State ex rel. Simpson v. State Teachers Retirement Bd. (Slip Opinion) , 143 Ohio St. 3d 307 ( 2015 )

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
State ex rel. Simpson v. State Teachers Retirement Bd., Slip Opinion No. 2015-Ohio-149.]
NOTICE
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an advance sheet of the Ohio Official Reports. Readers are requested
to promptly notify the Reporter of Decisions, Supreme Court of Ohio,
65 South Front Street, Columbus, Ohio 43215, of any typographical or
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made before the opinion is published.
SLIP OPINION NO. 2015-OHIO-149
THE STATE EX REL. SIMPSON v. STATE TEACHERS RETIREMENT BOARD.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as State ex rel. Simpson v. State Teachers Retirement Bd.,
Slip Opinion No. 2015-Ohio-149.]
Mandamus—When a state employee elects on retirement to combine total
contributions and service credits from the State Teachers Retirement
System and the Public Employees Retirement System, the system
administering the payments must apply its own statutory formulas for
determining the retirement benefit—Writ denied.
(No. 2013-1169—Submitted August 19, 2014—Decided January 21, 2015.)
IN MANDAMUS.
_____________________
Per Curiam.
{¶ 1} We deny the request by relator, Martha A. Simpson, D.O., for a
writ of mandamus. When a state employee elects on retirement to combine total
contributions and service credits from the State Teachers Retirement System
(“STRS”) and the Public Employees Retirement System (“PERS”), the system
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administering the payments must apply its own statutory formulas for determining
the retirement benefit.
{¶ 2} Simpson was employed in two state positions. In one, she and her
employer contributed to STRS, and in the other, she and her employer contributed
to PERS. Members of STRS who are also members in another state retirement
system may choose to combine their total contributions and service credits in
determining eligibility for benefits. R.C. 3307.57. The retirement benefits are
calculated and paid by the system in which the member had the greatest service
credit. R.C. 3307.57(B)(4); R.C. 145.37. Under the STRS statutes, the pension
benefit to be paid is calculated by determining a final average salary. The salaries
used to calculate the final average salary must be capped under certain conditions.
R.C. 3307.501. PERS has no similar statute.
{¶ 3} Simpson retired, relying in part on advice from STRS personnel
whose estimates of her retirement income (based on incorrect information she
provided regarding her maximum PERS salary) did not specifically indicate to her
that her PERS salary, once combined with her STRS salary, would be subject to
STRS’s capping provision. However, once she had retired, and based on her
actual salary record, STRS applied the cap to the combined salaries when
calculating Simpson’s final average salary, thus decreasing Simpson’s pension
benefit.
{¶ 4} Simpson timely appealed the STRS calculation to respondent,
State Teachers Retirement Board, but the board denied her appeal. Simpson,
having exhausted her administrative remedies, then filed this action in mandamus.
{¶ 5} Because STRS administers the pension benefits for Simpson,
STRS’s statutes must be applied to the entirety of Simpson’s retirement
contributions. We therefore deny the writ.
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Facts
{¶ 6} Simpson is a doctor of osteopathic medicine. From 1994 until she
retired in 2012, Simpson worked for Ohio University in Athens in a teaching
position. Simpson was also employed from 2006 until her retirement at
Appalachian Behavioral Healthcare as a physician. Both employers deducted
pension contributions—one paid into STRS and one into PERS. Simpson
considered the pensions a valuable part of her compensation in both positions.
{¶ 7} Before she retired, Simpson sought and received counseling from
STRS staff regarding estimates of her retirement benefits, in part to determine a
retirement date that would maximize her benefits. STRS staff prepared
retirement-benefit estimates on several occasions in 2010, 2011, and 2012. The
estimates were based in part on annual income amounts from her PERS
employment that Simpson provided to STRS.
{¶ 8} For example, in March 2012, STRS prepared an estimate using
figures provided by Simpson of her earnings for her PERS job of about $35,000
for each year of 2009-2010 and 2010-2011. She reported her 2011-2012 earnings
as $52,000. STRS provided an estimate based on these numbers that included a
limited final salary of $143,833. The estimate was based on earnings from STRS
and the figures provided by Simpson regarding PERS earnings. Simpson claims
that STRS did not inform her that her retirement benefit would be reduced
because her PERS salary would be capped under the STRS capping statute.
{¶ 9} Simpson filed an application for retirement benefits with STRS,
effective July 1, 2012. Ohio University agreed to purchase one year of service
credit for Simpson and agreed to her anticipated retirement date. STRS obtained
Simpson’s service-credit information from PERS. PERS also transferred funds to
STRS from Simpson’s PERS account as required by R.C. 3307.57(B)(6)(a).
{¶ 10} The information sent by PERS on Simpson’s earnings did not
match the earnings estimates that Simpson had given STRS in March 2012. The
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final earnings reported by PERS were $4,764 for 2009-2010, $50,598 for 2010-
2011, and $90,216 for 2011-2012.
{¶ 11} STRS calculates retirement benefits using a number of criteria,
including “final average salary.” Final average salary is calculated by dividing by
three the sum of the member’s annual compensation for the three highest years of
compensation for which the member made contributions. R.C. 3307.501(C).
Compensation includes all salary, wages, and other earnings paid by reason of
employment. R.C. 3307.01(L)(1). However, STRS, unlike PERS, caps the salary
for the two highest years based on the amount of salary increase during those
years over previous years. R.C. 3307.501(B)(1) and (2).
{¶ 12} In October 2012, STRS notified Simpson of her final benefit,
indicating that two of her three highest earning years were capped. STRS allowed
an increase of only 7.42 percent for 2010-2011 and 2011-2012 rather than the
actual, higher increase. STRS calculated her final salary for those years, with the
caps, as $114,755 and $123,291 respectively. Her final average salary was then
used to calculate a monthly retirement benefit of $3,163.39. Contributions made
on the portion of salary that is not treated as compensation add some additional
income (R.C. 3307.501(D)); in Simpson’s case, this was an extra $105.81, for a
total monthly retirement benefit of $3,269.20.
{¶ 13} STRS notified Simpson that she had the right to appeal its
decision. Simpson appealed and requested a hearing before a review committee.
The board reviewed the information provided and affirmed the determination of
Simpson’s benefit using a final average salary that was calculated based on two
years of salary that were capped.
{¶ 14} Simpson filed this action in mandamus, requesting a writ ordering
the board to recalculate her retirement benefit by not capping the PERS portion.
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Analysis
Mandamus
{¶ 15} STRS is required to calculate a member’s final average salary
according to R.C. 3307.501. A member who contests the calculation has the right
to file an administrative appeal. There is no right to appeal the board’s decision.
{¶ 16} Because there is no right of further appeal, mandamus is the
appropriate remedy to further challenge the board’s actions. Ohio Academy of
Nursing Homes v. Ohio Dept. of Job & Family Servs., 114 Ohio St. 3d 14, 2007-
Ohio-2620, 867 N.E.2d 400, ¶ 23 (“when an agency’s decision is discretionary
and, by statute, not subject to direct appeal, a writ of mandamus is the sole vehicle
to challenge the decision, by attempting to show that the agency abused its
discretion”); State ex rel. Nese v. State Teachers Retirement Bd. of Ohio, 136
Ohio St. 3d 103, 2013-Ohio-1777, 991 N.E.2d 218, ¶ 24, citing State ex rel. Hulls
v. State Teachers Retirement Bd. of Ohio, 113 Ohio St. 3d 438, 2007-Ohio-2337,
866 N.E.2d 483, ¶ 27; State ex rel. Schaengold v. Ohio Pub. Emps. Retirement
Sys., 114 Ohio St. 3d 147, 2007-Ohio-3760, 870 N.E.2d 719, ¶ 8.
{¶ 17} To be entitled to a writ of mandamus, Simpson must establish a
clear legal right to the requested relief, a clear legal duty on the part of the board
to provide that relief, and the lack of an adequate remedy in the ordinary course of
the law. State ex rel. Waters v. Spaeth, 131 Ohio St. 3d 55, 2012-Ohio-69, 960
N.E.2d 452, ¶ 6.
{¶ 18} When “some evidence” supports the board’s decision, a writ of
mandamus will not issue to control an agency’s exercise of discretion. State ex
rel. Kolcinko v. Ohio Police & Fire Pension Fund, 131 Ohio St. 3d 111, 2012-
Ohio-46, 961 N.E.2d 178, ¶ 2, citing Kinsey v. Bd. of Trustees of Police &
Firemen’s Disability & Pension Fund of Ohio, 49 Ohio St. 3d 224, 225, 551
N.E.2d 989 (1990).
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{¶ 19} To prevail, Simpson must show that the board abused its
discretion, which happens “when a decision is unreasonable, arbitrary, or
unconscionable.” State ex rel. Schaengold v. Ohio Pub. Emps. Retirement Sys.,
114 Ohio St. 3d 147, 2007-Ohio-3760, 870 N.E.2d 719, ¶ 8, citing State ex rel.
Worrell v. Ohio Police & Fire Pension Fund, 112 Ohio St. 3d 116, 2006-Ohio-
6513, 858 N.E.2d 380, ¶ 10.
STRS must calculate and pay Simpson’s total retirement benefit
{¶ 20} When a state employee has service credit in more than one
retirement system, the board of the retirement system in which the employee had
the greatest service credit calculates and pays the benefit. R.C. 145.37(B)(1)(d).
In Simpson’s case, that is STRS. R.C. 3307.57(B)(4). The question here is
whether STRS is required to cap Simpson’s total annual salary, including salary
earned as a member of PERS, or only the portion that she earned as a member of
STRS.
{¶ 21} Under R.C. 3307.501, STRS is required to cap the annual income
for purposes of determining final average salary when the increase for the
member’s two highest years of compensation exceeds the greater of the highest
percentage increase during any of the three years immediately preceding the
earlier of the two years of highest compensation or exceeds, with some
exceptions, a percentage increase paid to the member as part of a similar increase
to others employed by the same employer.
(B) Notwithstanding division (L) of section 3307.01 of the
Revised Code, for the purpose of determining final average salary
under this section, “compensation” has the same meaning as in that
division, except that it does not include any amount resulting from
a percentage increase paid to a member during the member’s two
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highest years of compensation that exceeds the greater of the
following:
(1) The highest percentage increase in compensation paid
to the member during any of the three years immediately preceding
the earlier of the member’s two highest years of compensation and
any subsequent partial year of compensation used in calculating
the member’s final average salary;
(2) A percentage increase paid to the member as part of an
increase generally applicable to members employed by the
employer. An increase shall be considered generally applicable if it
is paid to members employed by a school district board of
education in positions requiring a license issued under section
3319.22 of the Revised Code in accordance with uniform criteria
applicable to all such members or if paid to members employed by
an employer other than a school district board of education in
accordance with uniform criteria applicable to all such members.
R.C. 3307.501. PERS has no similar requirement. R.C. 145.01(K).
{¶ 22} STRS found that Simpson’s three highest years of compensation,
including both STRS and PERS employment, were 2009-2010, when she earned
$106,847; 2010-2011, when she earned $155,676; and 2011-2012 when she
earned $196, 462. Her earnings in 2010-2011 were a 45.7 percent increase over
her 2009-2010 earnings. This is a higher percentage than allowed by the capping
provision, which allows an increase of either the greater of the member’s largest
increase in the three years preceding the earlier of the two highest years of
compensation—7.42 percent in Simpson’s case—or the generally applicable
increase of the employer—in Simpson’s case, 1 percent. STRS capped
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Simpson’s 2010-2011 salary at $114,775, or 7.42 percent more than her 2009-
2010 salary.
{¶ 23} Similarly, Simpson’s earnings for 2011-2012 were a 71 percent
increase over the previous year’s capped earnings. STRS again allowed her a
7.42 percent increase. The average of her highest three years of compensation
was then calculated as $114,971, which STRS used to calculate her pension
benefit. An additional annuity was added to her benefit because of the amounts
not counted as salary, as required by R.C. 3307.501(D).
{¶ 24} As explained above, R.C. 3307.57 governs the coordination of
retirement benefits for STRS and PERS members whose greater service credit is
with STRS. Under that statute, “total contributions and service credit in all
retirement systems * * * shall be used in determining the eligibility for benefits.”
R.C. 3307.57(B). The “board of the state retirement system in which the member
had the greatest service credit * * * shall calculate and pay the total benefit.”
R.C. 3307.57(B)(4); see also R.C. 145.37(B)(1) (“total contributions and service
credit in all state retirement systems * * * shall be used in determining the
eligibility and total retirement or disability benefit payable”) and
145.337(B)(1)(d) (“The board of the state retirement system in which the member
had the greatest service credit, without adjustment, shall calculate and pay the
total retirement or disability benefit”).
{¶ 25} R.C. 3307.57 does not specifically state that the cap on salaries
required for STRS members should not be placed on the total contributions in all
retirement systems to be used in determining the total retirement benefit payable.
{¶ 26} An attorney general opinion has determined that when
coordinating retirement benefits from two state plans, all benefits should be
calculated by the system paying the benefit in accordance with that system’s
benefit calculator. 1988 Ohio Atty.Gen.Ops. No. 88-072, *2. In that opinion,
PERS asked the attorney general to address whether PERS, as the administering
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system, should apply each retirement system’s benefit formula to the credits
earned under that system. The attorney general opined that PERS was required to
apply its own benefits formula to all of the retiree’s credits rather than apply the
formula of each system under which the benefits were earned. Id. The attorney
general reasoned, in part, that a retirement system is a statutory entity that must
follow its own governing statutes, including any formulas for calculating benefits.
{¶ 27} The reasoning from the attorney general’s opinion supports the
board’s position that STRS is to calculate the pension benefit based on the
calculation required by STRS’s statutes and not on separate calculations under
each retirement system’s statutes.
{¶ 28} Simpson’s arguments to the contrary are without merit. She first
misinterprets R.C. 3307.501(B)(2): she asserts that the section contains an
exception that allows the entire salary from the second retirement system to be
included for determining a final average salary if it was “paid to members
employed by an employer other than a school.” However, this language is taken
out of context. The statute does not state that such compensation is excluded
from the capping provision. Rather, it states that the cap applies to exclude the
amount that exceeds “[a] percentage increase paid to the member as part of an
increase generally applicable to members employed by the employer.” In other
words, an increase must exceed the amount given to an employee as a regular
raise given to everyone to be excluded from the annual salary. This provision
applies to both “members employed by a school district board of education in
positions requiring a license issued under section 3319.22 of the Revised Code in
accordance with uniform criteria applicable to all such members” and to
“members employed by an employer other than a school district board of
education in accordance with uniform criteria applicable to all such members.”
That is, the statute does not explicitly exclude from the capping provision income
from non-STRS employers. Moreover, Simpson’s cap was based on R.C.
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3307.501(B)(1), which does not rely on a “generally applicable” percentage
increase in salary.
{¶ 29} Second, Simpson relies on comments in a Legislative Service
Commission’s bill analysis, but these comments were made in regard to a 1991
provision that was removed from the statutes in 2001 and that therefore no longer
applies. Sub.H.B. No. 535, 148 Ohio Laws, Part III, 5831, 5960. Indeed, the later
amendment severely undercuts Simpson’s arguments, because it deleted a
provision that excepted from the cap a percentage increase in income that “results
from employment by a different employer.” Id. Thus, if anything, after 2001, the
General Assembly meant to include income from all employers (STRS and non-
STRS) in the income considered for the cap.
{¶ 30} Third, Simpson points out that Ohio Adm.Code 3307:1-4-01 lists
three instances in which a percentage increase is to be considered as an increase
“generally applicable” to members employed by the employer for purposes of
R.C. 3307.501(B)(2) and that all three instances involve pay by a board of
education or a university, not by a non-STRS employer. Again, Simpson’s cap
was based on R.C. 3307.501(B)(1), which does not rely on a “generally
applicable” percentage increase in salary.
{¶ 31} Fourth, Simpson asserts that R.C. 3307.351 provides that
retirement benefits from non-STRS employers are to be combined with those
from STRS employers with no reduction. However, the provision of that statute
applicable to Simpson says nothing about how the final average salary is to be
calculated. Instead, it allows an employee to continue to contribute to a
retirement fund in one job while retiring from another:
Subject to division (E) of this section, a member of the state
teachers retirement system who also holds one or more other
positions covered by the other state retirement systems may retire
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under section 3307.57, 3307.58, or 3307.60 of the Revised Code or
under an STRS defined contribution plan from the STRS position
and continue contributing to the other state retirement systems if
the annual compensation for the STRS position at the time of
retirement is greater than annual compensation or earnable salary
for the position, or any of the positions, covered by the other state
retirement systems.
R.C. 3307.351(B)(2). In other words, that provision allows an employee to retire
from one system while continuing to work and contribute to another system. The
statute does not address calculating the final average salary of an employee who
retires from two systems, as Simpson did.
Estoppel
{¶ 32} Simpson also argues that the board should be estopped from
capping her annual compensation for purposes of determining her final average
salary because she relied to her detriment on the estimates given to her by STRS.
However, equitable estoppel generally does not apply against a public retirement
system. Ohio Assn. of Pub. School Emps. v. School Emps. Retirement Sys., 10th
Dist. Franklin No. 04AP-136, 2004-Ohio-7101, ¶ 51 (“If SERS can be estopped
[from] reallocating costs or modifying health care plan features because of alleged
promises by its employees/representatives, SERS would no longer have the
discretion expressly granted to it by the General Assembly * * *”).
{¶ 33} Even if estoppel could be applied to STRS, Simpson relied on
STRS estimates based on erroneous information that she had provided.
Specifically, she provided estimates of her PERS earnings of about $35,000 for
2009-2010 and 2010-2011 and $52,000 for 2011-2012. The real numbers turned
out to be $4,764, $50,598 and $90,216 respectively. Simpson cannot claim to
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have detrimentally relied on estimates based on incorrect information she herself
provided to STRS to use in calculating those estimates.
{¶ 34} Moreover, the STRS estimates gave Simpson clear notice that her
final average salary might vary from the estimate and might be limited under
statute. Both of the last two benefit statements stated, “These calculations are
estimates, that have been prepared based on information provided in part by you
and are for discussion purposes only. * * * Actual benefits will be paid in
accordance with the law in effect at the time of retirement.”
Conclusion
{¶ 35} Under R.C. 3307.57(B)(4), STRS combined Simpson’s PERS and
STRS contributions and then correctly calculated her pension benefit using the
provision in R.C. 3307.501(B) requiring that her combined annual salary be
capped. The board’s decision was not unreasonable, arbitrary, or unconscionable
and was supported by some evidence in the record. It was not an abuse of
discretion.
{¶ 36} We deny the writ.
Writ denied.
O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, KENNEDY,
FRENCH, and O’NEILL, JJ., concur.
_____________________
Luper, Neidenthal & Logan, Luther L. Liggett Jr., and Jacqueline M.
Wirtz, for relator.
Michael DeWine, Attorney General, and Lydia M. Arko, Assistant
Attorney General, for respondent.
______________________
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