MASSACHUSETTS TEACHERS' RETIREMENT SYSTEM vs. CONTRIBUTORY RETIREMENT APPEAL BOARD & another. [Note 1]

DUFFLY, J. We are called upon to settle a dispute between two administrative agencies, the Massachusetts Teachers' Retirement System (MTRS) and the Contributory Retirement Appeal Board (CRAB), concerning the validity of a regulation promulgated by MTRS. [Note 2]

James T. Walsh had been a professional electrician for many years when, in 1980, he was certified by the Department of Education to teach in his occupational field. In October, 1987, he began full-time employment at a vocational school and became a member of MTRS. In December, 2005, before the effective date of his retirement the following June, Walsh applied to MTRS to increase his anticipated retirement allowance by adding to his "creditable service" (his years of service as a member of MTRS) through the "buyback" of three years of creditable service, based on his work experience as an electrician. Walsh sought credit for service performed from February 1, 1977, through January 31, 1980. This buyback required Walsh to pay certain "makeup payments" into the annuity savings fund of MTRS, in accordance with a formula set forth in G. L. c. 32, § 4 (1) (h 1/2 ) (trade service credit statute). That statutory formula calls for "buyback interest" to be paid on such makeup payments. Pursuant to 807 Code Mass. Regs. § 14.05 (2005), [Note 3] a regulation promulgated by MTRS, MTRS assessed buyback interest to commence as of February 1, 1977, the beginning of the three-year period for which Walsh sought trade service credit. [Note 4]

Walsh appealed the action of MTRS to CRAB. See G. L. c. 32, § 16 (4). He claimed that buyback interest should not

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have begun to accrue until October, 1987, when he became a member of the MTRS. After a hearing before the division of administrative law appeals (DALA), an administrative magistrate affirmed the action of MTRS. Walsh appealed that decision to CRAB, which reversed DALA's decision.

MTRS sought review of CRAB's decision in the Superior Court pursuant to G. L. c. 30A, § 14. Deferring to CRAB's interpretation of the trade service credit statute, a Superior Court judge allowed CRAB's motion for judgment on the pleadings. MTRS appealed, and we transferred the case to this court on our own motion. We conclude that G. L. c. 32, § 4 (1) (h 1/2 ), is silent on the issue of when buyback interest accrues, and that 807 Code Mass. Regs. § 14.05 is a reasonable interpretation of statutory silence. The regulation promulgated by MTRS is therefore a valid exercise of MTRS's statutory authority, and CRAB's failure to assess interest in accordance with 807 Code Mass. Regs. § 14.05 was an error of law. Thus, CRAB's decision must be reversed.

Statutory and regulatory framework. Pursuant to G. L. c. 32, a public employee in the Commonwealth earns a retirement allowance as a member of a public retirement system, such as MTRS. See Rosing v. Teachers' Retirement Sys., 458 Mass. 283, 285 (2010). A member's retirement allowance is based, in part, on the number of years and full months of "creditable service" earned by the member at the time of retirement. G. L. c. 32, § 5 (2) (a). See Pelonzi v. Retirement Bd. of Beverly, 451 Mass. 475, 477 & n.3 (2008). Creditable service ordinarily is based on the duration of a member's employment in public service in the Commonwealth while a member of a public retirement system. [Note 5] See G. L. c. 32, § 4 (1) (a). During that time, the member contributes a certain percentage of her salary to the retirement system by means of a payroll deduction. G. L. c. 32, § 22 (1) (b). See Cooper v. Commissioner of Revenue, 421 Mass. 557, 558 (1995), cert. denied, 517 U.S. 1221 (1996), citing G. L. c. 32, § 22. In certain situations, a member of a retirement system may purchase additional creditable service, or credit, for work or other service performed before becoming a member of a retirement system.

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See Rotondi v. Contributory Retirement Appeal Bd., 463 Mass. 644, 646 n.4 (2012). The purchase of credit can substantially increase the member's annual retirement allowance. [Note 6]

In September, 2005, the Legislature passed an enactment permitting vocational education teachers to purchase up to three years of credit for certain prior work experience in the trade in which the member became a teacher. See St. 2005, c. 90, codified at G. L. c. 32, § 4 (1) (h 1/2 ) ("An Act relative to creditable service for vocational education teachers"). Under that provision, a member in service of the MTRS for at least ten years may purchase up to three years of "creditable service for any period or periods of prior work experience in the occupational field in which the member became a vocational-technical teacher and which was required as a condition of the member's employment and licensure under regulations of the department of education." G. L. c. 32, § 4 (1) (h 1/2 ). To receive the additional trade service credit, the member must pay into the retirement system's annuity savings fund certain "makeup payments," defined as an amount which is equal to ten per cent of the member's regular annual compensation as of the member's most recent date of entry into MTRS membership, plus "buyback interest" on that amount. [Note 7] See G. L. c. 32, § 4 (1) (h 1/2 ). [Note 8]

Soon after the enactment of G. L. c. 32, § 4 (1) (h 1/2 ), at a meeting in November, 2005, the MTRS board (board), the

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governing body of MTRS, see G. L. c. 15, § 16, discussed what it perceived to be an ambiguity in the trade service credit statute as to the date from which buyback interest should be charged. The board specifically considered whether buyback interest should begin to accrue on the period of trade service being purchased, or, instead, on the date the member joined the MTRS; as reflected in the minutes of that meeting, "the Board voted to adopt on an emergency basis the version with interest going back to the date of service."

After soliciting comments on the proposed regulation, holding a public hearing, and reviewing material prepared by its staff, the board voted to adopt a regulation, codified at 807 Code Mass. Regs. § 14.05, providing that interest "be charged back to the years of service being purchased." Thereafter, the board submitted the regulation for approval to the public employee retirement administration commission (PERAC), as required by G. L. c. 32, § 20 (5) (b). [Note 9] PERAC approved the regulation in February, 2006.

Discussion. CRAB claims that the language of G. L. c. 32, § 4 (1) (h 1/2 ), provides unambiguously that the date on which buyback interest begins to accrue is the date the member joined the retirement system, which in Walsh's case was October, 1987. CRAB argues that, even if the statute is ambiguous or silent on the issue, its own interpretation, and not the regulation promulgated by MTRS, is entitled to deference. CRAB further contends that, even assuming MTRS's interpretation as set forth in its regulation is entitled to deference, the regulation is not a reasonable interpretation of G. L. c. 32, § 4 (1) (h 1/2 ), and is therefore invalid.

As a preliminary matter, we address CRAB's claim that, notwithstanding the promulgation of 807 Code Mass. Regs. § 14.05, we should defer to CRAB's contrary interpretation of G. L. c. 32, § 4 (1) (h 1/2 ). CRAB does not dispute MTRS's authority to promulgate certain regulations concerning the calculation of "makeup payments" under the trade service credit statute. Where a regulation has been duly promulgated, we do

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not give deference to a different administrative agency's contrary conclusion. See 1 R.J. Pierce, Jr., Administrative Law Treatise § 3.5, at 197-198 (5th ed. 2010) (where rulemaking and adjudicatory authority are vested in separate Federal agencies, deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 [1984] [Chevron], is not extended to agency with only adjudicatory responsibilities). "[A] properly promulgated regulation has the force of law . . . and must be accorded all the deference due to a statute" (citation omitted). Borden, Inc. v. Commissioner of Pub. Health, 388 Mass. 707, 723, cert. denied sub nom. Formaldehyde Inst., Inc. v. Frechette, 464 U.S. 936 (1983). See Poe v. Sex Offender Registry Bd., 456 Mass. 801, 809 (2010), quoting Massachusetts Fed'n of Teachers v. Board of Educ., 436 Mass. 763, 771 (2002).

Because it is undisputed that MTRS has the authority to promulgate regulations interpreting G. L. c. 32, § 4 (1) (h 1/2 ), subject to PERAC approval, and there is no claim that the regulation was not properly promulgated, our focus is on whether 807 Code Mass. Regs. § 14.05 reflects a reasonable interpretation of the statute. See Biogen IDEC MA, Inc. v. Treasurer & Receiver Gen., 454 Mass. 174, 186-187 (2009); Goldberg v. Board of Health of Granby, 444 Mass. 627, 632-634 (2005) (Goldberg). If the regulation provides a reasonable resolution, an adjudicating agency such as CRAB has an obligation to follow it. Cf. Boston Retirement Bd. v. Contributory Retirement Appeal Bd., 441 Mass. 78, 82 (2004), citing Flemings v. Contributory Retirement Appeal Bd., 431 Mass. 374, 375 (2000) ("Where an agency's interpretation of a statute is reasonable, the court should not supplant it with its own judgment").

We employ a two-part test to assess the validity of an administrative agency's properly promulgated regulation. Goldberg, supra at 632. "First, we determine, using conventional tools of statutory interpretation, whether the Legislature has spoken with certainty on the topic in question, and if we conclude that the statute is unambiguous, we give effect to the Legislature's intent." Id. at 632-633. "Second, if the Legislature has not addressed directly the pertinent issue, we determine whether the agency's resolution of that issue may 'be reconciled with the governing legislation.' " Id. at 633, quoting Nuclear Metals,

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Inc. v. Low-Level Radioactive Waste Mgt. Bd., 421 Mass. 196, 211 (1992). See Chevron, supra at 842-843 (describing two-part test used to ascertain validity of Federal agency regulation).

Thus, we consider first "whether the Legislature has spoken with certainty on" the accrual of buyback interest in G. L. c. 32, § 4 (1) (h 1/2 ). Goldberg, supra at 632-633. Our focus at this stage is on the text of the statute because its plain meaning will serve as our primary interpretive guide. See, e.g., Reading Coop. Bank v. Suffolk Constr. Co., 464 Mass. 543, 547 (2013).

The cost to a vocational education teacher of the purchase of credit for prior work experience is defined by G. L. c. 32, § 4 (1) (h 1/2 ), as "makeup payments of an amount equal to [ten] per cent of the regular annual compensation of the member as of the member's most recent date of entry into membership in the teachers' retirement system . . . , for each year of service purchased plus buyback interest thereon." CRAB discerns in this language a clear legislative mandate that the date buyback interest begins to accrue is the member's most recent date of entry into membership in the teachers' retirement system, by undertaking a two-step interpretation of the statute. First, CRAB notes (and we agree) that the word "thereon" in G. L. c. 32, § 4 (1) (h 1/2 ), means that the buyback interest is charged on "makeup payments." Building on this observation, CRAB contends that, because the amount of a makeup payment is calculated with reference to "the member's most recent date of entry into membership in the teachers' retirement system," the Legislature must have intended also that interest begin to accrue on that same date.

MTRS responds that the word "makeup" implies that buyback interest is designed to compensate MTRS for the return on investment that it could have earned had the member actually contributed to the retirement system during the years of creditable service being purchased. MTRS contends that, consistent with this view, interest should begin to accrue during the period of trade service credit being purchased. We discern no clarity of intent in G. L. c. 32, § 4 (1) (h 1/2 ), on the question of buyback interest accrual, particularly when the trade service credit provision is read in connection with related statutes. Cf. Wolfe v. Gormally, 440 Mass. 699, 704 (2004), quoting 2A N. Singer,

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Sutherland Statutory Construction § 46.05, at 154 (6th ed. 2000) ("statute must be viewed 'as a whole'; it is 'not proper to confine interpretation to the one section to be construed' "). For instance, the provision governing the purchase of credit for volunteer service in the Peace Corps provides that buyback interest must be paid "for the period of volunteer service" purchased, even though, like the trade service credit statute, it uses the member's salary on the date the member joined the MTRS to calculate the makeup payments to which interest applies. G. L. c. 32, § 4 (1) (r). [Note 10] This provision suggests that the date of interest accrual is not necessarily tied to the date used to calculate the amount of the member's makeup payment.

Nor does it follow inescapably from the Legislature's use of the term "makeup" that interest must accrue over the period of the trade service being purchased, as MTRS suggests, rather than at the later date suggested by CRAB. Another service credit provision, G. L. c. 32, § 4 (1) (h), authorizing veterans of the armed services to purchase creditable service, employs the concept of "makeup payments" without requiring any interest payment. [Note 11]

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We accept as reasonable MTRS's view that the makeup payment is designed to compensate MTRS for the return on investment that it could have earned had the member actually contributed to the retirement system during the years of creditable service being purchased. However, in light of the provisions for purchasing creditable service for veterans, we cannot say that the Legislature has, through its employment of the term "makeup payment" in the trade service credit statute, spoken with certainty regarding the date interest begins to accrue.

Based on the language of the majority of creditable service purchase provisions set forth in G. L. c. 32, the Legislature simply chose to be silent on the issue, thereby leaving a policy gap to be filled by agency action. When the Legislature has intended to assess interest on makeup payments that will most closely approximate the value of a member's contributions had the contributions been made at the time of the service being purchased, it has said so explicitly. See, e.g., G. L. c. 32, §§ 3 (4), 3 (4A), 4 (1) (g 1/2 ), 4 (1) (p), 4 (1) (r). [Note 12] In light of the statutory and regulatory context in which the question arises, "the contrast between [the Legislature's] mandate in one context with its silence in another suggests not a prohibition but simply a decision not to mandate any solution in the second context, i.e., to leave the question to agency discretion." (Emphasis in original.) Cheney R.R. Co. v. Interstate Commerce Comm'n, 902 F.2d 66, 69 (D.C.

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Cir.), cert. denied, 498 U.S. 985 (1990). See Chevron, supra at 843, quoting Morton v. Ruiz, 415 U.S. 199, 231 (1974) (administrative agency's power to administer congressionally created program "necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress"). See also Exelon Generation Co. v. Local 15, Int'l Bhd. of Elec. Workers, AFL-CIO, 676 F.3d 566, 571 (7th Cir. 2012). We therefore view the Legislature's silence here as an invitation to MTRS to fill the gap with appropriate regulation. In any event, whether the language of the trade service credit statute is ambiguous or silent, the result would be the same. See Goldberg, supra at 634 ("Statutory silence, like statutory ambiguity, often requires that an agency give clarity to an issue necessarily implicated by the statute but either not addressed by the Legislature or delegated to the superior expertise of agency administrators").

Because the trade service credit statute "neither explicitly forbids nor expressly allows the regulation in question," Goldberg, supra at 635, we proceed to consider whether the regulation promulgated by MTRS and approved by PERAC, the agency responsible for overseeing all retirement systems, is a "reasonable resolution of the statute's silence." Id. Our review is deferential, and it is therefore "unimportant whether we would have come to the same interpretation of the statute as the agency." Id. at 633. "Only an 'agency regulation that is contrary to the plain language of the statute and its underlying purpose may be rejected by the courts.' " Duarte v. Commissioner of Revenue, 451 Mass. 399, 408 (2008), quoting Smith v. Commissioner of Transitional Assistance, 431 Mass. 638, 646 (2000). Deference to an agency's interpretation of statutory silence, or ambiguity, is particularly appropriate where, as here, the regulation in question was promulgated immediately after the enactment of the governing legislation. See Biogen IDEC MA, Inc. v. Treasurer & Receiver Gen., 454 Mass. 174, 187 (2009), quoting Connery v. Commissioner of Correction, 414 Mass. 1009, 1010 (1993) (interpretation made close to time Legislature enacted statute is entitled to "heightened" deference because it "may represent 'understanding of the public regarding the enactment' ").

Applying this deferential standard of review, we conclude

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that 807 Code Mass. Regs. § 14.05 is a reasonable resolution of the Legislature's silence or ambiguity on the issue of interest accrual in G. L. c. 32, § 4 (1) (h 1/2 ). The regulation reflects a determination that buyback interest should approximate as closely as possible the return on investment that MTRS could have earned had the member actually contributed to the retirement system during the years of creditable service being purchased. [Note 13] Cf. State Bd. of Retirement v. Contributory Retirement Appeal Bd., 342 Mass. 58, 60 (1961) (retirement board has obligation to protect financial integrity of retirement system). This policy determination by MTRS is consistent with other statutes concerning creditable service purchases for teachers, which charge buyback interest as of the date of service purchased. See G. L. c. 32, §§ 3 (4), 3 (4A), 4 (1) (g 1/2 ), 4 (1) (p), 4 (1) (r).

In addition, the record indicates that 807 Code Mass. Regs. § 14.05 was the product of "thoughtful, reasoned deliberation," and not "rash, uninformed rule making . . . ." See Biogen IDEC MA, Inc. v. Treasurer & Receiver Gen., supra at 189. On this basis, as well, we conclude that the regulation is reasonable. Before promulgating 807 Code Mass. Regs. § 14.05, the board considered the costs of charging interest back to the date of service purchased with charging interest back to the most recent date of entry into MTRS membership. The board also examined the cost of creditable service under the proposed regulation compared to similar creditable service purchases in the Commonwealth and in other States.

Conclusion. Because 807 Code Mass. Regs. § 14.05 is a valid regulation, CRAB's failure to apply the regulation was an error of law. The matter is remanded to the Superior Court where the judgment affirming CRAB's decision shall be vacated and set aside, and judgment shall enter for MTRS.

So ordered.