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Lagerman v. Ariz. State Retirement Sys. - 3/7/2019

Arizona Court of Appeals Division One holds that a member of the State’s retirement system may not elect a retirement date earlier than the date of the member’s retirement application.

The Arizona State Retirement System (“ASRS”) provides benefits to qualifying state employees.  The governing statutes define the “normal retirement age.”  For ASRS members who joined before July 1, 2011, the normal retirement age is calculated based on the members’ birthdate and years of service.  ASRS members may also make a “service purchase” which allows them to pay to receive credit for prior public service.  Service purchases can accelerate the normal retirement age.

An attorney worked for state agencies and was an active ASRS member from 1978 to 2003.  The attorney submitted a service purchase in 2003 which ASRS processed in 2005.  ASRS sent the attorney annual member statements after she left state employment in 2003.  After it processed her service purchase in 2005, ASRS sent a statement listing the attorney’s normal retirement age as July 23, 2005.  ASRS continued to send annual member statements, each of which moved the attorney’s normal retirement age back to the end of the applicable period.  Those statements also noted that in some circumstances ASRS members could return to work and continue receiving benefits.  

In 2016 the attorney submitted a retirement application.  ASRS made her retirement effective as of the date of that application.  The attorney appealed her retirement date twice within the ASRS.  She wanted her retirement date to be August 2006, stating that she had not elected retirement earlier because her state employer had told her in 2003 and 2006 that she could not work more than 20 hours per week and still receive retirement benefits.  The ASRS denied the attorney’s appeals.  The superior court affirmed, and the attorney appealed.

The Court of Appeals affirmed, holding that members applying for ASRS benefits may not elect an earlier effective date.  The statute provides that retirement commences on the date elected by the member.  “That date shall not be earlier than the day following the date of termination of employment, the date ASRS receives the member’s completed retirement application or the date specified by the member pursuant to subsection I of this section.”  A.R.S. § 38–764(A) (emphasis added).  The attorney argued that “or” is disjunctive and so the date she elected only needed to satisfy one of the three criteria.  The Court held that the negative “shall not be earlier” prohibits retirement from beginning before any of the three dates. 

The statute does allow a member to elect retirement but continue working on a limited basis.  This technically violates the first criteria that retirement cannot begin until after the termination of employment.  But the option to continue working was added as an amendment and there is no indication that the legislature intended to modify the statute to allow retirees to elect a retroactive retirement date before the date of their application.

Judge Howe authored the opinion; Presiding Judge Johnsen and Judge Cruz concurred.

Posted by: Brian K. Mosley

Posted On: 4/1/2019