McGrath v. Rhode Island Retirement Bd.

Citation88 F.3d 12
Decision Date04 June 1996
Docket NumberNo. 95-2301,95-2301
PartiesEdward A. McGRATH, Plaintiff, Appellant, v. The RHODE ISLAND RETIREMENT BOARD, ETC., Defendant, Appellee. . Heard
CourtU.S. Court of Appeals — First Circuit

Edward C. Roy, Jr., with whom Roy & Cook, Providence, RI, was on brief, for appellant.

David D. Barricelli, with whom Hinckley, Allen & Snyder, Providence, RI, was on brief, for appellee.

Before SELYA, CYR and BOUDIN, Circuit Judges.

SELYA, Circuit Judge.

This appeal requires us to determine whether a legislated change to a substantive provision of a public employees' retirement plan, as applied, transgresses the Contracts Clause of the United States Constitution. We find no constitutional infraction: plaintiff-appellant Thomas McGrath's pension rights had not yet vested when the modification occurred, and the state had reserved the power to alter or revoke its promise of retirement benefits to municipal employees at the time it established the plan in which McGrath later became a participant. Consequently, we affirm the district court's grant of summary judgment in favor of defendant-appellee Rhode Island Retirement Board (the Board).

I. THE STATUTORY SCHEME

The Rhode Island General Assembly established a state employees' retirement plan in 1936. See 1936 R.I. Pub. Laws, ch. 2334 (codified at R.I. Gen. Laws §§ 36-8-1 to 36-10-39 (1990 Reenactment & Supp.1995)). In 1951, the General Assembly enabled Rhode Island's cities and town to enroll their employees in a matching plan. See 1951 R.I. Pub. Laws, ch. 2784 (codified at R.I. Gen. Laws §§ 45-21-1 to 45-21-62 (1991 Reenactment & Supp.1995)). The legislature patterned the municipal employees' plan (MEP) after the state employees' plan (SEP), engrafting the former onto the latter. Together, these plans comprise what is familiarly known as the state retirement system. The key provisions of both plans are ordained by statute and both are administered under the aegis of the Board.

The law authorizing the MEP affords each of Rhode Island's thirty-nine municipalities the option of deciding whether or not to participate. See R.I. Gen. Laws § 45-21-4. If a city or town chooses to join, its eligible employees are required to become members of the plan and must contribute six percent of salary until they have reached the maximum amount of service credit attainable. See id. § 45-21-41. Municipalities may elect to defray some or all of their employees' required contributions to the MEP. See id. § 45-21-41.1.

A qualified employee is entitled to a life annuity upon retirement in the amount of two percent of his or her final salary times the number of years of total creditable service (up to thirty-seven and one-half years). See id. § 45-21-17. A person is eligible to retire with such a pension once he or she attains age fifty-eight and has logged at least ten years of total creditable service. See id. § 45-21-16. Under this formulation--the only formulation that is germane to this case 1--a municipal member's right to a pension vests when he or she meets both the age and years-in-service minima.

The MEP gives members the opportunity to purchase up to four years of pension credits for temporally equivalent active duty military service. See id. § 45-21-53. A member also can purchase pension credits for any "prior service with the city or town of which the employee is now employed." Id. § 45-21-9(b). Prior to 1991, these purchased credits benefitted a plan participant in two ways. First, they served to increase the life annuity payments that would be payable upon the participant's retirement. Second, they served to accelerate the participant's vesting date. For example, an individual who had served four years in the military could purchase four years of creditable pension time at a relatively modest rate and then retire at age fifty-eight after only six years of municipal employment. What is more, the individual would receive an annuity upon retirement in the amount of two percent of his or her final salary times ten years (despite having worked for a mere six years).

From its very inception, the statute that paved the way for municipal employees to enter the state retirement system included a provision reserving the state's power to amend the terms of the municipal members' participation. We reproduce this escape clause in its entirety:

Reserved power to amend or repeal--Vested rights.--The right to amend, alter, or repeal this chapter at any time or from time to time is expressly reserved, and in that event the liability of the municipal employees' retirement system of Rhode Island shall be limited[,] in the case of a member or a person claiming through the member[,] to the contributions made by the member, without interest, and in the case of a municipality, to contributions made by the municipality[,] without interest, subject to deductions prescribed in the case of withdrawal by a municipality as provided in § 45-21-6. All retirement allowances or other benefits granted by the retirement of members, and in force prior to a repeal or amendment, shall be vested in the beneficiaries thereof and shall be paid in full in accordance with the terms of this chapter, and the rights of the retirement board to compel the payment by any municipality of the sum or sums necessary to provide the retirement allowances granted to members formerly employed by the municipality shall not be affected by the repeal or amendment.

Id. § 45-21-47. Under this provision, the state reserves the authority to make changes to the pension plan, up to and including the termination of municipal participation and the elimination of the pension rights of all employees (except those who have already retired). Upon repeal, current employees would receive back nothing more than the contributions they had made over the course of their employment, without interest. See id.

For many years the state retirement system was plagued with problems. In 1991, with tales of suspected pension abuse rampant, the General Assembly restructured the system in several respects. Among other changes, the legislature revised the method for calculating the minimum years of service (ten) required before an employee of suitable age could retire with a pension. The new method focused on actual time in service without regard to purchased credits. It did so by designating contributing membership (i.e., the period of time during which an employee had been working for the public employer and making contemporaneous contributions to the system) as the virtually exclusive measure of creditable time for vesting purposes. The new law stated:

Except as specifically provided in § 36-10-9.1, §§ 36-10-12 through 36-10-15 and §§ 45-21-19 through 45-21-22 of the general laws, no member shall be eligible for pension benefits under this chapter unless the member shall have been a contributing member of the employees' retirement system for at least ten (10) years. Provided, however, a person who has ten (10) years service credit shall be vested. Any person who becomes a member of the employees' retirement system pursuant to § 45-21-4 shall be considered a contributing member for the purposes of title 45, chapter 21 and this chapter.

R.I. Gen. Laws § 36-10-9(c) (Supp.1993) (enacted June 16, 1991). It is readily evident that, under the amendment, an employee may only count years of actual service for purposes of meeting an applicable ten-year vesting requirement. Thus, purchased credits (for, say, time in the military) can no longer be counted toward vesting (unless the holder comes within the "grandfather clause" protecting persons who already had logged ten years of total creditable service, including the purchased credits, at the effective date of the statutory change). 2

In enacting this statute, the General Assembly amended only Title 36--the law creating the SEP. Nevertheless, as the last sentence of the excerpted language indicates, the change seemed to apply to the MEP as well. When the Board exhibited some confusion about which minimum vesting requirement applied to municipal members, the legislature moved swiftly to dispel all doubt by amending Title 45--the law creating the MEP--to make it pellucid that municipal members, like other participants in the system, must have been contributing members for at least ten years in order to meet the minimum years-in-service requirement for a pension. See R.I. Gen. Laws § 45-21-16(b) (enacted July 21, 1992). The new law ceded substantially the same grandfathering to members who already had accumulated ten years of total service (including purchased credits), see id., but it did not extend the same unguent to persons who had bought credits but had not yet, even with the aid of those credits, cleared the years-in-service hurdle.

II. THE COURSE OF EVENTS

The relevant facts underlying this litigation are not in dispute. Thomas McGrath began working for the City of Cranston as a probationary employee on April 9, 1986. His probationary status ended six months later. Because Cranston had elected to participate in the system, he became a contributing member of the MEP on November 28, 1986. He remained in that status until April 28, 1994 (although Cranston defrayed some of the contribution costs).

In February 1991 the appellant began pursuing the purchase of retirement credits for two and one-half years of prior military service. Applying the statutory formula (ten percent of first-year salary for each year of surrogate credit purchased) the Board informed the appellant that he could buy the desired credits for $4,316.09, and that for the added sum of $917.53 he could purchase credits corresponding to his six-month probationary period. The appellant bought the credits on April 15, 1991. At that time he had been a contributing member of the system for just over four and one-half years.

As the law then read, the appellant's purchase of surrogate credits worked to his...

To continue reading

Request your trial
114 cases
  • Cal Fire Local 2881 v. Cal. Pub. Employees' Ret. Sys.
    • United States
    • California Supreme Court
    • March 4, 2019
    ...582 P.2d 614 ; Kern v. City of Long Beach , supra , 29 Cal.2d at pp. 851–852, 855, 179 P.2d 799 ; see McGrath v. Rhode Island Retirement Bd., etc. (1st Cir. 1996) 88 F.3d 12, 16–17 ; Moro v. State (2015) 357 Or. 167, 351 P.3d 1, 20–22.)1 Of course, not every statute or ordinance providing a......
  • National Educ. Association-Rhode Island ex rel. Scigulinsky v. Retirement Bd. of Rhode Island Employees' Retirement System
    • United States
    • U.S. Court of Appeals — First Circuit
    • February 1, 1999
    ...The claims raise a difficult set of issues that were expressly reserved in this court's leading decision in McGrath v. Rhode Island Retirement Board, 88 F.3d 12 (1st Cir.1996), further complicated by the somewhat eccentric facts of this Pension plans come in all sorts of shapes and sizes bu......
  • Public Service Co. of New Hampshire v. Patch
    • United States
    • U.S. Court of Appeals — First Circuit
    • October 6, 1998
    ...claim plausible, even if closer examination might defeat the claim or provide the state a loophole. See McGrath v. Rhode Island Retirement Bd., 88 F.3d 12, 16 (1st Cir.1996). Of course, the Johnson Act may well preclude an injunction based solely on constitutional grounds, as we discussed a......
  • Cranston Police Retirees Action Comm. v. City of Cranston
    • United States
    • Rhode Island Supreme Court
    • June 3, 2019
    ...parties." Nonnenmacher v. City of Warwick , 722 A.2d 1199, 1202 (R.I. 1999) (deletion omitted) (quoting McGrath v. Rhode Island Retirement Board, Etc. , 88 F.3d 12, 16 (1st Cir. 1996) ). The Contract Clause "has been interpreted to apply to municipalities as well." Id. We have previously ad......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT