Kildeer-Countryside School District No. 96 v. Board of Trustees of the Teachers' Retirement System

ILLINOIS OFFICIAL REPORTS

Appellate Court

Kildeer-Countryside School District No. 96 v. Board of Trustees of the Teachers’

Retirement System, 2012 IL App (4th) 110843

Appellate Court KILDEER-COUNTRYSIDE SCHOOL DISTRICT NO. 96, Plaintiff-

Caption Appellant, v. THE BOARD OF TRUSTEES OF THE TEACHERS’

RETIREMENT SYSTEM OF THE STATE OF ILLINOIS, Defendant-

Appellee.

District & No. Fourth District

Docket No. 4-11-0843

Filed August 3, 2012

Held Where the undisputed facts established that a teacher in plaintiff district

(Note: This syllabus retired at the end of the 2007-08 school year but started substitute

constitutes no part of teaching the following year, her contributions to defendant Teacher’s

the opinion of the court Retirement System and the service credits she earned by substitute

but has been prepared teaching did not change the conclusion that the substitute teaching was

by the Reporter of in accordance with the system’s rules; therefore, the finding of the

Decisions for the system’s board of trustees that the teacher did not retire at the end of the

convenience of the 2007-08 school year was reversed, and the order requiring the school

reader.)

district to make an excess-salary contribution to the system was reversed.

Decision Under Appeal from the Circuit Court of Sangamon County, No. 10-MR-755; the

Review Hon. John Schmidt, Judge, presiding.

Judgment Judgment reversed; order reversed.

Counsel on Joseph J. Perkoski (argued) and Camille Cribaro-Mello, both of Robbins,

Appeal Schwartz, Nicholas, Lifton & Taylor, Ltd., of Chicago, for appellant.

Ralph H. Loewenstein (argued), of Loewenstein, Hagen & Smith, P.C.,

of Springfield, for appellee.

Panel PRESIDING JUSTICE TURNER delivered the judgment of the court,

with opinion.

Justices Appleton and Pope concurred in the judgment and opinion.

OPINION

¶1 In October 2010, defendant, the Board of Trustees (Board) of the Teachers’ Retirement

System of the State of Illinois (TRS), found plaintiff, Kildeer-Countryside School District

No. 96 (District), owed TRS a $53,705.27 employer contribution under section 16-158(f) of

the Illinois Pension Code (Pension Code) (40 ILCS 5/16-158(f) (West Supp. 2007) (eff. Aug.

21, 2007)). In assessing the contribution, the Board found the District’s former employee,

Barbara Emde, did not retire under the terms of an exempt collective-bargaining agreement.

The District sought administrative review in the Sangamon County circuit court, which

affirmed the Board’s decision.

¶2 On appeal, the District contends it does not owe the employer contribution because

Emde’s pay increases were exempt under section 16-158(g) of the Pension Code (40 ILCS

5/16-158(g) (West Supp. 2007)). We reverse the trial court’s judgment and the Board’s

order.

¶3 I. BACKGROUND

¶4 A. Collective-Bargaining Agreement

¶5 In October 2002, the District and Kildeer Education Association entered into a collective-

bargaining agreement (Agreement) for the school years 2002-03, 2003-04, 2004-05, and

2005-06. According to the parties, the Agreement terminated on June 30, 2006. (The

recommended decision stated an expiration date of June 30, 2008, which is clearly incorrect

as the last school year covered was 2005-06.) Article XIII of the Agreement addressed

retirement and contained sections 13.1 to 13.3. Section 13.1(b) addressed eligibility for

retirement incentives and provided the following:

“To be eligible for any of the benefits provided in Section 13.2 below, the teacher shall

have served at least ten (10) full years as a teacher in the District and be at least fifty-five

(55) years of age as of the last day of the school term.”

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Subsection (b) of section 13.2 of the Agreement provided, in pertinent part, the following:

“During the final two (2) years of employment as a teacher, if a teacher has submitted an

unqualified notice of retirement and completed a minimum of ten (10) years of

employment in the District as a member of the certified staff, the Board will pay an

additional ten percent (10%) increase in compensation over the prior year’s

compensation.

For each year of service in the District beyond ten (10) years, up to and including

twenty (20) years of service as a teacher, the Board will pay an additional one percent

(1%) to the prior year’s compensation. ***

Any eligible teacher who wishes to retire with this benefit must submit an application

in writing to the Superintendent not later than May 15 *** in the school year prior to

accessing the District Retirement Program.”

¶6 With the Agreement was a letter of agreement regarding retirement. The letter stated

attached to it was a request-of-district-longevity form and an intent-to-retire notice. While

the letter stated documents reflected the intent of article XIII of the Agreement, the letter

expressly stated it was not part of the Agreement and was not precedential in nature. The

intent-to-retire notice required the employee to acknowledge, inter alia, the following: “I will

be at least fifty-five (55) years of age within six (6) months of the last day of the current

school term as reported to Teachers’ Retirement System.”

¶7 B. Emde’s Retirement

¶8 Emde began teaching for the District in the 1984-85 school year. On April 13, 2006,

Emde submitted her intent-to-retire notice, stating she intended to retire at the end of 2007-

08 school year. The notice stated her salary would be increased by 20% over the prior year’s

compensation for the remaining two years. When Emde submitted her intent-to-retire notice,

her salary was $88,675. For the 2006-07 school year, Emde received her first 20% increase

under section 13.2(b), resulting in a salary of $107,482. The following school year, Emde

again received a 20% increase under section 13.2(b), which gave her a final salary as a full-

time teacher of $129,630.

¶9 In April 2008, the following e-mail exchange took place between Emde and TRS

counseling services:

Emde: “I am turning fifty five in December and although I retire from my school

district at the end of this year according to [TRS] my retirement is December. Should I

complete the PRI [(personalized retirement interview)] now so that the supplementary

report and the sick leave certification are completed before I finish the school year?”

TRS: “Your employer will automatically submit your earnings and sick leave

information on their annual report in August 2008. We recommend you complete your

PRI approximately 6-12 weeks prior to your 55th birthday.

If you do any substitute teaching in the Fall semester, you would need to notify TRS

during your PRI of the districts you had worked in so those districts could be sent a

supplementary report and sick leave certification.

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If you decide to substitute teach in the Fall, you will not be allowed to do any post-

retirement employment in a certified position until July 1, 2009.”

Emde: “Thank you for this information. Just to clarify, I will be able to substitute

until my 55th birthday this year but then no more substituting after that date until the

school year is over. Is that correct?”

TRS: “You are correct. You will need to wait until July 1, 2009, before doing any

substitute teaching if you substitute leading up to your 55th birthday (your retirement

date). There are no restrictions for working in the private sector, university, college or

private school. In addition, you may be employed by a school district in a position not

covered by TRS without limitation (teacher’s aide, lunchroom helper, playground

supervisor, etc.).”

¶ 10 Emde’s full-time employment with the District terminated on June 9, 2008. During the

2008-09 school year, the District employed Emde as a substitute teacher for a total of 52

days. Her last day of substitute teaching was December 4, 2008. Emde turned 55 on

December 5, 2008.

¶ 11 On February 3, 2009, the District’s director of business services signed a TRS form,

which was a supplementary report for the 2008-09 school year for Emde’s retirement

benefits. The report listed June 9, 2008, as (1) the last date Emde taught, (2) the effective

date of Emde’s resignation, and (3) the last day of the school year. It also stated Emde’s last

school year employed was 2007-08. Moreover, the form listed a total annual salary of

$129,630 and retirement contributions of $12,185.22. On February 25, 2009, the District’s

director of business services signed a second supplementary report for the 2008-09 school

year for Emde. The second report listed December 4, 2008, as (1) the last date Emde taught,

and (2) the effective date of Emde’s resignation. It also stated Emde’s last school year

employed was 2008-09 and the last day of the school year was June 11, 2009. Last, the form

listed a total annual salary of $7,700 and retirement contributions of $723.80.

¶ 12 C. Employer Contribution Proceedings

¶ 13 In March 2009, TRS notified the District it anticipated the District would owe $53,705.27

under section 16-158(f) of the Pension Code (40 ILCS 5/16-158(f) (West Supp. 2007)) for

the retirement-incentive-salary increases given to Emde. On July 9, 2009, Tom Gray, TRS’s

general counsel, issued a final staff disposition, requiring the District to make the $53,705.27

employer contribution. Under title 80, section 1650.620, of the Illinois Administrative Code

(80 Ill. Adm. Code 1650.620 (2012)), the District appealed TRS’s decision, asserting the

salary increases to Emde were exempt from employer contributions under section 16-158(g)

of the Pension Code (40 ILCS 5/16-158(g) (West Supp. 2007)). On appeal, the District and

TRS filed cross-motions for summary judgment. To its motion, the District attached the

following: (1) the Agreement; (2) Emde’s April 13, 2006, intent-to-retire notice; (3) the

District’s first 2008-09 supplementary report to TRS; (4) the District’s second 2008-09

supplementary report to TRS; (5) Emde’s e-mail correspondence with TRS; and (6) TRS’s

July 2009 final staff disposition. TRS’s response to the District’s exemption argument was

the District lost eligibility for the employer-contribution exemption because it continued to

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employ Emde as a substitute teacher after its exempt Agreement expired, and thus Emde

retired under the successor, nonexempt collective-bargaining agreement. According to TRS,

if Emde had stopped working for the District when she so stated in her intent-to-retire notice,

Emde’s salary increases would have been exempt under section 16-158(g) of the Pension

Code.

¶ 14 In August 2010, a claims hearing committee (Hearing Committee) heard the cross-

motions for summary judgment. On September 27, 2010, the Hearing Committee issued its

recommended decision upholding TRS’s final staff disposition. The Hearing Committee

made factual findings, including the following: (1) Emde ceased full-time employment with

the District on June 9, 2008; (2) the District continued to employ Emde as a substitute

teacher for 52 days in the 2008-09 school year; (3) Emde’s substitute teaching is active

creditable service under sections 16-106 and 16-106.3 of the Pension Code (40 ILCS 5/16-

106, 16-106.3 (West 2008)); (4) Emde’s last day of active creditable service with TRS was

December 4, 2008; and (5) Emde’s effective retirement date with TRS was December 5,

2008, when she turned 55. The Hearing Committee found that, by allowing Emde to continue

to teach into the next school year, the District lost its exemption since Emde did not

terminate her active service with the District. In October 2010, the District filed exceptions

to the recommended decision.

¶ 15 On October 29, 2010, the Board voted to uphold the recommended decision of the

Hearing Committee. The District received notice of the Board’s decision on November 5,

2010.

¶ 16 On December 8, 2010, the District filed its complaint for administrative review in the

Sangamon County circuit court. After reviewing the parties’ pleadings and the record of the

administrative review proceedings, the court “denied” the District’s petition for

administrative review on August 23, 2011.

¶ 17 On September 20, 2011, plaintiff filed a timely notice of appeal in compliance with

Illinois Supreme Court Rule 303 (eff. May 30, 2008). Accordingly, this court has jurisdiction

of this appeal under Illinois Supreme Court Rule 301 (eff. Feb. 1, 1994).

¶ 18 II. ANALYSIS

¶ 19 A. Standard of Review

¶ 20 Under section 16-200 of the Pension Code (40 ILCS 5/16-200 (West 2010)), judicial

review of the Board’s decision is conducted in accordance with the Administrative Review

Law (735 ILCS 5/art. III (West 2010)). With administrative cases, this court reviews the

administrative agency’s decision, not the circuit court’s. Williams v. Board of Trustees of the

Morton Grove Firefighters’ Pension Fund, 398 Ill. App. 3d 680, 687, 924 N.E.2d 38, 45

(2010). Section 3-110 of the Administrative Review Law (735 ILCS 5/3-110 (West 2010))

allows review of “all questions of law and fact presented by the entire record before the

court.” On issues of law, this court reviews the Board’s findings de novo. Speed District 802

v. Warning, 242 Ill. 2d 92, 111, 950 N.E.2d 1069, 1080 (2011). With the Board’s findings

of fact, we deem them prima facie correct unless they are against the manifest weight of the

evidence. Speed, 242 Ill. 2d at 111-12, 950 N.E.2d at 1080. An administrative agency’s

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finding is “against the manifest weight of the evidence only where the opposite conclusion

is clearly evident.” Peacock v. Board of Trustees of the Police Pension Fund, 395 Ill. App.

3d 644, 652, 918 N.E.2d 243, 250 (2009). Finally, as to mixed questions of law and fact, this

court applies a clearly erroneous standard of review. Speed, 242 Ill. 2d at 112, 950 N.E.2d

at 1080. Our supreme court has defined that standard as follows:

“An agency decision will be reversed because it is clearly erroneous only if the reviewing

court, based on the entirety of the record, is left with the definite and firm conviction that

a mistake has been committed. [Citation.] While this standard is highly deferential, it

does not relegate judicial review to mere blind deference of an agency’s order.” (Internal

quotation marks omitted.) Speed, 242 Ill. 2d at 112, 950 N.E.2d at 1080-81 (quoting

Board of Trustees of the University of Illinois v. Illinois Labor Relations Board, 224 Ill.

2d 88, 97-98, 862 N.E.2d 944, 950-51 (2007)).

¶ 21 Additionally, we note that, generally, a party may not rely on matters outside the

appellate record to support his or her position on appeal. See Allstate Insurance Co. v. Kovar,

363 Ill. App. 3d 493, 499, 842 N.E.2d 1268, 1273 (2006). Thus, we will only consider

arguments supported by the record on appeal. In its reply brief, the District asks this court

to disregard the Board’s statement of facts in its entirety because the statement of facts lacks

citation to the record and is in the form of an argument. We decline to do so as the Board’s

statement of facts does contain some citations to the record and we can easily disregard any

statements not supported by the appellate record.

¶ 22 B. Employer Contributions to TRS

¶ 23 TRS was created to provide retirement annuities and other retirement benefits for

teachers. 40 ILCS 5/16-101 (West 2008). To determine the proper annuity for a retiring

teacher, retirement system staff must determine a member’s final average salary. See 40

ILCS 5/16-133(a)(B) (West 2008). “Final average salary” is defined as the average of the

highest 4 consecutive years of salary within the last 10 years of creditable service, subject to

the rules of the Board. 40 ILCS 5/16-133(b) (West 2008). However, the part of a member’s

salary that “exceeds the member’s annual full-time salary rate with the same employer for

the preceding year by more than 20% shall be excluded.” 40 ILCS 5/16-133(b) (West 2008).

¶ 24 Public Act 94-4 (Pub. Act 94-4, § 5 (eff. June 1, 2005)) added section 16-158(f) to the

Pension Code (40 ILCS 5/16-158(f) (West Supp. 2005)), which required an employer to

make a contribution to TRS for the increase in retirement benefits for an employee’s salary

increase from the preceding year that was more than 6%. The legislature later added section

16-158(g) (Pub. Act 95-331, § 425 (eff. Aug. 21, 2007)), which provides, in pertinent part,

the following:

“This subsection (g) applies only to payments made or salary increases given on or after

June 1, 2005 but before July 1, 2011. ***

When assessing payment for any amount due under subsection (f), the System shall

exclude salary increases paid to teachers under contracts or collective bargaining

agreements entered into, amended, or renewed before June 1, 2005.” 40 ILCS 5/16-

158(g) (West Supp. 2007).

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Title 80, section 1650.483(a), of the Illinois Administrative Code (80 Ill. Adm. Code

1650.483(a) (2012)) further explains the above exemption to the employer contribution by

stating the following:

“The exemptions from employer contributions provided under *** 40 ILCS 5/16-158(f)

for those members who notify their employer of the intent to retire under the terms of an

exempt contract or collective bargaining agreement but do not receive such incentives

until after the expiration of the contract or collective bargaining agreement shall cease

no later than three school years after the expiration of the contract or collective

bargaining agreement or June 30, 2011, whichever is earlier.”

¶ 25 C. Emde’s Retirement

¶ 26 The District asserts TRS must exclude all salary increases paid to teachers under a

collective-bargaining agreement entered into before June 1, 2005, and its salary increases to

Emde were made pursuant to an exempt collective-bargaining agreement. It further argues

(1) the District and Emde complied with the terms of the exempt Agreement and (2) Emde’s

substitute teaching in the year after she retired from the District did not change her retirement

date and cause a loss of the exemption from employer contributions. The Board concedes (1)

the Agreement at issue is exempt under section 16-158(g) of the Pension Code and (2) the

salary increases paid in the 2006-07 and 2007-08 school years did not lose their exempt

status by the Agreement’s expiration. However, it asserts Emde and the District did not

comply with terms of the exempt Agreement because Emde did not actually retire in

accordance with her intent to retire notice.

¶ 27 Initially, we note that, in making its argument, the District insists Emde qualified for the

retirement incentives under the Agreement. While the Board points out Emde was not

eligible to receive the Agreement’s retirement incentives because she was not 55 years old

by the last day of the school year as required by section 13.1(b) of the Agreement, the Board

does not argue the District should be denied the section 16-158(g) exemption because of

noncompliance with the agreement, and thus we do not address that issue. Moreover, both

parties cite and discuss various bulletins of TRS that addressed sections 16-158(f) and 16-

158(g) of the Pension Code in support of their respective arguments. However, the Board did

not rely on any TRS bulletin in making its determination, and the bulletins do not address

the specific matter at issue in this case. Thus, we also do not address the TRS bulletins.

¶ 28 According to the Board, the key issue is whether Emde severed her employment with the

District on June 8, 2008. Section 16-118 of the Pension Code (40 ILCS 5/16-118 (West

2008)) defines “retirement” as “[e]ntry upon a retirement annuity or receipt of a single-sum

retirement benefit granted under this Article after termination of active service as a teacher.”

Applying section 16-118, the Board stated, “in Emde’s case, that meant severing her

employment with [the District] on June 8, 2008 and retiring effective December 5, 2008.”

The Board then found Emde did not terminate her active service with the District on June 8,

2008, but, rather, “remained employed” by the District in the 2008-09 school year as a

substitute teacher.

¶ 29 The pertinent facts are undisputed. First, Emde only submitted one document stating her

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retirement date, which listed a retirement date at the end of the 2007-08 school year. Emde

did not submit any other documents to the District changing that retirement date. In an April

2008 e-mail to TRS, Emde stated she was retiring at the end of the school year and

understood her retirement was not effective until December when she turned 55. Moreover,

the District’s original supplementary report to TRS for the 2007-08 school year stated a

resignation date of June 9, 2008 (June 8 and 9, 2008, are both listed as the last day of school

for the District’s 2007-08 school year in various documents). Second, after the last day of the

2007-08 school year, Emde did not remain in her same position with the District, did not

remain a full-time employee, and did not receive the same pay. In fact, her pay rate was

substantially lower as she received $720.17 per day for the 2007-08 school year and only

$148.08 per day as a substitute teacher for the 52 days she worked. Third, Emde’s substitute

teaching for the District did not violate any TRS rules as TRS did not argue any such

violation and its responses to Emde’s e-mail inquiries show such activity was permissible.

Fourth, Emde made $723.80 in retirement contributions to TRS and earned TRS service

credit in the fall of 2008. Fifth, the District’s second supplementary report to TRS had a

resignation date of December 4, 2008. TRS’s response to Emde’s e-mail inquiries noted any

school district for which she was a substitute teacher would have to submit such a document.

Last, Emde’s effective retirement date of December 5, 2008, was unchanged by her substitute

teaching.

¶ 30 The only reasonable conclusion from the aforementioned undisputed facts is Emde did

sever her relationship with the District at the end of the 2007-08 school year and the

substitute teaching was a new, temporary relationship between the parties. All of the

documentation between Emde and the District shows she retired from her position with the

District in June 2008. The only document stating a resignation date later than June 2008 was

the second supplementary report that TRS required the District to complete with the dates

listed due to Emde’s substitute teaching. The Board cannot bootstrap a resignation date later

than June 2008 by pointing to a document it required the District to complete as a result of

the disputed substitute teaching. Moreover, we note that, if Emde had not severed her

relationship with the District, her pay would have been substantially higher than $148.08 per

day and some new retirement documentation would have been submitted. The fact she still

contributed to TRS and earned service credit does not change that conclusion since the

substitute teaching was in accordance with TRS rules. Moreover, the supplementary report

was required by TRS to address the substitute teaching, not her original employment.

Accordingly, the Board’s finding Emde did not sever her employment with the District at the

end of the 2007-08 school year was against the manifest weight of the evidence, and thus the

Board erred by ordering the District to pay TRS an excess-salary contribution of $53,705.27.

¶ 31 III. CONCLUSION

¶ 32 For the reasons stated, we reverse the Sangamon County circuit court’s judgment as well

as the Board’s order.

¶ 33 Judgment reversed; order reversed.

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