STATE OF NEW HAMPSHIRE SUPREME COURT. No Raymond A. Cloutier. The State of New Hampshire. And

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1 STATE OF NEW HAMPSHIRE SUPREME COURT No Raymond A. Cloutier v. The State of New Hampshire And The Board of Trustees of the New Hampshire Judicial Retirement Plan BRIEF FOR THE BOARD OF TRUSTEES OF THE NEW HAMPSHIRE JUDICIAL RETIREMENT PLAN ON APPEAL FROM A JUDGMENT OF THE STRAFFORD COUNTY SUPERIOR COURT THE BOARD OF TRUSTEES OF THE NEW HAMPSHIRE JUDICIAL RETIREMENT PLAN By: Charles G. Douglas, III NH Bar No. 669 Douglas, Leonard & Garvey, P.C. 6 Loudon Road. Suite 502 Concord, NH (603) By: David M. Howe NH Bar No Wildemere Terrace Concord, NH (603) March 4, minutes oral argument requested Charles G. Douglas, III, Esquire to argue

2 TABLE OF CONTENTS Page TABLE OF AUTHORITIES.....ii ISSUES PRESENTED...1 CONSTITUTIONAL AND STATUTORY PROVISIONS..2 STATEMENT OF THE CASE AND FACTS..4 SUMMARY OF ARGUMENT...12 ARGUMENT I. IF THE PETITIONER and INTERVENORS ARE ENTITLED TO RECEIVE THE BENEFITS PROVIDED BY THE REPEALED RETIREMENT STATUTES, THE TRIAL COURT PROPERLY DETERMINED THAT THE 10 PERCENT AND 1 PERCENT REIMBURSEMENT AWARDS SHOULD BE EXCLUDED IN DETERMINING THEIR BENEFITS. 13 A. The Ten Percent Contribution Reimbursement Should Be Excluded In Determining Benefits pursuant to the Previous Retirement Statutes..13 B. The 1.01 Percent Raise Should Be Excluded in Determining Benefits pursuant to the Repealed Retirement Statutes...16 II. III. IF CONTRACT RIGHTS OF THE PETITIONER AND THE INTERVENORS HAVE BEEN VIOLATED, THE STATE SHOULD PAY FOR THEIR BENEFITS OR REIMBURSE THE BOARD FOR ANY ADDITIONAL COST OF PROVIDING THE BENEFITS...18 IF CONTRACT RIGHTS OF THE PETITIONER AND INTERVENORS UNDER THE REPEALED RETIREMENT STATUTES HAVE BEEN VIOLATED, THEY SHOULD NOT HAVE A CHOICE BETWEEN THOSE BENEFITS AND THE BENEFITS PROVIDED PURSUANT TO RSA 100-C.. 22 CONCLUSION.25 REQUEST FOR ORAL ARGUMENT.26 CERTIFICATE OF SERVICE.26 i

3 TABLE OF AUTHORITIES Page Cases J.E.D. Associates v. Atkinson, 121 N.H. 581 (1981) 20 Claremont School District v. Governor, 144 N.H. 210 (1999).22 State v. Chrisicos, 158 N.H. 82 (2008) 19, 23 Soukup v. Brooks, 159 N.H. 9 (2009)...19 Kopp v. Fair Political Practices Commission, 47 Cal. Rptr. 2d 108 (Cal. 1995)..24 Statutes Laws, 1999, 225: 38, Laws, 2001, 158: 93, 94, 95, , 18 Laws, 2002, ch , 17 Laws, 2003, ch passim Laws, 2003, 311: Laws, 2003, 311: , 13, 15, 16, 17 Laws, 2003, 311: , 13, 14, 19, 22, 23 Laws, 2003, 311: , 21 Laws, 2003, 311: Laws, 2003, 311: Laws, 2004, 146: Laws, 2005, 177: 74, 75, 76, 77, 78, Laws, 2005, 177: , 16, 17 ii

4 Laws, 2007, 263: 150, 151, 152, 154, 155, Laws, 2007, 313: RSA 94: RSA 94: RSA Chapter 100-C...passim RSA 100-C: , 19. RSA 100-C: , 19 RSA 100-C: RSA 100-C: 13. 7, 8, 9, 10 RSA 100-C: , 9, 10, 13 RSA 100-C: , 10 RSA 490: 2 (repealed 2003).....4, passim RSA 491: 2 (repealed 2003). 4, passim RSA 491-A: RSA 502-A: 6-a (repealed 2003) , passim RSA 547: 2-a (repealed 2003).. 4, passim Other Authorities N.H.R. Jour. 713 (2002). 5 N.H.S. Jour (2003).. 19 N.H.S. Jour (2003)..6 N.H.H.R. Jour. 244 (1999)... 5 N.H.H.R. Jour (1999)....5 N.H.H.R. Jour (2001)..5 iii

5 N.H.R. Jour (2001)....5 N.H.H.R. Jour. 147 (2002)..5 N.H.H.R. Jour. 58 (2003)....6 N.H.H.R. Jour , 952 (2003)....6 Report of the Finance Committee of the New Hampshire House of Representatives dated March 18, John Bursh, Who Has the Power? An Administrative Agency s Authority to Determine in the First Instance, Whether a State Statute is Unconstitutional, 28 Administrative Law Quarterly 1, 2 (Fall 2002/Winter 2003)..20 Constitutional Provisions N.H. Const. pt. I. art N.H. Const. pt. I, art 36-a..20 iv

6 ISSUES PRESENTED 1. If Chapter 311 of the Laws of 2003 is held to be unconstitutional as applied to the Petitioner and the Intervenors, whether the trial court erred in ruling that the 10 percent and 1.01 raises provided by Chapter 311 and Chapter 177 of the Laws of 2005 are excluded from the compensation upon which the benefits of the Petitioner and the Intervenors are determined under the previous retirement statutes, RSA 490:2, RSA 491:2, RSA 502-A:6-a and RSA 547:2-a? Supplementary Memorandum of Law in Support of the Board of Trustees Objection to Summary Judgment (State Appendix, ). 2. If Chapter 311 is held to be unconstitutional as applied to the Petitioner and Intervenors, does the State pay retirement benefits to the Petitioner and the Intervenors, and if not, is the State required to fund the New Hampshire Judicial Retirement Plan for any additional cost incurred by the Plan as a result of paying such benefits Memorandum of Law in Support of the Board of Trustees Objection to Summary Judgment (State App ). 3. If RSA Chapter 100-C is held to be unconstitutional as applied to the Petitioner and Intervenors, did the trial court err in ruling that the Petitioner and Intervenors have the right to elect the retirement benefit statute under which they shall receive benefits? Trial Court Order (State App., 46). 1

7 CONSTITUTIONAL AND STATUTORY PROVISIONS Provisions not referenced by the Appellant: N.H. Constit., pt. I, art. 36-a See Appendix at 1 Laws, 1999, 225: 38, 40 See Appendix at 1 Laws, 2001, 158: 93, 94, 95, 96 See Appendix at 2 Laws, 2002, ch. 177 See Appendix at 3 Laws, 2004, 146: 3-7 See Appendix at 4 Laws, 2005, 177: 74, 75, 76, 77, 78, 79 See Appendix at 7 Laws, 2005, 177: 96 See Appendix at 8 Laws, 2007, 263: 150, 151, 152, 154, 155, 156 See Appendix at 9 Laws, 2007, 313: 3-4 See Appendix at 11 RSA 94: 4 See Appendix at 12 RSA 94: 9 2

8 See Appendix at 12 RSA Chapter 100-C:13 See Appendix at 12 RSA 491-A: 1 See Appendix at 14 3

9 STATEMENT OF THE CASE AND FACTS The Board of Trustees (the Board ) of the New Hampshire Judicial Retirement Plan (the Plan ), which has not appealed the decision of the trial court, agrees with the Statement of the Case and Facts set forth in the brief of the appellant, the State of New Hampshire (the State ), as far as it goes, but the Board desires to bring other facts to the attention of the Court concerning the Board, the Plan and the legislative history of RSA Chapter 100-C. For many years New Hampshire judges received retirement, disability and death benefits from a pay as you go system pursuant to RSA 490:2 (Supreme Court Justice benefits), RSA 491:2 (Superior Court Justice benefits), RSA 502-A:6-a (District Court Justice benefits) and RSA 547:2-a (Probate Court Judge benefits) (collectively the Repealed Retirement Statutes ). The necessary annual retirement, disability and death benefits of retired judges and their beneficiaries were funded entirely out of the State s biennial budget and paid by the State Treasurer out of the General Fund. Under the prior statutes a judge retiring at age 70 with at least seven years of service or at age 65 with at least ten years of service received a retirement benefit equal to 75 percent of the currently effective annual salary of the office from which he retired. See The Repealed Retirement Statutes. Over a period of several years a group of legislators grappled with how to fund these retirement benefits as well as the cost of providing attractive judicial salaries and other benefits to judges through the course of the peaks and valleys of New Hampshire State revenues. In the 1999 legislative session a group of legislators submitted House Bill 735-FN-A to establish a defined contribution judicial retirement plan (i.e. a plan in 4

10 which the contributions, not the benefits, are specified). See N.H.H.R. Jour. 244 (1999). This bill would have established a retirement plan for new judges appointed after the effective date of the law and for exiting judges who opted to join the new plan within a year of its effective date. Id. at As a defined contribution plan it would have been funded with contributions made by the judges. Id. at 725 (proposed RSA 491-A: 7). Because of the complexity of the issues involved and concerns expressed about the bill, the bill was referred to a committee at the request of the sponsor without further action. See id. at 105. Following committee meetings during the summer of 2000 a group of legislators submitted House Bill 560 in the 2001 legislative session to create a contributory defined benefit plan for judges. See N.H.H.R. Jour. 201 (2001). This bill would have provided a defined retirement benefit funded with contributions made by both the State and the judges. Id. at The bill would also have permitted a judge with at least ten years of service to retire at age 55 with a reduced retirement benefit. Id. at 202. The bill was retained by a committee without action in December Id. at In early 2002 HB 560 was substantially amended to create RSA Chapter 100-C in a form similar to what was ultimately enacted as RSA Chapter 100-C. See N.H.H.R. Jour. 147 (2002). After passage by the House, it was sent to the Senate. In the Senate, however, it was amended simply to create a joint Senate and House committee to study the judicial retirement plan, N.H.S. Jour. 713 (2002), and, following concurrence of the House, the amended bill was enacted N.H. Laws Chapter 177. Following meetings of the joint study committee in 2002, a group of legislators submitted HB 671-FN-A in the 2003 legislative session to create the New Hampshire 5

11 Judicial Retirement Plan pursuant to a new RSA Chapter 100-C. N.H.H.R. Jour. 58 (2003). After amendments were made to the bill in both the House of Representatives and the Senate, see N.H.H.R. Jour , 952 (2003); N.H.S. Jour (2003), the amended bill was enacted N.H. Laws Chapter 311 ( Chapter 311 ). As a part of the implementation of Chapter 311, a request was filed with the Internal Revenue Service for a letter confirming the Plan s status as a defined benefit plan. The IRS responded with a request for certain technical amendments to RSA Chapter 100-C that are not relevant to this proceeding. These requested amendments were enacted as amendments of RSA Chapter 100-C in See 2004 N.H. Laws 146:3-7. Chapter 311 provided for the enactment of RSA Chapter 100-C effective upon the later of July 1, 2004, or 180 days after the Board of Trustees of the New Hampshire Judicial Retirement Plan certified to the joint legislative fiscal committee that the Plan had received a favorable determination letter from the Internal Revenue Service N.H. Laws Chapter 311:11. The parties have stipulated that such effective date is January 1, Pursuant to Chapter 311 judges who retired prior to such effective date continue to receive the retirement benefits pursuant to the Previous Retirement Statutes N.H. Laws 311:6. The law also provided for the appropriation of $42.8 million to the Board (funded from proceeds of a State bond issue) to be used to pay the unfunded accrued liability attributable to the judicial retirement system N.H. Laws 311: 8-9. This sum matched the total unfunded liability for the anticipated retirement benefits for judges who retired pursuant to the Repealed Retirement Statutes and future retirement benefits of sitting judges as determined in the actuarial report prepared by Milliman 6

12 Company for the legislature and later for the Board. See State App., (Affidavit of Charles G. Douglas, III, Esquire, Exhibit 1 to the Memorandum of the Board in support of its Objection to Summary Judgment) (this report dated as of January 1, 2005 (the effective date of RSA Chapter 100-C) is attached thereto and relies upon the same data as the report dated as of January 1, See the cover letter at the beginning of the report)). Although the statutes are less than clear how judges who retired before January 1, 2005 are to be paid, the Board in fact pays the retirement benefits of both those judges who retired pursuant to the Repealed Retirement Statutes and those who retire pursuant to RSA Chapter 100-C. There are no longer continuing appropriations in the State s budget for the payment of benefits pursuant to the Previous Retirement Statutes, only appropriations for the State s employer contribution to the Plan pursuant to RSA 100-C: 13. RSA Chapter 100-C provided for the creation of the Board, consisting of seven trustees, three appointed by the Courts, two by the Governor and Council, one by the Senate President and one by the Speaker of the House, to administer the Plan. RSA 100- C: 11. In addition to the initial $42.8 million dollars appropriated for the Plan, the Plan is funded on an ongoing basis by contributions of both the State and sitting judges. The rates of those contributions are determined by the Plan s actuary every two years. See RSA 100-C:13, I. To determine the contribution rates the actuary determines the actuarial values of the Plan s assets and liabilities based its projections of Plan membership and compensation of judges and other actuarial factors. See RSA 100-C: 13, I, III. As a part of this process the actuary determines the unfunded accrued liability of the Plan and 7

13 determines the level annual contribution that is necessary to discharge that liability over a twenty year period. Id., III(d). Member contributions are determined so as to equal in aggregate one half of the necessary annual contributions to the Plan, subject to a cap of not more than ten percent of each member s annual compensation. RSA 100-C: 14. Once a member has reached the combination of age and years of service making the member eligible for the maximum retirement benefit, the member no longer is required to make employee contributions to the Plan, but the State is still required to make its employer contributions for that member. RSA 100-C: 14. The Parties have stipulated that the Petitioner and the Intervenors did not have to make employee contributions to the Plan because they were fully vested in the maximum retirement benefit at Plan inception. See Joint Stipulation of the Parties filed with the Court on or about March 3, After the employee portion of the Plan s annual contribution is calculated, the State pays the balance of the annual required contributions to the Plan. See RSA 100-C: 13, IV. Under the new statute a judge who has at least 15 years of creditable service and is at least age 60, or has at least 10 years of service and is at least age 65, or has at least seven years of service may retire with a pension. RSA 100-C:5, I. A judge with at least 10 years of service and is at least age 65 receives a retirement benefit equal to 75 percent of the judge s final year s salary. Id., II. A judge who is age 70 and has seven years of service receives a retirement benefit of 45 percent of the judge s final year s salary and receives an additional 10 percent of such salary for each additional year of service over seven years. Id., I. A judge who is at least 60 years of age with at least 15 years of service receives a retirement benefit of 70 percent of the judge s final year s salary and is 8

14 granted an additional one percent for each year of service exceeding 15. Id., IV. Notwithstanding the above-described increases in benefits for additional years of service, in no event may a judge s retirement benefit exceed 75 percent of the judge s final year s salary. Id., V. The Board has construed the term final year s salary for purposes of RSA 100- C:5 to mean a judge s compensation earned for the 12-month period ending with the member s retirement during which the judge is an active member in the Plan. The Board has also determined that this amount includes longevity pay paid pursuant to RSA 94:4 and the last three days of termination pay paid pursuant to RSA 94:9. See State App., (Affidavit of Maureen Kryger, Exhibit 2 to the Memorandum of Law in Support of the Board s Objection to Summary Judgment). These amounts are not included in the compensation upon which the retirement benefit is determined under the Previous Retirement Statutes, which are position-based and rely upon current effective salary of the office from which he [or she] is retired. See Repealed Retirement Statutes. As enacted in Chapter 311, RSA 100-C: 13, III (g) provided for the establishment of a special account into which all earnings of the Plan in excess of 9.5 percent were allocated to be used only for the payment of supplemental benefits, including cost of living awards ( COLA s ) N.H. Laws 311: 1. RSA 100-C:17, I permitted the Board to award COLA benefits with the approval of the joint fiscal committee of the legislature from the special account. Id. These sections were amended in 2007 to eliminate the concept of the special account and provide different parameters for COLA awards N.H. Laws 313:3-4. 9

15 As amended these sections provide the Board with the discretion to award one time or nonrecurring COLA benefits up to an aggregate amount of $50,000 per year. RSA 100-C: 13, III(g); RSA 100-C: 17. The Board may award one time COLA s in the aggregate exceeding $50,000 per year only with the approval of the joint fiscal committee of the legislature and only if (i) the Plan s annuity accumulation fund earns at a level greater than the actuarial assumed rate of return approved by the Board (currently 8.0 percent) and (ii) the Plan is at least 90 percent funded for the calendar year. RSA 100-C: 17 (as amended in 2007). The funded ratio of the Plan determined in its most recent actuarial report included in the Plan s annual report was 74 percent. Chapter 311 also provided for a 10 percent increase in judicial salaries to cover the cost of the judges employee contributions to the Plan, which were initially 10 percent of compensation. See 2003 N.H. Laws 311: 3. It was later recognized that the 10 percent raise did not cover the whole amount of the employee contributions of the judges because they also had to pay an employee contribution on the 10 percent increase. In 2005 judicial salaries were increased by 1.01 percent to correct for this effect. See 2005 N.H. Laws 177:96. Although the judges employee contributions to the Plan are set by the Board based on actuarial reports, they are currently legislatively capped at 10 percent. RSA 100-C: 14. Because Chapter 311 provided the 10 percent raise solely to cover the judges employee contributions to the Plan, Chapter 311 also provided for those raises to be excluded from the calculation of retirement benefits of judges who retired before RSA Chapter 100-C went into effect. See 2003 N.H. Laws 311: 6. Because the 2005 judicial pay raise was a technical correction of the 2003 raise, the Board determined that it had to 10

16 exclude the 2005 raise of 1.01 percent from the calculation of retirement benefits provided under the Previous Retirement Statutes. See State App., (Affidavit of Maureen Kryger, Exhibit 2 to the Memorandum of Law in Support of the Board s Objection to Summary Judgment). 11

17 SUMMARY OF THE ARGUMENT The Board takes no position in this appeal as to whether RSA Chapter 100-C is unconstitutional as applied to the Petitioner and the Intervenors. If, however, the Court determines that Chapter 311 is unconstitutional as applied to the Petitioner and the Intervenors, the Court should affirm the trial court s determination that the ten percent and 1.01 percent reimbursements are excluded from the determination of the Petitioner s and the Intervenors benefits pursuant to the Previous Retirement Statutes. Further, if Chapter 311 is unconstitutional, the State government should pay the benefits pursuant to the Repealed Retirement Statutes directly to the Petitioner and the Intervenors or, alternatively, if the Plan must pay such benefits, the State should be required to pay the Plan for any additional actuarial cost incurred by the Plan in paying those benefits. The Court should also determine that the Petitioner and the Intervenors do not have a per person option to elect to receive benefits under the Repealed Retirement Statutes or RSA Chapter 100-C, but only the right to receive retirement benefits pursuant to the previous retirement statutes. 12

18 ARGUMENT I. IF THE PETITIONER AND INTERVENORS ARE ENTITLED TO RECEIVE BENEFITS PURSUANT TO THE REPEALED RETIREMENT BENEFITS, THE TRIAL COURT PROPERLY DETERMINED THAT THE 10 PERCENT AND 1 PERCENT RAISES SHOULD BE EXCLUDED IN DETERMINING THEIR BENEFITS A. The Ten Percent Contribution Reimbursement Should Be Excluded In Determining Benefits pursuant to the Repealed Retirement Statutes Section 3 of Chapter 311 of the Laws of 2003 ( Chapter 311 ) amended RSA 491-A:1 to increase the salary of each judicial position by ten percent. This increase only became effective on January 1, 2005 (the effective date of the Plan). The ten percent increase matches the contribution of ten percent of earnable compensation that judges were required to make to the Plan beginning January 1, 2005 as determined by the Board pursuant to RSA 100-C: 14 and the Plan s initial actuarial report. State App., (Exhibit 1 to the Board s Legal Memorandum in Support of Its Objection to Summary Judgment). Paragraph I of Section 6 of Chapter 311 provided that judges who retired prior to the effective date of the repeal of the Repealed Retirement Statutes and their beneficiaries would continue to receive benefits to which they were entitled pursuant to the Repealed Retirement Statutes, provided however that the amount of the salary increase for current full time judges provided by Section 3 of this act, which amends RSA 491-A:1, shall not be included in the currently effective salary used for the calculation of the retired judge s disability or retirement benefit. Paragraph II of Section 3 further provides that the Supreme Court was not required to consider this salary increase when determining proportional compensation of other judicial branch employees. 13

19 Chapter 311 clearly and unambiguously provides that the ten percent increase is not included in determining retirement benefits pursuant to the Previous Retirement Statutes. That intent is confirmed by the legislative history. The statement of intent in a Report dated March 18, 2003 of the Finance Committee of the House of Representatives concerning HB 671 (which was enacted at Chapter 311) states: This bill provides a onetime adjustment to judicial salaries equal to the contributions required by the plan. See State App., 332 (Report attached as Exhibit 1 to the Supplementary Memorandum of Law in Support of the Board s Objection to Summary Judgment). The Petitioner and Intervenors nonetheless argue that they are entitled to include the ten percent in the base for determining their benefits pursuant to the Previous Retirement Statutes. They suggest that Chapter 311 did not purport to exclude the ten percent increase from the calculation of their benefits under the Previous Retirement Statutes. Although it is correct that Chapter 311 does not expressly exclude the increase from the Petitioner s and the Intervenors benefits under the Previous Retirements Statutes, the express exclusion is unnecessary. Chapter 311 intended to create only two groups of judges, the group of judges who retired before the effective date of RSA Chapter 100-C and receive the retirement benefits pursuant to the Repealed Retirement Statutes without regard to the ten percent increase and another group of judges who did not retire before that effective date and therefore became members of the Plan. See 2003 N.H. Laws Chapter 311:6, I; RSA 100- C:3. Judges in the second group received the ten percent increase, were required to contribute ten percent of their compensation to the Plan until they became vested in the maximum retirement benefit and receive the retirement benefits provided by RSA 14

20 Chapter 100-C. Nothing in Chapter 311 or RSA 100-C expresses or implies that any judge who retires after the effective date of RSA Chapter 100-C receives benefits pursuant to the Previous Retirement Statutes, with or without the ten percent contribution reimbursement included in the base for the determination of benefits. The express provisions of the statutes are all to the contrary, and nothing in the legislative history supports the Petitioners construction of Chapter 311. Further, the Petitioner s and the Intervenors interpretation would result in a windfall for the petitioners; they would receive retirement benefits that are greater than those that are received by the judges who retired pursuant the Repealed Retirement Statutes and whose benefits were not increased by the ten percent contribution reimbursement. The Petitioner and the Intervenors were fortunate not to have to make employee contributions to the Plan because they were fully vested, but that does not make them eligible for a retirement benefit calculated with the ten percent reimbursement. The Petitioners also argue that the exclusion of the ten percent increase from the benefits under the Repealed Retirement Statutes, as provided by Section 3 of Chapter 311, violates their alleged contractual rights to retirement benefits equal to 75% of the current salary pursuant to the unaltered language of the Repealed Retirement Statutes. The ten percent increase is not, however, salary for purposes of the Previous Retirement Statutes. The only reason Chapter 311 provided the ten percent increase was to compensate for the ten percent employee Plan contribution that judges had to make upon the effective date of the Plan. If section 3 of Chapter 311 did not exclude the ten percent increase from the base for determining benefits under the Previous Retirement Statutes, those judges 15

21 who retired before the effective date of RSA Chapter 100-C would have received a windfall increase in benefits. The ten percent increase is therefore not salary for purposes of the Previous Retirement Statutes. Amending the judicial compensation statutes to provide an increase equal to the amount of the employee contribution was simply the easiest way for the State to make the judges whole for having to start making employee contributions. The Legislature could have accomplished this alternatively by simply enacting a new statute providing for a continuing reimbursement of judges in the amount of the initial employee contribution. Such a statute would have been awkward and confusing, but would have eliminated the Petitioners argument that the ten percent contribution reimbursement should be included in the base for determining retirement benefits. In short, the substance of the ten percent reimbursement transaction is that it was not salary within the meaning of the Previous Retirement Statutes B. The 1.01 Percent Contribution Reimbursement Should Be Excluded in Determining Benefits pursuant to the Repealed Retirement Statutes After enactment of Chapter 311 it was apparently recognized that the ten percent contribution reimbursement provided by Section 3 of Chapter 311 did not fully compensate the sitting judges for the full impact of their employee contributions to the Plan. In providing the ten percent increase, the drafters of Chapter 311 did not realize that the judges would also have to contribute ten percent of this increase as well. To address this problem, the general budget law of 2005, section 96 of Chapter 177 of the laws of 2005, included a 1.01 percent increase in judicial salaries to compensate for the ten 16

22 percent employee contribution with respect to the ten percent increase as well as the ten percent employee contribution with respect to the corrective 1.01 percent increase. It must be conceded that Section 96 of Chapter 177 does not specifically state that it is a correction of the ten percent contribution reimbursement provided by Chapter 311, nor is there anything in the official legislative history of Chapter 177 concerning this increase. Since Chapter 177 is a general budget bill, this silence is not surprising. However, just as is the case of the ten percent contribution reimbursement provided by Chapter 311 (see Section 3 of Chapter 311), there was no pay increase for judicial staff employees in Chapter 177 that corresponded to the 1.01 percent judicial increase that the law provided. This is in stark contrast to the usual situation; the pay of judicial staff employees has normally been increased when judicial salaries have increased. See, e.g., 2007 N.H. Laws Chapter 263:154 (raise effective July 6, 2007 corresponding to the judicial raise provided by 2007 N.H. Laws Chapter 263:150); 2007 N.H. Laws Chapter 263: 155 (raise effective January 4, 2008 corresponding to the judicial raise provided by 2007 N.H. Laws Chapter 263:151); 2007 N.H. Laws Chapter 263:156 (raise effective January 2, 2009 corresponding to the judicial raise provided by 2007 N.H. Laws Chapter 263:152); 2005 N.H. Laws Chapter 177: 77 (raise effective July 8, 2005 corresponding to the judicial raise provided by 2005 N.H. Laws Chapter 177:74); 2005 N. H. Laws Chapter 177:78 (raise effective January 6, 2006 corresponding to the judicial raise provided by 2005 N. H. Laws Chapter 177:75); 2005 N. H. Laws Chapter 177: 79 (raise effective July 7, 2006 corresponding to the judicial raise provided by 2005 N.H. Laws Chapter 177:76); 2001 N.H. Laws Chapter 158: 95 (raise effective December 28, 2001 corresponding to the judicial raise provided by 2001 N.H. Laws Chapter 158:93);

23 N.H. Laws Chapter 158: 96 (raise effective December 27, 2002 corresponding to the judicial raise provided by 2001 N.H. Laws Chapter 158:94); 1999 N.H. Laws Chapter 225: 40 (raise effective October 1, 2000 corresponding to judicial raise provided by 1999 N.H. Laws Chapter 225: 38). For the same reasons set forth above concerning the ten percent contribution reimbursement provided by Chapter 311, the 1.01 percent contribution reimbursement is not salary for purposes of determining benefits pursuant to the Previous Retirement Statements, whether for the Petitioner and Intervenors or for other judges who retired before the effective date of the Plan. II. IF CONTRACT RIGHTS OF THE PETITIONER AND INTERVENORS HAVE BEEN VIOLATED, THE STATE SHOULD PAY FOR THEIR BENEFITS OR REIMBURSE THE BOARD FOR ANY ADDITIONAL COST OF PROVIDING THE BENEFITS If the Court finds that there has been substantial interference with vested rights of the Petitioners in the benefits provided pursuant to the Repealed Retirement Statutes in violation of Part 1, Article 23 of the New Hampshire Constitution, such interference has not been effected by the Board, but by the New Hampshire Legislature. Either the State should pay the benefits directly to the Petitioner and the Intervenors as it did for retirees before the enactment of Chapter 311 or the State should pay the Plan for any additional actuarial cost incurred by the Plan from paying those benefits. The trial court s decision does not address this issue, but the issue needs to be addressed if the Court affirms the trial court s ruling that Chapter 311 is unconstitutional. Since the issue arises from the constitutionality of the statute and may not be resolved until decided by this Court and it involves only a question of law, judicial economy 18

24 warrants the Court addressing the issue at this time. See Soukup v. Brooks, 159 N.H. 9, 16 (2009); State v. Chrisicos, 158 N.H. 82, 86 (2008). The Board only has the power granted by Chapter 311 and RSA Chapter 100-C. Despite the assertions of the Petitioner and the Intervenors to the contrary, the lack of specific language addressing the judges in the Petitioner s and the Intervenors situation (i.e. judges who were permanent employees prior to the effective date) does not suggest any ambiguity in how their retirement benefits are determined. Chapter 311 clearly provides that judges who retired prior to the effective date of RSA Chapter 100-C (January 1, 2005) continue to receive their retirement benefits pursuant to the Previous Retirement Statutes N.H. Laws 311: 6, I. RSA Chapter 100-C clearly provides that all judges who did not retire before January 1, 2005 are members of the Plan and requires the Board to pay them benefits pursuant to RSA Chapter 100-C. RSA 100-C: 3 and 5. If, however, there were any ambiguity concerning the treatment of judges who were appointed before the effective date of RSA Chapter 100-C, one would look to the legislative history of Chapter 311 for guidance. Statements on the floor of the Senate concerning HB 671 show that the legislature intended judges who were appointed before the effective date of RSA Chapter to receive their retirement benefits pursuant to RSA Chapter 100-C and not the Previous Retirement Statutes: SENATOR D ALLENSANDRO: So that the presently sitting judges will be converted to this system and everybody will be in the new system? SENATOR FLANDERS: Yes. N.H.S. Jour (2003). 19

25 Even if Chapter 311 violated the Petitioners vested rights, the Board does not have the power to deviate from the express provisions of Chapter 311 and RSA Chapter 100-C in the absence of a court order to do so. As a creation of statute, the Board does not have the power to rule that its own enabling statutes are unconstitutional. See J.E.D. Associates, Inc. v. Atkinson, 121 N.H. 581, 583 (1981); see also John Bursch, Who Has the Power? An Administrative Agency s Authority to Determine, in the First Instance, Whether a State Statute is Unconstitutional, 28 Administrative Law Quarterly 1, 2 (Fall 2002/Winter 2003)(administrative agency exercising quasi-judicial authority does not have power to rule on the constitutionality of a statute). J.E.D. Associates involved a question of constitutionality of a town zoning ordinance. Rejecting a claim that the plaintiff was barred from raising a constitutionality challenge because it failed to appeal a ruling of the town planning board, the Court stated that the planning board did not have jurisdiction to rule on the constitutionality of the ordinance in the first instance. J.E.D. Associates, at 583. It is a question for a court. If the Court concludes that Chapter 311 has violated the Petitioners vested rights, it should not require the Board to pay the Previous Pension Benefits to the Petitioners without requiring the State to supplement its contributions to the Plan to cover any additional actuarially computed cost of such benefits. See N.H. Constitution Part I, Article 36-a (requiring employer contributions to be appropriated each fiscal year to the same extent as is certified ). The impact on the Plan of an order requiring the Board to pay the Previous Pension Benefits to the Petitioners is unclear, but will be adverse to the Plan. 20

26 If the Court does not require the State to reimburse the Plan for any shortfall in funding attributable to the change in benefits for the Petitioner, the Intervenors and similarly situated retirees and sitting judges, it must be conceded that the funding mechanism of RSA Chapter 100-C would likely require the State and sitting judges to fund the shortfall over time. There would be number of problems with this result. First, if there is a shortfall, the Plan s unfunded liabilities will increase, increasing risk for all members, retirees and beneficiaries. Second, because the Board s ability to pay aggregate COLA benefits depends in part on the Plan s funding ratio, a shortfall may make it less likely that retirees and beneficiaries receiving benefits pursuant to RSA Chapter 100-C will receive COLA awards in the future by reducing the Plan s funded ratio. Third, by increasing the unfunded liability, the shortfall makes it less likely that sitting judges and future judges will ever be required to pay less than the capped 10 percent employee contributions. Requiring the Board to pay the Petitioner and the Intervenors retirement benefits pursuant to the Repealed Retirement Benefits instead of RSA Chapter 100-C pursuant to section 1 of Chapter 311 without requiring an increase in funding of the Plan to cover any increase in cost would treat section 6 of Chapter 311 as severable from Chapter 311. This is not what the Legislature intended. If the Legislature had known that all judges appointed before the effective date of the Plan would be entitled to receive retirement benefits pursuant to the Repealed Retirement Plan and would not be required to pay employee contributions to the Plan, it would have directed its actuary to make corresponding changes in its assumptions underlying its report on which the Plan s initial funding under section 8 of Chapter 311 was based, which might have changed the 21

27 amount of the initial funding of the Plan. Section 6 of Chapter 311 is therefore so integral and essential in the general structure of Chapter 311 that it may not be rejected without the result of an entire collapse and destruction of the act and therefore should not be treated as severable. See Claremont School District v. Governor, 144 N.H. 210, 217 (1999). In summary, requiring the Board to pay the Petitioner and Intervenors benefits pursuant to the Repealed Retirement Statutes without requiring the State to reimburse the Plan will harm other Plan retirees, beneficiaries and sitting judges if the change increases the Plan s unfunded liability. III. IF CONTRACT RIGHTS OF THE PETITIONER AND INTERVENORS TO BENEFITS UNDER THE REPEALED RETIREMENT STATUTES HAVE BEEN VIOLATED, THE PETITIONER AND INTERVENORS SHOULD NOT HAVE A CHOICE BETWEEN THOSE BENEFITS AND THE BENEFITS PROVIDED PURSUANT TO RSA 100-C The Petitioner and the Intervenors argue that they should have the per person option to elect between the benefits offered under RSA Chapter 100-C and those offered pursuant to the Previous Retirement Statutes. Because they first raised this issue in their Supplemental Memorandum and Request for Relief dated August 3, 2010, only days before the hearing of the Superior Court, the Board did not have sufficient to time to consider the issue and requested that the Superior Court defer any consideration of a remedy to a later date. In its order, however, the Court implied that it would consider such remedy by ordering the Petitioner and Intervenors to make their election between the two benefits schemes within 60 days. (The Superior Court stayed that requirement pursuant to an assented to motion of the Petitioner and Intervenors, State App., 350). 22

28 The interests of the parties would be served if the Court addresses this issue at this time. No additional factual record is necessary for the Court to address this issue, which may soon also arise with other state public retirement plan cases. Judicial economy therefore warrants the Court addressing this issue at this time. See State v. Chrisicos, 158 N.H. 82, 86 (2008). The Petitioner and Intervenors offered no case law to the trial court supporting their requested option to elect between the two benefit schemes, and the Board has found no case law or other support for such a remedy. The Board suggests that either Chapter 311 is constitutional and the Petitioner and Intervenors must receive their benefits pursuant to RSA Chapter 100-C, or Chapter 311 is unconstitutional, in which case the Petitioner and Intervenors must receive their benefits pursuant to the Previous Retirement Statute. They cannot require the Board to pay them benefits pursuant to a law that is unconstitutional as applied to them. In support of their right to elect between the two statutory benefit schemes, the Petitioner and the Intervenors note that a court need not invalidate an entire statute but only the offending section, provided it is severable from the remaining sections. As argued in the previous section concerning State funding of the benefits, section 6 of Chapter 311 is not severable. Furthermore, the Petitioner and the Intervenors are not asking that this section be severed; they ask that it be reformed to permit them to elect between the two statutory schemes. Although courts do not lack the power to remedy a constitutional defect by literally rewriting statutory language, it is comparatively drastic alternative, to be invoked sparingly, and only when the result achieved by such a course is more consistent with legislative intent that the result that would attend outright 23

29 invalidation. Kopp v. Fair Political Practices Commission, 47 Cal. Rptr. 2d 108, 119(Cal. 1995)(quoting Arp v. Workers Comp. Appeals Bd., 19 Cal. 3d 395, (Cal. 1977)(emphasis in the original). In this case the Legislature did not intend the retirement benefit schemes to be optional, and reformation of Chapter 311 to create such an option is therefore inappropriate. If each of the Petitioner and the Intervenors has a right to elect between the two benefit schemes, the Board must provide that right to all other similarly situated members (perhaps all judges who were appointed before January 1, 2005). Although setting up a process for such elections is not a heavy burden for the Board, it is not a trivial task, and the Board questions the appropriateness of the requested relief and the ramifications for other vested right cases pending before this Court. 24

30 CONCLUSION For the foregoing reasons the Board respectfully requests that, if this Honorable Court affirms the ruling below that RSA Chapter 100-C is unconstitutional as applied to the Petitioner and the Intervenors, the Court also affirm the trial court s ruling that the ten percent and 1.01 raises are excluded in determining their benefits under the Repealed Retirement States. The Board also respectfully requests that the Court rule that either the State must pay the benefits to the Petitioner and the Intervenors pursuant to the Repealed Retirement Statutes or, if the Court rules that the Board must pay such benefits, that the State pay the Board for any additional cost associated with paying such benefits. Finally, the Board also respectfully requests that this Honorable Court rule that the Petitioner and the Intervenors do not have a right to elect the statutes pursuant to which they receive retirement benefits. 25

31 REQUEST FOR ORAL ARGUMENT The Board requests a five minute oral argument to be made by Charles G. Douglas, III, Esquire. Respectfully submitted, THE BOARD OF TRUSTEES OF THE NEW HAMPSHIRE JUDICIAL RETIREMENT PLAN By its attorneys, Charles G. Douglas, III, NH Bar No. 669 Douglas, Leonard & Garvey, P.C. 6 Loudon Road, Suite 502 Concord, NH (603) David M. Howe, NH Bar No Wildemere Terrace Concord, NH (603) CERTIFICATE OF SERVICE I hereby certify that two copies of the foregoing were mailed this day, postage prepaid to counsel of record this 4th day of March, 2011: Anne Edwards, Esquire, Associate Attorney General Laura E.B. Lombardi, Assistant Attorney General Office of the Attorney General 33 Capitol Street Concord, NH Ovide M. Lamontagne, Esquire Sandra K. Mann, Esquire Joshua M. Wyatt, Esquire Devine, Millimet & Branch, P.A. 111Amherst Street Manchester, NH