Peterson v. Fire and Police Pension Ass'n
| Decision Date | 18 July 1988 |
| Docket Number | No. 86SC266,86SC266 |
| Citation | 759 P.2d 720 |
| Parties | Patricia Dyer PETERSON and Constance Preble, Petitioners, v. FIRE AND POLICE PENSION ASSOCIATION, Police Pension Relief Board, Mike Licht, Auditor, and the City and County of Denver, Respondents. |
| Court | Colorado Supreme Court |
Brauer & Buescher, P.C., Thomas E. Buescher, Ellen M. Kelman, Denver, for petitioners.
Tallmadge, Tallmadge, Wallace & Hahn, P.C., C. Thomas Bastien, Denver, for respondent Fire and Police Pension Assn.
Stephen H. Kaplan, City Atty., Darlene M. Ebert, Asst. City Atty., Denver, for respondents Police Pension Relief Bd., Mike Licht, Auditor, and the City and County of Denver.
Petitioners Patricia Peterson and Constance Preble commenced this declaratory judgment action against the Fire and Police Pension Association (Association), the Police Pension and Relief Board (Board), the City and County of Denver, and Mike Licht, Auditor, to obtain a judgment entitling them to survivor benefits under sections 31-30-1001 to -1016, 12 C.R.S. (1985 Supp.) (state plan), and under section C5.42 of the Denver City Charter (1982) (city plan). 1 Alternatively, they sought a declaration that the state plan is unconstitutional as applied to them, and as such, does not preempt their benefits under the Denver Charter. The court of appeals, 725 P.2d 81 (1986), affirmed the trial court's holding that the petitioners are not entitled to benefits under both the state plan and city plan, and that the state plan is constitutional as applied to them, thereby entitling petitioners to benefits only under the state plan. We granted certiorari on two issues: (1) whether the trial court erred in holding that the amount of survivor benefits payable to a surviving spouse could be changed during an officer's life because rights to those benefits do not fully vest until death; and (2) whether the trial court erred in holding that partially vested rights in survivor benefits can be reduced because corresponding changes of a beneficial nature were made. We now affirm the court of appeals decision as to all issues except the issue of standing, which we reverse.
The petitioners are surviving spouses of Denver police officers who died while still employed by the city, after the effective date of the state plan, sections 31-30-1001 to -1016, 12 C.R.S. (1985 Supp.). Officer Albert Peterson joined the Denver Police Department on May 1, 1961, and died on January 5, 1980, having served the department for almost nineteen years. Officer Robert Preble had served the department for just over twenty-four years. He joined the department on February 1, 1957, and died on February 21, 1981. At the time petitioners' husbands were hired by the city, section C5.42 of the Denver City Charter (1982) provided for benefits in the amount of one-third of the officer's salary, based on rank at the time of death or retirement, to be paid to the surviving spouse of an officer who died while in active service. Additional benefits were awarded based on the number of dependent children. 2 The General Assembly, however, enacted Senate Bill 79 as sections 31-30-1001 to -1016. See ch. 316, sec. 1, §§ 31-30-1001 to -1016, 1979 Colo.Sess.Laws 1189-1203. Section 31-30-1008 provides for survivor benefits to the surviving spouse and dependents of police officers and fire fighters. The state plan became effective on January 1, 1980. When petitioners' husbands died, the state plan provided for payment of twenty-five percent of the base monthly salary that they were receiving immediately prior to death. Additional benefits were awarded based upon the number of dependents. The state did not provide for increases in benefits commensurate with salary plan increases of officers of the same rank. Petitioners were granted the benefits under the state plan but denied benefits under the city plan. Petitioner Peterson had been receiving $435.50 per month under the state plan until she remarried in November 1982. Under the city plan she would have been entitled to receive $579.33 a month. Since February 21, 1981, petitioner Preble has been entitled to receive $521.50 per month. She would be entitled to $695.33 per month under the city plan.
A brief review of the recent history of legislation relating to pension funds for police officers and fire fighters is necessary to understand the issues presented in this case. In January 1978, the Colorado Legislative Council Committee on Fire and Police Pensions (committee) estimated statewide unfunded accrued liabilities to be approximately $500,000,000. See generally City of Colorado Springs v. State, 626 P.2d 1122 (Colo.1981) (). The committee estimated that at that time the city and county of Denver had an unfunded liability of approximately $270,000,000 and it estimated that the liability would increase at a rate of $30,000,000 annually. Colorado Legislative Council Research Publication No. 229, Fire and Police Pensions, at 5 (1977) (hereinafter Publication No. 229 ). With respect to the Denver pension plan, the committee stated that Denver
has adopted the policy of "pay-as-you-go" funding of pension benefits. Under pay-as-you-go funding the city appropriates monies annually to pay the benefits of those members of the department on retirement. The fund retains practically no balance at the end of any year and, if the City and County of Denver were to experience severe financial conditions, there would be no monies available to pay future benefits for either the present retirees or new retirees.
Id. The committee recommended that the General Assembly pass legislation that would require full funding of policemen's and firemen's pension funds to cover both unfunded accrued liabilities and the current annual service costs of pension benefits attributable to active members. See City of Colorado Springs, 626 P.2d at 1124. In response to this recommendation, the General Assembly enacted the Policemen's and Firemen's Pension Reform Law, sections 31-30-801 to -807, 12 C.R.S. (1978 Supp.), as an interim measure requiring full funding of policemen's and firemen's pension funds.
On April 3, 1978, the Final Report on Policemen's and Firemen's Pensions in Colorado was submitted to the state auditor and the General Assembly. It stated, in part:
In its simplest terms, Colorado's policemen's and firemen's pension problem amounts to this:
--Many policemen and firemen and their families may never receive all or a substantial portion of their pensions; or
--The taxpayers in many communities in coming years will be asked to accept huge tax increases or unthinkable cuts in municipal services to finance these pensions; unless
--Responsible leadership now reforms the policemen's and firemen's pension system and taxpayers recognize the need for higher levels of pension funding now to avoid higher taxes later; and
--Unless both employers and employees recognize the need for reform through adoption of a less costly pension benefit program to be offered in the future.
Colorado's policemen's and firemen's pension system is ill equipped to deliver its promises.
If the local police and fire pension situation is not now of disastrous proportions, a continuation of present contribution practices and generous benefits have the capacity to create a very serious crisis.
A study required by Senate Bill 46 was filed on February 2, 1979, prior to the enactment of Senate Bill 79. See ch. 98, sec. 1, § 31-30-901, 1978 Colo.Sess.Laws 452-53. This study, entitled Colorado Police & Firemen's Pension Plans Actuarial Valuations as of January 1, 1978, 2 (1979), provides:
As of December 31, 1978, the 167 [pension] plans [throughout the state] have combined unfunded past service liabilities of $431.2 million. Of this amount, the two Denver plans have combined liabilities of $299.2 million, about 70% of the total. The four largest cities, Denver, Colorado Springs, Pueblo and Aurora, account for about 85% of the total.
The General Assembly's adoption of sections 31-30-1001 to -1016, provided a comprehensive benefit plan for firemen and policemen throughout the state. The legislative declaration of that statute provides, in part, that "any pension plan must be actuarially sound in order to assure the security of the pension system and that this part 10 is enacted to provide for the stability and security of policemen's and firemen's pension plans in this state." § 31-30-1001.
Petitioners assert that the right to survivor benefits payable to surviving spouses vested fully in Officers Preble and Peterson as soon as they became Denver Police Officers and the amount of those benefits could not, therefore, be decreased. The trial court held that the petitioners' rights were The court of appeals stated that this action should have been brought by the personal representatives of the deceased officers. Since the petitioners did not bring this action as personal representatives, the court of appeals concluded they did not have standing to sue. We agree with the trial court's conclusion that the petitioners are entitled to survivor benefits under the state plan only and therefore affirm the trial court's dismissal of the complaint.
In our view, the court of appeals erred in concluding that petitioners lack standing to sue. A surviving spouse's right to collect pension benefits is derivative of his or her spouse's pension right. See Henry v. City of Los Angeles, 201 Cal.App.2d 299, 313, 20 Cal.Rptr. 440, 448 (1962) (). A surviving spouse is a third-party beneficiary...
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