
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                              _________________________          No. 95-2301                                  EDWARD A. McGRATH,                                Plaintiff, Appellant,                                          v.                       THE RHODE ISLAND RETIREMENT BOARD, ETC.,                                 Defendant, Appellee.                              _________________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF RHODE ISLAND                    [Hon. Ronald R. Lagueux, U.S. District Judge]                                             ___________________                              _________________________                                        Before                                Selya, Cyr and Boudin,                                   Circuit Judges.                                   ______________                              _________________________               Edward C. Roy,  Jr., with whom Roy & Cook  was on brief, for               ___________________            __________          appellant.               David D. Barricelli, with whom Hinckley,  Allen & Snyder was               ___________________            _________________________          on brief, for appellee.                              _________________________                                     July 9, 1996                              _________________________                    SELYA,  Circuit  Judge.   This  appeal  requires us  to                    SELYA,  Circuit  Judge.                            ______________          determine whether a legislated  change to a substantive provision          of a public employees'  retirement plan, as applied, transgresses          the  Contracts Clause of the United States Constitution.  We find          no   constitutional   infraction:     plaintiff-appellant  Thomas          McGrath's pension rights had not yet vested when the modification          occurred, and the state had reserved the power to alter or revoke          its  promise of retirement benefits to municipal employees at the          time  it established  the plan  in which  McGrath later  became a          participant.  Consequently, we  affirm the district court's grant          of summary  judgment in favor of  defendant-appellee Rhode Island          Retirement Board (the Board).          I.  THE STATUTORY SCHEME          I.  THE STATUTORY SCHEME                    The Rhode Island General  Assembly established a  state          employees' retirement plan in 1936.  See 1936 R.I. Pub. Laws, ch.                                               ___          2334  (codified at  R.I. Gen.  Laws     36-8-1 to  36-10-39 (1990          Reenactment  &  Supp. 1995)).    In  1951,  the General  Assembly          enabled Rhode Island's cities and  town to enroll their employees          in a matching plan.  See 1951 R.I. Pub. Laws,  ch. 2784 (codified                               ___          at  R.I. Gen.  Laws     45-21-1 to  45-21-62 (1991  Reenactment &          Supp. 1995)).  The legislature patterned the municipal employees'          plan (MEP) after  the state employees' plan (SEP), engrafting the          former onto the latter.   Together, these plans comprise  what is          familiarly  known as  the  state  retirement  system.    The  key          provisions of both  plans are  ordained by statute  and both  are          administered under the aegis of the Board.                                            2                    The  law  authorizing the  MEP  affords  each of  Rhode          Island's  thirty-nine  municipalities  the  option   of  deciding          whether or not to participate.  See R.I. Gen. Laws   45-21-4.  If                                          ___          a  city or  town  chooses to  join,  its eligible  employees  are          required  to become members of  the plan and  must contribute six          percent of salary until  they have reached the maximum  amount of          service credit attainable.   See id.   45-21-41.   Municipalities                                       ___ ___          may  elect to  defray some  or all  of their  employees' required          contributions to the MEP.  See id.   45-21-41.1.                                     ___ ___                    A qualified employee is entitled to a life annuity upon          retirement  in  the amount  of two  percent of  his or  her final          salary  times the number of years of total creditable service (up          to thirty-seven  and one-half  years).   See id.    45-21-17.   A                                                   ___ ___          person is eligible to retire  with such a pension once he  or she          attains  age fifty-eight  and has  logged at  least ten  years of          total  creditable  service.  See  id.    45-21-16.    Under  this                                       ___  ___          formulation    the only formulation that is germane to this case1            a  municipal member's right to  a pension vests when  he or she          meets both the age and years-in-service minima.                    The MEP gives members the opportunity to purchase up to          four years  of pension  credits for temporally  equivalent active          duty military  service.  See id.    45-21-53.  A  member also can                                   ___ ___          purchase  pension credits for any "prior service with the city or                                        ____________________               1Under the MEP, a worker  also is eligible to retire with  a          similarly  calculated pension  regardless  of age  if  he or  she          accumulates at  least thirty  years of total  creditable service.          See R.I. Gen. Laws   45-21-16.          ___                                          3          town of which  the employee is now employed."   Id.   45-21-9(b).                                                          ___          Prior  to  1991,  these   purchased  credits  benefitted  a  plan          participant in two ways.  First, they served to increase the life          annuity  payments that  would be  payable upon  the participant's          retirement.  Second, they  served to accelerate the participant's          vesting date.   For example,  an individual who  had served  four          years in the  military could  purchase four  years of  creditable          pension time at  a relatively modest rate and then  retire at age          fifty-eight after only  six years of municipal  employment.  What          is more, the individual would receive an annuity upon  retirement          in the amount of two percent of his or her final salary times ten          years (despite having worked for a mere six years).                    From its very inception, the statute that paved the way          for  municipal employees  to  enter the  state retirement  system          included  a provision  reserving the  state's power to  amend the          terms of the municipal members' participation.  We reproduce this          escape clause in its entirety:                    Reserved  power to amend  or repeal    Vested                    Reserved  power to amend  or repeal    Vested                    rights.      The  right to  amend, alter,  or                    rights.                       repeal this chapter at  any time or from time                    to time  is expressly  reserved, and  in that                    event   the   liability   of  the   municipal                    employees' retirement system of  Rhode Island                    shall be  limited[,] in the case  of a member                    or a person claiming through the member[,] to                    the contributions made by the member, without                    interest, and in the case of a  municipality,                    to contributions made by  the municipality[,]                    without   interest,  subject   to  deductions                    prescribed  in  the case  of withdrawal  by a                    municipality as provided in    45-21-6.   All                    retirement   allowances  or   other  benefits                    granted by the retirement  of members, and in                    force prior  to a repeal  or amendment, shall                    be  vested in  the beneficiaries  thereof and                                          4                    shall be paid in  full in accordance with the                    terms of this chapter,  and the rights of the                    retirement board to compel the payment by any                    municipality  of the sum or sums necessary to                    provide the retirement allowances  granted to                    members formerly employed by the municipality                    shall  not  be  affected  by  the  repeal  or                    amendment.          Id.   45-21-47.   Under  this provision, the  state reserves  the          ___          authority  to make  changes  to  the  pension  plan,  up  to  and          including the  termination  of municipal  participation  and  the          elimination of the  pension rights of all employees (except those          who have already retired).  Upon repeal,  current employees would          receive back  nothing more than  the contributions they  had made          over the course of their employment, without interest.  See id.                                                                  ___ ___                    For many years the  state retirement system was plagued          with  problems.  In 1991,  with tales of  suspected pension abuse          rampant, the General Assembly  restructured the system in several          respects.    Among other  changes,  the  legislature revised  the          method  for  calculating  the  minimum  years  of  service  (ten)          required before an employee  of suitable age could retire  with a          pension.   The  new  method focused  on  actual time  in  service          without  regard to purchased credits.   It did  so by designating          contributing membership (i.e., the period of time during which an          employee  had been  working for  the  public employer  and making          contemporaneous  contributions to  the  system) as  the virtually          exclusive measure  of creditable time for vesting  purposes.  The          new law stated:                    Except as  specifically provided in    36-10-                    9.1,    36-10-12 through 36-10-15 and     45-                    21-19 through 45-21-22  of the general  laws,                                          5                    no  member  shall  be  eligible  for  pension                    benefits under this chapter unless the member                    shall have been a  contributing member of the                    employees' retirement system for at least ten                    (10) years.  Provided, however,  a person who                    has ten  (10) years  service credit shall  be                    vested.   Any person who becomes  a member of                    the employees' retirement system  pursuant to                      45-21-4 shall be considered  a contributing                    member for the purposes  of title 45, chapter                    21 and this chapter.          R.I. Gen. Laws   36-10-9(c) (Supp. 1993) (enacted June 16, 1991).          It  is readily evident that, under the amendment, an employee may          only count years  of actual  service for purposes  of meeting  an          applicable ten-year vesting requirement.  Thus, purchased credits          (for, say, time in the military) can  no longer be counted toward          vesting (unless the holder  comes within the "grandfather clause"          protecting  persons who  already had  logged ten  years  of total          creditable  service, including  the  purchased  credits,  at  the          effective date of the statutory change).2                    In enacting this statute,  the General Assembly amended          only Title 36   the  law creating the SEP.  Nevertheless,  as the          last  sentence of  the excerpted  language indicates,  the change          seemed to apply  to the MEP  as well.   When the Board  exhibited          some confusion about which minimum vesting requirement applied to          municipal members,  the legislature  moved swiftly to  dispel all          doubt by amending Title  45   the law creating the  MEP   to make                                        ____________________               2The  new  provision did  not  affect the  use  of purchased          credits  in regard  to the  thirty-year vesting  alternative, see                                                                        ___          supra note  1, or in regard  to pension augmentation.   Thus, the          _____          purchase  of military  credits  still could  yield a  significant          monetary  return  when  the  Board, at  retirement,  applied  the          statutory formula to compute the amount of a participant's yearly          annuity.                                          6          it pellucid  that municipal  members, like other  participants in          the  system, must have been contributing members for at least ten          years in  order to meet the  minimum years-in-service requirement          for  a pension.  See  R.I. Gen. Laws    45-21-16(b) (enacted July                           ___          21,   1992).    The   new  law   ceded  substantially   the  same          grandfathering to  members who already had  accumulated ten years          of total service (including  purchased credits), see id.,  but it                                                           ___ ___          did not extend the same unguent to persons who had bought credits          but had not yet, even with  the aid of those credits, cleared the          years-in-service hurdle.          II.  THE COURSE OF EVENTS          II.  THE COURSE OF EVENTS                    The relevant  facts underlying this  litigation are not          in  dispute.    Thomas McGrath  began  working  for  the City  of          Cranston  as a  probationary  employee on  April  9, 1986.    His          probationary status ended six months later.  Because Cranston had          elected to participate  in the system,  he became a  contributing          member of  the MEP on  November 28,  1986.  He  remained in  that          status until April  28, 1994 (although Cranston  defrayed some of          the contribution costs).                    In February  1991  the  appellant  began  pursuing  the          purchase  of retirement  credits  for two  and one-half  years of          prior  military service.    Applying the  statutory formula  (ten          percent  of first-year salary  for each year  of surrogate credit          purchased) the Board informed the appellant that he could buy the          desired  credits for  $4,316.09, and  that for  the added  sum of          $917.53 he could purchase  credits corresponding to his six-month                                          7          probationary period.   The appellant bought the  credits on April          15,  1991.  At that time he had been a contributing member of the          system for just over four and one-half years.                    As  the  law then  read,  the  appellant's purchase  of          surrogate  credits worked to his  advantage in two  ways.  First,          the   purchase  augmented  his  anticipated  pension  benefit  by          increasing the number of years that would form the basis on which          his yearly retirement  annuity would be calculated.   Second, the          purchase promised to accelerate vesting  and enable him to retire          with  a pension  after completing  a mere  seven years  of actual          municipal employment.   The appellant  claims that he  planned to          take advantage  of both attributes  and to retire  from municipal          service  late  in 1993  (at which  time  he would  be  beyond the          minimum retirement age).                    While the 1991 and  1992 amendments to the law  did not          diminish  the appellant's  prospects of  boosting his  pension by          reason of  the  purchased  credits,  they  dashed  his  hopes  of          accelerated vesting.3   Under the  new law, only  years in  which          municipal  employees  had  been  contributing  members  could  be          counted toward  the vesting  requirement.  Because  the appellant          had  only nine  years, two  months and  twenty-two days  of total          creditable service  (including purchased  credits) when  the 1992          amendment  took effect, he  lost the  benefit of  the accelerated                                        ____________________               3This case does not require us to speculate whether the 1991          amendment in and of itself dictated this result.  Even if the MEP          was  unaffected until  the General  Assembly  acted in  1992, the          outcome here would be the same.                                          8          vesting that he had envisioned.                    McGrath  met   with  a  representative  of   the  state          retirement system  in October 1993  to ascertain whether  the new          law  would  be  applied  to  the  determination  of  his  pension          eligibility.  After receiving  an adverse decision, he petitioned          the Board.   The Board  ruled that under  the amended  statute he          could use the purchased  probationary credits toward vesting, but          that he could  not use  the purchased military  credits for  that          purpose.  Accordingly, the Board decreed that the appellant would          not vest  unless he continued in municipal  service through April          9,  1996.  Put  another way, the  appellant would have  to work a          full ten years for Cranston before becoming eligible to receive a          pension.  Should  he reach that milestone, the purchased military          credits  would be  applied to  augment the  amount of  his yearly          retirement annuity and he  would retire with twelve and  one-half          years of credited service (rather than ten), thus allowing him to          receive a more munificent pension.                    The  appellant resigned his  municipal office  on April          28, 1994.  The Board stood fast, taking the position  that he was          not  entitled  to  any   pension  but  merely  to  a   return  of          contributions (including  the payments tendered for the purchased          credits).    Pensionless  but  undaunted,  McGrath  brought  suit          against the Board  in the  United States District  Court for  the          District of Rhode Island.   He alleged that the amendment to R.I.          Gen.  Laws     45-21-16,   as  applied  to  him  by   the  Board,          transgressed  the Contracts Clause, see U.S. Const. art. I,   10,                                              ___                                          9          the  Equal Protection  and Due Process  Clauses, see  U.S. Const.                                                           ___          amend.  XIV,   1, and the Takings  Clause, see U.S. Const. amend.                                                     ___          V.4  In a  thoughtful opinion, the district court  granted brevis                                                                     ______          disposition  in the Board's favor.   See McGrath  v. Rhode Island                                               ___ _______     ____________          Ret. Bd., 906 F. Supp. 749 (D.R.I. 1995).  This appeal ensued.          ________          III.  ANALYSIS          III.  ANALYSIS                    In this forum, the  appellant challenges only the lower          court's rejection of his Contracts Clause claim.  We restrict our          analysis accordingly.                                          A                                          A                    In  terms, the Contracts  Clause prohibits  states from          passing  "any . . .  Law impairing the  Obligation of Contracts."          U.S.  Const. art. 1,   10.   Though the Framers apparently had in          mind   only   purely   private   contracts   (particularly   debt          obligations), see Benjamin F. Wright, Jr., The Contract Clause of                        ___                          ______________________          the  Constitution 15-16  (1938),  the Clause  routinely has  been          _________________          applied  to contracts between  states and private  parties.  See,                                                                       ___          e.g., Fletcher v. Peck, 10 U.S. (6 Cranch) 87, 137-39 (1810).          ____  ________    ____                    Over time,  the Supreme Court has  devised a tripartite          test  for use in analyzing alleged impairments of contracts.  See                                                                        ___          General Motors Corp.  v. Romein, 503 U.S. 181, 186 (1992).  Under          ____________________     ______          this  paradigm, a  court first  must inquire  whether  a contract          exists.   If so, the court  next must inquire whether  the law in          question  impairs an obligation under  the contract.   If so, the                                        ____________________               4This provision is made applicable to the states through the          genius  of  the  Fourteenth   Amendment.    See  Webb's  Fabulous                                                      ___  ________________          Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 160 (1980).          ________________    ________                                          10          court  then must  inquire  whether the  discerned impairment  can          fairly be  characterized as substantial.   Affirmative answers to          these  three queries  compel  a court  to  abrogate the  proposed          application of the challenged state law.  See id.                                                    ___ ___                    It should  be noted that this  tripartite test actually          has a fourth component.  In an appropriate case the model expands          to  include  an  inquiry as  to  whether  the impairment,  albeit          substantial, is reasonable and  necessary to fulfill an important          public  purpose.   See Energy  Reserves Group  v. Kansas  Power &                             ___ ______________________     _______________          Light, 459 U.S.  400, 411-12 (1983).   If so, the  challenged law          _____          will  not be  held to  infringe rights  secured by  the Contracts          Clause.  See id.  Furthermore, when a state is  itself a party to                   ___ ___          a contract,  courts must scrutinize the  state's asserted purpose          with an extra measure of vigilance.  See  United States Trust Co.                                               ___  _______________________          v.  New Jersey,  431  U.S. 1,  25  (1977).   Because  this fourth              __________          component requires careful judicial scrutiny in all events, it is          clear that  a state must do more than mouth the vocabulary of the          public weal  in order to reach  safe harbor; a  vaguely worded or          pretextual  objective, or  one  that reasonably  may be  attained          without  substantially impairing  the contract rights  of private          parties, will not serve to avoid the full impact of the Contracts          Clause.                                          B                                          B                    In general,  retirement plans  are within the  reach of          the Contracts Clause.  To be  sure, noncontributory pensions were          viewed a century  ago not  as contracts but  as mere  gratuities.                                          11          See,  e.g., Pennie v. Reis, 132 U.S.  464, 471 (1889).  But times          ___   ____  ______    ____          have  changed, and  evolving legal  doctrine recognizes  that the          promise of a  pension is  part of the  compensation package  that          employers  dangle to attract and  retain qualified employees.  In          line with this evolving  doctrine we have held that,  in general,          pensions are to be regarded as a species of unilateral contracts.          See  Hoefel v. Atlas Tack Corp., 581  F.2d 1, 4-5 (1st Cir. 1978)          ___  ______    ________________          (explaining that "the  promise of a pension constitutes  an offer          which,  upon   performance  of   the  required  service   by  the          employee[,]  becomes  a binding  obligation"), cert.  denied, 440                                                         _____  ______          U.S. 913 (1979).  Other courts have come to view pension plans in          much the same way.   See, e.g.,  Pratt v. Petroleum Prod.  Mgmt.,                               ___  ____   _____    _______________________          Inc. Employee Sav.  Plan &  Trust, 920 F.2d  651, 661 (10th  Cir.          _________________________________          1990) (stating  that  a "pension  plan is  a unilateral  contract          which  creates a vested right  in those employees  who accept the          offer it contains by  continuing in employment for  the requisite          number  of years") (quoting Hurd  v. Illinois Bell  Tel. Co., 234                                      ____     _______________________          F.2d 942, 946 (7th Cir.), cert. denied, 352 U.S. 918 (1956)); see                                    _____ ______                        ___          generally  Arthur L. Corbin, Corbin  on Contracts    2.29, at 256          _________                    ____________________          (Joseph M. Perillo rev. ed. 1993).                    Though the principle that  a pension plan represents an          implied-in-fact unilateral  contract is  fairly well  settled and          has  been  applied  repeatedly  to state  and  municipal  pension          plans,5   there   is    significant   disagreement   about   when                                        ____________________               5Our opinion in  Hoffman v.  City of Warwick,  909 F.2d  608                                _______     _______________          (1st  Cir.  1990), does  not  subvert  this  principle.   Hoffman                                                                    _______          involved  a Rhode  Island  law that  granted veterans  additional                                          12          contractually enforceable  rights accrue under such  plans.  See,                                                                       ___          e.g., Nevada  Employees Ass'n,  Inc. v.  Keating, 903  F.2d 1223,          ____  ______________________________     _______          1227  (9th  Cir.)  (suggesting  that   nonvested  employees  have          contractual  rights subject  only to  "reasonable modification"),          cert. denied,  498 U.S. 999 (1990);  Betts v. Board of  Admin. of          _____ ______                         _____    ___________________          the Pub. Employees' Ret. Sys., 582 P.2d 614, 617  (Cal. 1978) (en          _____________________________          banc) (stating that the right to  a "substantial" or "reasonable"          pension  accrues on first day of employment); Petras v. State Bd.                                                        ______    _________          of Pension  Trustees, 464 A.2d  894, 896 (Del.  1983) (explaining          ____________________          that  rights accrue  when  vesting  occurs);  Singer v.  City  of                                                        ______     ________          Topeka, 607 P.2d  467, 475  (Kan. 1980) (similar  to Petras,  but          ______                                               ______          adding that rights remain subject to "reasonable  modification");          Sylvestre  v. State, 214 N.W.2d  658, 666-67 (Minn. 1973) (taking          _________     _____          the position that  an employee's  rights accrue on  first day  of          employment); Baker v. Oklahoma  Firefighters Pension & Ret. Sys.,                       _____    __________________________________________          718 P.2d 348, 353  (Okla. 1986) (holding that rights  accrue only          when an employee  vests); Leonard  v. City of  Seattle, 503  P.2d                                    _______     ________________          741,  746  (Wash.  1972) (en  banc)  (similar  to  Baker).   And,                                                             _____          moreover, some courts cling to the notion that a  state-sponsored          retirement plan  for  public  employees  creates  no  enforceable          contractual rights whatever.  See, e.g., Pineman v. Oechslin, 488                                        ___  ____  _______    ________                                        ____________________          seniority in public employment.  The state had never enforced the          law,  and there was no  indication that employees  knew about it,          much  less considered  it part  of their  employment arrangement.          See id. at 612.  On those idiocratic facts, we concluded that the          ___ ___          statute did not evince a legislative intent to contract, and that          a fortiori its repeal did not impair contractual obligations owed          _ ________          to current employees.  See id. at 614.  Fairly read, Hoffman does                                 ___ ___                       _______          not stand for the  proposition that statutory employment benefits          can never create contractual rights.                                          13          A.2d  803, 809-10 (Conn. 1985);  Spiller v. State,  627 A.2d 513,                                           _______    _____          516 (Me. 1993).                                          C                                          C                    Rhode  Island's  municipal  employees'  pension  system          differs  from the plans that have been considered by other courts          in at  least one material  respect:   R.I. Gen.  Laws    45-21-47          explicitly  reserves  to the  legislature the  power to  amend or          terminate  the plan,  including  the power  to eliminate  pension          benefits entirely  (except for  those employees who  have already          retired).6   It  is generally the  case with  supposed unilateral          contracts that  if the  offeror expressly  reserves the  power to          revoke  the offer  until the  offeree's performance  is complete,          then  the offer is illusory and cannot  give rise to a unilateral          contract.  See  Restatement (Second)  of Contracts    45, cmt.  b                     ___          (1981) ("A reservation of  power to revoke after performance  has          begun means that as yet there is no promise and no offer.").  The          Supreme  Court has endorsed  this approach in  respect to certain                                        ____________________               6Of course,  it can  be argued that  a legislatively-created          pension plan is always  subject to amendment by means  of further                          ______          legislative  enactments,  whether  or  not  the  plan  explicitly          reserves  a power  to amend.   We  caution that  this may  be too          simplistic an argument.   The Contracts Clause prohibits  a state          legislature  from  amending  any  law  in  a  way  that  works  a          substantial  impairment  of  contractual  obligations  previously          undertaken.  An  explicit reservation easily can be understood as          a legislative  effort to avoid creating  a contractual obligation          in the first  place, for  when the state  expressly reserves  the          power  to withdraw  or reconfigure  the promise  of a  pension, a          state employee  who thereafter  accepts employment will  be hard-          pressed  to assert a reasonable basis for relying on the original          promise.    Viewed  in this  light,  the  very  existence of  the          Contracts Clause seems to give a state's explicit  reservation of          authority  to amend its own public employee pension law more bite          than an inchoate power to amend can command.                                          14          federal  employee retirement  benefits.   See United  States R.R.                                                    ___ ___________________          Ret.  Bd.  v.  Fritz, 449  U.S.  166,  174  (1980) (stating  that          _________      _____          statutory "railroad  [retirement] benefits, like  social security          benefits,  are  not  contractual  and  may  be  altered  or  even          eliminated at any time").  If  this logic holds, the Rhode Island          municipal retirement  system seemingly does not  produce the kind          of binding offer that courts are likely to enforce.                    Yet this logic is not inevitable.  In the wide world of          employee  pension plans,  the  principle that  reserved power  to          revoke means that there is no offer and no contract  has not been          applied  consistently.    In   Allied  Structural  Steel  Co.  v.                                         ______________________________          Spannaus, 438 U.S. 234  (1978), the Court  held that a state  law          ________          impaired the obligations  of Allied Steel's  preexisting contract          with  its  employees  by  requiring  that  all  employer-provided          pension plans must include  certain guarantees.  See id.  at 250.                                                           ___ ___          En route to this holding the  Court recognized the existence of a          contract for Contracts  Clause purposes notwithstanding the  fact          that the  employer-sponsor had  explicitly reserved the  right to          amend  or terminate  its  pension plan  even  if doing  so  meant          depriving  employees (including  those employees who  had already          vested) of their expected benefits.                    In  the  same vein,  prior  to  the  enactment  of  the          Employee  Retirement  Income Security  Act  of  1974 (ERISA),  29          U.S.C.    1001-1461 (1994)    a statute that now occupies much of          the field in the law of pension benefits, but which has no direct          relevance here    significant common-law  precedent had developed                                          15          in  support   of  the  view  that  an   express  and  unqualified          reservation of the power  to amend or terminate a pension plan is          only to  be given effect up  to the point at  which an employee's          rights under the plan vest.  For instance, we held in a pre-ERISA          case that retired employees were entitled to benefits as provided          in a  negotiated pension plan notwithstanding (a) the presence of          a clause  in the  plan reserving  to the employer  "the right  to          change, suspend or discontinue the Plan at any time," and (b) the          employer's attempted termination  of the plan.   Hoefel, 581 F.2d                                                           ______          at 3-4.  In so holding, we observed approvingly that a "number of          courts have construed pension plans which reserve to the employer          the  right  to  alter  or  discontinue  .  .  .  as  limiting the          employer's  reserved  right  to  apply only  to  employees  whose          pension  rights had  not,  at the  time  of the  change,  already          vested."  Id. at 5.  Hoefel relied heavily on Cantor v. Berkshire                    ___        ______                   ______    _________          Life Ins.  Co., 171  N.E.2d 518  (Ohio 1960),  in which  the Ohio          ______________          Supreme Court ruled  that "even though the employer  has reserved          the right to amend or  terminate the plan, once an  employee, who          accepted  employment under such a plan, has complied with all the          conditions entitling him to participate  in such plan, his rights          become  vested and the employer cannot divest the employee of his          rights thereunder."  Id. at 522. Other  courts agree.  See, e.g.,                               ___                               ___  ____          In  re Erie Lackawanna  Ry. Co., 548  F.2d 621, 625-27  (6th Cir.          _______________________________          1977); Ehrle v. Bank  Bldg. & Equip. Corp.,  530 S.W.2d 482,  495                 _____    __________________________          (Mo.  Ct. App. 1975); Stopford  v. Boonton Molding  Co., 265 A.2d                                ________     ____________________          657, 665-66 (N.J.  1970); see generally Annot., 46  A.L.R.3d 464,                                    ___ _________                                          16          468-70 (1972)  (collecting cases).  Thus, the  caselaw evinces an          emergent  common-law  rule to  this  effect:   once  an  employee          fulfills  the  service  requirements  entitling  him  or  her  to          retirement benefits under a pension plan, the employee acquires a          contractual  right to  those  benefits, and  the employer  cannot          abridge that  right despite its aboriginal reservation of a power          to  effect  unilateral  amendments   or  to  terminate  the  plan          outright.7                    We hasten to  add a caveat.   To our knowledge,  all of          the  cases that have cabined the effect of an explicitly reserved          power to  amend involve private-sector  retirement plans.   It is          unclear  whether the same limitations apply  ex proprio vigore to                                                       __ _______ ______          public-sector  retirement  plans.   On  one  hand, principles  of          fairness argue  for  comparability of  treatment.   On the  other          hand, the very nature of a republican form of government and that          government's unique duty to represent the public interest combine          to create a special employment environment.  Lawmakers pay homage          to this reality in many ways, see, e.g., R.I. Gen. Laws   36-11-6                                        ___  ____          (1990 Reenactment)  (denying most  public employees the  right to          strike), and  there are  sound policy  reasons to  recognize this          difference in terms of  maximizing the states' flexibility vis- -          vis  the retirement benefits that  it offers to public employees.                                        ____________________               7Recent  legislation buttresses the legitimacy of this rule.          ERISA,  for  example,  specifically  provides that  pension  plan          amendments cannot decrease retirement benefits which have already          accrued.    See 29  U.S.C.    1054(g).   Similarly,  the Internal                      ___          Revenue  Code defines  as "qualifying  plans" only  those pension          plans  that provide for the protection of "accrued benefits" upon          plan termination.  26 U.S.C.   411(d)(3).                                          17          Indeed, such  concerns underlie  the recognized  presumption that          statutory enactments do not create contractual obligations in the          absence of an "unmistakable" intent on the legislature's  part to          do so.  See United States v. Winstar, No. 95-865, slip op. at 31-                  ___ _____________    _______          48  (U.S.   July   1,  1996)   (discussing   the  role   of   the          unmistakability doctrine in "limiting contractual incursions on a          State's  sovereign powers"  under the  auspices of  the Contracts          Clause).  Be that as it may, the instant case does not require us          to choose between these opposing viewpoints.  Even if the common-          law rule applies  to public employees'  retirement plans and  the          MEP therefore  creates an enforceable contract  linking the state          and the individual MEP members   a  matter we do not decide    it          would not assist McGrath.                                          D                                          D                    The district court found  that the appellant's purchase          of military credits created a contract between him and the state,          separate  and  apart from  the  overall  agreement  to provide  a          pension.   See  McGrath, 906  F. Supp.  at 760  n.1.   Under this                     ___  _______          separate  contract, the  state promised to  pay McGrath  a larger          retirement  annuity in return for a stipulated cash payment.  See                                                                        ___          id. at 763.   Although the purchase yielded a  second prospective          ___          benefit    producing an opportunity for  earlier retirement, made          possible  by the ability  to count  purchased credits  toward the          MEP's minimum years-in-service  requirement    the court  thought          that this feature was merely incidental  to the essential purpose          of the  separate contract.   See id. at  763-64.  Partly  because                                       ___ ___                                          18          R.I. Gen. Laws    45-21-47 rendered  the appellant's reliance  on          the state's  ancillary promise  unreasonable, and  partly because          the  amendment to R.I.  Gen. Laws    45-21-16 did  not impair the          "central undertaking"  of the  contract   pension  augmentation            the  court  concluded  that   the  amendment  comprised  only  an          "insubstantial" impairment of the separate contract and therefore          did not transgress  the Contracts  Clause.  See  McGrath, 906  F.                                                      ___  _______          Supp. at  766 (citing City of  El Paso v. Simmons,  379 U.S. 497,                                ________________    _______          514 (1965)).                    Although  we  uphold the  district court's  judgment we          arrive at that  destination by  a somewhat different  path.   For          purposes  of  Contracts  Clause  analysis,  as  in  contract  law          generally,  it serves no legitimate end to slice and dice unitary          agreements into a series of fragmentary subcontracts.   Cf. Smart                                                                  ___ _____          v. Gillette Co. Long-Term Disab. Plan, 70 F.3d 173, 179 (1st Cir.             __________________________________          1995) (warning that "[a]ccepted canons of construction forbid the          balkanization of  contracts for interpretive purposes").   To the          contrary,  a  singular  contract   should  be  treated  as  such.          Applying this  salutary principle, we think it  is unrealistic to          view the acquisition  of surrogate credits as  forming a separate          and   distinct  contract.    In  point   of  fact,  the  purchase          constitutes  no more than a  transaction made available under the          auspices  of the  overall  retirement arrangement.8   Hence,  the          rights created  by the purchase  of credits are  subsumed within,                                        ____________________               8As the district court recognized, the only rights conferred          by  the purchased credits were rights within the MEP itself.  See                                                                        ___          McGrath, 906 F. Supp. at 759.          _______                                          19          and  indistinguishable   from,  the  rights  created   under  the          retirement  plan proper.  We must, therefore, train our sights on          the MEP as a whole.                    Based  on the authorities  canvassed above,  we believe          that the  architecture of the MEP  at most extends an  offer of a          unilateral contract to employees of participating municipalities,          subject, however, to the  reserved powers contained in  R.I. Gen.          Laws    45-21-47.   Assuming,  for argument's  sake, that  such a          contract has significance for purposes  of the Contracts Clause            a matter on which we take no view   it nonetheless is clear that,          under  the contract  terms,  a member's  rights  to a  retirement          annuity  are not  secure until  he  or she  has met  the age  and          service requirements established in the plan (and, therefore, has          become vested).9  Until such  time, section 45-21-47 permits  the          state  to  make modifications  to,  or  even terminate,  members'          rights  under the  plan without  offending the  Contracts Clause.          And, moreover, since  rights gained by service and  rights gained          by purchase  are "equal in  stature" within the  system, McGrath,                                                                   _______          906 F. Supp. at 759, it follows that both are  equally subject to          the  state's  reserved  power  to  amend  or  terminate  whatever          presumptive entitlements an unvested member may from time to time          look forward to enjoying.                    In terms  of this case, then,  the appellant's purchase                                        ____________________               9It is unclear whether the legislature can pass and lawfully          enforce an amendment that adversely affects an individual who has          satisfied the  age and years-in-service requirement,  but has not          yet  retired.  This case does not present an appropriate occasion          for us to explore this terra incognito.                                 _____ _________                                          20          of surrogate credits  may have conferred  certain rights on  him,          but  it did so only against the  backdrop of the state's reserved          authority to modify those rights  up to the point of vesting  (if          not beyond).   And since  McGrath was not  vested when the  Rhode          Island General Assembly revised the MEP, his claim founders.                    To say  more would be supererogatory.  We conclude that          the  amendment to R.I. Gen.  Laws   45-21-16,  as applied, passes          constitutional  muster under the  Contracts Clause.   See City of                                                                ___ _______          Charleston v. Public Serv. Comm'n, 57 F.3d 385, 393-95 (4th Cir.)          __________    ___________________          (holding that a state law did  not impair a public contract  when          the  contract expressly  stated that  its terms  were subject  to          legislative  regulation), cert.  denied, 116  S. Ct.  474 (1995);                                    _____  ______          National  Ass'n of  Gov't Employees  v. Commonwealth,  646 N.E.2d          ___________________________________     ____________          106, 110 (Mass.) (holding that a statutorily mandated increase in          state  employees'  health insurance  premiums  did  not impair  a          public contract  because the  legislature had  expressly reserved          the power to change  the contract's terms), cert. denied,  115 S.                                                      _____ ______          Ct. 2615 (1995).          IV.  CONCLUSION          IV.  CONCLUSION                    We need go no further.  As between Rhode Island and the          appellant,  the 1992 amendment to  R.I. Gen. Laws    45-21-16 did          not  impair any  obligation  protected by  the Contracts  Clause.          Consequently,  the district court  appropriately entered judgment          for the Board.          Affirmed.          Affirmed.          ________                                          21
