Lenander v. Wash. State Dep't of Ret. Sys.

• Decision Date: 18 August 2016
• Docket Number: No. 92671–9,92671–9
• Citation: 377 P.3d 199,186 Wash.2d 393
• Court: Washington Supreme Court
• Parties: Tim Lenander, Appellant, v. Washington State Department of Retirement Systems, Respondent.

186 Wash.2d 393

377 P.3d 199

Tim Lenander, Appellant

v.Washington State Department of Retirement Systems, Respondent.

No. 92671–9

Supreme Court of Washington, En Banc.

Argued May 10, 2016

Filed Aug. 18, 2016

Wayne L. Williams, Williams Wyckoff & Ostrander PLLC, P.O. Box 316, Olympia, WA, 98507–0316, for Appellant.

Sarah Elizabeth Blocki, Attorney at Law, 7141 Cleanwater Lane S.W., P.O. Box 40123, Olympia, WA, 98504–0123, Jeffrey Todd Even, Office of the Attorney General, P.O. Box 40100, Olympia, WA, 98504–0100, for Respondent.

WIGGINS

, J.

¶ 1 Employees retiring from the Washington State Patrol are eligible to receive a pension calculated based on years of service and average final salary. For many years, the only pension benefit option available included a survivor benefit for a spouse who outlived the retiree that was usually equal to 50 percent of the retiree's monthly benefit. In 2000, the Department of Retirement Systems (DRS) created a new option under which the retiree could opt for a pension that would allow a surviving spouse to continue to receive monthly pension benefits at the same amount after the retiree's death. To make this pension actuarially equivalent in value to the previous pension, the DRS provided for a greater reduction in the retiree's monthly benefits. In 2010, the DRS adopted rules that modified the degree of the actuarial reduction. Appellant Tim Lenander challenges the changes to the reduction, arguing that it violates the statutory scheme and impairs his contract right to a lower reduction in his pension payment.

¶ 2 We reject Lenander's arguments. The plain language of the Washington State Patrol Retirement System (WSPRS) “Plan 1” survivor benefit statute, read in the context of its overall statutory scheme, grants authority to the DRS to adopt rules establishing an actuarially equivalent survivor option, and broad authority to adopt and revise actuarial factors for purposes of administering the state's public retirement systems. We therefore hold that the DRS acted within its statutory authority. Additionally, the DRS did not violate the contract clause of article I, section 23 of the Washington Constitution

. The decision of the Thurston County Superior Court is affirmed.

BACKGROUND

¶ 3 A brief discussion of the relevant statutory and regulatory history of WSPRS Plan 1, as well as a discussion of the facts of this case, provides the necessary context for our decision.

I. WSPRS Statutes and the Option B Regulations

¶ 4 WSPRS Plan 1 provides monthly retirement benefits to qualifying Washington State Patrol officers commissioned on or before January 1, 2003. See RCW 43.43.270

. Historically, WSPRS Plan 1 members had only one option for their retirement benefits: a monthly retirement allowance calculated based on the retiree's final average salary and years of service. RCW 43.43.270(2). If the member passed away, either in service or after retirement, the member's spouse would automatically receive a survivor allowance—usually equal to 50 percent of the member's average final salary—at no additional cost to the member.

¶ 5 In 1999, the legislature enacted a law directing the DRS to adopt rules creating a new survivor benefit option for WSPRS retirees that would provide for a continuing, unreduced retirement allowance for surviving spouses. Laws of 1999, ch. 74, § 4 (codified as amended at RCW 43.43.278

). The legislature required that this new option be actuarially equivalent to the historic option for WSPRS Plan 1 members. Id.

¶ 6 In 2000, pursuant to RCW 43.43.278

, the DRS adopted a rule implementing the legislative mandate to create an uncapped survivor benefit option. Clerk's Papers (CP) at 97 (Rule–Making Order, Wash. St. Reg. 00–11–103 (May 18, 2000)). This rule established two retirement options: “Option A” (the “historic retirement option” with historic survivor benefit) and “Option B” (the “actuarially equivalent retirement option” with new survivor benefit). Former WAC 415–103–215 (2000). In order to offset the continuing benefits provided to the survivor and ensure that the plan was actuarially equivalent, the monthly retirement allowance was actuarially adjusted by a reduction factor.¹

¶ 7 The Office of the State Actuary (OSA), which is responsible for conducting actuarial services for, and periodic studies of, the state retirement systems, recommended a flat actuarial reduction factor of three percent for Option B. Admin. Record (AR) at 77; see also RCW 44.44.040

. This meant that upon choosing Option B, a member's retirement allowance would be reduced by three percent,² but that allowance would continue at that same rate through the lifetime of his or her surviving spouse. Former WAC 415–103–215 (2000).

¶ 8 In 2007, the OSA completed its six-year periodic actuarial investigation (2001–2006) into each of the state retirement systems. CP at 361. Based on the results of this study, the OSA recommended that the DRS adopt a table of factors, rather than a single reduction factor. Id. The OSA explained that the switch in format to a table of factors that vary by age difference would “provide better actuarial equivalence.” CP at 364.

¶ 9 Upon receiving this advice from the OSA, the DRS amended WAC 415–103–215

, removing the reference to the three percent actuarial reduction, stating instead:

The department pays the retiree a monthly retirement benefit that is actuarially reduced from the benefit calculated under Option A. The department pays survivor benefits in accordance with RCW 43.43.278

using actuarial factors in

WAC 415–02–380 (10) and (11).

Former WAC 415–103–215(3) (2010)

(emphasis added). The DRS simultaneously amended WAC 415–02–380 to include a table of survivor benefit reduction factors for WSPRS Plan 1 Option B that based varying actuarial reduction rates on the age difference between member and spouse. Former WAC 415–02–380(10), (11) (2010). The new rules went into effect September 1, 2010. CP at 152.

II. Tim Lenander

¶ 10 Lenander became a commissioned trooper and a member of WSPRS on July 2, 1987. AR at 4

. He was an active, contributing member of WSPRS until his retirement on August 9, 2011. Id. Lenander is married, and upon retirement, he selected Option B for his WSPRS monthly retirement benefit. Id. This retirement benefit will continue for the lifetime of his wife, if she survives him. Id. When Lenander retired, the age difference between him and his wife was calculated as two years. Id. at 5. Based on the newly adopted table of actuarial factors at former WAC 415–02–380 (2010), and pursuant to former WAC 415–103–215(3) (2010), the DRS calculated his actuarial reduction factor at 5.3 percent (or 94.7 percent of the monthly pension payout). Id.

¶ 11 Lenander filed a lawsuit in superior court,³ seeking declaratory judgment invalidating the newly adopted actuarial factors on statutory and constitutional grounds. CP at 135–39. He simultaneously sought an administrative appeal before the DRS, challenging the validity of the calculation of his reduction factor. AR at 1

. In the administrative proceeding, the DRS held the actuarial reduction was properly calculated. Id. Lenander appealed the DRS's decision to the superior court. Id. at 124. His constitutional challenge and rule challenge cases were ordered consolidated by the superior court. CP at 752.

¶ 12 The superior court denied Lenander's claims for relief. Lenander appealed, and we granted direct review pursuant to RCW 2.06.030

.

ANALYSIS

¶ 13 At its core, this case presents issues of statutory interpretation. We are called on to interpret the scope of the DRS's authority to establish actuarial factors for the WSPRS Plan 1 system, and to determine whether its powers also include the authority to revise and update the factors once adopted.

I. Standard of Review

¶ 14 The Washington Administrative Procedure Act (APA) governs the standard of review for a challenge to an agency rule. The burden is on the challenger asserting invalidity of an administrative rule—in this case, Lenander. See ch. 34.05 RCW; Wash. Pub. Ports Ass'n v. State Dep't of Revenue, 148 Wash.2d 637, 645, 62 P.3d 462 (2003)

. An

agency rule may be invalidated only if the court determines it (1) is unconstitutional, (2) is outside the statutory authority of the agency, (3) is arbitrary or capricious, or (4) was adopted without complying with statutory rule making procedures. RCW 34.05.570(2)(c)

. Lenander claims that the amendments to WAC 415–103–215 are invalid because the DRS exceeded its statutory authority in promulgating the rule and that the rule changes were unconstitutional.

¶ 15 Determining the extent of rule making authority is a question of law. Wash. Pub. Ports Ass'n, 148 Wash.2d at 645, 62 P.3d 462

. The construction and meaning of a statute is a question of law, which we review de novo. Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wash.2d 1, 9, 43 P.3d 4 (2002). When possible, the court derives legislative intent from the plain language enacted by the legislature, considering the text of the provision in question, the context of the statute in which the provision is found, related provisions, amendments to the provision, and the statutory scheme as a whole. Id. at 10–11, 43 P.3d 4.

¶ 16 Constitutional issues are also questions of law that we review de novo. State v. Gresham, 173 Wash.2d 405, 419, 269 P.3d 207 (2012)

. We begin with the presumption that a statute is constitutional and place “ ‘the burden to show unconstitutionality ... on the challenger.’ ” In re Estate of Hambleton, 181 Wash.2d 802, 817, 335 P.3d 398 (2014) (alteration in original) (quoting Amunrud v. Bd. of Appeals, 158 Wash.2d 208, 215, 143 P.3d 571 (2006) ).

II. The DRS Acted within Its Statutory Rule Making Authority

¶ 17 Lenander first challenges the authority of the DRS to amend its own regulations concerning Option B. He argues that because the statute directing the creation of Option B included a date certain for enactment of the Option B regulations and did not expressly...