Florida Sheriffs Ass'n v. Department of Administration, Division of Retirement

• Citation: 408 So.2d 1033
• Decision Date: 10 December 1981
• Docket Number: Nos. 55419,55382,s. 55419
• Parties: FLORIDA SHERIFFS ASSOCIATION, James Scott, Sheriff of Jefferson County, etc., et al., Appellants, v. DEPARTMENT OF ADMINISTRATION, DIVISION OF RETIREMENT, State of Florida-WallaceHenderson, etc., et al., Appellees. FLORIDA POLICE BENEVOLENT ASSOCIATION, INC., etc., et al., Appellants, v. DEPARTMENT OF ADMINISTRATION, DIVISION OF RETIREMENT, State of Florida-WallaceHenderson, etc., et al., Appellees.
• Court: United States State Supreme Court of Florida

Page 1033

408 So.2d 1033

FLORIDA SHERIFFS ASSOCIATION, James Scott, Sheriff of Jefferson County, etc., et al., Appellants, v. DEPARTMENT OF ADMINISTRATION, DIVISION OF RETIREMENT, State of Florida-WallaceHenderson, etc., et al., Appellees.

FLORIDA POLICE BENEVOLENT ASSOCIATION, INC., etc., et al., Appellants, v. DEPARTMENT OF ADMINISTRATION, DIVISION OF RETIREMENT, State of Florida-WallaceHenderson, etc., et al., Appellees.

Nos. 55419, 55382.

Supreme Court of Florida.

Dec. 10, 1981.

Rehearing Denied Feb. 15, 1982.

Jack M. Skelding, Jr. of Madigan, Parker, Gatlin, Swedmark & Skelding, Tallahassee, for Florida Sheriffs Ass'n, et al.

Edward S. Jaffry of Horne, Rhodes, Jaffry, Stephens, Bryant, Horne & Chapman, Tallahassee, for Florida Police Benevolent Ass'n, Inc., et al.

David V. Kerns, Gen. Counsel, Tallahassee, for Dept. of Administration.

Stephen S. Mathues, Asst. Division Atty., Tallahassee, for Division of Retirement.

OVERTON, Justice.

This is an appeal by special risk law enforcement members of the Florida Retirement System created by chapter 121, Florida Statutes (1971), asserting the unconstitutionality of sections 121.091(1)(a) and .091(11), Florida Statutes (1979). By this act, the legislature reduced prospectively from three percent to two percent the special risk credit these members earn toward retirement. Appellants contend that the legislature is contractually bound by its prior legislative act, and any reduction in the amount present employees can earn toward future retirement is a constitutionally prohibited impairment of the employees' contract with the state. We reject this contention and find that the legislature has the authority to prospectively modify or amend the mandatory, noncontributory retirement plan.

To fully understand governmental retirement plans, it is important to define certain terms. First, it is necessary to distinguish a "mandatory retirement plan" from a "voluntary retirement plan." In a mandatory plan, the employee is required to participate. In a voluntary plan, the employee has complete choice in whether to participate. Second, we distinguish a "noncontributory retirement plan" from a "contributory plan." In a noncontributory plan, the employer contributes the entire amount to the retirement fund for the employee. In a contributory plan, both the employer and the employee must contribute to the retirement fund. Each of these terms is interrelated but not interdependent; both a mandatory and voluntary system can be contributory or noncontributory. For example, a mandatory plan may require the employee to contribute part of his pay to the system or, if noncontributory, the employer would contribute the entire amount necessary for the plan's operation.

The circumstances behind this suit are essentially undisputed. We set them forth chronologically:

(1) On December 1, 1970, the legislature consolidated all existing retirement systems into a mandatory, contributory plan by the enactment of chapter 70-112, Laws of Florida (codified as chapter 121, Florida Statutes (1971)). Appellants are members of this system.

(2) In accordance with section 121.091(1)(a), Florida Statutes (1973), appellants, as law enforcement officers, received a "special risk credit" as an extra benefit. Before July 1, 1974, the credit equaled two percent of the officers' average monthly income.

(3) Effective July 1, 1974, the legislature enacted a "preservation of rights" provision, section 121.011(3)(d), providing:

The rights of members of the retirement system established by this chapter shall not be impaired by virtue of the conversion of the Florida Retirement System to an employee noncontributory system. As of July 1, 1974, the rights of members of the retirement system established by this chapter are declared to be of a contractual nature, entered into between the member and the state, and such rights shall be legally enforceable as valid contract rights and shall not be abridged in any way.

(4) Effective October 1, 1974, the legislature enacted chapter 74-376, Laws of Florida, amending section 121.091(1)(a), to increase the special risk credit from two to three percent.

(5) On January 1, 1975, the retirement plan changed from a contributory to a noncontributory plan, the state assuming the full burden of making the plan actuarially sound. § 121.071, Fla.Stat. (1975). Employees, therefore, no longer were required to contribute.

(6) Effective October 1, 1978, the legislature enacted chapter 78-308, section 6, Laws of Florida (codified as section 121.091(1)(a), .091(11), Florida Statutes (1979)), reducing prospectively the special risk credit from three to two percent.

Appellants commenced this action in circuit court, contending that the "preservation of rights" provision of section 121.011(3)(d), enacted in 1974, elevated Florida's retirement system to a binding contractual relationship between employees and the state. Appellants argue that reduction of special risk credit impaired this contractual right and thus violated article I, section 10, Florida Constitution. ^* The trial court entered judgment against appellants, granting the Department of Administration's motion for summary judgment, saying: "The court fails to find any vested contractual right in (appellants) which would have been impaired by the act of the state." We find this an inherent ruling on the constitutional validity of sections 121.091(1)(a), .091(11), Florida Statutes (1979), which vests jurisdiction in this Court pursuant to article V, section 3(b)(1), Florida Constitution (1972).

Prior to the statutory enactment of the preservation of rights provision in 1974, there was considerable Florida case law which established basic legal guidelines for governmental retirement systems in the state. It is necessary to fully discuss these cases to best understand the intent of the legislature in enacting this provision. In an early decision, this Court expressly held that Florida's constitutional impairment of contract provision did not protect a governmental mandatory retirement system and that the legislature could modify or alter benefits provided by such a retirement plan. Anders v. Nicholson, 111 Fla. 849, 150 So. 639 (1933).

Although the Anders case involved a voluntary, contributory retirement plan, the Court discussed the principles applicable to both mandatory and voluntary plans. In Anders, the employee was a participant in the City of Jacksonville's voluntary retirement system. When originated in 1919, the pension fund provided that, upon discharge, an employee who participated in the plan could withdraw his contributions in full plus four percent interest. Subsequently in 1925, the city amended the plan to allow, upon discharge, only a refund of fifty percent of the amount personally contributed by the employee without interest. The employee was terminated in 1932 and sought to obtain the full amount of his contributions with interest under the 1919 act. The city contended that the provisions of the 1925 act controlled and thus the employee should only receive one-half of his contributed amount without interest. The Court held that, because the plan was voluntary, contractual principles applied and the employee had a contractual right in the amount of his contributions up to the date of the retirement plan's amendment in 1925. The Court determined that the employee could receive all contributions paid plus interest in accordance with the 1919 act before the 1925 act's effective date, but, because he acquiesced in the terms of the 1925 act by continued participation in the plan after 1925, he could only receive fifty percent of his payment without interest after the effective date.

The decision went further to point out that an employee under a mandatory pension system would not be similarly protected. Quoting from a prior decision, the Court said:

"It is also settled that constitutional provisions against impairing the obligation of a contract do not apply to obligations imposed by the law without the assent of the party bound, even though by a legal fiction they may be enforced in an action in form ex contractu. In other words, the classes of contracts protected are voluntary-that is, based on the assent of the parties, expressly or impliedly given. That class of obligations, aptly styled 'quasi contracts,' is not embraced within the constitutional guaranty against the passage of a law violating the obligation of a contract...."

Quasi contracts are defined in 13 C.J. 244, as:

"A class of obligations which are imposed or created by law without regard to the assent of the party bound, on the ground that they are dictated by reason and justice, and which are allowed to be enforced by an action ex contractu. They rest solely on the legal fiction and are not contract obligations at all in the true sense, for there is no agreement."

Id. at 855-56, 150 So. at 642 (citations omitted).

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