Reduction of Public Officials' Pension and RetroactiveApplication

[25-2(A) KCCR 382, 2010Hun-Ba354, 2011Hun-Ba36·44, 2012Hun-Ba48(consolidated), August 29, 2013]

In this case, the Constitutional Court held constitutional Article 64 Section 1 Item 1 of the Public Officials Pension Act which stipulates reduction of retirement benefits in a case where a present or former public official is sentenced to imprisonment without labor or heavierpunishment due to a cause in performing his/her official duties, excludingcases where such sentence is caused ‘by negligence not related to his/her official duties’ and ‘by negligence in the course of complying with an order lawfully issued by his/her superior.’ But the Court held unconstitutional Article 1 and latter part of Article 7 Section 1 of the Addenda of the Public Officials Pension Act which prescribe retroactive application of Article 64 Section 1 of the aforementioned Act.

Background of the Case

(1) Complainants are former public officials who retired after being sentenced to imprisonment without labor or heavier punishment and have been receiving reduced retirement pension, etc., subject to Article 64 Section 1 Item 1 of the former Public Officials Pension Act (revised as Act No. 5117, December 29, 1995 but before revised as Act No. 9905, December 31, 2009) (hereinafter, the ‘Provision of Former Act’).

(2) On March 29, 2007, the Constitutional Court held that the Provision of the Former Act is incompatible with the Constitution and ordered temporary application until December 31, 2008. But the legislature failed to revise the provision by the deadline, and thereby the Provision of Former Act lost its effect. Whereupon the Government Employees Pension Service paid the complainants the full amount of retirement benefits, etc. from January 1, 2009.

(3) Meanwhile, Article 64 Section 1 Item 1 of the Public Officials Pension Act was revised on December 31, 2009, stipulating that even if a public official is sentenced to imprisonment without prison labor or heavier punishment, if such sentence is caused ‘by negligence not related to his/her official duties’ and ‘by negligence in the course of complying with an order lawfully issued by his/her superior’, the amount of the retirement benefits shall not be reduced. The proviso of Article 1 and the latter part of Article 7 Section of the Addenda prescribed that the amended provisions of Article 64 shall apply from January 1, 2009.

(4) The Government Employees Pension Service sought redemption of half of the complainants' retirement benefits, etc., already paid and also reduced the amount of the retirement benefits to be paid. Thecomplainants, while filing an administrative suit against the aforementionedadministrative action by the Government Employees Pension Service, filed this constitutional complaint on Article 64 Section 1 Item 1 of the Public Officials Pension Act and the proviso of Article 1 and the latter part of Article 7 Section 1 of the Public Officials Pension Act Addenda (No. 9905 on December 31, 2009).

Provisions at Issue

The subject matters of this case are whether 1) Article 64 Section 1 Item 1 of the Public Officials Pension Act (revised as Act No. 9905, December 31, 2009)(hereinafter, the ‘Reduction Provision’) and 2) the proviso of Article 1 and the latter part of Article 7 Section 1(hereinafter, ‘the Addenda Provisions’) are constitutional. The provisions at issue are as follows:

Public Officials Pension Act (revised as Act No. 9905, December 31, 2009)

Article 64 (Restriction on Benefits due to Penalties, etc.)

(1) Where a present or former public official falls under any of the following subparagraphs, part of his/her retirement benefits and retirement allowances shall be reduced before payment as prescribed by

Presidential Decree. In such cases, the amount of the retirement benefits shall not be reduced below the amount calculated by adding the interest of specified in Article 379 of the Civil Code to the total amount of contribution paid:

1. when he/she is sentenced to imprisonment without prison labor or heavier punishment due to a ground accrued in performing his/her official duties (excluding cases where such sentence is cause by negligence not related to his/her official duties and by negligence in the course of complying with an order lawfully issued by his/her superior)

Public Officials Pension Act (No. 9905, December 31, 2009) Addenda

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation: Provided, That the amended provisions of Article 64 shall enter into force on January 1, 2009.

Article 7 (Transitional Measures for Payment of Benefits)

(1) the payment of benefits, a ground for the payment of which has accrued before this Act enters into force shall be governed by the former provisions: Provided, That the amended provisions of Article 47(2) shall also apply to persons for which a ground for benefits has accrued before this Act enters into force and the amended provisions of Article 64 shall also apply to the payment of a retirement pension or early retirement pension which is payable after January 1, 2009 to annuitants of a retirement pension or early retirement pension prior to January 1, 2009, as well as retirement benefits and retirement allowances a ground of the payment of which has accrued after January 1, 2009.

Summary of the Decision

1.Whether the Reduction Provision is contradictory to the binding force of the decision of incompatibility with the Constitution

The Constitutional Court, in 2005 Hun-Ba33 decision, held that Article

64 Section 1 of the former Public Officials Pension Act, which reduced the amount of retirement benefits even when a public official was punished by negligence ‘not related to his/her official duties’, is incompatible with the Constitution as the provision infringed upon the public officials' fundamental rights. The Reduction Provision is the amended version pursuant to the Court's decision. Even for a crime not related to the official duties, if such a crime falls under the category of intentional offense, it should be considered as violating public officials' duty to abide by law and regulations, their duty of integrity, and the duty to maintain dignity, etc. Therefore, even though such crimes are not excluded from the grounds for reduction of retirement benefits, it is not against the decision of incompatibility with the Constitution. Thus the Reduction Provision is not contradictory to the binding force of the decision of incompatibility with the Constitution.

2.Whether the Reduction Provision violates the property right and the right to humane livelihood

The legislative purpose of the Reduction Provision is to prevent public officials from committing crimes and to make them properly and faithfully conduct their public duties while in office. These purposes are legitimate and the Reduction Provision can be considered as a proper means to achieve them. The Reduction Provision excludes cases where a crime is caused ‘by negligence not related to official duties’ and ‘by negligence in the course of complying with an order lawfully issued by superior’ from the grounds for the reduction of retirement benefits, etc. And such reduction of payment shall be applied only to the case where a public official is sentenced to ‘imprisonment without prison labor or heavier punishment.’ This shows that the Reduction Provision categorizes crimes subject to the reduction of payment as narrow as possible to the extent that it can sufficiently achieve the legislative purposes. Also the Reduction Provision provides for the scope of payment reduction not exceeding the shares of the state or local governments. Considering these

facts, the Reduction Provision also meets the requirement of minimum restriction.

The complainants' infringed private interest is the reduction of partial amount of retirement benefits, but considering the facts that this was basically caused by their own culpability; the public interest to maintain people's trust in individual public officials or the public service as a whole is considerably more important. Also considering that the Reduction Provision far more narrows down the grounds for payment reduction than the Provision of the Former Act, thereby minimizing the infringement on the private interests, the Provision successfully strikes the balance between legal interests.

Therefore, the Reduction Provision does not violate the complainants' property right and the right to humane livelihood.

3. Whether the Reduction Provision violates the principle of equality

Given the facts that there is a basic difference between the government employees pension system and the national pension plan or the retirement allowance system; the Reduction Provision, unlike the Provision of the Former Act, excludes negligence crimes not related to the official duties or public position from the grounds of payment reduction; the payment reduction merely amounts to the shares borne by the state; and the purposes of the Reduction Provision are to pre-empt crimes committed by public officials and to maintain order in the public service, we cannot conclude that the Reduction Provision unreasonably discriminate public officials against the national pension subscribers or the employees under the Labor Standard Act. Therefore, the Reduction Provision does not violate the principle of equality.

4. Whether the Addenda Provisions violate the principle of prohibition against retroactive legislation

In this case, the complainants had been fully paid retirement benefits

from January 1, 2009 to December 31, 2009, but due to the Addenda Provisions were required to return 1/2 of the retirement benefits received in 2009. The Addenda Provisions apply retroactively to the part of retirement benefits that the complainants were completely paid and therefore it regulates factual and legal relations already settled and completed, which is retroactive legislation prohibited by Article 13 Section 2 of the Constitution.

In order for the retroactive legislation to be allowed as an exception, there should be important public interests by which such a retroactive legislation can be justified. The decision whether a retroactive law can be an exceptionally allowed or not should be based on a strict standard. Although an amended version pursuant to the Court's decision was anticipated and there was ample time from the Court's decision on March 29, 2007 to the time limit for temporary application on December 31, 2008, the legislature did not revise the provision. Accordingly, the complainants were paid full retirement benefits from January 1, 2009 to December 31, 2009 and this is totally or mainly due to the failure of the legislature to revise the provision. Therefore, the redemption of retirement benefits, etc., from the complainants seems to impute all the responsibility of execution of law by error of a state organ to the complainants who do not have faults or bear responsibility. Then, it seems potent that the complainants did not expect to be asked to retroactively return the retirement benefits pursuant to the belatedly revised Addenda Provisions, and therefore, their expectation interest should not be considered minimal.

Meanwhile, the legislative interests intended to be achieved by the Addenda Provisions are prevention of crime committed by public officials, encouragement of integrity in performing public duties, improvement of people's trust in public officials and effective execution of sanction. But these interests can be sufficiently achieved by other means such as theipso factoretirement of public officials who commit crimes or the reduction of their future benefit. Also the financial and monetary interests conserved by the Addenda Provisions do not seem

considerably large. On the contrary, public interests such as the legislature's duty to abide by the Constitutional Court's incompatibility decision within the time limit for temporary application and the stability of legal relations through prompt legislation are very important. Considering that public confidence in these interests are related to the objective confidence in judicial and legislative branches, the requirement of protecting confidence takes priority over public interests.

Therefore, the Addenda Provisions is retroactive legislation prohibited under Article 13 of the Constitution, and does not fall under the exceptions. Subsequently, the Addenda Provisions infringe on the complainants' property rights in violation of the principle against retroactive legislation.

Partial Dissenting Opinion on the Reduction Provision of Two Justices

In case a public official commits a crime, public interests may sufficiently be achieved by criminally punishing the public officials or, in certain cases, depriving them of their positions. Nevertheless, if legislation aims to reduce retirement benefits in addition to the aforementioned sanctions, there should be the special situation where the legislative purposes cannot be achieved by any other means. For crimes not related to official duties, the damage to people's trust in public service is little or close to none, compared to crimes in relation to official duties. Therefore in these cases it is more reasonable to limit the scope of payment reduction to the extent the legislative purposes can be achieved, depending on the degree of culpability or nature of crimes such as antinational crime or despicable crime. However, the Reduction Provision provides a uniform ground for the reduction of retirement benefits, etc., even for those who commit a crime not related to their official duties. Therefore, the Reduction Provision infringes on thecomplainants' property right in violation of the principle against excessiverestriction.

Also, the Reduction Provision violates the principle of equality, as it

unreasonably discriminates public officials against general citizens or employees.

Therefore, the Reduction Provision violates the complainants' property right and the principle of equality.

Partial Dissenting Opinion on the Addenda Provisions of Two Justices

Reflecting on the Court's decision of incompatibility to the Constitutionregarding the Provision of Former Act and the following process of revision, the Addenda Provisions cannot be considered as providing a new legal judgment on a matter that has already been legally decided, infringing on the people's confidence and legal stability. Rather, the provisions should be regarded as simply filling the legal vacuum, including even the constitutional portion of the former Act, created bythe expiration of temporary application period decided in the incompatibilitydecision. Moreover, the retired public officials who received full retirement benefits, etc., were notified that they might be required to return the retirement benefits pursuant to the upcoming revision. Therefore, they may well have understood the possibility that their retirement benefits, etc. could be retroactively reduced after the revision of the related provisions. Such legislative vacuum falls into a case where expectation interests are small due to the uncertainty and confusion in legal status.

Also, paying full amount of retirement benefits, etc. simply based on the coincidental delay in legislation by the National Assembly is against the public interests to increase people trust in public service, to come up with effective measures to sanction and to realize social justice and equality. Therefore, the Addenda Provisions which restrict such a payment can be considered as contributing to achieve important public interests.

As the government employees pension system has also been suffering from chronic deficit, becoming a burden to the national treasury, the public interest to preserve finance for the government employee pension

plan is also very important.

Therefore, the Addenda Provisions can be considered as a case in which retroactive legislation is justified due to the existence of greatpublic interest in precedence over the principle of protection of confidence.

For the forgoing reasons, the Addenda Provisions do not violate the Constitution, as they are a justified exception to retroactive legislation.