                                  IN THE

    SUPREME COURT OF THE STATE OF ARIZONA
                   MARY WADE AND MARLA PADDOCK,
                         Plaintiffs/Appellants,

                                     v.

   ARIZONA STATE RETIREMENT SYSTEM; ARIZONA STATE RETIREMENT
                         SYSTEM BOARD,
                       Defendants/Appellees.

                           No. CV-16-0087-PR
                           Filed March 23, 2017


           Appeal from the Superior Court in Maricopa County
               The Honorable Randall H. Warner, Judge
                          No. CV2013-015082
                             REVERSED

            Opinion of the Court of Appeals, Division One
               239 Ariz. 263, 370 P.3d 132 (App. 2016)
       AFFIRMED IN PART, VACATED IN PART, REMANDED

COUNSEL:

Susan Martin (argued), Daniel L. Bonnett, Jennifer Kroll, Martin & Bonnett,
P.L.L.C., Phoenix; and Thomas M. Rogers, Robaina & Kresin, PLLC,
Phoenix, Attorneys for Mary Wade and Marla Paddock

Mark Brnovich, Arizona Attorney General, Dominic Draye, Solicitor
General, Paula S. Bickett, Chief Counsel, Civil Appeals Section, Jothi Beljan
(argued), Assistant Attorney General, Phoenix, Attorneys for Arizona State
Retirement System and Arizona State Retirement System Board


JUSTICE TIMMER authored the opinion of the Court, in which CHIEF
JUSTICE BALES, VICE CHIEF JUSTICE PELANDER, and JUSTICES
BRUTINEL and BOLICK joined.
       MARY WADE/MARLA PADDOCK V. ASRS/ASRS BOARD
                   Opinion of the Court


JUSTICE TIMMER, opinion of the Court:

¶1           The Arizona State Retirement System (“ASRS”) operates a
defined-benefit plan for employees of the state and participating political
subdivisions, including the City of Chandler. Both employers and
employees contribute to ASRS. The contribution amounts, and the benefits
paid to a retired employee, depend on the employee’s “compensation”
while employed.

¶2            The City operates a deferred-compensation plan in which it
contributes money for its employees and permits employees to defer
additional amounts. These monies are invested and held in trust until
distributed to employees, generally at age seventy and one-half. Here, we
decide whether City-contributed payments into the deferred-
compensation-plan trust constitute “compensation” for the purpose of
calculating ASRS contributions and benefits. We hold that such payments
are “compensation” for ASRS purposes.

                              I. Background

¶3           Employer and employee contributions to ASRS are calculated
using a formula tied to employee compensation. Employers must
contribute to ASRS based on “a percentage of compensation of all
employees” enrolled in ASRS. A.R.S. § 38-737(A). The contribution rate is
established annually. A.R.S. § 38-737(C). Employees, referred to as
“members,” contribute “a percentage of a member’s compensation,” via
payroll deductions. A.R.S. § 38-736(A). Upon retirement, an eligible
member receives a monthly life annuity calculated, in part, from “[t]he
member’s average monthly compensation.” A.R.S. § 38-757(B)(2).

¶4           The City operates a deferred compensation plan, the “457
Plan,” which provides retirement income and other deferred benefits to its
employees in accordance with 26 U.S.C. § 457(b). The 457 Plan authorizes
two contribution methods. An employee can elect to defer some pay from
each paycheck. The City can also elect to “credit” “any other amount” to
the employee’s account. All contributions are held in trust for the exclusive
benefit of employees and their beneficiaries. Although income taxes on the
amounts are deferred until withdrawal, an employee immediately pays
Federal Insurance Contribution Act (“FICA”) taxes on amounts contributed

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                   Opinion of the Court


by both the City and the employee. See 26 U.S.C. §§ 3101(a), 3121(a)(5)(E),
(v)(3)(A).

¶5            Mary Wade served as the City’s attorney for about five years
until 2013, and Marla Paddock has served as the City’s clerk since 2002.
Both signed yearly contracts that entitled them to a base salary and
periodic, employer-contributed payments into the 457 Plan. For example,
Paddock’s 2013 contract entitled her to an “annual base” salary
approximating $120,000 plus “annual deferred compensation payment in
an amount equal to seven and one-half percent (7.5%) of [Paddock’s] annual
base salary,” payable in equal, bi-weekly amounts. The City-contributed
deferred compensation was exclusive of any deferred compensation that
Wade or Paddock elected to contribute to the 457 Plan as employee-
deferred compensation.

¶6            The City has historically reported employer-contributed
deferred compensation payments to ASRS as “compensation” for the
purpose of calculating retirement contributions and benefits. In 2010, on
the advice of an ASRS official, the City stopped this practice. After Wade
and Paddock objected, the City requested “a more formal opinion” from
ASRS and pointed out that some employee contracts, like Wade and
Paddock’s, required the City to make contributions into the 457 Plan. ASRS
responded that “an employer should not report employer contributions to
supplemental defined contribution plans on behalf of its contract
employees as compensation for ASRS purposes,” thereby confirming the
City’s new practice.

¶7           Wade and Paddock filed a complaint against ASRS and others
on behalf of themselves and similarly situated employees seeking
declaratory and injunctive relief. The superior court granted ASRS’s
motion to dismiss Wade’s claims for failure to exhaust administrative
remedies. The court simultaneously entered summary judgment in favor
of ASRS and denied Paddock’s cross-motion for partial summary judgment
on whether the City’s contributions to the 457 Plan constituted
“compensation” for ASRS purposes. After finding the definition of
“compensation” in A.R.S. § 38-711(7) ambiguous, the superior court
concluded that “compensation” includes “salary or wages from which an
employee might make deferred compensation payments” but does not
include employer-contributed payments to the 457 Plan “on top of salary

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                   Opinion of the Court


or wages.” The court entered judgment pursuant to Arizona Rule of Civil
Procedure 54(b) and stayed further proceedings pending appellate review.

¶8             The court of appeals reversed both the dismissal order and
the summary judgment and remanded for further proceedings. Wade v.
Ariz. State Ret. Sys., 239 Ariz. 263, 269 ¶ 22, 370 P.3d 132, 138 (App. 2016).
As pertinent here, the court concluded, based on the “plain language” of §
38-711(7), that “the term ‘salary’ includes the City’s regular contributions to
the [457 Plan].” Id. at 268 ¶ 18, 370 P.3d at 137. The court also awarded
attorney fees to Wade and Paddock pursuant to A.R.S. § 12-341.01. Id. at
270 ¶ 24, 370 P.3d at 139.

¶9             ASRS petitioned for review of the court of appeals’ holding
regarding the meaning of § 38-711(7) and the court’s attorney fee award
under § 12-341.01. (ASRS does not challenge reversal of the dismissal
order.) We granted review because these issues are of statewide
importance and are likely to recur. We have jurisdiction pursuant to article
6, section 5(3) of the Arizona Constitution and A.R.S. § 12-120.24.

                                II. Discussion

¶10            We review the interpretation of statutes de novo. Glazer v.
State, 237 Ariz. 160, 163 ¶ 12, 347 P.3d 1141, 1144 (2015). Our primary goal
is to effectuate the legislature’s intent. Id. “If the statute is subject to only
one reasonable interpretation, we apply it without further analysis.” Id.
But when a statute is ambiguous, “we consider other factors, including the
context of the statute, the language used, the subject matter, its historical
background, its effects and consequences, and its spirit and purpose.” Id.
(citation and internal quotation marks omitted).

              A.      “Compensation” under § 38-711(7)

¶11           Section 38-711(7) defines “compensation” as:

       [T]he gross amount paid to a member by an employer as
       salary or wages, including amounts that are subject to
       deferred compensation or tax shelter agreements, for services
       rendered to or for an employer, or that would have been paid
       to the member except for the member’s election or a legal

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       requirement that all or part of the gross amount be used for
       other purposes . . . .

¶12           Section 38-711(7) is subject to more than one reasonable
interpretation. By including amounts “subject to deferred compensation or
tax shelter agreements,” the statute injects uncertainty about legislative
intent. At first blush, this phrase encompasses any monies governed by a
deferred compensation or tax shelter agreement—including employer-
contributed amounts. On the other hand, because compensation is “paid
to” a member, the definition reasonably could refer only to payments a
member elects to defer from salary or wages the member would otherwise
have immediately received. We therefore disagree with the court of
appeals that § 38-711(7) plainly means that all deferred compensation
deposits are “compensation.” See Wade, 239 Ariz. at 268 ¶ 18, 370 P.3d at
137. The statute is ambiguous.

¶13           We therefore turn to secondary principles of statutory
interpretation to ascertain the legislature’s intent. After doing so, we agree
with the court of appeals that the most plausible view is that the legislature
intended to include employer-contributed deferred compensation, as paid
by the City under the conditions here, as “compensation” under § 38-711(7).
See id.

¶14           First, these payments form part of the “salary” “paid to a
member.” A.R.S. § 38-711(7). The legislature did not define “salary,” so we
give the word its common meaning. See Watts v. Medicis Pharm. Corp., 239
Ariz. 19, 28 ¶ 32, 365 P.3d 944, 953 (2016). Webster’s defines “salary” as
“fixed compensation paid regularly (as by the year, quarter, month, or
week) for services.” Webster’s Third New International Dictionary 2003
(2002); see also Black’s Law Dictionary 1537 (10th ed. 2009) (defining
“salary” as “[a]n agreed compensation for services – esp. professional or
semiprofessional services – usu. paid at regular intervals on a yearly
basis”).

¶15          The annual employment agreements between the City and
Paddock unconditionally required the City to contribute deferred
compensation, payable in regular, equal installments, in exchange for
employment services. These amounts were paid in addition to Paddock’s
“base salary.” The City contributions are held in trust for Paddock’s

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exclusive benefit, and will be “paid to” her or her beneficiaries at a future
date. See A.R.S. § 38-711(7). This is no different than if the City had made
the contribution amounts immediately available to Paddock and she
elected to defer payment under the 457 Plan. ASRS acknowledges that
employee-elected deferred compensation is “compensation” under § 38-
711(7). No reason appears to treat the City’s contributions differently.

¶16           The cases relied on by ASRS do not persuade us to reach a
different conclusion. In Kerr v. Killian, 207 Ariz. 181, 182 ¶ 1, 84 P.3d 446,
447 (2004), this Court addressed whether Arizona’s income tax scheme
violates the intergovernmental tax immunity doctrine. In reciting case
history, the Court stated that although employee and employer
contributions to a retirement plan “would seem to be current taxable
income to the employee [because] the former comes out of the employee’s
salary, while the latter is plainly a benefit conferred by the employer,”
federal tax law provided otherwise. Id. at 182–83 ¶ 4, 84 P.3d at 447–48. But
whether an employer contribution is “a benefit” rather than part of “salary”
was not at issue, and we do not read the passing statement as remarking on
the matter.

¶17           In Ventura County Deputy Sheriffs’ Ass’n v. Board of Retirement
of Ventura County Employees’ Retirement Ass’n, 940 P.2d 891, 898 (Cal. 1997),
the California Supreme Court concluded that “compensation,” as used in
laws creating a government pension plan, did not include employer-
contributed deferred compensation payments. Unlike here, however,
California law defined “compensation” as including “an amount deducted
from a member’s wages for participation in a deferred compensation plan,”
leaving “no room for inclusion” of employer contributions not deducted
from wages. Id. (internal quotation marks omitted).

¶18            Second, limiting “amounts that are subject to deferred
compensation or tax shelter agreements” to employee-deferred amounts, as
ASRS argues, would render that language superfluous. Cf. Fields v. Elected
Officials’ Ret. Plan, 234 Ariz. 214, 218 ¶ 16, 320 P.3d 1160, 1164 (2014)
(recognizing that courts construe statutes to avoid making parts
superfluous). Other language in § 38-711(7) defines “compensation” as
including amounts “that would have been paid to the member except for
the member’s election . . . that all or part of the gross amount be used for
other purposes,” i.e., employee-deferred amounts. Including employer-

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contributed payments into a deferred–compensation-plan trust gives
meaning to all language in § 38-711(7).

¶19           Third, the legislature’s treatment of employer-contributed
deferred compensation in calculating maximum retirement benefits
supports our interpretation. Cf. David C. v. Alexis S., 240 Ariz. 53, 55 ¶ 9,
375 P.3d 945, 947 (2016) (“Statutes that are in pari materia—those of the
same subject or general purpose—should be read together and harmonized
when possible.”). Section 38-769(O)(4)(a) excludes from “compensation”
“[e]mployer contributions to a plan of deferred compensation to the extent
the contributions are not included in the gross income of the employee for
the taxable year in which contributed.” The absence of a similarly specific
exception in § 38-711(7) suggests that the legislature intended to include
such contributions as “compensation” when paid as salary or wages.

¶20           ASRS’s remaining arguments are unpersuasive. It asserts that
counting City-contributed deferred compensation as “compensation”
means the City’s ASRS contribution must also be considered
“compensation.” Even if this is so, ASRS fails to explain how this compels
a different conclusion.        Regardless, whether an employer’s ASRS
contributions are “compensation” is not before us. We note, however, that
because an employee’s “compensation” is used to calculate ASRS
contribution amounts from employers and employees, the legislature
treated compensation and contributions as separate components. It is
doubtful, therefore, that it intended to include the contribution amounts as
“compensation” for calculating contribution amounts.

¶21           Finally, ASRS urges us to defer to its interpretation of § 38-
711(7) as a matter within its expertise. See Ariz. Water Co. v. Ariz. Dep’t of
Water Res., 208 Ariz. 147, 154 ¶ 30, 91 P.3d 990, 997 (2004) (“[When] the
legislature has not spoken definitively to the issue at hand, ‘considerable
weight should be accorded to an executive department’s construction of a
statutory scheme it is entrusted to administer.’” (quoting Chevron, U.S.A.,
Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 844 (1984))). In Arizona
Water Co., no specific statutory provision addressed the issue presented,
and this Court therefore gave great weight to the agency’s view as adopted
in a groundwater management plan. See id. at 153 ¶ 22, 155 ¶ 31, 91 P.3d at
996, 998. Here, the legislature explicitly defined “compensation” in § 38-
711(7), and we are able to ascertain legislative intent by applying

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interpretive principles. Cf. Chevron, 467 U.S. at 843 n.9 (stating that “[t]he
judiciary is the final authority on issues of statutory construction” and “[i]f
a court, employing traditional tools of statutory construction, ascertains
that Congress had an intention on the precise question at issue, that
intention is the law and must be given effect”). There is no reason to defer
to ASRS’s interpretation.

¶22           In sum, the City’s contractually required contributions into
the 457 Plan trust for the benefit of Paddock forms part of her salary and is
“compensation” under § 38-711(7). We therefore agree with the court of
appeals that the superior court incorrectly entered summary judgment for
ASRS as against Paddock. (As noted previously, see supra ¶ 9, ASRS does
not challenge here the reversal of the trial court’s order dismissing Wade’s
complaint.)

              B. Attorney fees

¶23            After we granted review in this case, this Court decided Hall
v. Elected Officials’ Retirement Plan, which resolved the attorney fee dispute
here. 241 Ariz. 33, 45 ¶ 37, 383 P.3d 1107, 1119 (2016). ASRS nevertheless
asks us to reconsider the matter. We decline to do so. The court of appeals
correctly decided that the dispute here arose from contract, and § 12-341.01
therefore authorized an attorney fee award.

                               III. Conclusion

¶24           For the foregoing reasons, we vacate paragraphs eleven and
eighteen of the court of appeals’ opinion and otherwise affirm the opinion
as it concerns the summary judgment and the attorney fee award.

¶25         We reverse the superior court’s entry of summary judgment
against Paddock. The court of appeals’ reversal of the order dismissing
Wade’s complaint was not challenged here and remains intact.

¶26           We award Wade and Paddock their reasonable attorney fees
incurred in this Court. Although the court of appeals also awarded them
fees, it had not determined the amount before ASRS filed its petition for
review. Accordingly, we remand to the court of appeals to determine the



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amount of fees to be awarded for proceedings before that court and this
Court.




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