Clark v. State Teachers Retirement Sys. , 2018 Ohio 4680 ( 2018 )

[Cite as Clark v. State Teachers Retirement Sys., 2018-Ohio-4680.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Brian C. Clark et al., :
Plaintiffs-Appellants, : No. 18AP-105
(C.P.C. No. 16CV-7360)
v. :
(REGULAR CALENDAR)
State Teachers Retirement System, :
Defendant-Appellee. :
D E C I S I O N
Rendered on November 20, 2018
On brief: Cohen Rosenthal & Kramer LLP, Joshua R. Cohen
and James B. Rosenthal; J. Randall Nye, for appellants.
Argued: Joshua R. Cohen.
On brief: Tucker Ellis LLP, Karl A. Bekeny, Benjamin C.
Sasse, Michael J. Ruttinger and Christine M. Snyder, for
appellee. Argued: Karl A. Bekeny.
APPEAL from the Franklin County Court of Common Pleas
TYACK, J.
{¶ 1} Plaintiffs-appellants, Brian C. Clark, Steven Conn, B. David Ridpath, Zhaohui
Xu, and John Zipp ("appellants"), appeal the February 2, 2018 judgment of the Franklin
County Court of Common Pleas in favor of defendant-appellee, State Teachers Retirement
System ("STRS"). For the reasons that follow, we reverse the judgment of the court of
common pleas.
I. Factual and Procedural History
{¶ 2} This appeal involves a challenge to the amount STRS collects as a "mitigating
rate" from employers who have employees enrolled in alternative retirement plans
("ARPs") instead of the traditional defined benefit plan provided by STRS.
No. 18AP-105 2
{¶ 3} Under Ohio law, full-time employees of public institutions of higher
education who would otherwise be subject to STRS, may elect to participate in an ARP
rather than the public retirement system that otherwise covers the employee. The ARP
must be a defined contribution plan qualified under section 401(a) of the Internal Revenue
Code that provides retirement and death benefits through a number of investment options.
R.C. 3305.02. The ARP provides increased flexibility and portability in the participants'
retirement investments. As with the traditional defined benefit plan, both the employer
and employee contribute a percentage of the employee's compensation to the plan
(currently 14 percent). But unlike the STRS defined benefit plan, ARP participants have
individual accounts into which both employee and employer contributions are paid.
Participants then choose how to invest the contributions from a set of investment options.
What they receive in retirement is dependent on the returns generated by the contributions
made to their ARPs.
{¶ 4} STRS members who are not employees of a public institution of higher
education have the option of a defined contribution plan ("DC Plan"). Under this plan,
which operates similarly to an ARP, teachers can choose investment options for the funds
they and their employers contribute towards their retirement. The benefits they receive
depend on the return generated by those investments.
{¶ 5} If an employee is enrolled in an ARP or the DC Plan, not all of the employer
contribution goes to the employee's individual account. The employer must contribute a
portion of its employer contribution to STRS to offset any negative financial impact of the
ARP or DC Plan participation on the state retirement system. The contribution is known
as the "mitigating rate." R.C. 3305.06(D); R.C. 3307.84. This appeal presents an issue of
statutory construction related to the mitigating rate. Appellants' claim is premised on
provisions of the Ohio Revised Code that were amended and subsequently repealed in 2017.
The statutes relevant to this appeal are those that were in force in July 2013.
{¶ 6} R.C. 3305.06(D) originally set the mitigating rate for ARPs at 6 percent. The
statute authorized the Ohio Retirement Study Council ("ORSC")1 to automatically adjust
this figure to reflect determinations made by triennial actuarial studies for purposes of
1 The ORSC performs oversight functions for the various state retirement systems. R.C. 171.03.
No. 18AP-105 3
assessing an appropriate mitigating rate. Only one such study was ever conducted resulting
in a mitigating rate of 5.76 percent in 2000. In 2001, R.C. 3305.06 was amended to
eliminate any automatic adjustment to the ARP mitigating rate, and gave ORSC the power
to increase or decrease the rate based on actuarial studies. The amended statute provided
that the percentage shall be 6 percent, except that the percentage may be adjusted by the
ORSC to reflect determinations made by triennial actuarial studies conducted under R.C.
171.07.
{¶ 7} The mitigating rate for the DC Plan was controlled differently. The legislature
gave STRS the authority to control the mitigating rate subject to actuarial studies. R.C.
3307.84. In 2000, upon the creation of the DC Plan, STRS commissioned an actuarial
study which set the DC Plan mitigating rate at 3.5 percent. In addition, the General
Assembly enacted R.C. 3305.061, which prohibited the ARP mitigating rate from exceeding
STRS's mitigating rate for its DC Plan. This resulted in the ARP rate becoming 3.5 percent,
notwithstanding the ARP rate set by ORSC was higher at 5.76 percent.
{¶ 8} The DC Plan rate and the ARP rate remained the same until July 2013, when
STRS raised the mitigating rate for the DC Plan to 4.5 percent. STRS determined the ARP
mitigating rate should also be raised to 4.5 percent to match the DC Plan based on its
interpretation of R.C. 3305.061.
{¶ 9} In 2015, the General Assembly enacted R.C. 3305.062 which set the
mitigating rate for ARPs at 4.5 percent. That statue was subsequently repealed and, in 2017,
the system was changed to delegate the authority for calculating and setting the mitigating
rates for ARPs and the DC Plan to STRS based on independent actuarial studies. R.C.
3305.061, the statute at issue in this appeal, was repealed by 2016 H.B. No. 520, Section 2,
effective April 6, 2017.
{¶ 10} Appellants are a group of faculty members at Ohio's public colleges and
universities who have opted for an ARP in lieu of participating in the traditional defined
benefit plan provided by STRS. Appellants filed this action against STRS on August 8, 2016.
Appellants sued for equitable restitution of the amounts collected by STRS when the
mitigating rate was changed from 3.5 percent to 4.5 percent in July 2013 until the
implementation of R.C. 3305.062 in September 2015. The appellants alleged that STRS
unlawfully implemented this increase and unjustly enriched itself by doing so.
No. 18AP-105 4
{¶ 11} The parties filed cross-motions for summary judgment. STRS took the
position that the July 2013 ARP mitigating rate increase was required by operation of law
under R.C. 3305.061. The appellants took the position that the rate increase was unlawful
because only the ORSC had the authority to raise the mitigating rate for ARPs during this
time. Furthermore, appellants argued that R.C. 3305.061 did not require parity between
the DC Plan mitigating rate and the ARP mitigating rate, nor did it forbid the DC Plan rate
from exceeding the ARP rate.
{¶ 12} The trial court granted STRS's motion for summary judgment on February 2,
2018. At the same time, it denied appellants' motion for summary judgment and dismissed
as moot appellants' motion for class certification and appointment of class counsel.
{¶ 13} The trial court found that when ORSC failed to conduct the triennial actuarial
studies required under R.C. 171.07, the actual ARP mitigating rate reverted to the original
6 percent rate designated under R.C. 3305.06. The court then reasoned that as long as the
DC Plan mitigating rate was less than 6 percent, the "effective" ARP mitigating rate must
be the same as the defined contribution plan mitigating rate pursuant to R.C. 3305.061.
Thus, when STRS raised the defined contribution plan mitigating rate to 4.5 percent in July
2013, STRS could collect a 4.5 percent mitigating rate on ARPs, but no more, pursuant to
R.C. 3305.061.
II. Assignments of Error
{¶ 14} Appellants have assigned the following four errors for our review:
[I.] The trial court erroneously granted summary judgment to
Defendant State Teachers Retirement System ("STRS") based
on a misinterpretation of R.C. 3305.061 that permitted STRS
to increase the so-called "mitigating rate" for its Alternative
Retirement Plans to coincide with an increase in the
"mitigating rate" for its Defined Contribution Plan.
[II.] In granting summary judgment to STRS, the trial court
erroneously determined that decreases in the "mitigating rate"
for Alternative Retirement Plans made pursuant to R.C.
3305.061 did not actually change the rate but only limited the
amount STRS could collect.
[III.] In granting summary judgment to STRS, the trial court
erroneously found that R.C. 3305.061 permitted increases to
the "mitigating rate" for Alternative Retirement Plans to match
No. 18AP-105 5
increases in the "mitigating rate" for STRS's Defined
Contribution Plan.
[IV.] The trial court erred in denying summary judgment to the
Appellants on their claim for equitable restitution of the one-
percent increase in the "mitigating rate" for Alternative
Retirement Plans that STRS unlawfully and unfairly collected
and retained.
III. Standard of Review
{¶ 15} This appeal was decided on cross-motions for summary judgment. When
considering a motion for summary judgment, a court must determine if the pleadings,
depositions, answers to interrogatories, written admissions, affidavits, transcripts of
evidence, and written stipulations of fact, if any, timely filed in the action, show that there
is no genuine issue as to any material fact and the moving party is entitled to judgment as
a matter of law. Civ.R. 56(C). Our review of summary judgment is de novo. Tobin v.
Steptoe & Johnson, PLLC, 10th Dist. No. 17AP-821, 2018-Ohio-2957, ¶ 4.
{¶ 16} Here, the facts of the case are not in dispute, and the appeal presents a
question of statutory construction in which the parties present differing interpretations of
R.C. 3305.061. Interpretation of statutory language is a question of law that we review de
novo. MA Equip. Leasing I, LLC v. Tilton, 10th Dist. No. 12AP-564, 2012-Ohio-4668, ¶ 18.
{¶ 17} Resolution of the dispute rests on a review of the plain language of R.C.
3305.061 in light of well-established principles of statutory construction. When the
wording of a statute is clear and unambiguous, the only task is to give effect to the plain
words used. State v. Elam, 68 Ohio St.3d 585, 587 (1994); State ex rel. Carna v. Teays
Valley Local Sch. Dist. Bd. of Edn., 131 Ohio St.3d 478, 2012-Ohio-1484, ¶ 20. It must be
applied as written. State ex rel. Pruce v. Ohio Pub. Emp. Retirement Sys. Bd., 10th Dist.
No. 16AP-782, 2018-Ohio-713, ¶ 43.
{¶ 18} In enacting a statute, it is presumed that the entire statute is intended to be
effective. R.C. 1.47(B). "The different sections and parts of sections of the same legislative
enactment should if possible be so interpreted as to harmonize and give effect to each and
all." State ex rel. Myers v. Indus. Comm., 105 Ohio St. 103 (1922). Words and phrases in a
statute are to be read in context with the whole statute. Commerce & Indus. Ins. Co. v.
No. 18AP-105 6
Toledo, 45 Ohio St.3d 96, 102 (1989). Words in statutes should not be construed to be
redundant, nor should any words be ignored. East Ohio Gas Co. v. Pub Util. Comm., 39
Ohio St.3d 295, 299 (1988).
{¶ 19} Where, as here, a statute refers to other statutes that relate to the same
subject matter, the in pari materia rule states that the court must read all statutes relating
to the same general subject matter together to give proper force and effect to each one. In
re Duke Energy Ohio, Inc., 150 Ohio St.3d 437, 2017-Ohio-5536, ¶ 27. The in pari materia
rule may be used to interpret a statute, but only when some doubt or ambiguity exists. Id.If there is no ambiguity, there is no cause to resort to rules of statutory construction. Id.IV. Analysis
A. Assignments of Error One through Three
{¶ 20} Assignments of error one through three are interrelated and will be addressed
together.
{¶ 21} Appellants contend that under R.C. 3305.061, STRS lacked the authority to
increase the mitigating rate for ARPs when it increased the mitigating rate for the DC Plan.
{¶ 22} STRS acknowledges that under R.C. 3305.061, a dip in the DC Plan rate limits
the amount STRS can collect from ARP employers, and that at no time can STRS collect
more from ARP employers than DC Plan employers. However, STRS disagrees with
appellants in that it claims the "actual" ARP mitigating rate remained at 5.76 percent for all
relevant times at issue, but the "effective" ARP mitigating rate dropped to 3.5 percent when
the DC Plan rate was changed to 3.5 percent. During this time, ORSC never changed the
ARP mitigating rate to 3.5 percent, so when STRS raised the DC Plan rate to 4.5 percent it
was authorized to collect the same amount from ARP participants pursuant to R.C.
3305.061. This interpretation ignores the statutory language that refers to "a change [in
the mitigating rate] as required by this section." R.C. 3305.061.
{¶ 23} Under the statutory scheme in effect that is relevant to this lawsuit, STRS did
not have the statutory authority to set the ARP mitigating rate. The ORSC had the authority
to commission an actuarial study for purposes of setting the mitigating rate for ARPs
pursuant to R.C. 3305.06(D) and 171.07.
{¶ 24} The statutorily required mitigating rate for ARPs is set by ORSC under R.C.
3305.06(D) and 171.07. That rate was 5.76 percent based on the actuarial study in 2000
No. 18AP-105 7
that lowered the rate from 6 percent to 5.76 percent. Although ORSC retained the power
to change the mitigating rate based on further actuarial studies, it never did. ORSC's
authority under R.C. 3305.06(D) and 171.07 is limited by R.C. 3305.061 which prohibits
the ARP mitigating rate from exceeding the DC Plan mitigating rate.
{¶ 25} Instead, when STRS set the DC Plan mitigating rate at 3.5 percent, R.C.
3305.061 was triggered and operated as a ceiling or cap on the ARP mitigating rate. Under
R.C. 3305.061, as a matter of law, the ARP mitigating rate could not exceed the DC Plan
mitigating rate.
{¶ 26} R.C. 3305.061, as passed by the General Assembly in 2001, provided as
follows:
Notwithstanding section 171.07 [triennial actuarial study] and
division (D) of section 3305.06 [mitigating rate of 6% subject
to actuarial studies] of the Revised Code, the percentage of an
electing employee's compensation contributed by a public
institution of higher education under division (D) of section
3305.06 of the Revised Code shall not exceed the percentage of
compensation transferred [mitigating rate] under section
145.87 [PERS DC Plan], 3307.84 STRS DC Plan], or 3309.88
[SERS DC Plan] of the Revised Code, as appropriate, by the
state retirement system that otherwise applies to the electing
employee's position. A change in the percentage of
compensation contributed under division (D) of section
3305.06 of the Revised Code, as required by this section, shall
take effect on the same day a change in the percentage of
compensation takes effect under section 145.87, 3307.84, or
3309.88 of the Revised Code, as appropriate.
{¶ 27} The "notwithstanding" language requires an examination of the interplay
between R.C. 3305.06(D) and 3305.061.
{¶ 28} R.C. 3305.06(D) provides as follows:
Each public institution of higher education employing an
electing employee shall contribute on behalf of that employee
to the state retirement system that otherwise applied to the
electing employee's position a percentage of the electing
employee's compensation to mitigate any negative financial
impact of the alternative retirement program on the state
retirement system. The percentage shall be six per cent, except
that the percentage may be adjusted by the [Ohio Retirement
No. 18AP-105 8
Study Council] to reflect the determinations made by actuarial
studies conducted under [R.C. 171.07].
{¶ 29} The six percent rate was adjusted by ORSC in 2000 to a rate of 5.76 percent
based on an actuarial study.
{¶ 30} When R.C. 3305.061 became effective in 2001, the DC Plan mitigating rate
had been set at 3.5 percent effective July 13, 2000. Therefore, R.C. 3305.061 came into play
because the ARP rate was higher than the DC Plan rate.
{¶ 31} The "shall not exceed" language in R.C. 3305.061 indicates that the mitigating
rate for ARPs cannot exceed the mitigating rate for DC Plans. If the ARP mitigating rate is
higher than the DC Plan rate, the ARP mitigating rate must change to the same percentage
as the DC Plan rate and take effect the same day as the DC Plan rate changes. Thus, for
many years, the ARP rate remained at 3.5 percent because it could not, by law, exceed the
DC Plan rate after the implementation of R.C. 3305.061.
{¶ 32} The question is what happens if the DC Plan rate is raised but is still less than
the ARP mitigating rate set by ORSC? The statute appears to be silent on this issue.
{¶ 33} Appellants argue that, pursuant to former R.C. 3305.061, the ARP mitigating
rate changed to 3.5 percent in 2001 when STRS set the mitigating rate for its DC Plan at
that figure. Even though STRS subsequently raised the DC Plan rate to 4.5 percent in July
2013, appellants contend the ARP rate did not concomitantly increase, since (1) R.C.
3305.061 did not require the rates to remain in lockstep; (2) the statute did not countenance
increases in the ARP rate; and (3) under R.C. 3305.06(D), ORSC had exclusive authority to
change the ARP mitigating rate.
{¶ 34} STRS argues that as long as the DC Plan mitigating rate is less than the rate
set pursuant to R.C. 171.07 or 3305.06(D), R.C. 3305.061 supersedes those statutes, and
the ARP mitigating rate must change to be the same as the DC Plan mitigating rate.
{¶ 35} The plain language of R.C. 3305.06(D) provides that ORSC may adjust the
mitigating rate for ARPs, but only to reflect the determination made by the actuarial studies
commissioned under R.C. 171.07. But R.C. 3305.06(D) is limited by R.C. 3305.061 since
changes under R.C. 3305.061 occur "notwithstanding" what is stated in R.C. 3305.06(D)
and 171.07. Based on the plain language of R.C. 3305.061, the mitigating rate for ARPs
"shall not exceed" the mitigating rate for the DC Plan. Thus, when the mitigating rate set
No. 18AP-105 9
by STRS for the DC Plan drops below the mitigating rate for ARPs, the ARP rate must
change as well since it is not permitted to exceed the mitigating rate for the DC Plan. The
new mitigating rate for ARPs will be the same as the DC Plan mitigating rate so that the
ARP mitigating rate does "not exceed" the DC Plan rate. This change occurs by operation
of law since the remaining language in the statute indicates that such change "shall take
effect on the same day a change in the percentage of compensation takes effect under [R.C.
3307.84]."
{¶ 36} In the present case, R.C. 3305.061 did not require that the ARP mitigating
rate be the same as the DC Plan mitigating rate. The "shall not exceed" language of the
statute only required a change to the ARP mitigating rate if the DC Plan mitigating rate is
below the ARP mitigating rate. In such a situation, the ARP rate would decrease as a matter
of law to satisfy the statutory requirement that the ARP rate not exceed the DC Plan rate.
{¶ 37} Again, under the plain language of the statute, an increase in the DC Plan rate
would not trigger a required increase in the ARP rate since the ARP rate would not exceed
the DC Plan rate under those circumstances. The only change that could occur by operation
of law under the statute would be a decrease in the ARP rate to match a decrease in the DC
Plan rate. R.C. 3305.061 does not require or authorize a change to increase the ARP rate to
match an increase in the DC Plan rate. Instead, under the statutory scheme as it existed
during the timeframe of this lawsuit, changes to the ARP rate were under the authority of
ORSC unless a reduction in the DC Plan rate triggered the operation of R.C. 3305.061.
ORSC was still authorized under R.C. 3305.06(D) and 171.07 to conduct actuarial studies
and increase or decrease the ARP mitigating rate. But any new rate would be limited by the
new ceiling set by the DC Plan mitigating rate pursuant to R.C. 3305.061.
{¶ 38} STRS urges this court to defer to its interpretation of the statute arguing that,
if a statute is ambiguous, we should defer to the agency's interpretation. Doubts as to the
interpretation of a statute should be resolved in favor of the agency if the interpretation is
reasonable. State ex rel. Gill v. School Emp. Retirement Sys. of Ohio, 121 Ohio St.3d 567,
2009-Ohio-1358, ¶ 28. However, we find the statutes in question are clear and
unambiguous. As such, our duty is to give effect to the plain words used in such a way as to
give effect to each provision and giving force and effect to each statute. Accordingly, we
sustain assignments of error one through three.
No. 18AP-105 10
B. Fourth Assignment of Error
{¶ 39} In their fourth assignment of error, appellants argue that the trial court
should have granted their motion for partial summary judgment on their equitable
restitution claim. Unjust enrichment occurs when a person has and retains money or
benefits which in justice and equity belong to another. Johnson v. Microsoft Corp., 106
Ohio St.3d 278, 2005-Ohio-4985, ¶ 20.
{¶ 40} The trial court's denial of appellants' motion for summary judgment was
based purely on the decision to grant summary judgment to STRS on a question of law
regarding statutory interpretation. Having determined that decision was in error, we
sustain the assignment of error for the limited purpose of remanding the case to the trial
court to consider the merits of appellants' motion for partial summary judgment on their
unjust enrichment claim.
V. Disposition
{¶ 41} Having sustained the four assignments of error, the judgment of Franklin
County Court of Common Pleas is reversed and the case is remanded for further
proceedings in accordance with this decision.
Judgment reversed and remanded.
KLATT and SADLER, JJ., concur.
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