Fallin v. Mayor Etc. of Baltimore

Henderson, J., delivered the opinion of the Court. This appeal is from a declaratory decree of the Circuit Court of Baltimore City, construing the Ordinance creating the Employees’ Retirement System of Baltimore City as not obligating the city to pay a member, upon retirement, an annuity equal to his pension unless the actuarial equivalent of his accumulated contributions at the time of his retirement is equal to his pension. The Retirement System was established by Ordinance 553 of 1926, (Article 30, Pensions, Baltimore City Code, 1927 Edition). The complainants became members in ⁴⁶⁸ 1926 and 1927, respectively.

They will shortly reach the voluntary retirement age of 60. As stated by the Chancellor, “the present difficulty arises from the fact that the severe decline in the purchasing power of the dollar has made it necessary for the city to increase sharply the pay of its employees, in many categories, and as to such employees, from whose former salaries regular deductions were made, but in a smaller sum, the total of such contributions will not now produce an annuity equal to the pension. The pension is fixed in amount 1/140 of average final compensation multiplied by the number of years of service. Sharply increased final compensation will necessarily require increased pension.

The burden of such increases will naturally fall on the city. That responsibility cannot be escaped. But complainants insist that the city is likewise responsible for the payment of increased annuities as well to equal the pension.” Section 1(12) of the Ordinance defines “Accumulated contributions” to mean “the sum of all the amounts deducted from the compensation of a member and credited to his individual account in the Annuity Savings Fund together with regular interest thereon as provided in Sections 7 and 8 of this Article”. Section 1(14) defines “annuity” to mean “payments for life derived from the ‘accumulated contributions’ of a member”.

Section 1(15) defines “pension” to mean “payments for life derived from money provided by the City of Baltimore.” Section 1(17) defines “retirement allowance” to mean “the sum of the ‘annuity’ and the ‘pension’ ”. “Annuity Reserve” is defined by Section 1(18) to mean “the present value of all payments to be made on account of any annuity or benefit in lieu of any annuity computed upon the basis of such mortality tables as shall be adopted by the Board of Trustees and regular interest”. Section 8 (1) (a) provides that “the Annuity Savings Fund shall be a fund in which shall be accumulated con ⁴⁶⁹ tributions from the compensation of members to provide for their annuities”. Section 8(2) provides that “the Annuity Reserve Fund shall be the fund from which shall be paid all annuities.” There Is no suggestion in any of these definitions that the city should be required to contribute to annuities. The appellants contend, however, that the following language of section 8(1) (a) is controlling: “Upon the basis of such tables as the Board of Trustees shall adopt and regular interest, the actuary of the retirement system shall determine for each member the proportion of compensation which, when deducted from each payment of his prospective earnable annual compensation prior to his attainment of age sixty and accumulated at regular interest until attainment of such age shall be computed to provide at that time an annuity equal to the pension to which he will be entitled at that age on account of his service as a member.

Such proportion of compensation shall be computed to remain constant”. But as the Chancellor said: “It is a far different thing to provide that the employee’s contributions shall be computed to provide an annuity equal to the pension, from providing that the annuity shall equal the pension. No such provision will be found in the law. An annuity equal to the pension is not an