Allan T. Thoms Vs. Iowa Public Employees' Retirement System And Employment Appeal Board

IN THE SUPREME COURT OF IOWA
No. 58 / 04-1730
Filed June 2, 2006
ALLAN T. THOMS,
Appellant,
vs.
IOWA PUBLIC EMPLOYEES’
RETIREMENT SYSTEM and
EMPLOYMENT APPEAL BOARD,
Appellees.
________________________________________________________________________
Appeal from the Iowa District Court for Polk County, Robert J.
Blink, Judge.
Appeal from district court judgment affirming administrative
agency’s determination of retiree’s pension benefits. AFFIRMED.
Alice E. Helle and Douglas E. Gross of Brown, Winick, Graves,
Gross, Baskerville and Schoenebaum, P.L.C., Des Moines, for appellant.
Gregg A. Schochenmaier, Des Moines, for appellees.
2
CADY, Justice.
In this judicial review proceeding, an Iowa Public Employees’
Retirement System (IPERS) pensioner who retired, returned to work, and
retired again claims he was entitled to have his retirement benefits
calculated by adding the years of his original employment to the years of
his reemployment. Instead, IPERS calculated the amount of his benefits
by separately determining his benefits based upon his original
employment and adding them to the benefits calculated from the period
of his reemployment. The district court affirmed the Employment Appeal
Board decision that affirmed a decision by an administrative law judge
(ALJ) that found IPERS properly determined the benefits. On our review,
we affirm the district court.
I. Background Facts and Proceedings
Allan Thoms was a State employee covered by IPERS. In 1994, at
age fifty-six, he retired from his State employment after 14.75 years of
service. He began receiving monthly IPERS benefits of $570.78 in July
1994. In April 1995, he returned to IPERS-covered employment. His
retirement benefits were suspended after his earnings exceeded the
limitation in Iowa Code section 97B.48A (1995). 1 Thoms worked for the
1That section provided:
If, after the first day of the month in which the member attains
the age of fifty-five years and until the member’s sixty-fifth birthday, a
member who has a bona fide retirement under this chapter is in regular
full-time employment during a calendar year, the member’s retirement
allowance shall be suspended for as long as the member remains in
employment for the remainder of that calendar year. However, effective
January 1, 1992, employment is not full-time employment until the
member receives remuneration in an amount in excess of seven
thousand four hundred forty dollars for a calendar year. Effective the
first of the month in which a member attains the age of sixty-five years, a
retired member may receive a retirement allowance after return to
covered employment regardless of the amount of remuneration received.
3
State for an additional 6.5 years, and retired again on October 26, 2001.
He then applied for retirement benefits.
On January 30, 2002, IPERS notified Thoms by letter that his final
wages had been credited to his account, and his reemployment
termination notice had been processed. IPERS gave Thoms the choice of
a lump-sum refund or monthly benefits for the remainder of his life.
Thoms requested monthly benefits, which were subsequently
recalculated to be $1441.83. This amount was based upon his original
monthly benefit of $570.78, added to the monthly benefit of $871.05
derived from his period of reemployment.
Thoms appealed the recalculation of benefits, asserting his “benefit
should be recalculated to take into account his additional years of
service, additional earnings and increased age at the time of his ‘re-
retirement,’ with a single recalculated retirement allowance being paid.”
See Iowa Code § 97B.20A (2001) (“If the party appeals the decision of the
department, the department shall conduct an internal review of the
decision and the chief benefits officer shall notify the individual who has
filed the appeal in writing of the department’s decision.”). In other
words, Thoms wanted his retirement benefits recalculated based on the
total years of service from his two periods of employment and the
circumstances existing at the time of his second retirement. The two
different methods of calculations resulted in a significant difference in
the amount of benefits. 2 IPERS conducted an internal review and issued
________________________
Iowa Code § 97B.48A(1) (1995).
2Thoms wanted IPERS to add his first period of employment, 14.75 years, to his
second period of employment, 6.75 years, for a total of 21.5 years. This increases his
total benefit more than just adding the two calculated benefits together because IPERS
benefits are calculated using a “fraction of years of service,” in which the numerator is
the years of service, and the denominator is 30. The formula for calculating monthly
IPERS benefits is:
4
a final agency determination affirming its recalculation of Thoms’s
benefits. See id.
Thoms appealed IPERS’s determination to the Department of
Inspections and Appeals (DIA). See id. (“The individual who has filed the
appeal may file an appeal of the department’s final decision with the
department under chapter 17A by notifying the department of the appeal
in writing within thirty days after the notification of its final decision was
mailed to the party’s last known mailing address. Once notified, the
department shall forward the appeal to the department of inspections
and appeals.”). An administrative law judge (ALJ) with the DIA held a
hearing. Thoms and IPERS entered into a stipulation of facts (agreeing
to the facts set forth above) and submitted it to the ALJ. The ALJ issued
its decision on January 20, 2004. The ALJ found IPERS was correct in
calculating separate benefits based on the separate employment periods
________________________
Years of service
1/12 × (.60 × three-year average covered wage) × 30
Iowa Code § 97B.49A(3) (2001); Iowa Code § 97B.49(5)(b) (1995).
Thoms also wanted to use a figure of approximately $100,000 for his three-year
average covered wage, not the $35,666 average wage used by IPERS. The $35,666
figure is the average of Thoms’s wages in 1992, 1993, and 1994—the three years before
his initial retirement. Before Thoms retired the second time, his salary was
approximately $100,000.
Finally, Thoms wanted to calculate his benefits based on his age at the time of
the second retirement, 64. When he retired the first time, he was 56, so IPERS applied
an early-retirement penalty. See Iowa Code § 97B.50(1)(a) (1995) (“[A] vested member,
upon retirement prior to the normal retirement date . . . is entitled to receive a monthly
retirement allowance . . . reduced as follows: . . . For a member who is less than sixty-
two years of age, by twenty-five hundredths of one percent per month for each month
that the early retirement date precedes the normal retirement date.”). He wanted IPERS
to do a new calculation of his benefits as of 2001, when he was 64, so no early-
retirement penalty would apply. See Iowa Code § 97B.50(3) (2001) (“A member who is
at least sixty-two years of age and less than sixty-five years of age, and who has
completed twenty or more years of membership service and prior service, shall receive
benefits under 97B.49A through 97B.49G, as applicable, determined as if the member
had attained sixty-five years of age.”).
5
and adding them together to send a single check. Thoms petitioned for
review by the Employment Appeal Board. See id. § 97B.27. The Board
affirmed and adopted the ALJ’s decision.
Thoms filed a petition for judicial review in district court. See id.
§ 97B.29 (“Judicial review of action of the system may be sought in
accordance with the terms of the Iowa administrative procedure act.”).
Thoms claimed the agency decision was subject to reversal under each of
the fourteen grounds for reversal in the administrative procedure act.
See id. § 17A.19(10)(a)-(n). The district court affirmed the agency’s
decision. Thoms appeals.
II. Standard of Review
The Iowa Administrative Procedure Act, Iowa Code chapter 17A,
governs the scope of our review in this case. Iowa Code § 97B.29. Under
the Act, we may only interfere with the agency decision if it is erroneous
under a ground enumerated in the statute, and a party’s substantial
rights have been prejudiced. Id. § 17A.19(10). Thoms did not specify
which of the grounds in the statute supports reversal of the agency’s
decision. However, Thoms is challenging the agency’s interpretation of
Iowa Code section 97B.48A, the statute governing benefits upon
retirement after employment. Section 17A.19(10)(c) provides that an
agency’s action is subject to reversal if it is “[b]ased upon on erroneous
interpretation of a provision of law whose interpretation has not clearly
been vested in the discretion of the agency.” Id. § 17A.19(10)(c); see also
Arthur E. Bonfield, Amendments to Iowa Administrative Procedure Act
(1998) Chapter 17A, Code of Iowa (House File 667 As Adopted) 62 (1998)
[hereinafter Bonfield] (“Normally, the interpretation of a statute is a pure
question of law over which agencies are not delegated any special powers
6
by the General Assembly so, a court is free to, and usually does,
substitute its judgment de novo 3 for that of the agency and determine if
the agency interpretation of the statute is correct. That is what the first
ten words of paragraph (c) say.”). This section utilizes the familiar
correction-of-errors-at-law standard of review. Section 17A.19(10)(l)
provides that an agency’s action is subject to reversal if it is “[b]ased
upon an irrational, illogical, or wholly unjustifiable interpretation of a
provision of law whose interpretation has clearly been vested by a
provision of law in the discretion of the agency.” Iowa Code
§ 17A.19(10)(l); see also Bonfield at 62 (“[W]here the General Assembly
clearly delegates discretionary authority to an agency to interpret or
elaborate a statutory term based on the agency’s own special expertness,
the court may not simply substitute its view as to the meaning or
elaboration of the term for that of the agency but, instead, may reverse
the agency interpretation or elaboration only of it is arbitrary, capricious,
unreasonable, or an abuse of discretion.”). This section utilizes a
deferential abuse-of-discretion standard of review. Bonfield at 62. To
determine which section governs our review—and, consequently, how
much deference we give to the agency’s interpretation—we must
determine whether the interpretation of section 97B.48A has “clearly
been vested in the discretion of” IPERS.
3De novo, of course, means “anew.” Black’s Law Dictionary 447 (7th ed. 1999).
When we interpret a statute “de novo,” what we are doing is employing our familiar
correction-of-errors-at-law standard of review. See, e.g., Norwest Credit, Inc. v. City of
Davenport, 626 N.W.2d 153, 155 (Iowa 2001) (stating that under correction-of-errors-of-
law standard, we are not bound by lower tribunals’ determinations of law but instead
interpret the law on our own and determine whether our conclusion mirrors that
already made); see also Bonfield at 62 (“[M]ost Iowa cases treat agency interpretation of
the meaning of a statute as a pure question of law over which they have de novo review,
allowing the court simply to substitute its opinion of the meaning of the statute for that
of the agency . . . .”).
7
Chapter 97B makes IPERS the administrator of the retirement
system established under Iowa Code chapter 97B. See id. § 97B.4(2)
(setting forth IPERS’s powers and duties); see also id. § 97B.1(1) (“The
Iowa public employees’ retirement system shall administer the system
established under this chapter.”). Section 97B.4 provides IPERS with
rulemaking authority:
The system may adopt . . . rules . . . and take other
action it deems necessary for the administration of the
retirement system in conformity with the requirements of
this chapter, the applicable provisions of the Internal
Revenue Code, and all other applicable federal and state
laws. The rules shall be effective upon compliance with
chapter 17A.
Id. § 97B.4(2)(a). We have held that similar language vested the
interpretation of a statute in the relevant agency’s discretion. In City of
Marion v. Iowa Dep’t of Revenue & Finance, we concluded that Iowa Code
section 422.68(1), which provides, “The director shall have the power and
authority to prescribe all rules not inconsistent with the provisions of
this chapter, necessary and advisable for its detailed administration and
to effectuate its purposes,” vested the interpretation of section 422.45(20)
with the department of revenue and finance. City of Marion, 643 N.W.2d
205, 207 (Iowa 2002); accord Auen v. Alcoholic Beverages Div., 679
N.W.2d 586, 590 (Iowa 2004) (concluding section 123.21, granting the
agency authority to adopt rules “necessary to carry out this chapter”
“clearly vested the interpretation of section 123.45 with the agency”);
Becker v. Iowa Dep’t of Human Servs., 661 N.W.2d 125, 128-29 (Iowa
2003) (“We give weight to administrative interpretations of statutes that
agencies administer.” (citing Iowa Code § 4.6(6); City of Waterloo v. Black
Hawk Mut. Ins. Ass’n, 608 N.W.2d 442, 445 (Iowa 2000); In re G.J.A., 547
N.W.2d 3, 6 (Iowa 1996))). Thus, we utilize a deferential standard of
8
review in this case. This does not mean the agency’s interpretation is
conclusive, but we give it “appropriate deference.” See Iowa Code
§ 17A.19(11)(c) (stating that with respect to matters vested by law in an
agency, we “[s]hall give appropriate deference” to the agency’s
interpretation); see also Bonfield at 72 (defining “appropriate deference”
to mean “the agency action is subject to review by the unreasonable,
arbitrary, capricious, or abuse of discretion standard”). We will not
reverse an agency action based on an interpretation of law whose
interpretation has been clearly vested by a provision of law in the
agency’s discretion, unless the agency’s interpretation is “irrational,
illogical, or wholly unjustified.” Iowa Code § 17A.19(10)(l); see also Niles
v. Iowa Dist. Court, 683 N.W.2d 539, 541 (Iowa 2004) (explaining that in
interpreting statutes, specific terms (such as “irrational, illogical, or
wholly unjustified”) control general terms (such as “appropriate
deference” (citing Burton v. Univ. of Iowa Hosps. & Clinics, 566 N.W.2d
182, 189 (Iowa 1997); Christenson v. Iowa Dist. Ct., 557 N.W.2d 259,
262-63 (Iowa 1996))).
III. Discussion
Section 97B.48A(3) determines how benefits are to be calculated
when an IPERS member retires from covered employment, then resumes
covered employment, and retires again. Both parties agreed the
resolution of the correct computation of benefits rests with this statute.
It provides:
Upon a retirement after reemployment, a retired
member may have the retired member’s retirement allowance
redetermined under this section or section 97B.48, section
97B.50, or section 97B.51, whichever is applicable, based
upon the addition of credit for the years of membership
service of the employee after reemployment, the covered
wage during reemployment, and the age of the employee
after reemployment. The member shall receive a single
9
retirement allowance calculated from both periods of
membership service, one based on the initial retirement and
one based on the second retirement following reemployment.
If the total years of membership service and prior service of a
member who has been reemployed equals or exceeds thirty,
the years of membership service on which the original
retirement allowance was based may be reduced by a
fraction of the years of service equal to the number of years
by which the total years of membership service and prior
service exceeds thirty divided by thirty, if this reduction in
years of service will increase the total retirement allowance of
the member. The additional retirement allowance calculated
for the period of reemployment shall be added to the
retirement allowance calculated for the initial period of
membership service and prior service, adjusted as provided
in this subsection. The retirement allowance calculated for
the initial period of membership service and prior service
shall not be adjusted for any other factor than years of
service. The retired member shall not receive a retirement
allowance based upon more than a total of thirty years of
service. Effective July 1, 1998, a redetermination of a
retirement allowance as authorized by this subsection for a
retired member whose combined service exceeds the
applicable years of service for that member as provided in
sections 97B.49A through 97B.49G shall have the
determination of the member’s reemployment benefit based
upon the percentage multiplier as determined for that
member as provided in sections 97B.49A through 97B.49G.
Iowa Code § 97B.48A(3).
Based on this statute, IPERS calculates retirement benefits for
members who retire after reemployment by taking the sum of the
benefits calculated from the initial period of employment and the benefits
calculated from the period of reemployment. These two separate
calculations are then added together into a single retirement allowance.
One administrative rule promulgated by IPERS similarly explains the
recomputation of benefits by a member who is reemployed in covered
employment after retirement and retires again. It provides:
A member who is reemployed in covered employment
after retirement may, after again retiring from employment,
request a recomputation of benefits. The member’s
retirement benefit shall be increased if possible by the
addition of a second annuity, which is based on years of
10
reemployment service, reemployment covered wages and the
benefit formula in place at the time of the recomputation. A
maximum of 30 years of service is creditable to an individual
retired member. If a member’s combined years of service
exceed 30, a member’s initial annuity may be reduced by a
fraction of the years in excess of 30 divided by 30. The
second retirement benefit will be treated as a separate
annuity by IPERS. Any contributions that cannot be used in
the recomputation of benefits shall be refunded to the
employee and the employer.
Iowa Admin. Code r. 495—12.8(3) (2004) (emphasis added).
Thoms primarily challenges the method of calculation by IPERS by
isolating the second sentence in the relevant statute, “The member shall
receive a single retirement allowance calculated from both periods of
membership, one based on the initial retirement and one based on the
second retirement following reemployment.” Iowa Code § 97B.48(3). He
claims this sentence expresses the legislative intent for retired members
to receive “a single retirement allowance,” not two allowances added
together, calculated from both periods of membership service, meaning
the total years of service. In other words, Thoms claims this sentence
means benefits following retirement after reemployment are determined
by adding the two periods of employment together and computing
benefits based on a single uninterrupted period of employment. IPERS,
on the other hand, asserts this sentence merely means that the member
should only receive one monthly allowance in the form of a single check
for the total of the two benefits added together.
We interpret statutes by considering them as a whole, not by
looking at isolated parts of the statute. State v. Young, 686 N.W.2d 182,
184-85 (Iowa 2004). Thus, we begin our analysis with the entire statute
in mind.
A member who retires after reemployment already has an existing
retirement allowance in place. The benefits are merely suspended or
11
otherwise limited during the period of reemployment. Thus, retirement
after a period of reemployment means the existing retirement allowance
may need to be redetermined based upon the period of reemployment.
Section 97B.48A(3), the statute at the center of this controversy,
addresses how the allowance is redetermined.
We acknowledge the section is not crystal clear, especially
considering only the first two sentences of the statute. The statute
addresses a complicated subject matter that involves a very detailed and
intricate process. It is not always easy to express mathematical formulas
in words, and it is understandable how different interpretations can
result from statutes describing the rather enigmatic subject of retirement
and pension plans. We have recognized the ease with which different
interpretations can result from almost all statutes, and this is even more
so with pension statutes. See Teamsters Local Union No. 421 v. City of
Dubuque, 706 N.W.2d 709, 713 (Iowa 2005) (“Disputes over the
interpretation of a statute can arise even with the most carefully drafted
laws. Disputes arise because it is nearly impossible, even for the most
thoughtful lawmakers, to anticipate all future circumstances and neatly
corral them into communicative words.” (citing 2A Norman J. Singer,
Statutes and Statutory Construction § 45:02, at 15 (6th ed. 2000))).
However, when section 97B.48A(3) is considered in its entirety, it
becomes clear that the redetermination is based upon the sum of the two
separate benefit amounts computed for each period of employment.
Thus, we find it largely unnecessary to lock horns over particular words
and phrases within each sentence of the statute in this case because the
entirety of the statute clearly resolves the dispute.
12
After the statute describes in the first sentence the three factors
upon which a redetermination is made (“the years of membership after
reemployment, the covered wage during reemployment, and the age of
the employee after reemployment”), and explains in the second sentence
that the member receives a single retirement allowance based on the
redetermination calculated from both periods of service (“The member
shall receive a single retirement allowance calculated from both periods
of membership service, one based on the initial retirement and one based
on the second retirement following reemployment.”), the third sentence
describes the calculation method when the total years of service exceeds
thirty years. While the third sentence is not factually applicable to this
case, it unmistakably clarifies the intended calculation scheme under the
statute for retirement after reemployment.
It was necessary for the legislature to articulate a specific provision
describing how a retirement allowance would be calculated for retirement
after reemployment in the event the total years of membership service
exceeded thirty years because monthly IPERS benefits equal one-twelfth
of the applicable percentage of the three-year average covered wage
multiplied by the fraction of years of service, which is the years of service
divided by thirty years. Iowa Code § 97B.49A(3). However, this fraction
of years of service, used as the multiplier, can never exceed one. Id.
§ 97B.49A(1)(b). Thus, years of service by a state employee in excess of
thirty years do not benefit a member in the calculation process by
increasing the fraction of years of service to a number greater than one. 4
4Years of service by a state employee over thirty years do add to the applicable
percentage of the applicable wage component in the formula by increasing it up to a
maximum of sixty-five percent. Id. § 97B.49A(1)(a). That is, IPERS benefits are
calculated in part based on sixty percent of the three-year average covered wages. Id.
§ 97B.49A(3). Years of service in excess of thirty can increase this percentage up to
sixty-five percent. Id. § 97B.49A(1)(a).
13
Consequently, when a member retires after reemployment with more
than thirty years of total service, the third sentence of the statute
permits the member to adjust the initial retirement allowance by
reducing the service years used in the calculation by the total number of
service years in excess of thirty, so the calculation of the second
retirement allowance based on the period of reemployment can utilize
those years in the event they will make the total allowance greater.
Without this provision, the second retirement allowance could only use
the number of years remaining after the original years of service during
the original period of employment up to thirty. 5
This procedure is important in interpreting the statute because it
clearly reveals that the single retirement allowance given after retirement
following reemployment is based on two separate calculations, which are
then added together. That is, the calculation process described in the
5The operation of this procedure can be best described by using an example.
Assume an employee initially worked for 20 years, then retired, then later became
reemployed for 12 more years. Because the final retirement allowance can only be
based on 30 years of service, 2 years of the employee’s reemployment would essentially
go to waste and could not be used in the “fraction of years of service” used as the
multiplier in determining the retirement allowance. This is true because the fraction
used to calculate the benefit amount for the period of reemployment could only be
10/30, instead of 12/30, since the fraction used to calculate the initial retirement
benefit was 20/30. However, the legislature recognized that it may be more
advantageous for the employee to have the final allowance calculated based on more of
the reemployment years, as opposed to original employment years. Thus, instead of
using 20/30 for the “fraction of years of service” used to calculate the benefit amount
for the original employment, the statute allows the employee to reduce that fraction by a
fraction in which the “extra” years of service are the numerator, and 30 is the
denominator. This would then permit the retired member to use the full 12 years of
service in the fraction used to calculate the benefit amount for the period of
reemployment. So, in our example, the new fractions would be:
Fraction of Years of Service Fraction of Years of Service
for Original Employment for Reemployment
Was Now Was Now
20 − 2 = 18 10 12
30 30 30 30 30
14
first two sentences reveals that the calculation of the second retirement
benefit amount is based on the period of reemployment, which is then
added to the initial retirement benefit amount for a total single
allowance. Clearly, if the statute instead contemplated that the
calculation was made after adding together the two periods of
employment, as claimed by Thoms, it would be unnecessary for our
legislature to implement the procedure described in the third sentence
governing reemployment that covers total service years in excess of thirty
years. In other words, it would be unnecessary to have a procedure to
permit a retired member to allocate the thirty-years-of-service cap
between the first period of service and the second period of service to
come up with the most advantageous final retirement allowance if the
two periods of employment were combined together anyway and the
benefit was determined based on factors existing at the time of the
second retirement. It would be unnecessary because the allowance for
retirement after reemployment under that method of calculation would
not change depending on the number of years of service allocated
between the two periods. We will not read a statute so that any provision
will be rendered superfluous. See Miller v. Marshall County, 641 N.W.2d
742, 749 (Iowa 2002) (“Each term [in a statute] is to be given effect, so
that no single part is rendered insignificant or superfluous.” (Citation
omitted.)); 2A Singer § 46:06, at 181 (“ ‘It is an elementary rule of
construction that effect must be given, if possible, to every word, clause
and sentence of a statute.’ ”).
The remainder of the statute only confirms this interpretation. In
particular, the fourth sentence makes it clear that the additional (second)
retirement allowance calculated for the reemployment period is “added”
15
to the initial retirement allowance, as adjusted, calculated for the initial
period. See Iowa Code § 97B.48A(3) (“The additional retirement
allowance calculated for the period of reemployment shall be added to
the retirement allowance calculated for the initial period of membership
service . . . , adjusted as provided in this subsection.”). Any doubt cast
by the first two sentences over the question whether the final allowance
is calculated based on separate periods of service or a combination of the
periods of service is amply resolved by considering the entire statute.
We conclude the interpretation of the statute by IPERS under its
applicable rules and regulations reflects the intent of the legislature to
calculate retirement benefits after reemployment separately on each
period of employment. The district court correctly concluded that the
interpretation by IPERS was not “irrational, illogical, or wholly
unjustified.” Id. § 17A.19(1)(l).
IV. Conclusion
The decision by the district court on the petition for judicial review
filed by Thoms was correct. IPERS correctly determined Thoms’ monthly
benefits by calculating one annuity based on his initial employment, and
adding to it a second annuity based on his reemployment. Accordingly,
we affirm.
AFFIRMED.