BOROUGH OF POTTSTOWN v. PA MUNICIPAL RETIRMENT BD.

OPINION

SAYLOR, Justice

In this appeal, the Borough of Pottstown and the Pottstown Police Pension Fund challenge the Pennsylvania Municipal Retirement Board's denial of their claim to "excess interest" upon their withdrawal from participation in the Pennsylvania Municipal Retirement System.

After participating for eleven years in the Pennsylvania Municipal Retirement System (the "PMRS") pursuant to Article IV of the Pennsylvania Municipal Retirement Law (the "PMRL"),1 the Borough of Pottstown and members of its police department (collectively, the "Borough") sought to withdraw.2 The Pennsylvania Municipal Retirement Board (the "Board"), the agency charged with the administration of the PMRS, approved the withdrawal, effective September 30, 1991. To discharge statutory obligations under the PMRL, the Board tendered to the Borough the sum of $5,489,136.00.

The Borough contended that it was entitled to a greater distribution and requested administrative review.3 The Borough argued that, pursuant to Section 412 of the PMRL, 53 P.S. § 881.412, the Board should have tendered an additional $629,720.87 allocable to a "retired member's reserve account"4 (the "additional reserve funds"), interest thereon at the legal rate, and $307,000.00 in "excess interest."5

Following a hearing, the hearing examiner issued proposed findings of fact and conclusions of law and recommended that the additional reserve funds be awarded in favor of the Borough; however, he recommended against awarding either legal interest on the additional reserve funds or excess interest. On consideration of exceptions filed by the Borough, the Board adopted the hearing examiner's opinion in all relevant respects.6 Specifically, the denial of excess interest was predicated upon Board policy that such interest only becomes due to be credited to municipal and member accounts on December 31st of any given year, and a municipality that withdraws before that date will not receive excess interest for that year.

On appeal, the Commonwealth Court reversed the decision to deny legal interest on the additional reserve funds. The Commonwealth Court, however, affirmed the denial of excess interest.

Both the Borough and the Board filed timely petitions for allowance of appeal in this Court. We allowed only the Borough's appeal, limited to the following two issues: (1) did the Commonwealth Court correctly rule that the excess interest policies of the Board are interpretive rules that did not have to be promulgated in accordance with the Commonwealth Documents Law; and (2) assuming, arguendo, the Board's excess interest policies are determined to be interpretive rules, did the Commonwealth Court err in upholding them when these rules are unwise, violated legislative intent, constitute an unfair and unreasonable penalty, and work an unjust forfeiture?

Where an agency, acting pursuant to delegated legislative authority, seeks to establish a substantive rule creating a controlling standard of conduct, it must comply with the provisions of the Commonwealth Documents Law.7 That statute sets forth formal procedures for notice, comment and ultimate promulgation in connection with the making of rules that establish new law, rights or duties. See generally Pennsylvania Human Relations Comm'n v. Uniontown Area Sch. Dist., 455 Pa. 52, 80-81 n. 29, 313 A.2d 156, 171 n. 29 (1973). Such substantive regulations, sometimes known as legislative rules, when properly enacted under the Commonwealth Documents Law, have the force of law, Commonwealth v. DePasquale, 509 Pa. 183, 187, 501 A.2d 626, 628 (1985) (citation omitted), and enjoy a general presumption of reasonableness. See Commonwealth, Dep't of Environmental Resources v. Locust Point Quarries, Inc., 483 Pa. 350, 360, 396 A.2d 1205, 1210 (1979).

Agencies also devise rules and regulations that do not in themselves establish binding standards of conduct. Such pronouncements are valid as "interpretive rules" and need not be promulgated in accordance with the Commonwealth Documents Law to the extent that they merely construe a statute and do not improperly expand upon its terms. To be viable, an interpretive rule must genuinely track the meaning of the underlying statute, rather than establish an extrinsic substantive standard. See Philadelphia Suburban Corp. v. Commonwealth, Bd. of Finance and Revenue, 535 Pa. 298, 301, 635 A.2d 116, 118 (1993) (citations omitted).

In this case, the rule at issue is the Board's determination that excess interest is allowable for a given year only to the accounts of those municipalities that remain participants under Article IV of the PMRS on December 31st of that year. There is no dispute that this rule was not promulgated in accordance with the Commonwealth Documents Law and thus cannot be a legislative rule, nor is there any question that the Board has applied the rule in a manner that is binding upon all participating municipalities.8 Our task, then, is to determine whether, as the Board contends, the rule tracks the statutory framework and thus is valid as an interpretive rule, or, conversely, if it is unwise or violates legislative intent.9 See Philadelphia Suburban, 535 Pa. at 301-02, 635 A.2d at 118. While an administrative agency's interpretation of a statute for which it has enforcement responsibility is entitled to substantial deference, Alpha Auto Sales v. Dep't of State, 537 Pa. 353, 357, 644 A.2d 153, 155 (1994), the meaning of the statute ultimately is a question of law for the reviewing court. Philadelphia Suburban, 535 Pa. at 301-02, 635 A.2d at 118; see also 1 Pa.C.S. § 1921(c)(permitting courts, when construing a statute, to consider administrative interpretations only "[w]hen the words of the statute are not explicit").

At the core of the Board's interpretation is its assertion that it is statutorily required to allow excess interest "annually," and after payment of expenses. The Board derives this requirement principally from Sections 412 and 110 of the PMRL. Section 412 provides, in relevant part:

53 P.S. § 881.412 (emphasis added). Section 110 requires, inter alia, that the Board shall, after payment of expenses, annually allow excess interest to the credit of various accounts, including those accounts referenced in Section 412.

The Borough urges an interpretation of these provisions that would permit crediting a withdrawing municipality with all appreciation in value that can be attributed to funds residing in municipal and member accounts. The Borough implicitly suggests that the word "annually" not be given literal effect in determining when crediting of accounts is to occur under Section 110; or that the legislature intended a process for the crediting of accounts in Section 412 different from the crediting that occurs under Section 110.

We are obliged, however, to construe a statute according to its plain meaning and in such a manner as to give effect to all of its provisions. 1 Pa.C.S. § 1921(a), (b). The legislature's use of the term "annually" in the final sentence of Section 110, in context, directs nothing more or less than the yearly crediting of excess interest to the accounts of municipalities and members.10 Moreover, parts of statutes must be construed together if possible when they relate to the same persons or things. See 1 Pa.C.S. § 1932 (requiring application of the doctrine of in pari materia in statutory construction). The subject of excess interest and the process of crediting it to municipal and member accounts are integral to both Sections 412 and 110, and the statutory provisions can be harmonized only by treating these internal concepts consistently.

With these precepts in mind, Sections 110 and 412, read in conjunction, support the Board's rule governing the allowance of excess interest to a withdrawing municipality. We have determined that Section 110 directs that the Board annually allow available excess interest to the credit of participating municipalities and members. Section 412 clearly directs that a withdrawing municipality receive only such amounts that are standing to the credit of its member accounts as of the date the Board approves the application for withdrawal. Given the terms used by the legislature, it cannot be fairly said that amounts which are not yet due to be credited to municipality and member accounts under Section 110 must be "standing to the credit" of the municipality for purposes of distribution under Section 412 at the time of its withdrawal.11

Notably, where the legislature specifically intends to require an agency to credit interest more frequently than on a yearly basis, it has not hesitated to so provide. For example, under the Employee Retirement System established by the Second Class County Code,12 a withdrawing contributor is entitled to interest on refunded contributions calculated "through the month of refund." 16 P.S. § 4714. In the absence of specific legislative direction, we cannot engraft a similar directive into the terms of Article IV of the PMRL.

The Borough contends that the interpretation applied by the Board results in unfair consequences. For example, a municipality that withdraws after the close of business on December 31st of a given year will receive excess interest, whereas a municipality that withdraws one day earlier will be denied excess interest. Additionally, the Board freely acknowledges that a municipality that joins the PMRS at mid-year will receive a pro-rated share of excess interest, so long as it remains a member on December 31st. The Borough contends that there is no logical reason why a municipality that withdraws at mid-year should not be entitled to the same form of prorated distribution for the period of its participation. Centrally, the Borough argues that application of the Board's construction of the PMRL results in an unjust forfeiture.

The Borough's arguments are not so compelling as to require a court to override the plain meaning of the statute. The timing of the withdrawal from the PMRS is a matter over which a withdrawing municipality possesses a degree of control, and municipalities are on notice of the annual crediting of excess interest.13 The fact that a municipality joining at mid-year receives excess interest, while one withdrawing at mid-year does not, is controlled by the circumstance that only the former is a participant as of the date crediting occurs.14

The Borough's claim of an unjust forfeiture is also not persuasive. Numerous forms of investment carry a rate of return that is not controlled entirely by the actual appreciation of contributions, but rather, is conditional upon the occurrence of enumerated circumstances.15 In such instances, conditional portions of the return are not entitlements until such time as the prerequisite conditions are satisfied. Moreover, in this case, the Borough received multiple benefits for participation in the PMRS, including a guaranteed fixed rate of return on contributions in the form of regular interest and assumption by the PMRS of various liabilities that otherwise would have been obligations of the Borough. The Borough offered no evidence to suggest that the difference between the amount it received from the Board upon withdrawal from the PMRS and the appreciated value of its contributions was not offset by such benefits.16

The Board emphasizes that performing interim calculations of excess interest for the benefit of withdrawing municipalities would result in consequences detrimental to the PMRS. For example, the PMRS would incur actuarial costs for which the PMRL may not provide a mechanism for recoupment.17 Additionally, the Board indicates that annual calculation of excess interest serves to smooth market fluctuations and to discourage sophisticated municipalities from attempting to enter and exit the PMRS based upon the current performance of the market. While these considerations may indeed support the Board's rule governing excess interest, and while the Board is entitled to a degree of deference as to technical matters that are uniquely within its area of expertise, see Philadelphia Suburban, 535 Pa. at 301-02, 635 A.2d at 118 (citing Uniontown, 455 Pa. at 77-78, 313 A.2d at 169), the rule derives its validity in the first instance from the plain meaning of the statute.

This case is distinguishable from Lopata v. Commonwealth, Unemployment Compensation Bd. of Review, 507 Pa. 570, 493 A.2d 657 (1985), cited by the Borough, in which this Court held that a formula used by the Unemployment Compensation Board of Review to definitively calculate "credit weeks" in determining eligibility for benefits was invalid as an improperly adopted legislative rule. Id. at 579, 493 A.2d at 662. In Lopata, unlike the present case, the rule at issue contained provisions that modified substantive rights by expanding upon the plain meaning of the statute.18

Whether the Board, pursuant to the delegated grant of rulemaking authority from the legislature, could promulgate substantive rules providing for more frequent crediting of excess interest is an issue that is not before us.19 See generally 53 P.S. § 881.104(10)(establishing the Board's rulemaking authority). Rather, we hold only that the Board's rule is a valid interpretive rule, because: 1) Section 110 does not direct the crediting of excess interest to municipality and member accounts other than annually; 2) Section 412 does not direct distribution of excess interest to a withdrawing municipality such as is not credited (or due to be credited) to the relevant municipal and member accounts; and 3) the Board's rule denying excess interest to a municipality withdrawing prior to December 31st of a given year tracks these provisions of the PMRL.

The decision of the Commonwealth Court is affirmed.