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State Teachers’ Retirement System Properly Construed Definition Of Final Compensation In Education Code §22134.5 To Incorporate The Definition Of Compensation Earnable In §22115
The City College of San Francisco hired George Rush in 1974. From July 2008 through February 2009, Rush served as head football coach at a salary of roughly $120,000. From March 2009 through February 2010, Rush served in a position that he described as “associate dean,” in which he earned an annual salary of approximately $160,000 for a portion of the period and $151,000 for the other portion. From March 2010 through June 2010, he resumed serving as the head football coach at a salary of approximately $120,000. Rush retired in 2012 after 38 years of service.
After Rush retired, the California State Teachers Retirement System (CalSTRS) informed him that it calculated his pension using the entire 2009–2010 school year as the period of 12 consecutive months in which he had the highest average annual compensation earnable. During this time, Rush served the first eight months as associate dean and the last four months as football coach.
CalSTRS applied Education Code section 22115, subdivisions (c) and (d) in support of its calculation. These subdivisions provide that if a member worked at least 90 percent of a school year at a higher pay rate, CalSTRS must calculate the member’s pension as if the member earned all service credit for the year at the higher rate. However, if the member worked less than 90 percent of the year at the higher rate, as Rush did, CalSTRS must calculate the member’s pension by using the weighted average of the two salaries. CalSTRS determined the weighted average equaled $141,569.
Rush disagreed with CalSTRS’s calculation and argued that Education Code section 22134.5, subdivision (a) defined “final compensation” as “the highest average annual compensation earnable by a member during any period of 12 consecutive months.” Rush argued his final compensation must be $160,000, which is what he earned as an associate dean during the 12 consecutive months from March 2009 through February 2010. Using this higher compensation amount would increase Rush’s monthly pension.
Rush appealed the CalSTRS decision pursuant to Education Code section 22219. Following a hearing, an administrative law judge issued a proposed decision denying Rush’s appeal, and an appeals committee of the board adopted the decision. Rush filed a petition in the trial court asking the court to reverse the board’s decision. After briefing and a hearing, the trial court issued an order denying Rush’s petition. Rush again appealed to the Court of Appeal.
Upon examination of the applicable statutes, the Court of Appeal found the Legislature amended Education Code section 22115 in 1997 to define “compensation earnable:” as the annual creditable compensation that a person would earn in a school year if they were employed on a full-time basis and worked full time in that position. However, the Legislature enacted Education Code section 22134.5 in 2000. It defined “final compensation” to mean, for a member with 25 years or more of service, “the highest average annual compensation earnable by a member during any period of 12 consecutive months.” When Rush retired in 2012, these statutes provided in pertinent part that “final compensation” meant “the highest average annual compensation earnable by a member during any period of 12 consecutive months” (Section 22134.5, subd. (a)), and “compensation earnable” meant “the creditable compensation a person could earn in a school year for creditable service performed on a full-time basis.” (Section 22115, subd. (a).) Accordingly, Rush’s appeal questioned the interpretation of two seemingly inconsistent provisions of the Education Code and the constitutionality of applying the versions of those statutes in effect when he retired.
The Court of Appeal held that the definition of “final compensation” in Education Code section 22134.5, subd. (a) included “compensation earnable,” and Education Code section 22115 defined that term to refer to the compensation earned in a school year. Moreover, Education Code section 22115 is part of the “Definitions” chapter of the Teachers’ Retirement Law (Education Code sections 22100–22177). If a provision in the Definitions chapter defined a term, CalSTRS must apply that definition when construing provisions in the Teachers’ Retirement Law that use the term. The definition of “compensation earnable” in Education Code section 22115 thus governed the construction of that term as used in Education Code section 22134.5, subd. (a).
Furthermore, Education Code section 22115, subd. (d) included the sentence, “This subdivision shall be applicable only for purposes of determining final compensation.” Therefore, Rush’s argument that the definition of “compensation earnable” in Education Code section 22115 did not apply to the determination of final compensation was at odds with the express provisions of the statute. The Court of Appeal found CalSTRS’s interpretation was within the range of reasonable statutory construction, and thus the Court deferred to its expertise.
Rush further argued that CalSTRS’s determination impaired his vested contractual right to a pension calculated pursuant to Education Code section 22134.5, subd. (a) as enacted in 2000. However, the Court of Appeal found the Legislature’s enactment of Education Code section 22134.5, subd. (a) did not reduce any benefits Rush was promised prior to its adoption, so CalSTRS did not unconstitutionally impair an obligation of a contract.
Ultimately, the Court of Appeal denied Rush’s motion and upheld CalSTRS’s calculation of Rush’s pension.
Rush v. State Teachers’ Ret. Sys. (2021) 62 Cal.App.5th 151.