Mary wade/marla Paddock v. asrs/asrs Board
241 Ariz. 559
Ariz.2017Background
- The Arizona State Retirement System (ASRS) is a defined‑benefit pension plan whose employer and employee contribution rates and retiree benefits depend on a member’s “compensation.”
- The City of Chandler operated a 457 deferred‑compensation plan that allowed (1) employee payroll deferrals and (2) unconditional employer contributions specified in employment contracts, paid into a trust for employees’ exclusive benefit and subject to FICA when contributed.
- Mary Wade and Marla Paddock had employment contracts requiring periodic City contributions to the 457 Plan in addition to base salary; the City historically reported such employer 457 contributions to ASRS as “compensation” but stopped in 2010 on ASRS advice.
- Wade and Paddock sued ASRS seeking a declaration that the City’s contractually required employer contributions to the 457 trust are “compensation” under A.R.S. § 38‑711(7) and injunctive relief; the superior court granted summary judgment for ASRS, but the court of appeals reversed.
- The Arizona Supreme Court granted review to resolve whether employer‑contributed deferred compensation counts as “compensation” for ASRS purposes and whether plaintiffs were entitled to attorney fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether employer contributions to a 457 deferred‑compensation trust are “compensation” under A.R.S. § 38‑711(7) | Wade/Paddock: Employer contributions that are contractually paid and paid for services are part of the member’s salary and thus “compensation,” like employee‑elected deferrals | ASRS: “Compensation” should be limited to pay actually received or pay the employee elects to defer; employer contributions are benefits, not salary | Court: Statute ambiguous but, applying textual and contextual canons, employer contributions that are contractually required and paid as part of salary are “compensation” under § 38‑711(7) |
| Whether plaintiffs are entitled to attorney fees under A.R.S. § 12‑341.01 | Wade/Paddock: Dispute arises out of contract so fees are authorized | ASRS: urged reconsideration after subsequent authority | Court: Court of appeals correctly awarded fees; Hall resolved the fee issue and award stands |
Key Cases Cited
- Kerr v. Killian, 207 Ariz. 181 (Ariz. 2004) (discussed employer vs. employee contributions in tax context but not dispositive on whether employer contribution is salary)
- Ventura County Deputy Sheriffs’ Ass’n v. Board of Retirement of Ventura County Employees’ Retirement Ass’n, 940 P.2d 891 (Cal. 1997) (California decision excluding employer 457 contributions from retirement “compensation” under that state’s specific statutory definition)
- Hall v. Elected Officials’ Retirement Plan, 241 Ariz. 33 (Ariz. 2016) (resolved attorney‑fee question under A.R.S. § 12‑341.01 relied on here)
- Fields v. Elected Officials’ Ret. Plan, 234 Ariz. 214 (Ariz. 2014) (statutory construction canon against surplusage invoked)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (U.S. 1984) (framework for deference to administrative interpretations discussed)