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

• Citation: 12 Wash.App.2d 602,459 P.3d 396
• Decision Date: 03 March 2020
• Docket Number: No. 53054-6-II,53054-6-II
• Court: Court of Appeals of Washington
• Parties: Donald SLOMA, Appellant, v. WASHINGTON STATE DEPARTMENT OF RETIREMENT SYSTEMS, Respondent.

12 Wash.App.2d 602

459 P.3d 396

Donald SLOMA, Appellant,

v.WASHINGTON STATE DEPARTMENT OF RETIREMENT SYSTEMS, Respondent.

No. 53054-6-II

Court of Appeals of Washington, Division 2.

Filed March 3, 2020

Wayne L. Williams, Attorney at Law, 6035 Troon Ln Se, Olympia, WA, 98501-5176, for Appellant.

Nam Duc Nguyen, WA Attorney General's Office, Po Box 40123, Olympia, WA, 98504-0123, for Respondent.

PUBLISHED OPINION

Worswick, J. ¶1 Donald Sloma worked in a Public Employees Retirement System (PERS)-eligible employment for over 30 years. In 2004, he elected into a program for PERS 1 members with over 30 years of service credit wherein, upon retirement, he would receive a refund of all employee contributions he made to the Department of Retirement Systems (DRS) after his election date, and his retirement benefit would be calculated based on only his compensation earned prior to the election. A few months later, Sloma retired.

¶2 In 2012, Sloma began work for Thurston County, a PERS eligible employer. Sloma rejoined PERS membership and believed that when he re-retired his retirement benefit would be recalculated based on his higher Thurston County salary. But when Sloma retired, DRS limited his retirement benefit to his compensation earned prior to his 2004 election.

¶3 Sloma petitioned DRS to reverse its decision. A presiding officer granted DRS’s motion for summary judgment, and Sloma sought review by the superior court. The superior court affirmed. Sloma now appeals the superior court’s order affirming the Department’s final order.

¶4 Sloma argues that (1) the Department erroneously interpreted RCW 41.40.191 to apply beyond a member’s first retirement, (2) RCW 41.40.191 unconstitutionally impairs his public pension contract rights, and (3) equitable and promissory estoppel apply to compel DRS to calculate his retirement benefits using his higher Thurston County salary. We disagree and affirm the Department’s final order.

FACTS

¶5 Sloma agrees to the findings of fact contained in the Department’s final order. Therefore, the findings of fact contained in the final order are verities on appeal.¹ Tucker v. Dep’t of Ret. Sys. , 127 Wash. App. 700, 705, 113 P.3d 4 (2005). Accordingly, the following facts are primarily from the Department’s final order.

I. DRS, PERS, PLAN 1, POST 30-YEAR ELECTION

¶6 DRS administers the statewide retirement systems for public employees, including PERS. PERS comprises three plans—PERS 1, PERS 2, and PERS 3. A PERS member who meets the statutory conditions for retirement receives a defined retirement benefit that is paid monthly for life. A PERS 1 member who completes 30 years of creditable service can retire for service with a full benefit, without regard to his or her age.

¶7 PERS defined retirement benefits are funded in part by contributions to the system from both the employee-member and the member’s employer. A PERS 1 member must contribute six percent of his compensation to the system while in PERS-covered employment. An individual PERS member’s retirement benefit is determined by a statutory formula that takes account of the compensation and service credit the member earned while working for retirement system employers. One component of the formula is average final compensation (AFC). In PERS 1, AFC is the annual average of the member’s highest salary during any consecutive two-year period of PERS service. A PERS 1 retirement benefit is said to be "capped" at 30 years of service because service beyond 30 years may not be used to increase the member’s benefit above 60 percent of AFC.

¶8 In 1999, the legislature created a new option for members of PERS 1. Those members who continue working in PERS-covered employment after they attain 30 years of creditable service can choose to obtain a refund of the PERS contributions they make after that point. DRS refers to this option as the "post-30-year program." PERS 1 members wishing to choose this optional refund of contributions at retirement must notify DRS within six months after they have earned 30 years of service credit. Beginning the month after a member chooses this option, DRS must separately account for the member’s employee contributions to PERS and, at retirement, refund to the member the amount of those contributions, plus interest at the rate of seven and one-half percent. Upon retirement, the retirement benefit of a member who chooses to enroll in the post-30-year program "shall be calculated using only the compensation earnable credited prior to the effective date of the member’s election." RCW 41.40.191(2). Stated another way, the statute provides that the member’s AFC calculation does not change after the effective date of the member’s election into the post-30-year program.

¶9 Following reemployment in an eligible position, a retiree may elect to prospectively become a member of the retirement system if otherwise eligible. RCW 41.40.023(12). Such a member may retire again if eligible. RCW 41.40.037(3).

II. SLOMA’S FIRST RETIREMENT

¶10 Sloma became a PERS 1 member in 1973. By the end of September 2003, Sloma had earned 30 years of service credit in PERS. In January 2004, Sloma began to plan for his retirement from public service. He reviewed the January 2002 version of the PERS Plan 1 Member Handbook published by DRS, which stated, in response to the question, "Can I obtain a refund of contributions paid after 30 years of service?"

If you participate in the [post-30-year] program, your monthly retirement benefits will be based on earnings made prior to the date DRS received notice of your election to participate. Election to participate is irrevocable and must be made within six months after earning 30 service credit years.

Administrative Record (AR) at 4 (alteration in original).

¶11 Sloma submitted his notice of election into the post-30-year program on January 15, 2004. The form stated, "This is an IRREVOCABLE ELECTION. Once you have submitted this election to DRS, you cannot reverse your decision." AR at 208. By Sloma’s signature, the form stated:

I hereby elect to have my retirement contributions after 30 years of service posted to a separate account that is refundable at my retirement. I understand that contributions will be posted to the refundable account beginning the month after I submit this election form and I have accumulated at least 30 years of service credit. Furthermore, I understand that my Average Final Compensation (AFC) will be based on earnings prior to DRS receiving this election. (The AFC is used in the retirement benefit calculation to determine the amount of your monthly retirement benefit.)

AR at 208.

¶12 Sloma retired from the Department of Health effective March 1, 2004, at 54 years of age. DRS calculated his PERS AFC at $6,492.80 monthly, yielding a gross monthly retirement benefit of $3,895.68, and began paying his retirement benefit in that amount. DRS refunded to him the PERS employee contributions he made after his election into the post-30-year program became effective, in a lump sum totaling $920.60.

¶13 In 2011, Sloma learned from his personal contacts that Thurston County’s Public Health and Social Services Department director planned to retire. Sloma considered applying for the position and how it might affect his PERS retirement benefit. He thought that the director position might offer him the opportunity to "re-base" his retirement benefit based on the increased salary of the director position. Sloma applied for the position on January 30, 2012.

¶14 Thurston County offered Sloma the position sometime before April 12, 2012, but Sloma did not immediately accept. He asked Thurston County personnel staff how his PERS retirement benefit would be affected if he were to accept the position, and they referred him to DRS for specific questions.

¶15 Believing that if he accepted employment with Thurston County he could reenter active PERS membership and retire again from PERS in the future, Sloma accepted the director position. Thurston County confirmed Sloma’s appointment in a letter to him on April 12, 2012, and a press release on April 13. Sloma started working for Thurston County on May 1, 2012.

III. SLOMA’S SECOND RETIREMENT

¶16 One day after beginning work with Thurston County, Sloma spoke with Katie Sparkles, a DRS retirement analyst, on the telephone. On May 3, 2012, Sparkles e-mailed Sloma with the information he wanted "in writing." Sparkles wrote that her research and consultation with her team leader and other experienced retirement analysts, had produced answers to two of his concerns. First, he would have to work a minimum of 24 months in a new PERS-covered position in order to change the payment (survivor) option for a future retirement benefit.² Second, "any compensation you earn after returning to membership will be reviewed when determining your 24-month AFC at time of retirement." AR at 8.

¶17 Sloma responded with an attempt to further clarify that there was no minimum amount of time he needed to work in his new job to have his new earnings included in any new AFC. Sparkles responded,

[A]fter returning to active membership it doesn’t matter how long you work and then re-retire to have the new compensation and service credits counted towards recalculating your new AFC for re-retirement. But if you decide that you want a different retirement option when you re-retire you have to work at least 24 months before you re-retire.

AR at 9. Within an hour of acknowledging Sparkles’s last e-mail, Sloma e-mailed DRS, advising that he was employed with a PERS employer in a PERS-eligible position and that he wanted to start contributing to his PERS 1 retirement again.

¶18 During their 2012 interactions, neither Sloma nor Sparkles considered or discussed the post-30-year election Sloma made in 2004. Sparkles was not aware that Sloma had made the election.

¶19 While working for Thurston County, Sloma and his wife were actively looking to purchase a waterfront home. Around June 2015, they found a property that the...