School Teachers in the State of New York Similarly Situated, Appellants, v. NEW YORK STATE TEACHERS RETIREMENT SYSTEM, Respondent. |
| Court | New York Court of Appeals Court of Appeals |
Victor Levine and Gustus, J. Amrose, Syracuse, for appellants.
Louis J. Lefkowitz, Atty. Gen. (Milton Alpert and Paxton Blair, Albany, of counsel), amicus curiae, in support of appellants' position.
John T. De Graff, Albany, for Civil Service Employees Ass'n, Inc., amicus curiae, in support of appellants' position.
Charles A. Brind, Jr., Albany, for respondent.
Arthur E. Walker, Albany, for New York State School Boards Ass'n, Inc., amicus curiae, in support of respondent's position.
Peter Campbell Brown, Corporation Counsel, New York City (Leo A. Larkin, Seymour B. Quel, Pauline K. Berger, Robert E. Hugh and Peter J. Flanagan, New York City, of counsel), for City of New York, amicus curiae, in support of respondent's position.
This is an appeal by the plaintiffs, as of right, from a judgment, entered upon an order of the Appellate Division, Fourth Department, which unanimously modified, on the law, an order of the Supreme Court, Onondaga County, at Special Term, (1) dismissing the complaint on the merits, and (2) ordering 'that the action of the New York State Teachers' Retirement System in adopting a mortality table on or about January 9th, 1946, according to the mandate of Subdivisions 4 and 5 of Section 508 of the Education Law, and computing the actuarial equivalent of the contributions of members thereafter retiring accordingly is legal and valid.' The Appellate Division struck out the paragraph dismissing the complaint 'on the ground that the dismissal of the complaint is inconsistent with the declaration of rights'. (161 N.Y.S.2d 154.) In all other respects the judgment of Special Term was affirmed.
This is an action for a declaratory judgment brought by plaintiffs on behalf of themselves and all other school teachers in the State of New York similarly situated. They challenge the validity of the action of the defendant, the New York State Teachers Retirement System, in adopting on or about January 9, 1946, an actuarial table for computing the annuity benefits of the members of the defendant pursuant to subdivisions 4 and 5 of section 508 of the Education Law of the State of New York. Their contention is that the action of the defendant constitutes a breach of the contractual relationship established by section 7 of article V of the Constitution of the State of New York, as to members of the retirement system prior to the effective date (July 1, 1940) of the constitutional provision.
The complaint alleges, and the answer admits, that since 1920 the Education Law has established a retirement system for public schoolteachers within the State whereby the teachers make regular contributions to a retirement fund and receive in return upon their retirement an annuity; that the plaintiffs have made the required contributions, the plaintiff Birnbaum since 1935 and the plaintiff Cate since 1922; that they are eligible to retire after having completed 25 years of service and having attained the age of 60 years or over; and that the mortality table adopted on January 9, 1946 reduces by approximately 5% the amount to be paid to the plaintiffs pursuant to the table in use on July 1, 1940, when section 7 of article V of the Constitution went into effect.
The answer pleads two affirmative defenses. The first is that the plaintiffs have no present interest in the subject matter of the action and will have none until and when, if ever, they seek retirement and apply for their retirement benefits. The second is that subdivision 4 of section 508 of the Education Law mandates the periodical adjustment of annuity benefits payable upon retirement according to mortality and actuarial tables adopted pursuant to subdivisions 4 and 5 of section 508 of the Education Law, and that such section constitutes and forms part of the contract between each member of the retirement system and the New York State Teachers Retirement System.
Special Term rejected defendant's defense that the plaintiffs did not have standing to ask for a declaratory judgment. The court wrote:
The foregoing reasoning is sound and we think that nothing more need be said herein with respect to the plaintiffs' standing to prosecute this action.
Insofar as the merits of the case are concerned, Special Term ruled in favor of the defendant stating, in part:
Under the Teachers Retirement System a 'retirement allowance' is made up of two separate and independent parts: (1) a 'pension' which is provided from contributions made by the employer, and (2) an 'annuity' which is provided from contributions made by the member (Education Law, § 501, subds. 12, 13, 14).
The 'pension' part of the 'retirement allowance' is not involved in this case. Mortality tables are not involved in the computation of the 'pension' paid on superannuation retirement because the 'pension' consists of: 'One quarter (1/4) of his (the member's ) final average salary or if his total service is less than twenty-five years, a pension of one one-hundredth (1/100) of his final average salary multiplied by the number of years of total service' (Education Law, § 510, subd. 2, par. b).
The computation of the 'annuity' part of the 'retirement allowance' does involve the use of mortality tables. The Education Law () provides that the 'annuity * * * shall be the actuarial equivalent of his accumulated contributions at the time of his (the member's) retirement'.
The term 'actuarial equivalent' has reference to the mathematical formula for computing annuity payments according to the mortality table calculated and adopted pursuant to the provisions of subdivisions 4 and 5 of section 508 of the Education Law.
The issue in this case relates solely to the use of new mortality tables to compute the 'annuity' which is payable upon retirement from funds contributed by the member. When the Teachers Retirement System adopted new mortality tables in 1946, the new tables were made applicable to the computation of all annuities of all members who had not previously retired. The new tables, as mentioned earlier, have the effect of reducing the annuities of all members of the system by approximately 5%.
As a practical matter, the controversy here comes to this: Plaintiffs argue that the contractual arrangement which the Constitution envisaged was the usual annuity policy whereby an insurance company, on the day the policy is issued, agrees that it will pay periodically a fixed and stated amount commencing on a certain date and that, viewed in that light, it was intended that a teacher who was a member of the Retirement System on July 1, 1940, after making the required contributions to the Retirement System over the required period of time, should receive an annunity computed from mortality tables in use on July 1, 1940 (the date the constitutional amendment became effective). The defendant Retirement System, on the other hand, maintains that it was intended that the Retirement System should determine, at the time of retirement, the amount of annuity which the member's contributions will purchase at the time of retirement, employing the mortality table in effect at the time of making such calculation.
The determination of Special Term, in favor of the Retirement System, was predicated upon the theory that '(p)rior to retirement for superannuation the member's rights are inchoate'. The plaintiffs assert that it was this very theory that the constitutional amendment was designed to set at rest. We agree.
In Roddy v. Valentine, 1935, 268 N.Y. 228, at page 232, 197 N.E. 260, at page 262 this court held that where the statutory conditions for retirement from the civil service have been met 'and the award of the pension or benefit has been made, or as of right should have been made * * * the interest becomes vested and takes on the attributes of a contract, which, in the absence of statutory reservations, may not legally be diminished or otherwise adversely affected by subsequent legislation'. We pointed out, however, (268 N.Y. at page 231, 197 N.E. at page 262) that '(w)here the statutory scheme creates a fund wholly or largely out of public moneys, the interest of the member down to the point where there...
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