October 11, 2011

Determining an individual’s “final average salary” for retirement allowance purposes


Determining an individual’s “final average salary” for retirement allowance purposes
Weingarten v NYC Teachers' Retirement System, Ct. of Appeals, 98 N.Y.2d 575

Rhonda Weingarten was employed in the New York City school system. In addition to receiving her base annual salary, she also received hourly compensation -- referred to as "per session" compensation -- for the additional service she provided to the school district. The issue to be resolved in Weingarten’s lawsuit: may these additional earnings be added to the teachers' pensionable salary base for the purpose of determining their final averages salary for retirement purposes or are they barred by the provisions of Section 431 of the Retirement and Social Security Law?

The collective bargaining agreement between the teachers and the New York City Board of Education defines "per session work" as including such assignments as teaching summer school, teaching evening or adult education classes, or working with various athletic and non-athletic extracurricular programs.

Teachers apply these positions and may participate in only one such activity at a time. The teachers are required to submit separate time sheets for their "per session work" and receive payment for their per session work via checks issued in addition to their regular payroll checks.

In the early 1990s, teachers demanded that their "per session" compensation be included in determining their final average salary. The New York City Teachers' Retirement System [NYCTRS] refused consider per session earnings as pensionable compensation.

Weingarten sued NYCTRS, seeking a court decision holding that the System's exclusion of this income from a teacher's base salary calculation for retirement purposes was contrary to Section 13-554 of the Administrative Code and Sections 443(a), 504 and 604 of the Retirement and Social Security Law.

As the Court of Appeals noted, a critical element in determining a retiree's retirement allowance is the computation of the individual's "final average salary" for the purposes of retirement.
Both a State Supreme Court judge and the Appellate Division agreed with Weingarten, ruling that the teachers were entitled to receive credit all per session compensation earned while NYCTRS members in determining their final average salary for retirement purposes since the inception of this 1998 law suit.

Rejecting NYCTRS's argument that its views were entitled to "great weight," the Court of Appeals said that it was simply being asked to resolve a question "of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent." Accordingly, it said it would consider the matter de novo.

The critical arguments presented by the parties respectively were as follows:

1. NYCTRS contended that per session compensation has been outside the scope of the definition of "annual salary" since the inception of teachers' retirement plans and that subsequent legislative modifications to the retirement system -- which have not specifically addressed per session compensation -- did not adjust benefits to include this type of income.

2. Weingarten argued that per session compensation is a form of regular compensation and therefore should be considered in determining a member’s retirement allowance, primarily because per session income is not covered by the exclusions from "annual salary" set forth in the applicable statutes.

The Court of Appeals said that for the purpose of evaluating whether per session compensation is pensionable, it was "guided by several considerations, including the use of the term ‘salary’ in the progression of NYCTRS statutes and regulations, the legislative intent evidenced in the modifications to the programs and the public policy that precludes artificial inflation of income before retirement."
Observing that the term "annual salary" predated the establishment of the NYCTRS as it was used in a predecessor statute that established the New York City Public School Teachers' Retirement Fund in 1917, the court commented that the 1917 Fund and the NYCTRS were designed to provide an income related to actual earnings during employment, "indicating that pensionable income was intended to include more than just anticipated base salary."

The Court of Appeals pointed out that in response to the former practice of including certain one-time or lump sum items of compensation, such as sick leave payments, over-time payments, termination pay and payments for unused vacation credit to enhance a member's final salary prior to his or her retirement, in 1971 the Legislature enacted Section 431 of the Retirement and Social Security Law [Chapter 503, Laws of 1971].

Section 431 explicitly barred a public retirement system of this State from considering the following in determining a member's final average salary:

1. Lump sum payments for deferred compensation, sick leave, accumulated vacation or other credits for time not worked;

2. Any form of termination pay;

3. Any additional compensation paid in anticipation of retirement; and

4. That portion of compensation earned during any twelve months included in such salary base period that exceeded the total compensation paid to the individual during the preceding twelve months by more than twenty per cent.

Although per session compensation was different from the exclusions listed in the first three categories barred by Section 431, the court said that "[c]ategory four would, however, limit pensionable compensation to the extent that the addition of per session income exceeds the statutory cap" and it was therefore necessary for it to consider this type of exclusion in a manner that "accord[s] respect to the[ir] interlocking and interrelated features."

The court's decision: Since the Legislature's exclusion of particular forms of compensation or payments from the calculation of the individual's final average salary "implicates a long-settled principle of statutory construction" -- where the Legislature lists exceptions in a statute, items not specifically referenced are deemed to have been intentionally excluded. Applying this canon of construction in these circumstances, the court said that by failing to exclude per session compensation when it enacted Section 431, "the Legislature evidenced an intent to allow per session compensation to be includable for pension purposes."

Pointing out that this view is consistent with the treatment of "per session" type payments by the New York State Teachers' Retirement System [TRS], which covers teachers in public schools outside of the City of New York, the decision notes that TRS "treats per session compensation as pensionable." The court said that there was "no reasonable basis justifying the disparate treatment of per session compensation by the NYCTRS and ... TRS."

The Court of Appeals also observed that "the highly regulated nature of per session activities prevents artificial manipulation of total compensation in the pre-retirement period" thereby avoiding the type of abuse that Section 431 seeks to bar.