COMPUTATION OF RETIREMENT PAY FOR INSTRUCTORS AT WASHINGTON STATE COLLEGE AND UNIVERSITY OF WASHINGTON

COMPUTATION OF RETIREMENT PAY FOR INSTRUCTORS AT WASHINGTON STATE COLLEGE AND UNIVERSITY OF WASHINGTON.

Leave of absence does not count in the computation of retirement pay for length of service.

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                                                                    April 13, 1951

Honorable Marshall A. Neill
Neill and Aitken,Lawyers
First National Bank Building
Pullman, Washington                                                                                   Cite as:  AGO 51-53 No. 16

Dear Sir:

            We are in receipt of your letter of November 28, 1950, in which you ask our opinion as follows:

            "If a faculty member of the State College is granted a leave of absence for one or more years of service prior to his retirement, should the year or years spent on leave of absence count in computation of retirement pay?"

            The conclusion we have reached may be summarized as follows:

            The law in question is apparently designed to secure to retiring faculty members benefits commensurate with the annual salary paid for the last ten years of their full time service.  Therefore, only full years of service and compensation should be used.  As there is no requirement that such years be continuous if in the chronological order, one of such years is spent on a leave of absence, then computations should take into consideration the necessary year or years next prior to the last ten in order to establish the proper average.

             [[Orig. Op. Page 2]]

                                                                     ANALYSIS

            The retirement system in existence for faculty members and employees of the State College and the State University provides benefits and a method of financing based upon salaries.  It will be noted that the members contribute towards the purchase of an annuity to become payable upon retirement as follows:

            "* * * not less than 5% of their salaries during each year of full time service after the first two (2) years of such service * * *" (Section 2, Chapter 223, Laws of 1947, Rem. Supp. 47, 4543-12).

            Further, the Regents pay towards the purchase of an annuity under the following statutory language:

            "In no case shall the Regents pay in any one year towards the purchase of such annuity more than half of the annual premium of any faculty member or other employee, nor an amount exceeding ten per cent (10%) of such person's salary, whichever is less."  (Section 3, Chapter 223, Laws of 1947, Rem. Supp. 47, 4543-13).

            Benefits are computed under the provisions of section 1 (c), chapter 223, Laws of 1947 (Rem. Supp. 47, 4543-11) which reads in part as follows:

            "To pay to any such retired person, each year after his retirement, an amount which, when added to the amount of such annuity received by him in such year, will not exceed 50% of theaverage annual salary paid to such person for his last ten (10) yearsof full time service at such institution."  (Emphasis supplied).

            It is immediately apparent that the member's contributions buy an annuity which in the last analysis is a sum of money to be paid out to the recipient over a number of years.  The payments in question are governed by interest rates and mortality experience.  The difference between such annuity and the actual amount to be received is supplied from funds contributed by Regents of the institution.  The determination of this total amount is therefore of  [[Orig. Op. Page 3]] material importance and we must look to the pattern of the law to determine what is intended.  Obviously in drawing a law of this kind the legislature must have been aware of the fact that leaves of absence for various purposes are quite usual in connection with the operation of educational institutions.  On the other hand, the principle of basing retirement benefits on an average compensation over a period of years is very usual.  This principle embodies several features.  First, it protects the institution and the pension fund against the possibility of unusually large benefits to be based on a last minute promotion to a high salary range for a relatively short period of time.  On the other hand, it assures to the member benefits commensurate with an average salary over the later days of his service which period of time usually comprises the period of the highest earnings.  Also, in recent years it has tended to keep benefits to be derived in step with the declining value of the nation's currency.

            The key to the situation at hand are the words "annual salary paid" and "for full time service."  It is hardly necessary to quote numerous authorities to establish the fact that full time service could hardly be construed to be a period of time during which a person was on an uncompensated leave of absence.  Annual salary paid obviously takes into consideration the amount actually received in a year regardless of whether the person works the full twelve months, which is not usually the case where an educational institution is being operated.  We feel that the provision "full time service," therefore, is designed to protect a member from having a small amount actually paid as an annual salary in any year, most of which was spent on a leave of absence, from being used in the computation of the average which is to be one of the factors for controlling benefits.  Hence, it becomes logical to state that in the event one of the last ten actual years of service of a faculty member is devoted to either a full time or part time leave of absence, then in order to make computations, the necessary year or years next prior to retirement must be taken into consideration.

            The argument that the purpose is to set a salary pattern might be supported if it weren't for the fact that benefits must be based upon annual salary paid and not upon an annual salary which might have been receivable had the person actually worked full time in any given year.  To pursue this argument to a proper conclusion may we say that the words "annual salary paid" must be given a literal interpretation.  Annual salary would have been sufficient had the legislature not intended to convey a further meaning.  We realize, of course, that there must be some nexus between benefits and the financing of the same.  A study of the law reveals that contributions for annuity purposes are based on actual salary paid and the difference between the annuity purchased by the member and the benefits to be received must be paid by the  [[Orig. Op. Page 4]] Regents also on the basis of salary paid.  This militates against the use of any such theory as is advanced in favor of the general salary pattern contention.  Rather the average is based on actual amount received over a period of ten years and payments for the financing of the same are also made on a salary paid basis.  The protection to the member as pointed out herein, resides in the full time service wording which means that a year spent partially on a leave of absence or entirely on such a leave without compensation could not be used to lower the average upon which contributions have been made and rights are based.

Very truly yours,

SMITH TROY
Attorney General