RPEC v. Charles

• Decision Date: 30 January 2003
• Docket Number: No. 71847-4.,71847-4.
• Citation: 62 P.3d 470,148 Wash.2d 602
• Parties: RETIRED PUBLIC EMPLOYEES COUNCIL OF WASHINGTON, Washington State School Retirees' Association, Gloria M. Champeaux, Jane H. Carter, Richard D. Bever And James T. Lengenfelder, Appellants, v. John F. CHARLES, Director of the Department of Retirement Systems, Respondents.
• Court: Washington Supreme Court

62 P.3d 470

148 Wash.2d 602

RETIRED PUBLIC EMPLOYEES COUNCIL OF WASHINGTON, Washington State School Retirees' Association, Gloria M. Champeaux, Jane H. Carter, Richard D. Bever And James T. Lengenfelder, Appellants, v.John F. CHARLES, Director of the Department of Retirement Systems, Respondents.

No. 71847-4.

Supreme Court of Washington, En Banc.

Argued September 19, 2002.

Decided January 30, 2003.

Donald Clocksin, Olympia, for Appellants.

Christine Gregoire, Attorney General, Spencer Daniels, Asst., Olympia, for Respondents.

Harriet K. Strasberg, for Washington Education Association, amicus curiae.

IRELAND, J.

Organizations representing retired public employees and teachers, as well as individual current state employees and teachers, petitioned for a writ of mandamus against the director of the Department of Retirement Systems(Director).They alleged the Director unlawfully collected employer contributions to the retirement system at the lower rate adopted by the legislature in Engrossed House Bill(EHB) 2487 (Laws of2000, 2d Sp. Sess., ch. 1) in contravention of the statutorily required rates and methodology.The organizations and individuals appeal the trial court's decision dismissing their petition for mandamus and granting summary judgment in favor of the Director.Finding that the PERS 1andTRS 1 funds are not trusts and that the Director is not considered a trustee or fiduciary of those funds, and that EHB 2487 is constitutional, we affirm the trial court's dismissal of Appellants' petition for mandamus and its grant of summary judgment in favor of the Director.

I.FACTS

A.Background of the Retirement System

This case involves a challenge to the contribution rates for two of the State's retirement plans: PERS 1andTRS 1.Appellants, plaintiffs below, are individual retired and current state employees and teachers, as well as two organizations representing retired state employees and teachers, Retired Public Employees Council of Washington (RPEC) and Washington State School Retirees' Association.PERS 1 covers public employees who became members before October 1, 1977;TRS 1 covers school teachers who became members before October 1, 1977.RCW 41.40.010(33);RCW 41.32.010(38).Both retirement systems are administered by the Department of Retirement Systems(DRS).

Under both systems, members and employers make contributions to the plan, which are then invested.Any investment earnings are redeposited in the systems.In PERS 1, members pay a contribution rate, which is fixed by statute independently of the employer contribution rate for that plan.SeeRCW 41.40.330(1).The contribution rates for employees and employers under the TRS 1 system operate in the same way as for PERS 1.SeeRCW 41.32.035, .042. Upon retirement, PERS 1andTRS 1 provide retirement benefits to their members.Retirees of both plans no longer pay contributions to their respective systems.Retirees' benefits are not affected by the contributions that continue after retirement.¹

Employer contribution rates are adjusted to make up the difference between the estimated amount the State must pay for present and future benefits and the sum of employee contributions and investment returns as described below.

B.The Rate Setting Process Generally

The required employer contributions are derived from a three-step process.First, an outside actuary reviews and proposes suggested contribution rates based on the following assumptions: (a) growth in system membership; (b) growth in salaries; (c) growth in inflation; and (d) investment rate of return.SeeFormerRCW 41.45.030(2)(1995), .060(2)(2000).

Second, the Pension Funding Work Group serves to help the Pension Funding Council(PFC) in its role, including help in: (a) reviewing actuarial valuations, (b) reviewing economic assumptions, and (c)"any other purpose which may assist the [PFC]."RCW 41.45.120(3).Recommendations from affected employee and employer groups are actively sought during the "work group process."RCW 41.45.120(4).Open public meetings are to be held on those recommendations.Id.

Third, the PFC adopts and may change the employer contribution rates, consistent with the assumptions, every two years (even-numbered years).FormerRCW 41.45.060(2)(a)-(c).See alsoRCW 41.45.100(creating the Pension Funding Council).The PFC notifies directors of the Office of Financial Management and DRS of the state and employer contribution rates adopted by the council.FormerRCW 41.45.060(6).The Director collects the rates adopted by the council for the dates set by statute.FormerRCW 41.45.060(7).

C.The Rate Setting in this Case

Based on the results of the 1997 actuarial valuation, the State Actuary recommended a decrease in the employer contribution rates for the 1999-2001 biennium for both the PERS and TRS plans.The recommendation was to decrease the rates from 7.32 percent to 4.36 percent for PERS and from 11.75 percent to 8.38 percent for TRS.The PFC adopted the reduced contribution rates recommended by the State Actuary.The legislature implemented those rates for the 1999-2001 biennium and scheduled the rates to expire June 30, 2001.See former RCW 41.45.0603(2)(a), (b)(2000);Laws of 1999, ch. 309, § 907(1)(a), (b).Appellants do not challenge the implementation of these rates.

In 1998, the State Actuary performed another annual actuarial valuation.In April 2000, the legislature enacted EHB 2487, a supplemental budget bill for the remainder of the 1999-2001 biennium.The bill further lowered the employer contribution rates, midbiennium.Laws of 2000, 2d. Sp. Sess., ch. 1 at § 906.For PERS, the rates were lowered an additional 0.78 percent.The TRS rates were lowered an additional 2.35 percent.Compare rates adopted by PFC (Clerk's Papers(CP)at 109) with former RCW 41.45.0603(2)(a), (b).The stated reason for reducing the rates was that the 1998 valuation from the State Actuary determined that the funding goals expressed in former RCW 41.45.010(1998) could still be met using lower employer contribution rates, primarily because of investment returns on the pension funds that were higher than anticipated.FormerRCW 41.45.0603(1).Originally, the rates adopted by the PFC were to extend from July 1, 1999 through June 30, 2001 for PERS and from September 1, 1999 through June 30, 2001 for TRS.Laws of 1999, ch. 309, § 907.EHB 2487 changed these effective dates, making the former contribution rates set by the PFC ineffective as of April 30, 2000, for both plans.Laws of 2000, 2d Sp. Sess., ch. 1, § 902.It then established that the new rates were to take effect on May 1, 2000.Id. at § 906.The Director began collecting the new reduced rates provided in EHB 2487 between May 1, 2000 and the end of the 1999-2001 biennium.The Director's implementation of the new rates is being challenged in this action.

II.PROCEDURAL HISTORY

The plaintiffs filed their petition for a writ of mandamus against a state officer in October 2000 seeking jurisdiction in this court.The petition was transferred to the Thurston County Superior Court.The trial court dismissed the petition, denied the Retirees' and Employees' motion for summary judgment, and granted the State's cross motion for summary judgment.This court accepted direct review.

III.ISSUES

Should the Director of the Department of Retirement Systems collect the employer contribution rates originally set for the 1999-2001 biennium or collect the reduced rates set by the legislature midbiennium?

Before deciding the above question, this court must determine the following preliminary issues:

1.Whether former RCW 41.45.050(3)(1998) confers standing to members of the retirement systems independently of standing as a beneficially interested party under the mandamus statute.

2.Whether the PERS 1andTRS 1 are properly characterized as trusts.

3.Whether the Director of the Department of Retirement Systems is a trustee of the retirement funds or a fiduciary to the members and retirees of the systems.

4.Whether the appropriations bill, Engrossed House Bill 2487, violates article I, section 23 or article II, sections 19and37 of the Washington Constitution.

IV.ANALYSIS

A.Standard of Review

When reviewing an order of summary judgment, the appellate court engages in the same inquiry as the trial court.Bowles v. Dep't of Ret. Sys.,121 Wash.2d 52, 62, 847 P.2d 440(1993).The appellate court determines whether genuine issues of material fact exist and whether the moving party is entitled to judgment as a matter of law.Id.;CR56(c).The court considers the facts in the light most favorable to the nonmoving party.Bowles,121 Wash.2d at 62, 847 P.2d 440.The nonmoving party may not rely on speculation, argumentative assertions that unresolved factual issues remain, or on having its affidavits considered at face value.Seven Gables Corp. v. MGM/UA Entm't Co.,106 Wash.2d 1, 13, 721 P.2d 1(1986).The court should grant the motion only if reasonable persons could reach but one conclusion.Wilson v. Steinbach,98 Wash.2d 434, 437, 656 P.2d 1030(1982).

B.Additional Evidence on Review

RAP 9.11 allows an appellate court to take additional evidence on review if:

(1) additional proof of facts is needed to fairly resolve the issues on review, (2) the additional evidence would probably change the decision being reviewed, (3) it is equitable to excuse a party's failure to present the evidence to the trial court, (4) the remedy available to a party through postjudgment motions in the trial court is inadequate or unnecessarily expensive, (5)the appellate court remedy of granting a new trial is inadequate or unnecessarily expensive, and (6) it would be inequitable to decide the case solely on the evidence already taken in the trial court.

RAP 9.11(a).The Director has moved this court to accept the affidavit of the State Actuary, which explains that the criteria for a gain-sharing increase in pension benefits...