Goldmann, Kilkenny and Collester. The opinion of the court was delivered by Collester, J.A.D.
[81 NJSuper Page 462] This is an appeal from a decision of the State Board of Education affirming a decision of the Commissioner of Education in three consolidated cases. The Commissioner reversed a decision of the Board of Trustees of the Teachers' Pension and Annuity Fund, which awarded to three teachers smaller retirement allowances than they believed they were entitled to under N.J.S.A. 18:13-112.73. Both the Commissioner and the State Board of Education held that the Board of Trustees had no statutory authority to
interfere with salary determinations made by the local boards of education.
The Board of Trustees here contends that neither the Commissioner nor the State Board of Education has jurisdiction to review rulings of the Board of Trustees; that the appeal from its decision should have been taken directly to the Appellate Division, and that the Board of Trustees may refuse to award retirement allowances based upon extra compensation paid to a teacher during his final year of employment preceding retirement.
The teachers, Alex A. LaTronica, Harold B. Brunner, and Paul D. O'Connor, are veterans and members of the Teachers' Pension and Annuity Fund. Each has retired from employment with a local board of education and has thereby become eligible for a retirement allowance of "1/2 of the compensation received during the last year of employment upon which contributions to the annuity savings fund or contingent reserve fund are made." N.J.S.A. 18:13-112.73. "Compensation" is defined as "the contractual salary for services as a teacher as defined in this act." N.J.S.A. 18:13-112.4(d).
The facts pertinent to each teacher are as follows:
Alex A. LaTronica -- Each spring, from at least 1954 through 1957, LaTronica's salary, including an annual increment, was approved by the Lyndhurst Board of Education at the same time that the salaries of many other teachers were established. On July 24, 1957 he was engaged as High School Dean for the school year 1957-58 at a salary of $6,300. In the spring of 1958 he was re-engaged for the 1958-59 school year along with 132 tenure employees, his salary being increased to $6,700. However, on November 19, 1958 the local school board's finance committee voted to increase his salary to $7,950, retroactive to September 1, 1958. LaTronica retired on July 1, 1959 and claimed a retirement allowance of $3,975, or 1/2 of $7,950. He was awarded $3,350, or 1/2 of $6,700, by the Board of Trustees.
Harold B. Brunner -- Mr. Brunner's salary for the school year 1958-59 was $13,530. Thereafter, in a letter to the Secretary
of the Board of Trustees of the Teachers' Pension and Annuity Fund dated April 2, 1959, which is included in the record on file with the Appellate Division, Brunner stated that it "now looks as though my salary for the new school year will be fixed at $14,900." He then proposed a plan whereby the school board would pay this salary of $14,900 at the rate of $1,693.33 per month from July to December of 1959 and $790 per month from January to June of 1960. His purpose in suggesting this kind of salary arrangement was "to avoid the social security cut-off" by earning less than $4,800 in 1960 before his contemplated retirement on June 30, 1960 at the end of the school year. The Board of Trustees considered Brunner's suggested plan but concluded that "any program to accelerate or change the method of salary payment in the final year of service is an evasion of basic pension principles and would be considered an attempt to circumvent the statutes." On June 18, 1959 the Scotch Plains Board of Education voted to fix his salary for the nine-month period from July 1, 1959 to March 31, 1960 at $14,250, the motion reciting that "The dates were fixed at the request of Mr. Brunner who will retire as of March 31, 1960." Brunner retired on April 1, 1960 and claimed a retirement allowance of $8,816, or 1/2 of a final year's salary of $17,632 ($3,382 from April 1 to June 30, 1959 plus $14,250 from July 1, 1959 to March 31, 1960). The Board of Trustees awarded him $7,000.56 based on a final year's compensation of $14,070 (3/12 of $13,530 ($3,382.50) plus 9/12 of $14,250 ($10,687.50)). The Board of Trustees determined that the salary of $14,250 fixed on June 18, 1959 was an annual salary, so that over the nine-month period ending March 31, 1960 Brunner could only be credited with 9/12 of that amount as "compensation" within the meaning of the statute.
Paul D. O'Connor -- Each April, from at least 1957 through 1959, the Allendale Board of Education set his salary for the following school year, along with that of other school board employees. In 1958-59 he received $9,500. For the 1959-60 school year his salary was set at $10,500. On September 8,
1959 O'Connor announced his plan to retire, effective April 1, 1960, whereupon the local board of education voted to "reissue a new contract" with a salary of $10,500 for the period July 1, 1959 through March 31, 1960. O'Connor claimed a retirement allowance based upon a final year's compensation of $12,875 ($2,375 from April 1 to June 30, 1959 plus $10,500 from July 1, 1959 to March 31, 1960). The Board of Trustees awarded him a retirement allowance of $5,125 or 1/2 of a final year's compensation of $10,250 (3/12 of his 1958-59 salary of $9,500 ($2,375) plus 9/12 of his 1959-60 salary of $10,500 ($7,875)). The approach of the Board of Trustees in O'Connor's case was similar to its treatment of Brunner.
The Board of Trustees has declared as its established policy that certain payments shall not be recognized as compensation for pension coverage. These include inter alia: (a) a retroactive salary adjustment or an inter-school year pay adjustment made in a member's final year of service, unless such adjustment was made as a result of an across-the-board pay adjustment program for all personnel in the school district; (b) individual pay adjustment made within or at the conclusion of a member's final year of service; (c) increment granted for retirement credit; and (d) increment granted in final year of service in recognition of member's service.
The reason for this policy may be stated in the words of the Secretary of the Teachers' Pension and Annuity Fund:
"At a regular meeting conducted on April 9, 1959, the Board of Trustees ruled that any program to accelerate, adjust, or change the method of salary payment in an employee's final year of service was an evasion of basic pension principles and would be considered an attempt to circumvent the statutes. The Board observed that the statutes vest it (the Board) with the responsibility for the general administration and the proper operation of the Fund, therefore the Board has the right to rule on or define creditable compensation in the interest of safeguarding the actuarial soundness of the Fund and the preservation of the rights, privileges, and benefits of the membership of the Fund. The Board ...