POLICE PENSIONS ‑- APPLICABLE LAW

POLICE PENSIONS ‑- APPLICABLE LAW

Police officers have a vested contractual interest in the pension provisions in force at the commencement of their employment.  Any subsequent legislative amendments must be agreed to by them.

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                                                                  August 7, 1956

Honorable Cliff Yelle
State Auditor
Legislative Building
Olympia, Washington

                                                                                                              Cite as:  AGO 55-57 No. 310

Attention:  !ttMr. A. E. Hankins, Chief Examiner

            Division of Municipal Corporations

Dear Sir:

            Your letter of July 9, 1956, previously acknowledged, requested our opinion on six questions raised by the City of Vancouver as a result ofBakenhus v. Seattle, 148 Wash. Dec. 643 [[48. Wn.2d 695]].  The specific questions are as follows:

            1.         Do the officers who were in the employ of the city in 1952 and who have remained, have an option to come under the law in effect in 1952?

            2.         Do the officers who were employed subsequent to 1952 but prior to the effective date of the 1955 law (June 8, 1955) have an option to come under the prior act?

            3.         Assuming that the above officers do have an option and elected the prior law, and assuming they have been under the 1955 law since its effective date, would they be entitled to a refund in the amount of the difference between what their contributions would have been under the prior law and their contributions under the 1955 law?

             [[Orig. Op. Page 2]]

            4.         If the officers have an option, and exercise this option, would this be final as to all laws with respect to which the option could have been exercised?

            5.         Assuming that the officers have an option, is there any time limit for the exercise of this option?

            6.         If the legislature again amends the law, would the officers be allowed to choose between the law as amended and their choice at the present time?

            We answer all of the questions in the affirmative, with the exception of question 5.

                                                                     ANALYSIS

            The City of Vancouver became a city of the first class in 1952.  As a first class city it became subject to the provisions of chapter 41.20 RCW which provides for police relief and pensions in first class cities.  Prior to that time the police officers' retirement benefits were governed by the provisions of chapter 41.44 RCW, the state‑wide [[statewide]]city employees' retirement statute.

            Employee contributions under the state‑wide [[statewide]]city employees' retirement system were and are based on actuary tables with retirement at age 60.  Retirement could be extended year by year for a maximum of five years.  The city has the election of making matching contributions on the basis of a $300.00 per month salary or a $400.00 per month salary.  In the former case the maximum retirement benefit would be $150.00 per month, and in the latter, $200.00 per month.  In no event is it to exceed 50 per cent of the officer's average salary at time of retirement.

            RCW 41.20.050, as it read in 1952, provided that an officer in cities of the first class may be retired after twenty-five years of service at 50 per cent of the amount of salary attached to the rank held by him for the year preceding the date of his retirement.  The maximum pension was set at $125.00 per month.

            Certain police officers were employed by the City of Vancouver prior to 1952 and continued so to be thereafter.  The question arises whether these officers may elect to come under the provisions of chapter 41.20 RCW as it then existed.

             [[Orig. Op. Page 3]]

            Bakenhus v. Seattle, 148 Wash. Dec. 643 [[48 Wn.2d 695]], held that pension rights are contractual in nature and become vested upon the employee's entering public service.  The pension rights in existence at the time the person accepts a public position becomes an integral part of the contract of employment, and may not be diminished by subsequent legislation without corresponding benefits.

            It appears, under the theory of the Bakenhus case, that the police officers of Vancouver had a vested contractual interest in the retirement benefits in effect when they entered the service.  This is true in spite of RCW 41.44.060 which excludes policemen in first class cities from the provisions of the state‑wide city employees' retirement act.

            Parties to a contract may substitute a new contract for a prior one under the theory of novation.  A novation is a new contractual relation; it must have necessary parties to the contract, a valid prior obligation to be displaced, a proper consideration and a mutual agreement.  MacPherson v. Franco, 34 Wn. (2d) 179.

            In the instant case we have the proper parties, i.e., the police officers and the City of Vancouver.  The city's obligation under the pension system in effect prior to 1952 constitutes a valid prior obligation to be displaced.  A proper consideration exists, and the mutual agreement required would be self-evident, should the officers elect to come under RCW chapter 41.20 as it read in 1952.

            Police officers employed subsequent to 1952 but prior to the 1955 enactment remain under the pension provisions of the law in effect at the time of entering employment.  Any election on the part of the employee must be to become covered by the subsequent enactment.  This appears to be the clear holding of the Bakenhus case, supra.  The court at page 647 makes the following statement:

            ". . . The promise on which the employee relies is that which is made at the time he enters employment; and the obligation of the employer is based upon this promise."

            We conclude in this respect the officers under consideration remain subject to the prior law until such time as they elect to be subject to the provisions of the more recent pension law.

             [[Orig. Op. Page 4]]

            RCW 41.20.130, as it existed prior to 1955, provided for employee contributions at the rate of 2 per cent of the officer's salary monthly. RCW 41.20.130 (1955 Supp.) calls for a monthly contribution of 4 1/2 per cent, not to exceed 4 1/2 per cent of the basic monthly salary of a member holding the rank of captain.  Assuming there are officers whose contracts of employment include the provisions of RCW chapter 41.20 before the 1955 amendment and who have not elected to come under the latter enactment, and, assuming these officers have been contributing under the higher rate of the 1955 act, they would be entitled to a refund of the excess contributions.  The officers have a vested interest in the entire pension act and not in just portions thereof.  The contributions must not exceed those provided for in the act which has become a part of the contract of employment.

            If a police officer elects to supplant his former contract with a new one based upon a legislative change, he must accept the new law in its entirety.  His decision would be final as to all matters covered by the new statute.  He cannot retain the advantages of his prior agreement and obtain any increased benefits of the latter act.  The novation must be complete.

            Judging from theBakenhus case, there appears to be no time limit for the exercise of the election.  In that case the officer waited almost eighteen years before making known his intention to remain under chapter 39, Laws of 1909.

            If the law is again amended by the legislature, the officers would be entitled to elect the law under which they wish to be covered.  The contract in effect may always be displaced by a new contract with the mutual consent of the parties.

            We hope this opinion will prove of service to you.

Very truly yours,

DON EASTVOLD
Attorney General

MITCHELL DOUMIT
Assistant Attorney General