Lagerman v. Ariz. State Ret. Sys.
| Citation | 248 Ariz. 504,462 P.3d 1009 |
| Decision Date | 14 May 2020 |
| Docket Number | No. CV-19-0101-PR,CV-19-0101-PR |
| Parties | Susan LAGERMAN, Plaintiff/Appellant, v. ARIZONA STATE RETIREMENT SYSTEM, Defendant/Appellee. |
| Court | Supreme Court of Arizona |
J. Alex Grimsley (argued), Dickinson Wright PLLC, Phoenix; and Thomas Griffin, Robaina & Kresin PLLC, Phoenix, Attorneys for Susan Lagerman
Mark Brnovich, Arizona Attorney General, Kathleen P. Sweeney, Senior Appellate Counsel, Phoenix; and Timothy J. Berg (argued), Ryan C. Curtis, Fennemore Craig, P.C., Phoenix, Attorneys for Arizona State Retirement System
¶1 This case involves two distinct yet interrelated issues concerning the administration of the Arizona State Retirement System ("ASRS").2 First, we consider whether requiring submittal of a retirement application pursuant to A.R.S. § 38-757(A) as a condition for receiving retirement benefits violates article 29, section 1(D) of the Arizona Constitution, which prohibits the diminishment or impairment of public retirement system benefits. Second, we determine whether all the conditions for electing a retirement date set forth in A.R.S. § 38-764(A) must be satisfied or if meeting any one may suffice.
¶2 We hold that the requirement to submit a retirement application for receipt of retirement benefits pursuant to § 38-757(A) does not violate article 29, section 1(D), and that all conditions listed in § 38-764(A) must be satisfied in order to elect a retirement date under the Plan.
¶3 Susan Lagerman began her Plan-qualified employment as a securities examiner with the Arizona Corporation Commission in 1978. She continued in the Plan as an attorney with the Arizona Attorney General's Office from 1981 to February 17, 2003. She became eligible for a normal retirement on July 23, 2005.3
¶4 On April 6, 2016, Lagerman submitted an application for retirement, listing July 23, 2005 as her date for commencing retirement. The Agency rejected the July 23 date as her retirement date and instead used the April 6 date. The financial consequence of the Agency's decision to Lagerman is significant. The benefit payments between the 2005 date and the date she submitted her application in 2016 is approximately $220,000.
¶5 Lagerman unsuccessfully appealed the Agency's decision to the Agency Assistant Director and then to the Director. She then appealed the decision to the Office of Administrative Hearings and argued that the plain language of § 38-764(A) permitted her to choose July 23, 2005 as her retirement commencement date. Throughout, the Agency maintained that § 38-764(A) requires a retiring member to choose a date for commencing retirement that is not earlier than the day following termination of employment and not earlier than the date of submission of a retirement application. The administrative law judge recommended affirming the determination that Lagerman's retirement date was April 6, 2016, and the Agency Appeals Committee accepted that recommendation.
¶6 Lagerman then sought judicial review in superior court pursuant to the Administrative Review Act. A.R.S. § 12-901, et seq . The court affirmed the Agency's decision.
¶7 Lagerman appealed, and the court of appeals affirmed the superior court. Lagerman v. Ariz. State Ret. Sys. , 246 Ariz. 270, 272 ¶ 2, 438 P.3d 639, 641 (App. 2019). The court rejected her interpretation of § 38-764(A), concluding that the statute precludes electing a retirement date before the Agency receives a retirement application and that such a result does not diminish or impair her benefits in violation of § 38-757(A) or article 29, section 1(D) of the Arizona Constitution. See id.
¶8 We granted review because the terms and conditions for beginning retirement and the receipt of retirement benefits under the Plan are legal issues of first impression with statewide importance. We have jurisdiction under article 6, section 5(3) of the Arizona Constitution.
¶9 The Plan is a defined benefit plan that provides retirement benefits to employees of the State of Arizona and employees of participating political subdivisions. See A.R.S. §§ 38-711(13), -711(23), and -712(B). Public employees in Arizona are required to participate if they are working at least twenty hours each week for at least twenty weeks in a fiscal year with a participating Plan employer. A.R.S. §§ 38-736(A), -711(23)(b).
¶10 There are three categories of Plan members: active, inactive, and retired. Active members contribute to the Plan and work the required hours for membership. See A.R.S. § 38-711(1), -711(23)(b). Inactive members are those who previously made contributions to the Plan but are not currently contributing, are not eligible for active membership, and have not withdrawn their contributions or begun receiving retirement benefits. A.R.S. § 38-711(16). Retired members are currently receiving Plan retirement benefits. A.R.S. § 38-711(30).
¶11 Plan members do not necessarily retire when they end employment. There are several possible post-employment scenarios. First, when members terminate employment, they can seek a return of their own contributions plus those of the employer, if applicable, with interest. A.R.S. § 38-740. Second, members can terminate employment and simply leave their contributions with the Plan where their contributions, along with a percentage of the employer's contributions based on years of service, plus any interest may be returned to the member at a later date or used as a survivor benefit payable to a designated beneficiary following the member's death. A.R.S. §§ 38-740, -762. Third, members may later return to employment with a Plan employer and resume making contributions. A.R.S. § 38-766. Finally, members may choose to retire when they reach their normal retirement date. See A.R.S. § 38-711(27).
¶12 Lagerman contends that her right to a retirement benefit was unconditional and nonforfeitable as of her July 23, 2005 retirement date pursuant to § 38-757(A). Thus, she claims that her right to collect retirement benefits was not contingent on submitting a retirement application, which she insists is just a procedural step. Therefore, any delay in initiating payment of her monthly benefit—regardless of when she submitted a retirement application—requires either a lump sum payment with interest or an increase in future payments to account for benefits not paid in the interim. Otherwise, she asserts, the failure to account for amounts not paid diminishes or impairs her benefits contrary to article 29, section 1(D) of the Arizona Constitution. Lagerman additionally argues that § 38-764(A) permits her to elect a retirement date that satisfies any of the conditions listed therein.
¶13 We review de novo an administrative decision based on an interpretation of law. See A.R.S. § 12–910(E) ; see also Forest Guardians v. Wells , 201 Ariz. 255, 259 ¶ 9, 34 P.3d 364, 368 (2001). "If a statute is subject to only one reasonable interpretation, we apply it without further analysis." Glazer v. State , 237 Ariz. 160, 163 ¶ 12, 347 P.3d 1141, 1144 (2015). Statutes that address the same subject or general purpose "should be read together and harmonized when possible." David C. v. Alexis S. , 240 Ariz. 53, 55 ¶ 9, 375 P.3d 945, 947 (2016). "[I]f possible this court construes statutes to avoid rendering them unconstitutional." Hayes v. Cont'l Ins. Co. , 178 Ariz. 264, 272, 872 P.2d 668, 676 (1994).
¶14 Arizona Revised Statutes § 38-757 provides:
¶15 Reading subsections (A) and (B) together, as the reference to subsection (B) in subsection (A) necessarily requires, it is clear that a member shall receive a monthly annuity payment after applying on the prescribed form and reaching the normal retirement date. The fact that a Plan member's right to a normal retirement benefit is nonforfeitable as of the normal retirement date, except as provided in § 13-713,4 does not eliminate the statutory requirements a member must satisfy in order to receive the benefit. Before submitting an application and attaining a normal retirement date, a member is not entitled to receive retirement benefits. The statute, by its terms, renders submitting a retirement application a substantive condition precedent for receiving retirement benefits; the application is not just a procedural step.
¶16 In Hall v. Elected Officials' Retirement Plan , we surveyed previous cases involving pension rights to conclude that "a public employee's interest in a retirement benefit or pension becomes a right or entitlement at the outset of employment, but the right to begin collecting pension benefits is contingent upon completing the requirements for retirement eligibility." 241 Ariz. 33, 44 ¶ 33, 383 P.3d 1107 (2016) ().
¶17 Consequently, although Lagerman's right to retirement benefits was nonforfeitable as of July...
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