Appeal from the order of the Commonwealth Court entered November 30, 1995 at No. 254 C.D. 94, reversing/remanding the decision entered January 4, 1995 of the State Employes' Retirement Board at No. 1992-15. JUDGE(S) BELOW: State Employes' Retirement Board - / COMMONWEALTH - SMITH, KELLEY, JJ., RODGERS, S.J.
Before: Flaherty, C.j., Zappala, Cappy, Castille, Nigro, JJ. Madame Justice Newman did not participate in the consideration or decision of this case. Mr. Justice Nigro files a Concurring and Dissenting opinion.
The opinion of the court was delivered by: Castille
The issue before this Court is whether a member of the State Employes' Retirement System ("SERS") who teaches at a university in a foreign country must establish the existence of an employer/employee relationship with an agency or department of the United States government in order for that member to purchase "creditable nonstate service" retirement credit pursuant to Section 5304(c)(3) of the State Employes' Retirement Code ("Retirement Code"), 71 Pa. C.S. § 5304(c)(3). Because we hold that Section 5304(c)(3) of the Retirement Code requires a SERS member to establish the existence of an employer/employee relationship with an agency or department of the United States government in order to purchase creditable nonstate service for retirement benefits, and because appellee has failed to demonstrate the existence of an employer/employee relationship with an agency or department of the United States government, we reverse the order of the Commonwealth Court.
Under the Retirement Code, the cornerstone of the benefit structure is the "standard single life annuity," which is "an annuity equal to 2% of the final average salary, multiplied by the total number of years and fractional part of a year of credited service of a member." 71 Pa. C.S. § 5102. This benefit formula places great importance on years of credited service because a member's retirement benefit increases as he accumulates more years of credited service. The Retirement Code allows a member to purchase additional years of credited service for certain service known as "creditable nonstate service." 71 Pa. C.S. § 5304. "Creditable nonstate service" is service performed by a member even though the member was not a "state employee" *fn1 when that service was rendered. 71 Pa. C.S. § 5102. The Retirement Code, however, explicitly limits the purchase of creditable nonstate service to specifically defined categories of service. The category of creditable nonstate service in dispute in this case is as follows:
Service as an administrator, teacher, instructor in the field of education for any agency or department of the government of the United States, whether or not such area was under the jurisdiction of the United States.
71 Pa. C.S. § 5304(c)(3). *fn2 At issue in this case is whether the nonstate service rendered as an administrator, teacher or instructor in the field of education which is referenced in this provision requires the existence of an employer/employee relationship with a United States government agency or department and if so, whether appellee can purchase creditable nonstate service for the academic year he spent as a Fulbright Scholar teaching at a university in Egypt.
On August 22, 1970, appellee was hired as a professor of English at Indiana University of Pennsylvania ("IUP"). By virtue of this employment, appellee became a member of the SERS.
In 1977, appellee applied for a Senior Fulbright-Hays Grant ("Fulbright Grant") at Ain Shams University in Cairo, Egypt for the 1978-1979 school year. It is not in dispute that Ain Shams University is a public university in Egypt that has no connection or affiliation with the United States government.
The purpose of the Fulbright Grant program is to promote international cooperation for education, cultural advancement, and a mutual understanding between the United States and other countries through educational and cultural exchange. *fn3 The approval process for appellee's Fulbright Grant application required a review and recommendation by the Council for International Exchange of Scholars, the American Embassy in Cairo, Egypt, and the English Department and Administration of Ain Shams University. After approval by these entities, the Board of Foreign Scholarship, *fn4 which consists of twelve members appointed by the President of the United States, had final approval over appellee's Fulbright Grant application.
In a letter dated July 28, 1978, appellee received notification from the International Communication Agency that he had been selected to receive the Fulbright Grant to teach American Literature at Ain Shams University. Enclosed with the July 28, 1978 letter was a grant authorization form which provided that appellee would receive round trip transportation to Cairo, Egypt for him and his spouse, a stipend of $1870 per month payable in advance by the United States Embassy, and a one-day orientation program in Washington, D.C. The July 28, 1978 letter also contained a document entitled "Terms and Conditions of Fulbright-Hays Grants." The Terms and Conditions document expressly provided that:
person accepting such a grant is not by virtue thereof an official or employee of the International Communication Agency or other agency of the Government of the United States of America, or of any agency of the Government of the host country.
The Terms and Condition document also contained the following conditions: (1) appellee could not accept other compensatory employment in Egypt without approval of the American Foreign Services Post; (2) appellee was expected to perform other duties as requested by the American Foreign Services Post or the International Communication Agency during extended recesses or vacation periods for which he received his stipend; (3) appellee would be provided health insurance free of charge for himself only through the International Communication Agency; (4) appellee could be reassigned to another mutually agreeable position if conditions changed in Egypt; (5) appellee had to submit monthly reports and a final report as specified by the American Foreign Service Post; and, (6) if the Fulbright Grant was terminated or revoked for any reason other than physical or mental incapacitation, appellee had to repay his grant monies. After reading the Terms and Condition document, appellee accepted the Fulbright Grant by signing a statement at the end of the Terms and Conditions document which read as follows: "I accept the award and agree to abide by the conditions of the grant as specified in the attached 'Terms and Conditions of Award.'"
IUP granted appellee an unpaid leave of absence to accept the Fulbright Grant and teach at Ain Shams University. While teaching at Ain Shams University, appellee did not receive a federal "GS" wage rating like other federal government employees. Appellee also did not contribute to the federal civil ...