     ..!J:'fi:'E ""'                                          This opinion was filed for record
/        :. CLERKS OFFICE   .                                    'rt               ~ 1 I {p
....--.BTA11!0FWASHINGTON                                   at   If-DO            or_~~() _
      DATE   AUG 1 l\ 2016                                                                .
                                                                          'Sf\"1 L CARLSON
         •   ~ • ·                                                      SL.PI<,n;e Court   Clerk

'~c;;;~u;t~uPR;ME COURT OF THE STATE OF WASHINGTON
    TIM LENANDER,                                 )
                                                  )
                    Appellant,                    )                    No. 92671-9
    v.                                            )
                                                  )                     En Bane
    WASHINGTON STATE DEPARTMENT OF                )
    RETIREMENT SYSTEMS,                           )
                                                  )         Filed        AUG 1 3 2016
                     Respondent.                  )
    ----------------------~)

             WIGGINS, J.-Employees retiring from the Washington State Patrol are eligible

    to receive a pension calculated based on years of service and average final salary. For

    many years, the only pension benefit option available included a survivor benefit for a

    spouse who outlived the retiree that was usually equal to 50 percent of the retiree's

    monthly benefit. In 2000, the Department of Retirement Systems (DRS) created a new

    option under which the retiree could opt for a pension that would allow a surviving

    spouse to continue to receive monthly pension benefits at the same amount after the

    retiree's death. To make this pension actuarially equivalent in value to the previous

    pension, the DRS provided for a greater reduction in the retiree's monthly benefits. In

    2010, the DRS adopted rules that modified the degree of the actuarial reduction.

    Appellant Tim Lenander challenges the changes to the reduction, arguing that it violates

    the statutory scheme and impairs his contract right to a lower reduction in his pension

    payment.
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

      We reject Lenander's arguments. The plain language of the Washington State

Patrol Retirement System (WSPRS) "Plan 1" survivor benefit statute, read in the

context of its overall statutory scheme, grants authority to the DRS to adopt rules

establishing an actuarially equivalent survivor option, and broad authority to adopt and

revise actuarial factors for purposes of administering the state's public retirement

systems. We therefore hold that the DRS acted within its statutory authority.

Additionally, the DRS did not violate the contract clause of article I, section 23 of the

Washington Constitution. The decision of the Thurston County Superior Court is

affirmed.

                                    BACKGROUND

      A brief discussion of the relevant statutory and regulatory history of WSPRS Plan

1, as well as a discussion of the facts of this case, provides the necessary context for

our decision.

       I.       WSPRS Statutes and the Option B Regulations

      WSPRS Plan 1 provides monthly retirement benefits to qualifying Washington

State Patrol officers commissioned on or before January 1, 2003. See RCW 43.43.270.

Historically, WSPRS Plan 1 members had only one option for their retirement benefits:

a monthly retirement allowance calculated based on the retiree's final average salary

and years of service. RCW 43.43.270(2). If the member passed away, either in service

or after retirement, the member's spouse would automatically receive a survivor

allowance-usually equal to 50 percent of the member's average final salary-at no

additional cost to the member.




                                             2
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

        In 1999, the legislature enacted a law directing the DRS to adopt rules creating

a new survivor benefit option for WSPRS retirees that would provide for a continuing,

unreduced retirement allowance for surviving spouses. LAWS OF 1999, ch. 74, § 4

(codified as amended at RCW 43.43.278). The legislature required that this new option

be actuarially equivalent to the historic option for WSPRS Plan 1 members. /d.

        In 2000, pursuant to RCW 43.43.278, the DRS adopted a rule implementing the

legislative mandate to create an uncapped survivor benefit option. Clerk's Papers (CP)

at 97 (Rule-Making Order, Wash. St. Reg. 00-11-103 (May 18, 2000)). This rule

established two retirement options: "Option A" (the "historic retirement option" with

historic survivor benefit) and "Option B" (the "actuarially equivalent retirement option"

with new survivor benefit). Former WAC 415-103-215 (2000). In order to offset the

continuing benefits provided to the survivor and ensure that the plan was actuarially

equivalent, the monthly retirement allowance was actuarially adjusted by a reduction

factor. 1

        The Office of the State Actuary (OSA), which is responsible for conducting

actuarial services for, and periodic studies of, the state retirement systems,

recommended a flat actuarial reduction factor of three percent for Option B. Admin.

Record (AR) at 77; see also RCW 44.44.040. This meant that upon choosing Option B,




1 Actuarial factors are specific percentages used by the DRS to calculate adjustments to
retirement benefits for different benefit options, such as an offset to pay for providing a survivor
benefit. See CP at 31; WAC 415-02-300(1 ). "The department adopts actuarial factors upon the
office of the state actuary's (OSA) recommendation, following OSA's investigation into the
mortality, service, compensation, and other experience of retirement plan members, retirees,
and beneficiaries." WAC 415-02-300(2).

                                                 3
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

a member's retirement allowance would be reduced by three percent, 2 but that

allowance would continue at that same rate through the lifetime of his or her surviving

spouse. Former WAC 415-103-215 (2000).

       In 2007, the OSA completed its six-year periodic actuarial investigation (2001-

2006) into each of the state retirement systems. CP at 361. Based on the results of this

study, the OSA recommended that the DRS adopt a table of factors, rather than a single

reduction factor. /d. The OSA explained that the switch in format to a table of factors

that vary by age difference would "provide better actuarial equivalence." CP at 364.

       Upon receiving this advice from the OSA, the DRS amended WAC 415-103-215,

removing the reference to the three percent actuarial reduction, stating instead:

       The department pays the retiree a monthly retirement benefit that is
       actuarially reduced from the benefit calculated under Option A. The
       department pays survivor benefits in accordance with RCW 43.43.278
       using actuarial factors in WAC 415-02-380 (1 0) and (11 ).

Former WAC 415-1 03-215(3) (201 0) (emphasis added). The DRS simultaneously

amended WAC 415-02-380 to include a table of survivor benefit reduction factors for

WSPRS Plan 1 Option B that based varying actuarial reduction rates on the age

difference between member and spouse. Former WAC 415-02-380(10), (11) (2010).

The new rules went into effect September 1, 2010. CP at 152.




2 There is no documentation as to why the DRS initially adopted the three percent reduction
factor, or why it chose a single factor over a table of varying factors. However, in light of the
absence of evidence to the contrary, both parties admit this calculation was actuarially
equivalent.

                                               4
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

       II.   Tim Lenander

       Lenander became a commissioned trooper and a member of WSPRS on July 2,

1987. AR at 4. He was an active, contributing member ofWSPRS until his retirement

on August 9, 2011. /d. Lenander is married, and upon retirement, he selected Option B

for his WSPRS monthly retirement benefit. /d. This retirement benefit will continue for

the lifetime of his wife, if she survives him. /d. When Lenander retired, the age difference

between him and his wife was calculated as two years. /d. at 5. Based on the newly

adopted table of actuarial factors at former WAC 415-02-380 (201 0), and pursuant to

former WAC 415-103-215(3) (2010), the DRS calculated his actuarial reduction factor

at 5.3 percent (or 94.7 percent of the monthly pension payout). /d.

       Lenander filed a lawsuit in superior court,3 seeking declaratory judgment

invalidating the newly adopted actuarial factors on statutory and constitutional grounds.

CP at 135-39. He simultaneously sought an administrative appeal before the DRS,

challenging the validity of the calculation of his reduction factor. AR at 1. In the

administrative proceeding, the DRS held the actuarial reduction was properly

calculated. /d. Lenander appealed the DRS's decision to the superior court. /d. at 124.

His constitutional challenge and rule challenge cases were ordered consolidated by the

superior court. CP at 752.

       The superior court denied Lenander's claims for relief. Lenander appealed, and

we granted direct review pursuant to RCW 2.06.030.




3 This lawsuit was commenced by a different retiree, but Lenander was later substituted as
plaintiff. CP at 585.

                                             5
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

                                        ANALYSIS

       At its core, this case presents issues of statutory interpretation. We are called on

to interpret the scope of the DRS's authority to establish actuarial factors for the

WSPRS Plan 1 system, and to determine whether its powers also include the authority

to revise and update the factors once adopted.

  I.   Standard of Review

       The Washington Administrative Procedure Act (APA) governs the standard of

review for a challenge to an agency rule. The burden is on the challenger asserting

invalidity of an administrative rule-in this case, Lenander. See ch. 34.05 RCW; Wash.

Pub. Ports Ass'n   v. State Dep't of Revenue, 148 Wn.2d 637, 645, 62 P.3d 462 (2003).

An agency rule may be invalidated only if the court determines it (1) is unconstitutional,

(2) is outside the statutory authority of the agency, (3) is arbitrary or capricious, or (4)

was adopted without complying with statutory rule making procedures. RCW

34.05.570(2)(c). Lenander claims that the amendments to WAC 415-103-215 are

invalid because the DRS exceeded its statutory authority in promulgating the rule and

that the rule changes were unconstitutional.

       Determining the extent of rule making authority is a question of law. Wash. Pub.

Ports Ass'n, 148 Wn.2d at 645. The construction and meaning of a statute is a question

of law, which we review de novo. Dep't of Ecology v. Campbell & Gwinn, LLC, 146

Wn.2d 1, 9, 43 P.3d 4 (2002). When possible, the court derives legislative intent from

the plain language enacted by the legislature, considering the text of the provision in

question, the context of the statute in which the provision is found, related provisions,

amendments to the provision, and the statutory scheme as a whole. /d. at 10-11.

                                             6
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

       Constitutional issues are also questions of law that we review de novo. State v.

Gresham, 173 Wn.2d 405, 419, 269 P.3d 207 (2012). We begin with the presumption

that a statute is constitutional and place '"the burden to show unconstitutionality ... on

the challenger."' In re Estate of Hambleton, 181 Wn.2d 802, 817, 335 P.3d 398 (2014)

(alteration in original) (quoting Amunrud v. Bd. of Appeals, 158 Wn.2d 208, 215, 143

P.3d 571 (2006)).

 II.   The DRS Acted within Its Statutory Rule Making Authority

       Lenander first challenges the authority of the DRS to amend its own regulations

concerning Option B. He argues that because the statute directing the creation of

Option B included a date certain for enactment of the Option B regulations and did not

expressly include language reserving the right to make future amendments or changes

thereto, the DRS did not have authority to make future amendments. Br. of Appellant

at 14-15. We do not read the DRS's authority to be so limited. We hold that DRS acted

within its statutory rule making authority in amending WSPRS Option B regulations to

adopt actuarial reduction factors that provide for a better estimation of actuarial

equivalence. When examining the WSPRS statute as a whole-in conjunction with

related statutes defining the scope of the DRS's authority-it is clear that the DRS

retained authority to amend its own rules consistent with legislative intent.

       Administrative agencies have only those powers expressly granted by statute or

are necessarily implied from the legislature's statutory delegation of authority. Tuerk v.

Oep't of Licensing, 123 Wn.2d 120, 124-25, 864 P.2d 1382 (1994). "Agencies have

implied authority to carry out their legislatively mandated purposes." /d. at 125. When

the legislature grants power to an agency, it also grants by implication '"everything

                                             7
Lenander v. Wash. State Oep't of Ret. Sys.
No. 92671-9

lawful and necessary to the effectual execution of the power."' /d. (quoting State ex ref.

Puget Sound Navigation Co. v. Dep't of Transp., 33 Wn.2d 448, 481, 206 P.2d 456

(1949)).

       In 1999, the legislature delegated express authority to the DRS to create rules

adopting a continuing survivor benefit for WSPRS Plan 1 members. RCW 43.43.278.

Specifically, the DRS was instructed:

              By July 1, 2000, the department of retirement systems shall adopt
       rules that allow a member to select, in lieu of benefits under RCW
       43.43.270, an actuarial/y equivalent retirement option that pays the
       member a reduced retirement allowance and upon death shall be
       continued throughout the life of a lawful surviving spouse ....

LAWS OF 1999, ch. 74, § 4 (emphasis added) (codified as amended at RCW

43.43.2784 ). Lenander does not challenge the DRS's initial rule adoption pursuant to

this statutory grant of authority, only that it lacked the authority to later make

amendments to that rule. Br. of Appellant at 15. The DRS argues that when RCW

43.43.278 is read in conjunction with other related statutes defining its authority, it is

clear that the DRS had authority to adopt updated actuarial factors and thus its rule

change was consistent with its statutory charge. Br. of Resp't at 21-22.

       When interpreting a statute, the court's fundamental objective is to ascertain and

give effect to the legislature's intent. Hama Hama Co.      v. Shorelines Hr'gs Bd., 85 Wn.2d



4 The text of RCW 43.43.278 was amended in 2000, wherein the legislature removed the
language stating the new option was "in lieu of benefits under RCW 43.43.270." LAWS OF 2000,
ch. 186, § 9. This cross-referenced statute, RCW 43.43.270, sets forth the historic Plan 1
benefit (Option A). Even though the express reference to that provision was removed, RCW
43.43.278 still requires that the new option be actuarially equivalent to the benefits outlined in
RCW 43.43.270. The 2000 changes to the statute have no bearing on the issue of the DRS's
rule making authority in this case.

                                                8
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

441, 445, 536 P.2d 157 (1975). We begin with the plain meaning of the statute. See

Campbell & Gwinn, 146 Wn.2d at 9. In doing so, we consider the text of the provision

in question, the context of the statute in which the provision is found, related provisions,

amendments to the provision, and the statutory scheme as a whole. /d. at 10-11. If the

meaning of the statute is plain on its face, then we must give effect to that meaning as

an expression of legislative intent. /d. If, after this inquiry, the statute remains

ambiguous or unclear, it is appropriate to resort to aids of construction and legislative

history. /d. at 12.

       The legislature created the DRS in 19765 and vested the agency with the

authority to administer all of the state retirement systems, including WSPRS. LAWS OF

1976, 2d Ex. Sess., ch. 105, §§ 4, 11 (codified at ch. 41.50 RCW); see also RCW

41.50.030. When the DRS was created, the legislature granted the director of the DRS

the authority to "[a]dopt such rules and regulations as are necessary to carry out the

powers, duties, and functions of the department" consistent with the APA. RCW

41.50. 050(5). In conjunction with establishing the DRS, the legislature also created the

OSN and directed that all "actuarial services required by the department [of retirement

systems] shall be performed by the state actuary." LAWS OF 1976, 2d Ex. Sess., ch. 105,

§§ 11(1), 19(1), 22(1).




5 Prior to 1976, authority for administering each of the various state retirement systems was
vested in individual retirement boards, which were specific to each retirement plan. LAWS OF
1947, ch. 250, §§ 2(A), 3. Upon its creation, the DRS assumed all responsibilities and powers
previously held by the retirement boards. LAWS OF 1976, 2d Ex. Sess., ch. 105, § 11.
6 Prior to 1976, the retirement boards hired independent, private actuaries to provide actuarial

services for the retirement systems. LAWS OF 1947, ch. 250, § 9.

                                               9
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

      In 1989, the legislature revised the actuarial funding for all of the state retirement

systems. LAWS OF 1989, ch. 273 (codified at ch. 41.45 RCW). This law directed the

DRS and the OSA to coordinate roles regarding actuarial assessments and calculations

for the WSPRS system. Under this law, the DRS is charged with collecting the data

necessary for an actuarial investigation and valuation of all state retirement systems.

RCW 41.45.090. Additionally, every six years the state actuary is required to conduct

an actuarial experience study analyzing the mortality, service, compensation, and

experience of the members of each retirement system, and an actuarial investigation

into the financial condition of each system. RCW 41.45.090. Upon the completion of

these actuarial studies, the state actuary must give the results to the DRS. /d.

      The legislature vested the DRS with broad authority to adopt regulations and

actuarial factors as necessary in response to the findings of the state actuary's

investigations:

      Upon the basis of such actuarial investigation [by the state actuary] the
      department shall adopt such tables, schedules, factors, and regulations,
      as are deemed necessary in light of the findings of the actuary for the
      proper operation of the state retirement systems.

/d. (emphasis added). This grant of authority to the DRS was made in 1989, 10 years

prior to the enactment of the WSPRS Option B survivor benefit legislation.

       Read as a whole, it is clear the legislature understood when enacting the new

survivor benefit legislation that actuarial data and valuation are not constant, static

concepts. The legislature gave the DRS the flexibility and authority to make periodic

changes to its regulations in light of the state actuary's recommendations. /d.;

RCW 41.50.030. We presume the legislature enacts laws with the full knowledge of


                                            10
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

existing laws. Jametsky     v.   Olsen, 179 Wn.2d 756, 766, 317 P.3d 1003 (2014). When

the legislature in 1999 delegated to the DRS authority to create rules establishing an

"actuarially equivalent" survivor benefit option, it did so in light of this statutory scheme

for selecting and revising actuarial factors. This scheme gave the DRS broad authority

to make changes as necessary under chapters 41.45 and 41.50 RCW to ensure that

actuarial calculations remain actuarially sound, and that the state retirement systems

maintain their integrity.

        Lenander ignores this larger statutory scheme and instead points to the lack of

an express reservation clause in the WSPRS statute. He argues that without this

express language, the DRS lacks the authority to amend WSPRS Option B. Br. of

Appellant at 15-16. He notes that the legislature, when directing the DRS to create

similar survivor benefit options for other retirement systems, included express

reservation language authorizing the DRS to make future amendments to actuarial

factors, but failed to do so for WSPRS. Reply Br. of Appellant at 20-22; see also LAWS

OF   2000, ch. 186.

        Express reservation language is not necessary in this case as the amendments

at issue are authorized by the broader statutory scheme. We previously considered and

decided this issue in King County Employees' Ass'n v. State Employees' Retirement

Board, 54 Wn.2d 1, 336 P.2d 387 (1959). The case challenged the State Employees'

Retirement System 7 board's authority to adopt updated actuarial factors-under nearly


7
 Our decision in King County Employees' Ass'n concerned provisions of the "State Employees'
Retirement System," codified at chapter 41.40 RCW. See King County Emps. 'Ass'n, 54 Wn.2d
at 3. Today, these statutes are referred to as the "Washington Public Employees' Retirement
System." See RCW 41.40.020.

                                              11
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

identical statutory language. At the time, members of this plan could choose to receive

retirement benefits in the form of an annuity; 8 the annuity was required by statute to be

the '"actuarial equivalent'" of the accumulated contributions at the time of retirement.

/d. at 8 (quoting former RCW 41.40.190 (1953)). The retirement board initially adopted

a mortality table for male lives as the basis for the computation of annuity benefits for

both male and female retirees. /d. at 3. Later, the retirement board adopted separate

male and female mortality tables. /d. at 3-4. The statutory scheme did not at the time

include an express reservation of the right to modify the actuarial factors. However, the

statutory scheme did include provisions requiring periodic actuarial investigations of the

retirement system, and provisions authorizing the retirement board to adopt tables and

factors as were deemed necessary in light of the actuary's findings, id. at 8, much like

the present WSPRS scheme.

       Interpreting the plain meaning of the statute, this court concluded that the term

"actuarial equivalent" in the retirement statute reasonably required the use of the most

accurate tables available. /d. "When the legislature gave the retirement board the

responsibility for making effective the provisions of the retirement act, it simultaneously

gave to the board 'the authority to make all rules and regulations necessary therefor."'

/d. at 9. This court held that the retirement board had "the power to adopt new mortality

tables from time to time for the purpose of endeavoring to reflect the accurate life

expectancy of members when they retire." /d.



8 "An annuity is defined as the monthly 'payments for life derived from accumulated
contributions of a member."' King County Emps.' Ass'n, 54 Wn.2d at 7 (quoting former RCW
41.40.01 0(7), now codified as RCW 41.40.01 0(5)).

                                            12
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

       Like the retirement board in King County Employees' Ass'n, the DRS has

authority to "[a]dopt such rules and regulations as are necessary to carry out

the ... duties ... of the department," RCW 41.50.050(5), and to adopt actuarial

"tables, schedules, factors, and regulations as are deemed necessary" in light of the

periodic actuarial investigations by the state actuary, RCW 41.45.090. Based on this

statutory scheme, we hold that the DRS has authority to amend its regulations to ensure

benefits for WSPRS Plan 1 remain actuarially equivalent.

       We also reject Lenander's argument based on the text of the DRS's own

regulations. Lenander points to specific DRS regulations expressly reserving the right

to amend actuarial factors for other retirement systems, and contrasts this language to

the WSPRS Plan 1 Option B regulations that do not include such language. Br. of

Appellant at 19-22. Lenander argues that the absence of express reservation language

for Option B in the regulations is determinative, and shows that the DRS always

regarded WSPRS as "different." /d. at 19. This argument misses the point of our

analysis. The scope of an agency's authority is set by legislative enactment, not by its

own regulations. An agency's rules or regulations cannot amend or alter legislative

enactments. Tuerk, 123 Wn.2d at 125. "[A]Ithough we generally accord substantial

deference to agency decisions, we do not defer to an agency the power to determine

the scope of its own authority." In reRegistration of E/ec. Lightwave, Inc., 123 Wn.2d

530, 540, 869 P.2d 1045 (1994) (citation omitted). In light of the statutory text and

framework, we conclude that the DRS had authority to amend its regulations to update

its actuarial factors.



                                           13
Lenander v. Wash. State Oep't of Ret. Sys.
No. 92671-9

      Furthermore, Lenander's position would have the peculiar result of requiring the

DRS to treat WSPRS Plan 1 differently from all other retirement plans, without any

indication that the legislature intended such result. Lenander challenges the DRS's

authority to amend WAC 415-02-380 to change only the WSPRS Plan 1 Option B

actuarial factors, and does not argue that the DRS lacked authority to amend this

regulation to update factors for other retirement systems. Yet RCW 41.45.090 grants

the DRS authority to adopt new and updated actuarial factors for all of the state

retirement systems, including WSPRS. See RCW 41.45.090 (authorizing the DRS to

adopt actuarial factors as necessary for the "state retirement systems"), .020(1 0)

(defining "[s]tate retirement systems" as the systems listed in RCW 41.50.030); RCW

41.50.030( d) (listing WSPRS). Lenander's proposed reading of the statutes would, in

effect, render the inclusion of WSPRS in RCW 41.45.090 meaningless.

      Moreover, Lenander's position would in effect limit the DRS to using outdated or

rejected actuarial factors and methodology for WSPRS Plan 1 alone. We do not read

the statutes to create such a result when the legislature regularly lumped the state

retirement systems together for similar treatment by the DRS. See, e.g., RCW

41.45.035 (authorizing adoption of investment rate of return assumptions across

WSPRS and other state retirement systems), .090 (authorizing DRS's authority in

collection of actuarial data for all state retirement systems); RCW 41.50 .005( 1) (stating

policy intent for the DRS that "[t]he retirement systems of the state shall provide similar

benefits wherever possible").




                                            14
Lenander v. Wash. State Oep't of Ret. Sys.
No. 92671-9

Ill. The 2010 Changes to the WSPRS Regulations Fell within the Scope of the
     DRS's Authority

      Lenander argues that even if we hold that the DRS had implied authority to

amend the Option B rule, the particular regulations adopted exceeded the scope of the

agency's authority. Lenander argues that the DRS was limited to amending the

regulations establishing the actuarial equivalent benefit based on a new interest rate or

mortality rate. He bases this argument on the language in the WSPRS statutes defining

"actuarial equivalent" with reference to only two actuarial factors:

      "Actuarial equivalent" shall mean a benefit of equal value when computed
      upon the basis of such mortality table as may be adopted and such
      interest rate as may be determined by the director.

RCW 43.43.120(1) (emphasis added). This definition has been in place in the statute

since 1951. Compare LAWS OF 1951, ch. 140, § 1(o), with RCW 43.43.120(1 ). Lenander

argues that pursuant to this definition, the DRS has implied authority to amend the three

percent actuarial reduction only if there is a change in either the mortality table or

interest rate (or both). Br. of Appellant at 19. We reject this argument.

      "We presume that administrative rules adopted pursuant to a legislative grant of

authority are valid, and we will uphold such rules if they are reasonably consistent with

the controlling statute." Wash. Pub. Ports Ass'n, 148 Wn.2d at 646. Additionally, we

have held that agencies may adopt rules to fill in gaps in legislation where doing so is

necessary to the effectuation of a general statutory scheme. Hama Hama Co., 85

Wn.2d at 448. Because Lenander claims that the amended rule exceeds the scope of

the DRS's statutory authority, he has the burden of showing that the amended rule is in




                                            15
Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

conflict with the intent and purpose of the statute. See Wash. Pub. Ports Ass'n, 148

Wn.2d at 646.

      Resolution of this issue turns on the proper interpretation of "actuarial equivalent"

in the WSPRS statute. The statutory definition of "actuarial equivalent" requires a

benefit be of "equal value" based on a mortality rate and interest rate selected by the

DRS. RCW 43.43.120(1 ). This language indicates these two factors are relevant to the

calculation of "equal value" but says nothing about when or how the DRS may make

changes to these factors. To the extent Lenander's argument suggests there must be

a demonstrable change in these rates in order to make adjustments to the actuarial

equivalency calculation, we reject his arguments. The plain text of the statutes say

nothing about requiring a demonstrable change in the interest rate or mortality rate as

a prerequisite to the adoption of new actuarial factors, and we will not read such

additional language into the statute. Neither do we read the references to the two

actuarial factors in RCW 43.43.120(1) as limiting the expansive authority granted to the

DRS to adopt such actuarial factors, tables, schedules, and regulations as it deems

necessary in light of the recommendations of the state actuary under RCW 41.45.090.

Here we undertake the task of construing statutes in pari materia, i.e., the WSPRS

statutes and others under the DRS umbrella. In this situation, it is this court's paramount

duty to discern and give effect to the intent of the legislature. Hama Hama Co., 85

Wn.2d at 445. Statutes relating to the same subject are to be read together so as to

constitute a unified whole. Waste Mgmt. of Seattle, Inc. v. Utils. & Transp. Comm'n, 123

Wn.2d 621, 630, 869 P.2d 1034 (1994). Where possible, we will read statutes as

complementary, rather than in conflict with each other. /d. To the extent there are

                                            16
Lenander v. Wash. State Oep't of Ret. Sys.
No. 92671-9

apparent conflicts between statutes, courts generally resolve such conflicts by giving

"'preference to the more specific and more recently enacted statute."' Gorman v.

Garlock, Inc., 155 Wn.2d 198, 210, 118 P.3d 311 (2005) (quoting Tunstall v. Bergeson,

141 Wn.2d 201, 211, 5 P.3d 691 (2000)). "Furthermore, in interpreting conflicting

statutory language, a court may ascertain legislative intent by examining the legislative

history of particular enactments." !d. at 211.

      We conclude that these statutes can be harmonized so as to give effect to all

language and carry out the legislative intent to provide for an actuarially sound and

funded retirement system. The statutory scheme for the collection and application of

actuarial valuations for WSPRS has undergone significant changes since the definition

of "actuarial equivalent" was added to the statute in 1951. In 1989, when the legislature

granted the DRS authority to periodically adopt actuarial factors and regulations as

necessary, it announced its intent was "to provide a dependable and systematic

process for funding the benefits provided to members" of WSPRS. LAWS OF 1989, ch.

273, § 1 (codified at RCW 41.45.01 0). To address the problem of unfunded liabilities in

the state retirement systems, this legislation enacted employer contribution rates for

the state retirement systems (including WSPRS) to ensure the full funding of future

pension benefits. S.B. REP.   ON   SUBSTITUTE S.B. 5418, 51st Leg., Reg. Sess. (Wash.

1989). At the same time, the legislature took note of the role that accurate actuarial

valuations-which assess the system's future liabilities-will play in determining the

rate of contributions necessary to ensure full funding for the benefits paid out. /d. This

legislative purpose is best effectuated by an interpretation that allows the DRS to utilize

a range of relevant actuarial factors to come to the most accurate calculation of

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Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

actuarial equivalenc·e and thereby ensures the DRS pays out benefits accurately. Such

a reading will ensure that the benefits paid out to retirees do not exceed their actual

value and threaten the integrity of the system's funding.

       Reading these provisions in harmony with each other, we hold that the DRS has

broad authority under RCW 41.45.090 to adopt such factors as it deems necessary for

the purpose of calculating a WSPRS survivor benefit of "equal value" but, at a minimum,

it must consider and adopt a mortality rate and interest rate it deems appropriate,

consistent with the language of RCW 43.43.120(1 ). This interpretation gives effect to

all language used by the legislature and is consistent with the legislative intent to create

a retirement system that is more actuarially sound. Based on this interpretation, we

hold that the DRS properly relied on recommendations from the state actuary in

updating the Option B actuarial factors, and that the 2010 changes to WAC 415-103-

215 and WAC 415-02-380 were valid.

IV. The DRS Did Not Violate the Contract Clause

       Lenander claims a contractual right to the three percent reduction factor set forth

in the original Option B regulations. Br. of Appellant at 31. Because the application of

the 2010 amended actuarial factors resulted in a greater reduction in his monthly

benefits (5.3 percent), Lenander argues the rule, as applied to him, is an

unconstitutional impairment of his pension benefits contract. Br. of Appellant at 28. We

affirm the lower court's denial of Lenander's constitutional claim.

       Article I, section 23 of the Washington Constitution provides that "[n]o ... law

impairing the obligations of contracts shall ever be passed." See also U.S. CONST. art.

I, § 10 ("No State shall ... pass any ... law impairing the obligation of contracts."). We

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Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

give these provisions of our federal and state constitutions the same effect in

Washington. Wash. Educ. Ass'n v. Dep't of Ret. Sys., 181 Wn.2d 233, 242, 332 P.3d

439 (2014) (WEA 1). While deference to the legislature is warranted when a private

contract is impaired, we are more stringent in our review of state action that impairs a

public contract. /d. at 242.

       The three-part test for the impairment of public contracts applies to public

pension contract impairment cases. /d. at 243-44. Under this test, a constitutional

violation will be found only if the challenged action substantially impairs an existing

contract and, even then, only if the action was not reasonable and necessary to serve

a legitimate public purpose. /d. at 243. The test has three prongs, under which we ask:

(1) Does a contractual relationship exist, (2) does the legislation substantially impair

the contractual relationship, and (3) if there is substantial impairment, is the impairment

reasonable and necessary to serve a legitimate public purpose? /d.

       In public pension contract impairment cases, we analyze this three-part test in

conjunction with the standards set forth in Bakenhus v. City of Seattle, 48 Wn.2d 695,

296 P.2d 536 (1956), for modifications to public pension contracts. In Bakenhus, we

held that prior to retirement, an employee's public pension contract terms may be

modified only for limited purposes. /d. at 701. Any such modifications must be for the

sole purpose of ensuring the continued flexibility and integrity of the pension system.

/d. Moreover, any modifications that have the effect of reducing a pension benefit or

have an adverse effect on members must be counterbalanced by a corresponding

increase or additional benefit. /d. While the three-prong contract impairment test "forms

the backbone of the analysis in pension cases," the analysis of substantial impairment

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Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

is guided by the principles set forth in Bakenhus and its progeny. WEA I, 181 Wn.2d at

244,249.

       A.   Scope of Contract Rights

       Both parties acknowledge that the WSPRS statutes create enforceable contract

rights. Br. of Resp't at 40; Br. of Appellant at 24-25. The disagreement between the

parties·stems from differing views on how those contract rights are defined. Lenander

argues that he has a constitutionally protected contract right to the three percent

reduction factor set forth in the initial Option B regulations. Br. of Appellant at 31. The

DRS disagrees and argues the contract is limited to the right to an "actuarial

equivalen[t]" benefit, subject to the DRS's authority to periodically update its actuarial

factors. Br. of Resp't at 42.

       The terms of the retiree's pension contract rights, and any limitations on those

rights, are defined by the language of the statutes creating those rights. WEA l, 181

Wn.2d at 244-45. Thus, we look to the relevant statutes defining Lenander's vested

pension benefits.

       A public employee's right to a pension vests at the time the employee

commences service, and thereafter may be modified only for limited purposes. Bowles,

121 Wn.2d at 65. Thus, Lenander's contractual right to a pension benefit vested at the

time joined the Washington State Patrol in 1987. See AR at 4. At that time, there was

only one method for the payment of pension benefits to WSPRS members (what is

today referred to as Option A). RCW 43.43.260. The legislature did not add the option

to choose a full survivor benefit retirement allowance until 1999, after Lenander's rights

had vested. LAWS OF 1999, ch. 74, § 4.

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Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

      Once pension contract rights vest, the State cannot alter the contract without

mutual consent. Wash. Fed'n of State Emps. v. State, 98 Wn.2d 677, 686, 658 P.2d

634 (1983). However, where the change is favorable to the employee, we will imply

consent to the contract's modification. WEA I, 181 Wn.2d at 250. Whether a change is

favorable involves a fact-specific analysis based on the totality of the circumstances.

/d. Because this new survivor benefit option allowed greater flexibility to members upon

retirement, it was a favorable change to which Lenander's consent may be implied. /d.

      However, this new contract right was both defined and limited by the statutes

that created and governed the implementation of the new benefit. See id. at 249. In

WEA I, we used ordinary principles of statutory interpretation to give effect to a

reservation clause included within a pension benefit statute as a term within the pension

contract itself. See id. at 244-45, 247. We held the legislature's exercise of this reserved

authority to repeal a newly added benefit did not constitute impairment of a contract

but, rather, constituted the exercise of a contractual provision of the established

pension contract. /d. at 245. Thus, we must read the pension benefits set forth in the

WSPRS Plan 1 statutes in conjunction with any clear statutory provisions allowing for

future amendments to those benefits.

      At the time the legislature granted a right to select an "actuarial equivalent"

survivor benefit for WSPRS Plan 1, it did so subject to the statutory scheme for

assessment, adoption, and revision of actuarial factors by the DRS. Prior to adding this

new benefit, the legislature required the state actuary to conduct periodic evaluations

of each of the state retirement systems and required the DRS to adopt such actuarial

factors and regulations as were deemed necessary in light of the study's results. LAWS

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Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

OF   1989, ch. 273, § 9 (codified at RCW 41.45.090). The process for reviewing and

updating the actuarial calculations for the "actuarial equivalent" benefit was part of the

contract terms to which Lenander was deemed to have consented.

        Once again, we find our decision in King County Employees' Ass'n controlling.

In that case, we held that the statutes giving state employee retirement system

members the option to select an "actuarial equivalent" annuity benefit established a

contractual right only to a "'benefit of equal value' to his or her accumulated

contributions," and did not create a right to a benefit calculated based on any particular

set of mortality tables adopted by the board. King County Emps. 'Ass'n, 54 Wn.2d at 9.

Because the statutory scheme contemplated the periodic updating of actuarial factors,

"[a]ny computations based upon mortality tables rejected by the board-because from

experience and actuarial investigation they did not properly reflect the life expectancy

of retiring members-would be actuarially unsound, and would not give the employees

what they had contracted for." /d.

        Thus, we hold that based on the WSPRS and the DRS statutes, Lenander has

a contractually protected right to a retirement allowance for life, computed based on

years of public service and final average salary. RCW 43.43.260, .270. And he has the

right to select a survivor benefit that is of equal value, subject to the DRS's authority to

update the actuarial factors involved in that calculation of equivalency. RCW 43.43.278.

But Lenander did not have a vested contract right to the three percent actuarial

reduction first used by the DRS. 9


9Lenander asks this court to adopt the reasoning of the Alaska State Supreme Court in
Sheffield v. Alaska Public Employees' Ass'n, 732 P.2d 1083 (1987), in which the Alaska

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Lenander v. Wash. State Oep't of Ret. Sys.
No. 92671-9

       Lenander argues that the long-standing use of the three percent factor by the

DRS gave rise to a constitutionally protected contractual right based on our decision in

Bowles v. Department of Retirement Systems, 121 Wn.2d 52, 847 P.2d 440 (1993). In

Bowles, members of the "Public Employees' Retirement System Plan I" challenged the

DRS's decision to discontinue its practice of including leave cash outs in the calculation

of average final compensation. /d. at 57, 68. This policy shift resulted in lower average

final salary calculations, and smaller pension benefits as a result. We held this long-

standing administrative practice, which continued for somewhere between 4 and 10

years, created an enforceable contract right, and the abandonment of this policy

constituted a contract clause violation. /d. at 68.

       In this case, unlike Bowles, the statutes carve out and retain for the DRS the

authority to periodically update actuarial regulations. See RCW 41.45.090, .050.

Lenander did not have an enforceable contract right to the use of the specific three

percent actuarial factor, even though it was used for nearly 10 years, because the use

of this factor was always subject to periodic updating. Accord King County Emps.'



Supreme Court held that the modification of actuarial adjustments to a similar pension statute
benefit violated the contract clause of the Alaska Constitution. However, in doing so the Alaska
Supreme Court discussed and expressly rejected the approach to contract clause analysis we
took in King County Employees' Ass'n. /d. at 1086-87. The rationale in Sheffield is incompatible
with our binding precedent in King County Employees' Ass'n and WEA I, 181 Wn.2d at 244-
45, where we gave effect to statutory provisions granting authority to adopt future regulations
as part of the contract terms. Lenander has argued that King County Employees' Ass'n was
wrongly decided. Wash. Supreme Court oral argument, Lenander v. Wash. State Oep't of Ret.
Sys., No. 92791-9 (May 10, 2016), at 13 min., 10 sec., audio recording by TVW, Washington
State's Public Affairs Network, http://www.tvw.org. However, we generally will not overturn
precedent unless there has been a "clear showing that an established rule is incorrect and
harmful." See In re Rights to Waters of Stranger Creek, 77 Wn.2d 649, 653, 466 P.2d 508
(1970). We find no evidence that this interpretation is either harmful or incorrect. Accordingly,
we reject the reasoning of the Alaska Supreme Court in Sheffield.

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Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

Ass'n, 54 Wn.2d at 9 (no contract right to specific actuarial factor when the factors were

subject to regular updating). He was entitled only to the standard retirement allowance

or the option of an "actuarial equivalent" allowance with a full survivor benefit, subject

to the DRS's right to adopt new actuarial factors. Accord id. (defining the contractual

right as a right "to 'a benefit of equal value'" to his or her contributions, paid on a monthly

basis over the remainder of his or her life).

       B.     Substantia/Impairment

       Substantial impairment is measured by the implied consent and comparable new

advantages analysis established in Bakenhus. WEA I, 181 Wn.2d at 249. "'A contract

is impaired by a statute which alters its terms, imposes new conditions or lessens its

value."' Wash. Fed'n of State Emps., 127 Wn.2d at 563 (quoting Caritas Servs., Inc. v.

Dep't of Soc. & Health Servs., 123 Wn.2d 391, 404, 869 P.2d 28 (1994)). The Bakenhus

requirements of flexibility, integrity, and comparable new advantages focus this analysis

for pension contract cases. WEA I, 181 Wn.2d at 244. "'Impairment may be substantial

if the complaining party relied on the supplanted portions of the contract."' Wash. Fed'n

of State Emps., 127 Wn.2d at 563 (quoting Caritas Servs., Inc., 123 Wn.2d at 405).

       Based on the plain statutory language, Lenander's pension contract rights were

not impaired by the DRS's 2010 rule changes. The adoption of updated actuarial factors

was simply an exercise of an existing provision to the pension contract. RCW

41.45.090; see also WEA I, 181 Wn.2d at 247 (because the legislature included a valid

reservation clause, the State did not violate any vested rights of the employees when

repealing the additional cost of living adjustment benefit); King County Emps. 'Ass'n,




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Lenander v. Wash. State Dep't of Ret. Sys.
No. 92671-9

54 Wn.2d at 9 (no contract impairment because new actuarial factors merely assured

right to '"benefit of equal value"' was met).

       Under the pre-201 0 and post-201 0 regulations, WSPRS Plan 1 members were

still entitled to receive a retirement benefit based on the same calculation of average

final salary and years of service. RCW 43.43.270. The change in actuarial reduction

factors did not alter the value of this substantive retirement benefit but, rather, how that

benefit was to be paid out over the lifetime of the member and his or her spouse so as

to be a benefit of "equal value" in light of accurate, current actuarial assumptions. This

is different from Bowles, where the administrative policy shift actually modified the value

of the underlying pension benefits received by changing the underlying valuation of

"average final salary." See 121 Wn.2d at 64. In Lenander's case, the underlying value

of the WSPRS retirement benefit-calculated based on average final salary and years

of service-has not changed as a result of the newly adopted actuarial tables.

       Furthermore, the adoption of new actuarial factors fulfilled the Bakenhus

principles of providing increased flexibility and integrity to the system. See 48 Wn.2d at

701. By adopting a table of factors that vary by age differential, the DRS has created a

valuation that more closely approximates the actuarial value of the retirement benefit

and, as a result, provides better funding to the WSPRS pension system. CP at 27

(memo from the DRS explaining rationale for adopting new actuarial table based on

age differential). The DRS did not infringe on Lenander's right to an "actuarial

equivalent" survivor benefit, and because the Bakenhus requirements are satisfied, we

hold Lenander has not suffered substantial impairment to his pension contract rights.



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Lenander v: Wash. State Dep't of Ret. Sys.
No. 92671-9

       Because we hold there was no substantial impairment, we need not reach the

third prong of the contract impairment test. WEA I, 181 Wn.2d at 224.

  V.   Attorney's Fees

       Lenander requested an award of attorney's fees on three separate grounds:

RCW 49.48.030, RCW 4.84.350(1 ), and the common fund doctrine. Br. of Appellant at

31-34. Because Lenander is not the prevailing party, he is not entitled to fees and we

decline to consider the merits of his fee requests.

                                     CONCLUSION

       The DRS acted within its authority in amending the WSPRS Plan 1 Option B

survivor benefit actuarial reduction regulations as set forth under former WACs 415-02-

380 (2010) and 415-103-215 (2010). In amending these regulations, the DRS did not

violate the contract clause of article I, section 23 of the Washington Constitution. We

affirm the decision of the superior court.




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Lenander v. Wash. State Dep't of Ret. Sys.
No. 92791-9




      WE CONCUR.




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