Wade v. Arizona State Retirement System
370 P.3d 132
Ariz. Ct. App.2016Background
- Appellants Paddock and Wade were City of Chandler employees and members of the Arizona State Retirement System (ASRS) and the City’s §457 deferred compensation plan; their employment contracts promised an "annual deferred compensation" paid into the plan.
- Historically the City included those deferred-compensation payments in the ASRS "compensation" base for employer/employee contributions; in 2011 it stopped after advice from an ASRS employee.
- ASRS issued a letter advising employers not to report employer contributions to supplemental defined-contribution plans as ASRS compensation.
- Paddock and Wade sued (class action) seeking declaratory/mandamus relief; Wade retired before filing. The superior court granted summary judgment to ASRS for Paddock and dismissed Wade for failure to exhaust administrative remedies.
- The court of appeals reversed both rulings, holding the statute’s plain language includes employer contributions to a deferred-compensation plan as "compensation" and that Wade need not exhaust the administrative process for the statutory-interpretation challenge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether A.R.S. § 38-711(7) includes employer contributions to a §457 deferred-compensation plan in "compensation" for ASRS contribution calculations | The City’s deposits into the deferred plan are contractually required deferred compensation and therefore fall within the statute’s express inclusion of "amounts that are subject to deferred compensation" | ASRS: "compensation" means salary/wages actually or potentially received in cash by the employee; employer contributions paid directly to the plan are not "paid to a member" and thus excluded | Reversed summary judgment: statutory text plainly includes amounts subject to deferred compensation, including employer contributions to the plan, as "compensation" |
| Whether a retired member (Wade) must exhaust ASRS administrative remedies before seeking judicial relief over ASRS’s statutory interpretation | Wade: challenge to ASRS statutory interpretation is not an "appealable agency action" and is excluded from the administrative-review requirements; exhaustion not required | ASRS: Wade should have pursued administrative remedies (appealable action or invoice procedure under §38-738(B)) before suing | Reversed dismissal: ASRS interpretation is a statement of policy/interpretation excluded from "appealable agency action," and §38-738(B) did not provide a viable administrative remedy here |
Key Cases Cited
- Dressler v. Morrison, 212 Ariz. 279 (Ariz. 2006) (statutory-interpretation standard: de novo review and focus on legislative intent)
- Pendergast v. Ariz. State Ret. Sys., 234 Ariz. 535 (App. 2014) (construe public-retirement statutes to protect contractual retirement benefits)
- Univ. of Chicago v. United States, 547 F.3d 773 (7th Cir. 2008) (FICA exception analysis includes mandatory salary-reduction agreements)
- Ventura Cnty. Deputy Sheriff's Ass'n v. Bd. of Retirement of Ventura Cnty. Employees' Retirement Ass'n, 16 Cal.4th 483 (Cal. 1997) (contrasting statutory scheme construed to exclude employer contributions to deferred plans)
- Fields v. Elected Officials' Retirement Plan, 234 Ariz. 214 (Ariz. 2014) (distinguishing mandamus and retirement-benefit claims)
- A.H. v. Ariz. Prop. & Cas. Ins. Guar. Fund, 190 Ariz. 526 (Ariz. 1997) (A.R.S. § 12-341.01 fee authorization applies when statute defines contract terms)