“When salary payments were periodically increased ..., benefits ... under the retirement system established by the Code of 1959 also were to increase accordingly.”
How later courts described this case
- “When salary payments were periodically increased ..., benefits ... under the retirement system established by the Code of 1959 also were to increase accordingly.”
- pension benefits are based upon contract theory of deferred compensation
- all of the justices concurring in the result
- Nix and Flaherty, JJ., concurring
Written by the judges who cited it.
The opinion
NIX, Justice,
concurring.
Although I concur in the result reached by the majority opinion, that opinion fails to address the real issue created by our case law.
It is well established that retirement benefits are founded upon a contract theory of deferred compensation. Harvey v. Allegheny County Retirement Board, 392 Pa. 421 , 141 A.2d 197 (1958); Baker v. Retirement Board of Allegheny County, 374 Pa. 165 , 97 A.2d 231 (1953); McBride v. Allegheny County Retirement Board, 330 Pa. 402 , 199 A. 130 (1938); Retirement Board of Allegheny County v. McGovern, 316 Pa. 161 , 174 A. 400 (1934).
However, some cases suggest that notwithstanding recognition of contractual rights from the time of entering employment and contributing to the retirement fund, the legislature may, prior to attaining eligibility to receive such benefits, enact legislation which changes the terms of the retirement contract if the change enhances the actuarial soundness of the retirement fund. Geary v. Allegheny County Retirement Board, 426 Pa. 254, 257-58 , 231 A.2d 743, 745 (1967); Harvey v. Allegheny County Retirement Board, 392 Pa. at 431-32 , 141 A.2d at 203 .
The basic unfairness of acknowledging the contractual nature of retirement benefits as of the time of entering employment on the one hand, but allowing subsequent adjustments of these contract rights under the guise of protecting “actuarial soundness” on the other is obvious.
The terms and conditions of a retirement contract must necessarily exist at the time the contract is entered into. To *335 allow the state to unilaterally change, to the employee’s detriment, the terms and conditions of the retirement contract based on the state’s misjudgment of funding needs, is contrary to the bargained for terms existing at the time of the employee assumed his or her position.
The state has full control of the retirement program at the time it is entered into with the employee. To allow a unilateral change in the terms or conditions of the retirement contract subsequent to its creation, under any circumstances, is contrary to the prohibition against the state’s impairment of the obligation of contracts. 1 “The Commonwealth can no more impair its contractual obligation by legislation unilaterally altering the terms of the pension it agreed to give to those in its service than it can by legislation abrogating its duty to pay in full the accrued salary of its employees.” Wright v. Allegheny County Retirement Board, 390 Pa. 75, 79 , 134 A.2d 231, 233 (1957).
The majority, in predicating its decision today upon the fact that class members’ rights were vested, implicitly acknowledges the legitimacy of the “actuarial soundness” exception. With that position I cannot agree. I would therefore hold that a state employee has a fixed contract right to continued membership in a retirement fund, under the same rules and regulations prevailing at the time of employment, which may not be unilaterally qualified or altered by subsequent legislative enactment. Wright, supra; Baker, supra.
. U.S.Const., Art. I, § 10; Pa.Const., Art. I, § 17.