City of Birmingham v. Alex Thomas: A pension board is a separate entity from the municipality under certain conditions.

On July 22, 2016, the Alabama Court of Civil Appeals handed down its decision in the matter of City of Birmingham v. Alex Thomas, [Ms. 2150329] — So.3d — (Ala.Civ.App. 2016), arising from post-judgment proceedings that originated with Thomas’ mediated worker’s compensation settlement with the City of Birmingham. Pursuant to the settlement, Birmingham made a lump sum payment and subsequent scheduled payments; it was further agreed that Thomas was eligible to apply for both Ordinary (“OD”) and Extraordinary Disability Benefits (“EOD”). Thomas did apply to the Retirement and Relief Pension Board, and was granted disability benefits. The Board granted Thomas EOD benefits but applied a setoff that was subject to the worker’s compensation benefits and resulted in net benefits of $0.00. Thomas filed a motion to enforce the settlement agreement, alleging that Birmingham had unilaterally reduced his pension benefits in contravention of the settlement agreement. Birmingham responded that it had made all agreed-upon payments and that the Board, which was a separate entity, which had made all decisions regarding the EOD benefits. The trial court granted Thomas’ motion, finding that because the settlement agreement was silent as to the setoff, Birmingham had waived its right to setoff and was estopped from asserting a setoff.

Birmingham appealed, arguing that the Board was the entity responsible for paying benefits and for effecting the setoff. Thomas alleged that the Retirement and Relief Pension Board was an instrumentality of Birmingham, and the enforcement judgment against Birmingham was therefore proper. The question to be decided by the appellate court was whether the Board is a separate entity or an instrumentality of the City of Birmingham.

The appellate court has previously (albeit loosely) set forth the principles from which distinguishing between municipalities and their “instrumentalities” can be inferred: (1) do the pertinent statutes require the board be dependent upon the express approval and consent of the municipality; (2) did the legislature delegate choices to the municipality regarding how the board should disburse benefits; and (3) did the legislature mandate that the board’s funds be kept separate from the municipality’s funds? See Harris v. Ethics Comm’n of Alabama, 585 So.2d 93 (Ala.Civ.App. 1991). Applying that test to the case at bar, the appellate court found that the Board was a separate entity, rather than an instrumentality of the City. The legislature has not required that retirement and relief systems seek approval or consent of their respective municipalities. There are a limited number city officials who are permitted to serve on the Board. Finally, the pension fund administered by Board was maintained in a separate account from the City.

The Alabama Court of Civil Appeals found that the City had complied with the settlement agreement, and the Board’s decision not to pay additional benefits to Thomas was not within the trial court’s enforcement power. Moreover, because the City is a separate entity from the Board, the City cannot have waived any right the Retirement and Relief Pension Board has to apply a setoff to Thomas’ EOD benefits.