Original jurisdiction in case of J. Frank McKenna, Jr., an individual, on behalf of himself and all others similarly situated and Frederick G. Weir, an individual, on behalf of himself and all others similarly situated v. The State Employees' Retirement Board and Richard L. Witmer, in his capacity as Executive Secretary of the State Employees' Retirement Board and Robert E. Casey, in his capacity as Treasurer of the Commonwealth of Pennsylvania.
John H. Bingler, Jr., with him J. Frank McKenna, III, and Jerome J. Pottmeyer, III, of Thorp, Reed & Armstrong, for plaintiffs.
Raymond Kleiman, with him Norman J. Watkins, Deputy Attorneys General, for defendant, Commonwealth of Pennsylvania.
President Judge Crumlish and Judges Wilkinson, Jr., Mencer, Rogers, Craig, MacPhail and Williams, Jr. Judge Blatt did not participate. Opinion by Judge Williams, Jr. Judge Wilkinson, Jr. dissents.
[ 54 Pa. Commw. Page 340]
This is a class action requesting this Court to determine the validity of certain legislative modifications of the state employees' retirement program or the validity of the administrative application of those modifications insofar as they relate to the retirement pensions of the named plaintiffs and others similarly situated.
The plaintiffs are two judges retired from the Court of Common Pleas of Allegheny County, the Honorable J. Frank McKenna, Jr., and the Honorable Frederic G. Weir. They originated this suit in this Court in November 1978 as an action in mandamus and for a declaratory judgment. The defendants are the State Employees Retirement Board, its Secretary and the Treasurer of the Commonwealth of Pennsylvania.
In July 1979, the plaintiff class was certified to consist of all state judges who were serving and had ten or more years of service as of June 22, 1972. The class was subdivided into two groups: (1) those who were sixty years of age as of June 22, 1972; and (2) those who had not attained that age as of that date.
The subjects of this class action are three retirement systems enacted or adopted by the state legislature between 1959 and 1974; (1) the State Employees Retirement Code of 1959 (1959 Code);*fn1 (2) the 1972 Commonwealth Compensation Commission Report imposing a "freeze" on the retirement base salary used
[ 54 Pa. Commw. Page 341]
to compute the Final Average Salary upon which benefits are computed (1972 FAS freeze);*fn2 and (3) the State Employees' Retirement Code of 1974 (1974 Code).*fn3 The gravamen of the plaintiffs' action is that the 1972 FAS freeze and the interpretation of the 1974 Code by the State Employees Retirement Board have unconstitutionally, or otherwise unlawfully, impaired retirement rights and benefits conferred by the 1959 Code upon the plaintiffs and the class they represent. An answer was filed on behalf of all defendants.
As a result of a stipulation entered into by the parties all genuine issues of material fact were removed from the case. The plaintiffs then filed two motions for summary judgment under Pa. R.C.P. No. 1035, asserting that they are entitled to judgment as a matter of law.
The first motion for summary judgment requests this Court to declare unconstitutional the 1972 FAS freeze and the provisions of the 1974 Code which purport to reduce the multiples by which benefits are calculated. The plaintiffs aver that those provisions impair their pension rights in violation of their property and contractual rights as protected by Article I, Section 17, and Article V, Section 16, of the Pennsylvania Constitution; and as further protected by Article I, Section 10, the fifth amendment and the fourteenth amendment of the United States Constitution.
The second motion requests us to declare that the defendants have misinterpreted the 1974 Code in their application of it to the named and class plaintiffs. In that motion the plaintiffs aver that the 1974 Code actually retains the "retirement allowance multipliers of the 1959 Code for all judicial service prior to January
[ 54 Pa. Commw. Page 3421]
, 1973. It is further asserted, in that regard, that the defendants have and are improperly calculating the retirement allowances of the named and class plaintiffs by using "retirement allowance multipliers" which the 1974 Code makes applicable to judicial service after January 1, 1973.
In both motions for summary judgment the plaintiffs also pray for a writ of mandamus ordering the defendants to recalculate the retirement allowances of the named and class plaintiffs according to the plaintiffs' interpretation of the 1974 Code, and to pay to the named and class plaintiffs the difference between what they have received as allowances and what they should have received.
The state retirement scheme in effect prior to June 22, 1972, was the 1959 Code. The 1959 Code provided for the computation of retirement allowances by multiplying the judge's years on the bench times his Final Average Salary (FAS) times two different multipliers. For the judge's first ten years on the bench the multiplier .04 was used. For years after the first ten the multiplier .03 was used.
The 1972 report of the Commonwealth Compensation Commission, while recommending a salary increase to $40,000.00 for judges, also froze the FAS used in computing the retirement benefits at a judge's then existing salary level, which for most state judges was $30,000.00 annually.
In 1974 the legislature enacted a new scheme, the 1974 Code, which it made retroactive to January 1973. The 1974 Code lifted the 1972 FAS freeze but also reduced the multipliers which would be applied to the FAS in computing benefits: the multipliers were reduced from the .04 and .03 under the 1959 Code to .03 and .0225. The 1974 Code contained a "saving clause" which gave a judge the option of having his benefits calculated according to the system under the 1972 FAS
[ 54 Pa. Commw. Page 343]
freeze, with the larger multipliers, instead of under the 1974 Code with the lower multipliers.
The effect of the 1972 retirement scheme and the 1974 scheme is illustrated by the following hypothetical example of a state judge who retired in 1977 after having served fifteen years on the bench.
First Ten Years 10 x $40,000.00 x .04 = $16,000.00
Remaining Five Years 5 x $40,000.00 x .03 = $6,000.00
First Ten Years 10 x $30,000.00 x .04 = $12,000.00
Remaining Five Years 5 x $30,000.00 x .03 = $4,500.00