Board of Trustees of the State Police Retirement System v. Halsell

Robert H. Dudley, Justice. The single issue is whether payment at retirement for unused annual leave should be included as part of the average annual salary when computing the amount of a retirement pension for a State Police officer. At his retirement from the State Police, the appellee, Arthur Halsell, had accrued annual leave for which he was paid a lump sum termination payment. The Director of the State Police advised appellee that this termination payment was not salary and would not be included in computing retirement benefits. The appellees then filed suit against appellants, the Board of Trustees of the State Police Retirement System, asking for declaratory judgment. The trial court ruled that the lump sum termination payment made to appellee should be included in his final average salary in computing his retirement pay. That decision is erroneous and is reversed. The pension payable to a retiring State Police officer is based upon set percentages of his final average salary. Final average salary is defined by Ark. Stat. Ann. § 42-451 (B) (/) (Repl. 1977) as: . . . the average of the annual salaries paid a member for the three (3) years of credited service rendered by him immediately preceding his last termination of employment with the Department, provided that the final average salary shall not exceed that of the highest permanent rank. The appellant has computed the compensation paid to appellee for services rendered over the past three years. The appellee is asking that the termination benefit, which is equal to one month’s unused leave, be added to the three years’ salary. In other words, use 37 months to compute three years. The statute contemplates using the past 36 months’ salary in computing “the average of annual salaries paid a member for the three years of credited service.” Ark. Stat. Ann. § 13-349 (A) (Repl. 1979) clarifies the legislative intent, as follows: * * * Provided that the remuneration paid to an employee of the State may exceed the maximum annual salary as authorized by the General Assembly as follows, and the following shall not be construed as payment for services or as salary as contemplated by Section 4 of Article 16 of the Constitution of the State of Arkansas'. (1) Overtime payments as authorized by law; (2) Payment of a lump sum to a terminating employee', (3) Payment for overlapping pay periods at the end of a fiscal year as defined or authorized by law. [Emphasis added.] The language in the statute is clear that the lump sum termination benefit should not be considered as salary. Therefore, it should not be added to the appellee’s average salary for the purpose of computing his retirement pension. An objective of the General Assembly in prohibiting the termination pay from being counted as part of the average annual salary is to prevent a distinction in retirement benefits from one State Police officer who took a vacation as opposed to one who did not take a vacation. The appellee argues that he has a vested right to have his termination payment included in his retirement pension, since it had been done in the past, and this was a factor in his continued employment. Appellee has not acquired such a vested right. He had been employed by the State Police since 1947, and the lump sum termination pay statute, Ark. Stat. Ann. § 13-349 (L), was enacted in 1973. There is no proof in the record of the State Police retirement policy or practice before 1973, and we do not speculate on either what the policy was or whether it was a factor in his continued employment. Hence, no vested right was acquired before 1973. A former member of the retirement board, Tommy Goodwin, testified that since 1975 four or five officers had the lump sum termination benefit added to their annual salary for computing retirement pay. However, since 1973 the statute has prohibited counting the lump sum termination benefit as salary. Appellee cannot gain a vested retirement right from an unauthorized administrative procedure which is contrary to a statute. Therefore, no vested right was acquired after 1973. Reversed. Adkisson, C.J., and Holt, J., dissent.