Board of Trustees of the Municipal Fire & Police Retirement Systems of Iowa vs. City of West Des Moines

IN THE SUPREME COURT OF IOWA
No. 280 / 97-603
Filed December 23, 1998
BOARD OF TRUSTEES OF THE
MUNICIPAL FIRE & POLICE
RETIREMENT SYSTEMS OF IOWA,
Appellant,
vs.
CITY OF WEST DES MOINES,
Appellee.
Appeal from the Iowa District Court for Polk County, Arthur E. Gamble, Judge.
Appeal from summary judgment entered by the district court construing statute to limit interest on unpaid
transition liability under the state retirement system for police officers and fire fighters. REVERSED AND
REMANDED.
Douglas E. Gross, Sean R. Moore, Scott L. Long, and Alice E. Helle of Brown, Winick, Graves, Gross,
Baskerville and Schoenebaum, P.L.C., Des Moines, for appellant.
Jack W. Rogers of George, Schwarz & Rogers, Des Moines, for appellee.
Considered by McGiverin, C.J., and Carter, Lavorato, Snell, and Cady, JJ.
CADY, Justice.
The City of West Des Moines challenged the authority of the Board of Trustees of the state retirement
system for police officers and fire fighters to charge interest on unpaid transition liability under Iowa Code
section 411.38 (1995) in excess of the general statutory rate of five percent per annum. The district court
determined the Board was not authorized to charge interest in excess of five percent. The Board
appealed. We reverse and remand.
The origin of this dispute dates back to 1990 when our legislature amended Iowa Code chapter 411 to
create a single statewide police officers and fire fighters retirement system. 1990 Iowa Acts ch. 1240, §
85 (codified at Iowa Code § 411.35 (1991)). Prior to that time, individual cities administered separate
retirement systems for their police officers and fire fighters.
The state system became effective January 1, 1992, and required each city to participate. Id. It was
administered by a board of trustees. The new law terminated the individual systems and mandated each
city to transfer funds to the state system in an amount equal to the accumulated liabilities of its terminated
system. Id. § 88 (codified at Iowa Code § 411.38 (1991)). This amount became known as the “transition
liability.”

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Prior to 1992, the City of West Des Moines employed three police officers who had previously been
employed by other cities in Iowa. During their previous employment, each officer accumulated retirement
contributions with their city retirement system. Each city transferred these accrued contributions to the
West Des Moines retirement system after the officers’ new employment began, and the funds became an
asset of the West Des Moines retirement system.
After the state system was implemented, West Des Moines paid to the state board the accumulated
liability of its terminated retirement system. In 1994, however, the Board discovered the West Des Moines
transition liability payment did not include the liability amount they received on account of the prior service
of the three police officers.
The Board determined the additional transition liability of West Des Moines attributable to the prior service
of the three officers was $134,870. The Board notified West Des Moines of its obligation to pay this
amount, together with accrued interest. The Board calculated the accrued interest on the additional
liability through September 30, 1994, to be $38,218. The Board set the interest rate at the greater of the
actuarial interest rate assumption on investments of the funds in the system or the actual investment
earnings of the fund for the fiscal year. Consequently, the interest was calculated to be 7.5%
compounded from January 1, 1992, until December 31, 1993, and 13.3% compounded from January 1,
1994, to September 30, 1994.
West Des Moines paid the additional transition amount plus accrued interest as of September 30, 1994.
However, the payment was not received by the Board until November 8, 1994. The Board then requested
the additional interest to the date of payment. The City refused.
The Board subsequently commenced an action against West Des Moines seeking to collect $2467 for
unpaid accrued interest on the City’s additional transition liability. The City filed a counterclaim for
$18,833. It claimed the Board had no authority to charge interest in excess of the general statutory rate of
five percent per annum.
At the time the action was commenced, Iowa Code section 411.38 specifically authorized the Board to
determine any additional transition liability attributable to errors and omissions.[1] Iowa Code §
411.38(1)(b) (1995). It also permitted the Board to enter into an amortization agreement with cities for the
payment of this additional liability over a period of time not to exceed thirty years. Id. Additionally, section
411.38 permitted the Board to charge interest on the amortized amount that was at least equal to the
estimated rate of return on the investments of the state system. Id. Yet, there was no similar provision for
interest in the absence of an amortization agreement.
In 1996, while this action was pending, the legislature amended section 411.38. The amendment
specifically authorized the Board to charge interest as it did for the additional transition liability of West
Des Moines.[2]
The Board and the City both filed motions for summary judgment. The district court interpreted chapter
411 to limit the Board’s authority to charge interest to five percent.[3] It determined the 1996 amendment
applied prospectively and did not consider it in its decision. Consequently, the district court granted West
Des Moines’ motion for summary judgment.
I. Standard of Review.
We review a summary judgment ruling for errors at law. Iowa Comprehensive Petroleum Underground
Storage Tank Fund Bd. v. Farmland Mut. Ins. Co., 568 N.W.2d 815, 817 (Iowa 1997). Similarly, our
review for issues involving statutory construction is for legal error. Schneider Leasing, Inc. v. United
States Aviation Underwriters, Inc., 555 N.W.2d 838, 840 (Iowa 1996).
II. Applicable Interest Rate.

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When confronted with the interpretation of a statute which has been amended prior to trial, we employ a
two-tiered analysis. If the amendment clarifies the statute, the former statute is interpreted with the aid of
the legislative clarification. See Barnett v. Durant Community Sch. Dist., 249 N.W.2d 626, 629 (Iowa
1977). On the other hand, if the amendment changes the statute and the change helps resolve the
underlying disputed issue, the amendment becomes the focus of the inquiry and the court must determine
if the legislature intended the change to apply retrospectively or prospectively. See Emmet County State
Bank v. Reutter, 439 N.W.2d 651, 653-54 (Iowa 1989).
Numerous considerations exist to help ascertain the purpose of legislation under the two-tiered approach.
See Barnett, 249 N.W.2d at 629. The distinction, however, between legislative clarification and legislative
change narrows considerably when the amendment unambiguously resolves the dispute and was
intended to apply retrospectively. In that situation, there typically is little need to interpret the former
statute by applying all relevant rules of construction. See First Nat’l Bank v. Diers, 430 N.W.2d 412, 414
(Iowa 1988) (where legislature clearly expressed its intent for a statute to apply retrospectively, there is
no need to resort to the rules of statutory construction). The retrospective nature of legislation usually
controls. Id.
In this case, the district court found the amendment did not clarify the existing statutory scheme. Instead,
it determined the amendment changed the statute to specifically authorize the Board to charge the
enhanced interest rate, but concluded the amendment applied prospectively. The district court then
looked to the other rules of statutory construction to reach its conclusion that the former statute did not
authorize the enhanced interest rate. Although the district court conducted a thorough analysis, we
conclude it erred in concluding the amendment applied prospectively.
Generally, a newly enacted statute is applied prospectively. Emmet County State Bank, 439 N.W.2d at
653; Iowa Code § 4.5. While this rule is nearly always followed when the legislation relates to substantive
rights, we recognize a statute or amendment may be applied retrospectively when it relates solely to a
remedy or procedure.[4] See Janda v. Iowa Indus. Hydraulics, Inc., 326 N.W.2d 339, 344 (Iowa 1982);
Emmet County State Bank, 439 N.W.2d at 653. This is true even when the statute is applied to
proceedings pending on the effective date of the amendment. Schuler v. Rodberg, 516 N.W.2d 902, 904
(Iowa 1994). Nevertheless, we ultimately look to legislative intent to determine the outcome. State ex rel.
Turner v. Limbrecht, 246 N.W.2d 330, 332 (Iowa 1976), overruled on other grounds by State ex rel. Miller
v. Hydro Mag, Ltd., 436 N.W.2d 617, 622 (Iowa 1989).
A remedial statute affords a private remedy to a person injured by a wrongful act, corrects an existing law
or redresses an existing grievance, gives a party a mode of remedy for a wrong where none or a different
remedy existed, or remedies defects in the common law and in civil jurisprudence generally. State ex rel.
Turner, 246 N.W.2d at 332. Substantive law creates, defines, and regulates rights, while procedural law
governs the “practice, method, procedure, or legal machinery by which the substantive law is enforced or
made effective.” First Nat’l Bank in Lenox v. Heimke, 407 N.W.2d 344, 346 (Iowa 1987) (quoting Baldwin
v. City of Waterloo, 372 N.W.2d 486, 491 (Iowa 1985)).
We have already determined an amendment which provides for a new interest rate is remedial in nature
and may be applied retrospectively. See Janda, 326 N.W.2d at 344. Nevertheless, we apply a three-part
test to determine whether the legislature intended to give each statute retrospective or prospective
application. Emmet County State Bank, 439 N.W.2d at 654. This test requires us to first look to the
language of the new legislation. Id. Second, we examine the evil to be remedied. Id. Finally, we address
whether there was a previously existing statute governing or limiting the mischief which the new
legislation was intended to remedy. Id. The district court relied exclusively upon the general rule and
failed to consider these tests.
We first consider the language of the amendment. It is plain from the amending language in section
411.38(1)(b) the legislature intended to establish a special interest rate on a city’s additional transition
liability. While section 411.38 did not specifically call for retrospective application, it expressly made the
interest applicable beginning January 1, 1992, the date the cities were originally required to transfer the

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transition liability. Thus, the transaction targeted by the legislature for the imposition of interest was the
past transaction involving the insufficient transfer, not the later transaction involving the discovery of the
insufficient transfer. See Walker State Bank v. Chipokas, 228 N.W.2d 49, 51 (Iowa 1975) (a retrospective
law includes one which creates a new obligation, imposes a new duty, or attaches a new disability in
respect to transactions already past). This reveals the legislature intended retrospective application of the
amendment.
The nature of the evil to be remedied in this case is more revealing. The amendment gave the Board
specific authority to charge the enhanced interest rate on the amount of the insufficient transfer for the
period beginning January 1, 1992. Prior to the amendment, the Board had established the identical
practice. This Board policy, however, was being challenged.[5] The wrong sought to be remedied by the
amendment was identical to the justification for the Board’s practice. The Board wanted the cities who
had previously transferred insufficient funds to pay an amount representing the rate of return the Board
would have received had sufficient funds been transferred. The Board had been deprived of the
opportunity to earn the rate of return on these untransferred funds, while the cities retained this
opportunity. Moreover, the loss of the return by the Board would ultimately be shared by all participating
cities, contrary to the expressed legislative intent that no city subsidize another city’s transition liability.
See Iowa Code § 411.38(2). The nature of the wrong was retrospective which required retrospective
action. We think this indicates the legislature intended the amendment to apply retrospectively.
Finally, we look to the prior statute to determine if it addressed the problem which the amendment sought
to remedy. The prior statute authorized interest on the amount of the amortization agreement entered into
with cities after an insufficient transfer had been discovered and the amount determined. Yet, it included
no similar provision for interest on the amount of the insufficient transfer from the date of the original
transfer to the date of the amortization agreement. The legislature sought to rectify this problem by the
amendment and there is no good reason why it would only want to remedy part of the problem by
applying the amendment prospectively. We believe the legislature intended to remedy the entire problem
so all cities would be affected in the same manner. Emmet County State Bank, 439 N.W.2d at 655.
We therefore conclude when considering the language of the amendment, the evil to remedied, and the
existing statute at the time of the amendment, the legislature intended retrospective application of the
amendment. Accordingly, we reverse the district court decision and remand the case with directions to
enter summary judgment in favor of the Board.
REVERSED AND REMANDED.
NOTES:
[1] Section 411.38 provided:
1. Upon the establishment of the statewide system, each city participating in the
statewide fire and police retirement system shall do all of the following:
a. Pay to the statewide system the normal contribution rate provided pursuant to section
411.8.
b. Transfer from each terminated city fire or police retirement system to the statewide
system amounts sufficient to cover the accrued liabilities of that terminated system as
determined by the actuary of the statewide system. The actuary of the statewide system
shall redetermine the accrued liabilities of the terminated systems as necessary to take
into account additional amounts payable by the city which are attributable to errors or
omissions which occurred prior to January 1, 1992, or to matters pending as of January
1, 1992. If the actuary of the statewide system determines that the assets transferred by
a terminated system are insufficient to fully fund the accrued liabilities of the terminated

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system as determined by the actuary as of January 1, 1992, the participating city may
enter into an agreement with the statewide system to make additional annual
contributions sufficient to amortize the unfunded accrued liability of the terminated
system. The terms of an amortization agreement shall be based upon the
recommendation of the actuary of the statewide system, and the agreement shall do
each of the following:
(1) Allow the city to make additional annual contributions over a period not to exceed
thirty years from January 1, 1992.
(2) Provide that the city shall pay a rate of return on the amortized amount that is at least
equal to the estimated rate of return on the investments of the statewide system for the
years covered by the amortization agreement.
(3) Contain other terms and conditions as are approved by the board of trustees for the
statewide system. In the alternative, a city may treat the city’s accrued unfunded liability
for the terminated system as legal indebtedness to the statewide system for the purposes
of section 384.24, subsection 3, paragraph “f”.
c. Contribute additional amounts necessary to ensure sufficient financial support for the
statewide fire and police retirement system, as determined by the board of trustees
based on information provided by the actuary of the statewide system.
2. It is the intent of the general assembly that a terminated city fire or police retirement
system shall not subsidize any portion of any other system’s unfunded liabilities in
connection with the transition to the statewide system. The actuary of the statewide
system shall determine if the assets of a terminated city fire or police retirement system
would exceed the amount sufficient to cover the accrued liabilities of that terminated
system as of January 1, 1992, using the alternative assumptions and the proposed
assumptions.
Iowa Code § 411.38 (1995) (emphasis added).
[2] The legislature amended section 411.38(1)(b) to read:
Transfer from each terminated city fire or police retirement system to the statewide
system amounts sufficient to cover the accrued liabilities of that terminated system as
determined by the actuary of the statewide system. The actuary of the statewide system
shall redetermine the accrued liabilities of the terminated systems as necessary to take
into account additional amounts payable by the city which are attributable to errors or
omissions which occurred prior to January 1, 1992, or to matters pending as of January
1, 1992. If the actuary of the statewide system determines that the assets transferred by
a terminated system are insufficient to fully fund the accrued liabilities of the terminated
system as determined by the actuary as of January 1, 1992, the participating city shall
pay to the statewide system an amount equal to the unfunded liability plus interest for the
period beginning January 1, 1992, and ending with the date of payment or the date of
entry into an amortization agreement pursuant to this section. Interest on the unfunded
liability shall be computed at a rate equal to the greater of the actuarial interest rate
assumption on investments of the moneys in the fund or the actual investment earnings
of the fund for the applicable calender year. The participating city may enter into an
agreement with the statewide system to make additional annual contributions sufficient to
amortize the unfunded accrued liability of the terminated system. The terms of an
amortization agreement shall be based upon the recommendation of the actuary of the
statewide system, and the agreement shall do each of the following:

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1996 Iowa Acts ch. 1187, § 107.
[3] The source of this limitation is Iowa Code section 535.2 (1995), which limits interest to five percent per
annum subject to specified exceptions or an agreement of the parties.
[4] We have also determined curative legislation or emergency legislation may be given retrospective
application. See Thorp v. Casey’s General Stores, Inc., 446 N.W.2d 457, 462-63 (Iowa 1989); 2 Norman
Singer, Sutherland Statutory Construction § 41.11 (5th ed. 1993).
[5] Neither party has controverted the amendment as a legislative attempt to affect pending court litigation
in violation of the separation of powers doctrine. But see State ex rel. Lankford v. Mundie, 508 N.W.2d
462, 463 (Iowa 1993); McSurely v. McGrew, 140 Iowa 163, 167, 118 N.W. 415, 417 (1908). We
accordingly do not address the issue. Braden v. Board of Supervisors, 261 Iowa 973, 975, 157 N.W.2d
123, 124 (1968) (proposition neither assigned or argued is not considered).

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