McCarrell v. Cumberland County Employees Retirement Bd.

• Decision Date: 27 September 1988
• Citation: 120 Pa.Cmwlth. 94,547 A.2d 1293
• Parties: Nancy W. McCARRELL et al., Appellants, v. CUMBERLAND COUNTY EMPLOYEES RETIREMENT BOARD et al., Appellees.
• Court: Pennsylvania Commonwealth Court

Page 1293

547 A.2d 1293

120 Pa.Cmwlth. 94

Nancy W. McCARRELL et al., Appellants, v. CUMBERLAND COUNTY EMPLOYEES RETIREMENT BOARD et al., Appellees.

Commonwealth Court of Pennsylvania.

Argued April 18, 1988.

Decided Sept. 27, 1988.

Robert W. Barton, Killian & Gephart, Harrisburg, for appellants.

Ronald Lucas, Tive, Hetrick & Pierce, Bruce Bratton, Martsolf & Bratton, Harrisburg, for appellees.

Before CRAIG and COLINS, JJ., and KALISH, Senior Judge.

COLINS, Judge.

This is an appeal from an Order of the Court of Common Pleas of Cumberland County granting summary judgment in favor of the Cumberland County Employees' Retirement Board (Board).

Factual History

Retirees of the Cumberland County Employees' Retirement System (appellants) initiated this action by the filing of a complaint seeking both equitable and declaratory relief. Count 1 of the complaint averred that the Board violated its fiduciary obligation under the County Pension Law ¹ to those retirees of Cumberland County who were drawing a county pension. Count 2 of the complaint alleged that the Board utilized monies earned on the investment of funds contained in the County Employees' Retirement Fund (Fund) to reduce or eliminate the amount paid by the County for the administration of the system, in violation of Section 5 of the Law, 16 P.S. § 11655. Count 3 of the complaint contended that the Board wrongfully allowed funds to be held in the name of private individuals and companies in dereliction of Section 8 of the Law, 16 P.S. § 11658, which requires that the County Treasurer maintain these funds.

The appellants sought, inter alia, relief in the form of an order declaring unlawful, the method of payment to the Fund utilized by the County. Appellants sought further relief in the form of an order requiring that the Board grant a cost of living increase to the retirees for the years 1983 and 1985. This request was based upon the allegation that the Board had breached its fiduciary obligation in failing to grant such increases for those years due to its offset of the County contribution to the Fund.

The Board joined, as an additional defendant, its actuarial consultant, the Hays/Huggins Company, Inc. The Board reasoned that because it acted upon the advice and direction of this company in fulfilling its obligations pursuant to the Law, the company should be held jointly liable in the event that the court found in favor of the retirees. The Board and the additional defendant filed Motions for Summary Judgment pursuant to Pa.R.C.P. No. 1035. The appellants conceded that summary judgment should be entered as to Count 3 of the complaint. The trial court entered summary judgment as to all counts and appellants appealed that decision to this Court.

As noted by the trial court, the issue before us today is one of first impression. Accordingly, we feel it necessary to set forth a complete analysis of the structure of the Fund, including the duties and obligations imposed upon the Board by the Law.

Structure of the Fund

The Cumberland County Employees Retirement System, established pursuant to the Law, is composed of several different accounts. The Law requires that county employees (employees) make contributions to the Fund from their salaries into the Member's Annuity Reserve Account (MARA). Upon retirement, the amount of a member's accumulated deductions in his MARA are transferred to a Retired Members' Reserve Account. The Law also provides that monies contributed to the Fund by the County are to be maintained in the County Annuity Reserve Account (CARA).

Although there are no other statutorily defined accounts within the Fund, Section 7(a) of the Law, 16 P.S. § 11657(a), does provide that the corpus of the Fund shall include the interest earned by the investment of monies contained therein. It reads:

Regular interest shall be credited up to the date of retirement, death or withdrawal, to the members' annuity and county annuity and retired members' reserve account. ²

Section 6 of the Law vests in the Board the authority to determine the rate of regular interest to be afforded member contribution accounts, such rate not to be less than four per cent nor more than five and one-half per cent per year. 16 P.S. § 11656. This Section further provides that the actuary of the Board shall:

"certify to the Board annually the amount of the appropriation to be made by the county to the fund to build up and maintain adequate reserves for the payment of the county's share of the retirement allowances."

16 P.S. § 11656. Basically, each year, the actuary computes the present and projected future liabilities of the Fund, weighs the liabilities against the assets of the Fund and determines the amount of County general funds to be appropriated to the Fund.

Discussion

In the instant matter, the actuary, in calculating the County contribution, included, as part of the assets of the Fund, the excess interest earned on the investment of monies in the Fund. The appellants contend that the members of the Board used the excess interest to reduce the mandated contribution from the County to the Fund in contravention of their fiduciary duties as trustees of the Fund. The appellants go on to draw the inference that the Board lessened the County contribution to aid the County in balancing its budget. Ultimately, the appellants conclude that because the Board impermissibly used the excess interest that would ordinarily be used to fund cost of living increases to balance the County budget, the increases to the retirees were not forthcoming. Consequently, appellants contend that a factual dispute as to the Board members' violations of their fiduciary obligations existed before the trial court, and therefore, request that we overturn the grant of summary judgment.

We note that summary judgment will be granted only when the moving party has established that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. Pa.R.C.P. No. 1035. Our scope of review when examining a common pleas court's grant of summary judgment is limited to determining whether the trial court committed an error of law or abused its discretion. Farley v. Township of Upper Darby 100 Pa. Commonwealth Ct. 535, 514 A.2d 1023 (1986), petition for allowance of appeal denied, 517 Pa. 611, 536 A.2d 1334 (1987). Our review of the record in this matter reveals that the trial court committed no error of law nor abused its discretion in granting summary judgment. We shall address the issues presented in the order in which they were raised.

Appellants first contend that there was, before the trial court, a substantial factual dispute as to whether the Board members, as trustees of the Fund, violated the fiduciary obligations imposed upon them by law. Citing the language of Section 9 of the Law, 16 P.S. § 11659, the appellants maintain that the Board members must carry out their duties as trustees solely in the interest of the beneficiaries of the Fund.

Section 9 of the Law, in pertinent part, reads:

The members of the board shall be trustees of the fund, and shall have exclusive management of the fund with full power to invest the moneys therein subject to the terms, conditions, limitations and restrictions imposed by law upon fiduciaries. Subject to like terms, conditions, limitations and restrictions, the trustees shall have power to hold, purchase, sell, assign, transfer or dispose of any of the securities and investments in the funds, as well as the proceeds of investments and of the moneys belonging to the fund.

16 P.S. § 11659. Appellants would have us read this section of the statute in a vacuum. By...