Oregon Advisory Opinions May 22, 1972: OAG 72-35 (May 22, 1972)

OAG 72-35.

Most state officers and employes, and many other public employes in this state, including school district employes, are members of the Public Employes' Retirement System. ORS 237.005 - 237.051. All school district employes are members of the system, except for employes who are members of or eligible for membership in a teachers' retirement fund association established under ORS chapter 239. ORS 237.011(1)(a).

Pursuant to ORS chapter 239, the teachers employed by School District No. 1 of Multnomah County have established a teachers' retirement fund association. We will for brevity refer hereinafter to the Public Employes' Retirement System as "PERS", and to the teachers'

retirement fund association of which School District No. 1 teachers are members as "TRFA".

It is contemplated that TRFA will eventually be merged with PERS. ORS 239.100, enacted by Oregon Laws 1971, ch. 700, § 2, provides that no one may become a member of TRFA after June 30, 1973. Teachers who complete an initial six months' employment by School District No. 1 after that date will thus automatically become members of PERS. ORS 237.011. However, there are now no provisions requiring merger, and the phase-out impliedly required by ORS 239.100 could take a half-century to complete.

Apparently with a view to a future merger of TRFA with PERS, it has been the policy of the legislature since 1959 that employe contributions, retirement benefits and disability benefits be identical for TRFA members and PERS members. ORS 239.201, enacted by Oregon Laws 1959, ch. 613, § 41, reads in relevant part as follows:

"(2) The provisions of ORS 239.131 to 239.137 and 239.201 to 239.263 shall be so construed and administered as to effectuate the general purpose to make uniform the contributions and benefits provided by ORS 239.131 to 239.137 and 239.201 to 239.263 with respect to members of the Teachers' Retirement System and the contributions and benefits provided by the Public Employes' Retirement Act with respect to teachers of the school district who are members of the Public Employes' Retirement System." (emphasis supplied)

Similarly, ORS 239.203, enacted by Oregon Laws 1959, ch 613, § 11, and since amended three times without significant change in effect, reads in relevant part as follows:

" (1) The objective of the Teachers' Retirement Act shall be to provide every teacher who is an active member of the association on or after July 1, 1959, a total disability retirement allowance and a total service retirement allowance identical in respective amounts

to the total disability retirement allowance and the total service retirement allowance he would be entitled to at the same rate of employe contributions subject to the same elections as are provided for from time to time by the Public Employes' Retirement Act with respect to retirement benefits at date of retirement and as are provided for from time to time by that Act with respect to contributions had he become a member of the Public Employes' Retirement System . . . and had his employe contributions toward retirement and subsequent service to the school district been made and performed at identical times and in identical amounts as a member of the Public Employes' Retirement System.

"(2) Each teacher shall make identical contributions as required under the Public Employes' Retirement Act, as that Act may be amended from time to time, . . . " (emphasis supplied) ORS 239.203.

In accordance with this declaration of policy, specific statutes in ORS chapter 239 provide for benefits to TRFA members, identical to benefits to PERS members. ORS 239.215, relating to separation from service prior to earliest retirement age, provides in subsection (1) for a disability or service retirement allowance consisting of a refund annuity plus:

"(b) A pension which when added to the annuity . . . shall provide him the same total retirement allowance he could receive from the Public Employes' Retirement System had he become a member of that system . . ." (emphasis supplied)

Similarly, ORS 239.219 provides for a pension for a TRFA member, who retires before retirement age but is then re-employed, which:

". . . shall be the same as if he had formerly retired, re-entered employment . . . and subsequently retired . . . as a member of the Public Employes' Retirement System." (emphasis supplied) ORS 239.219(1)(c).

And the disability retirement statute also provides for:

". . . the same total disability retirement allowance he would receive from the Public Employes' Retirement System had he become a member of that system . . ."

(emphasis supplied) ORS 239.233(1), (2)

The statute prescribing retirement benefits for TRFA members who retire at the usual retirement age contains virtually identical provisions. ORS 239.227 provides for a service retirement allowance consisting of an actuarially determined refund annuity, based upon the member's own contributions (subsection (1)), plus:

"(2) A pension (nonrefund) which, when added to the refund annuity referred to in subsection (1) of this section, shall provide him the same total service retirement allowance he would receive from the Public Employes' Retirement System had he become a member of that system . . ." (emphasis supplied)

It will be observed that in each case the statute does not prescribe a dollar amount of benefits, or a method of computing the dollar amount of benefits. Instead it provides for an amount the same as if the TRFA member had been a PERS member, requiring a computation under the provisions of ORS chapter 237 applicable to the particular type of benefit for PERS members. In the absence of anything requiring a contrary result, it would appear that amendments to statutes in chapter 237, changing retirement or disability benefits for the future, whether for PERS members already retired or who will retire in the future, would automatically operate to make the same change for TRFA members under chapter 239.

It is asserted, however, that all of these statutes should be construed in the light of ORS 239.203, and that this statute contemplates that benefits under the two statutes shall be the same at date of retirement ; but that increases in benefits provided for PERS members after their retirement do not automatically inure to the benefit of TRFA members. We again quote ORS 239.203, underlining the

language relied on to support this assertion:

"(1) The objective of the Teachers Retirement Act shall be to provide every teacher who is an active member of the association on or after July 1, 1959, . . . a total service retirement allowance identical . . . to . . . the total service retirement allowance he would be entitled to at the same rate of employe contributions subject to the same elections as are provided for from time to time by the Public Employes' Retirement Act with respect to retirement benefits at date of retirement . . . had he become a member of the Public Employes' Retirement System. . . ."

First, we point out that ORS 239.203 is merely a declaration of policy, and does not itself provide for any benefits. ORS 239.215, 239.219, 239.227, and 239.233 (among others) specifically provide for benefit payments. Each of these statutes provides for benefits for TRFA members which shall be " the same " as for PERS members. None qualifies this express requirement by adding the words "at date of retirement." If we construed ORS 239.203 as contended, we do not believe that it would be held specific enough to accomplish the implied addition of the words "at date of retirement" to the statutes specifically providing for payment of benefits.

Second, and more important, it appears clear to us that the construction contended for is incorrect. The words "with respect to retirement benefits at date of retirement" do not modify the words "a total service retirement allowance."(fn1) Instead, they are a part of the clause which reads as follows:

". . . subject to the same elections as are provided for from time to time by the Public Employes' Retirement Act with respect to retirement benefits at date of retirement . . ."

This is made clear by the succeeding language, also relating to employe elections:

". . . and as are provided from time to time by that Act with respect to contributions . . ."

Thus construed, the staute provides a basic policy, i.e., a total service retirement allowance for a retired TRFA member identical to that he would be entitled to as a PERS member, with identical service and contributions. He is also entitled to the same elections , with respect to retirement benefits at date of retirement, and with respect to contribution, as are available to PERS members.

This extensive exposition virtually serves to answer the question submitted, before consideration of the particular legislative acts which gave rise to the question. If the retirement benefits provided under ORS chapter 367 were increased by the 1971 legislature, so too were retirement benefits for TRFA members since their benefits must be "the same" as for PERS members.

The sole exception is for persons who retired before July 1, 1959, effective date of the Teachers' Retirement Act, for whom specific provision is made by ORS 239.263. Several statutes imply that persons who retired before July 1, 1959, may become members of TRFA (e.g. ORS 239.201(3), 239.203, 239.258), but such persons are specifically excluded from the equality of benefit policy of ORS 239.201 and 239.203, and specific maximum benefits are provided for them by ORS 239.263.

Until enactment of Oregon Laws 1971, ch 738, the Public Employe Relations Board was authorized to supplement retirement benefits of retired PERS members by distribution of a dividend based on excess interest income. This dividend was not a part of, but in ad

dition to the service retirement allowance. The statute read:

"The board, by means of a dividend payment system, may distribute annually to retired employe members of the system who retired before January 1, 1968, net interest received through investment of the fund in excess of the assumed rate of interest. Excess interest received for calendar years commencing after December 31, 1959, may be distributed under this section." ORS 237.198 (1967 Replacement Part)

The statute (without the words "who retired before January 1, 1968") was originally adopted in 1963. Oregon Laws 1963, ch 608, § 9. In accordance with the policy of ORS 239.203, a substantially identical provision ( not excluding persons who retired before July 1, 1959) was adopted for the TRFA system. Oregon Laws 1963, ch 616, § 3, codified as ORS 239.258. Without such specific authorization, TRFA members would not have been entitled to similar extra dividend payments, since they were an addition to their retirement benefits, not a part of them. Perhaps excess interest earned by PERS and TRFA differed, with the result that retired persons in similar circumstances under the different systems received dividends of differing amounts, contrary to the intent of ORS 239.203. For whatever reasons, ORS 239.258 was amended by Oregon Laws 1965, ch 520, § 2, to require that TRFA members who retired on or after July 1, 1959 (i.e., those persons covered by the policy of ORS 239.203) would receive an additional retirement benefit sufficient, when added to their dividends, to equal the dividend amounts they would have received had they been members of PERS.(fn2)

This exposition serves to set the stage for the legislative actions of 1971. Both PERS and TRFA would pay to their retired members

the regular retirement benefits provided by law, benefits which would be identical if based on identical service and contributions. Both PERS and TRFA would then determine the amount of undistributed excess interest available, and could allocate the amount thus determined as a dividend to each of their members who retired before 1968. TRFA would then be required to allocate an additional amount to each of its members who retired on or after July 1, 1959, and before 1968, to bring his total benefits to the amount he would have received, given identical employe contributions and identical service, had he been a member of PERS.

Oregon Laws 1971, ch 738, § 8, repealed ORS 237.198, and provided ". . . Section 9 of this Act is enacted in lieu thereof." Section 9, codified as ORS 237.199, provides:

"Effective January 1, 1972, the monthly service retirement allowance . . . of each member who retired at the following times shall be increased by the following percentages:

"(1) Before January 1, 1968, 25 percent.

"(2) After January 1, 1968, but before January 1, 1972, 12 percent."

Oregon Laws 1971, ch 738, § 11, codified as ORS 237.060, further provided for automatic cost-of-living adjustments to "every monthly retirement allowance payable to or on account of any person who has retired or who will retire as a member of the system . . ." ORS 237.060(1).

These and other significant changes in ORS chapter 237, the PERS chapter, were not matched by equivalent changes in chapter 239, the TRFA chapter.

It is asserted on the one hand that these changes neverthe

less are made applicable to TRFA and its members by ORS 239.203. Under this contention, TRFA members retired after January 1, 1968, previously entitled to no dividends, would be entitled to a 12 percent increase in retirement benefits; TRFA members retired between July 1, 1959, and January 1, 1968, would be entitled to a 25 percent increase in retirement benefits in lieu of the dividend and extra retirement payment previously provided by ORS 239.258 and ORS 237.198; and TRFA members retired before July 1, 1959, not given the benefit of ORS 239.203, would continue to receive the dividend provided by ORS 239.258(1). The cost-of-living adjustments provided by ORS 237.060 would also apply to TRFA members, retired on or after July 1, 1959, or in the future.

It is asserted to the contrary by others that since the authority to pay dividends under ORS 239.258 depends upon like action by the Public Employes' Retirement Board "pursuant to ORS 237.198," such dividends can no longer be paid since ORS 237.198 has been repealed. The substitute statute, ORS 237.199, does not provide for payment of any dividends. It is further asserted that whatever effect ORS 239.203 has on payment of retirement benefits is restricted to benefits payable at the date of retirement, and that the statute does not relate to adjustments which may be made to benefits under the PERS law after retirement.

We conclude that there is no necessity to rely on ORS 239.203 at all, except insofar as the public policy it expresses should be given weight in the construction of the specific statutes in chapter 239 relating to payment of benefits. That policy, that benefits under TRFA shall be identical to benefits under PERS, based on identical

service and identical contributions, is (as we have seen) not modified by any restriction to consideration of benefits at date of retirement.

ORS 239.227 provides:

"Upon retiring from service on account of superannuation at compulsory retirement age, a person who is a member of the Teachers' Retirement System shall receive a service retirement allowance which shall consist of:

"(1) A refund annuity . . . which shall be the actuarial equivalent of his accumulated contributions and interest thereon credited to him at the time he retires . . .; and

"(2) A pension (nonrefund) which, when added to the refund annuity referred to in subsection (1) of this section, shall provide him the same total service retirement allowance he would receive from the Public Employes' Retirement System had he become a member of that system . . ."

In order to determine "the same total service retirement allowance," it is necessary to turn to ORS 237.147, applicable to PERS members retired in like circumstances, which provides in subsection (1) for a refund annuity, in subsection (2) for an additional nonrefund life pension equalling .84 percent of his final average salary, multiplied by number of years in the system, and in subsection (3) for an additional pension based upon credit (in certain limited circumstances) for military service.

ORS 237.147, however, must now be read in connection with ORS 237.060 and ORS 237.199. ORS 237.199 increases the monthly service retirement allowance, as the term is used in ORS 237.147, by 25 percent for members who retired before January 1, 1968, and by 12 percent for members who retired after January 1, 1968,(fn3) but before

January 1, 1972.

Similarly, on and after July 1, 1972, " every monthly retirement allowance" is subject to annual cost of living adjustments under ORS 237.060.

These new statutes have thus become a part of the computation of "the same total service retirement allowance" under ORS 239.227, and are applicable to it to the same extent as ORS 237.147.

What, then, becomes of ORS 239.258?

ORS 239.258(1) provides:

"(1) The board of trustees of the association by means of a dividend payment system approved by the school board, may distribute to retired members of the association [net excess interest income] . . . The share of undistributed excess income allocated under such dividend payment system to retired members of the association who retired prior to July 1, 1959, may be distributed annually. The shares of undistributed excess interest allocated under such dividend payment system to retired members of the association who retired on or after July 1, 1959, shall be distributed as provided in subsection (2) of this section."

We note first that this payment is optional, requiring the approval of the school board, but is not conditioned upon any other event except the availability of excess interest income, and for members who retired before July 1, 1959, is subject to no other requirements: An advance look at paragraphs (a) and (b) of subsection (2) indicates that persons retiring on or after July 1, 1959, also receive this dividend payment under (a), not subject to any other conditions of subsection (2), plus , under (b), an extra pension payment (not a dividend) computed as provided in subsection (2).

Thus a dividend payment allocation may be made to members retiring either before, or on or after July 1, 1959, to the full extent of excess interest income. This payment is discretionary with

the trustees and requires the approval of the school board, but is in no way subject to anything that may happen or be required under the PERS law.

Does this mean that TRFA members who retired on or after July 1, 1959, receive this dividend payment in addition to the percentage increase provided by ORS 237.199, which we have held is applicable to them? If so, such TRFA members would receive more in retirement benefits than PERS members, since ORS 237.198, providing for dividend payments to PERS members, has been repealed and replaced by ORS 237.199. Oregon Laws 1971, ch 738, § 8.

As noted, the second subsection of ORS 239.258 requires an additional payment to members who retired on or after July 1, 1959, and before January 1, 1968. It reads:

"(2) Whenever pursuant to ORS 237.198(fn4) the Public Employes' Retirement Board pays a dividend to retired employe members of the system, the board of trustees of the association shall pay to each retired member of the association who retired on or after July 1, 1959, and before January 1, 1968, a payment equal in amount to the dividend payment he would have received from the Public Employes' Retirement System as a retired employe member of that system . . . Such payment shall consist of:

"(a) The share of undistributed excess income allocated to him under the dividend payment system referred to in subsection (1) of this section; and

"(b) An additional pension payment to be provided by the school district which, when added to the dividend payment referred to in paragraph (a) of this subsection, shall equal the total payment provided by this subsection."

Since under ORS 239.227, the TRFA member who retired on or after July 1, 1959 is entitled to receive the same retirement allowance as a PERS member under ORS 237.147, 237.199 and 237.060, ORS 239.258(2) becomes surplusage as to him. He does not need to receive any extra payment to bring him to the "dividend payment he would have received from the Public Employes' Retirement System," first, since PERS members no longer receive any such dividend, and second because even if the percentage increase provided by ORS 237.199 is considered for purposes of ORS 239.258(2) to be the equivalent of that dividend, he is already entitled to that percentage increase by virtue of ORS 239.227.

We nevertheless conclude that ORS 239.258(2) remains effective to negate any conclusion that a TRFA member who retired on or after July 1, 1959 is entitled to the dividend provided for by ORS 239.258(1) in addition to the percentage increases to which he is otherwise entitled. Such extra payment would of course be contrary to the legislative purpose expressed in ORS 239.201 and 239.203. ORS 239.258(2) remains effective as a legislative declaration that if the association has surplus interest income and declares a dividend, that part apportioned to members retiring before July 1, 1959, may be paid to them, but any part apportioned to members retiring on or after July 1, 1959, shall be used only to partially fund whatever extra payment is necessary to bring such retired members up to full benefit equality with retired PERS members.

ORS 237.199 is sufficiently unlike ORS 237.198 so that the legislature would not ordinarily enact one in lieu of the other, but would simply have repealed ORS 237.198, and enacted ORS 237.199 with

out reference to the repealed statute. ORS 237.198 required a condition (the availability of excess interest) and gave the Public Employe Relation Board discretion to distribute a dividend to retired PERS members if the condition was met. ORS 237.199 demonstrates a different legislative philosophy. It requires a percentage increase in payments, regardless of the availability of excess funds, and removes any discretion from the board. We accordingly place substantial significance upon the legislature's act in enacting ORS 237.199 in lieu of ORS 237.198. Oregon Laws 1971, ch 738, § 8. In our opinion this demonstrated a legislative intent supporting our conclusion that the dividends payable under ORS 239.258 to TRFA members retired on or after July 1, 1959, should now be used only as a means of partially funding the percentage increase in payments provided for by ORS 237.199. This interpretation is also consistent with the philosophy expressed in ORS 239.203; the contrary interpretation is not.

Even if we are incorrect in our conclusion that ORS 239.227 and equivalent statutes in the chapter are sufficiently clear, when read in light of the legislative philosophy expressed by ORS 239.201 and 239.203, to give the benefit of the percentage increases prescribed by ORS 237.060 to all retired members of PERS, we would have no hesitation in holding that the percentage increase prescribed by ORS 237.199 was intended for purposes of ORS 239.258(2) to be the equivalent of the dividend formerly provided for by ORS 237.198. Thus, the result would be the same for TRFA members who retired on or after July 1, 1959, but before January 1, 1968. These persons would thus be entitled to any dividend allocated to them under ORS 239.258(1), plus an amount sufficient to increase their total retirement benefits

to the amount which a PERS member would receive.

If in contrast ORS 239.227 is held not to have the effect we conclude and the provision under ORS 239.258(2) for an extra payment is considered to have been repealed, since the "dividends" under the PERS law giving rise to the obligation to make extra payment are no longer to be paid in view of the repeal of ORS 237.198, the result is that the increase in benefits for PERS members would result not in an increase, and not even maintenance of the status quo, but a decrease in benefits for these TRFA members. This result is unsupportable under ORS 239.201 and 239.203. It would amount to a repeal by implication of part of ORS 239.258. The implied partial repeal of a statute cannot rest upon an interpretation which is no stronger than its antithesis. City of Woodburn v. Domagalla , 238 Or. 401, 395 P.2d 150 (1964). This third interpretation is in our opinion clearly weaker than either of the two interpretations previously advanced.

The second interpretation, advanced in the second preceding paragraph, has its own weaknesses. It would result in treatment differing rather illogically between classes of retired TRFA members.

Members retired before July 1, 1959, would under any interpretation continue to receive the same retirement benefits and the same dividends (if allocated to them) as before. Members retired between July 1, 1959, and January 1, 1968, would receive a 25 percent increase in benefits (not a net 25 percent, however, since they presumably received dividends under ORS 239.258), but would not be entitled to the future cost of living adjustments. Except for the future cost of living adjustments, however, they would be on a par with PERS members. Members retiring after January 1, 1968, but be

fore January 1, 1972, effective date of Oregon Laws 1971, ch 738, would not receive either the 12 percent increase or the future cost of living adjustments. Members retiring on or after January 1, 1972, would (even under the most restrictive interpretation) in contrast be fully on a par with PERS members, and would receive cost of living adjustments in the future, since ORS 137.060 was a part of the Public Employes' Retirement Act on the date of their retirement. These considerations lend strength to our conclusion that the second interpretation, though stronger than the third, is itself incorrect.

In summary, we conclude that the specific statutes in ORS chapter 239 providing for " the same " retirement benefits for TRFA members as for PERS members, when read in light of the legislative policy expressed by ORS 239.201 and 239.203, operate to make any increases in retirement benefits provided by changes in ORS chapter 237 automatically applicable to retirement benefits under ORS chapter 239. Thus the 25 percent and 12 percent increases under ORS 237.199, and the cost of living adjustments under ORS 237.060, are applicable to any TRFA member who retired on or after July 1, 1959 and before January 1, 1972. The cost of living adjustments are of course applicable to TRFA members who retired on or after January 1, 1972, or who may retire in the future.