KIM ANN ZAJACK v. DIVISION OF PENSIONS AND BENEFITS, DEPARTMENT TREASURY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6467-03T36467-03T3

KIM ANN ZAJACK,

Petitioner-Appellant,

v.

DIVISION OF PENSIONS AND BENEFITS,

DEPARTMENT OF THE TREASURY,

Respondent-Respondent.

___________________________________

 

Submitted: October 18, 2005 - Decided May 1, 2006

Before Judges Kestin and Hoens.

On appeal from the Division of Pensions and Benefits, Department of the Treasury.

Kim Ann Zajack, appellant pro se.

Peter C. Harvey, Attorney General, attorney for respondent (Michael J. Haas, Assistant Attorney General, of counsel; Robert J. Gillispie, Jr., Deputy Attorney General, on the brief).

PER CURIAM

Petitioner, Kim Ann Zajack, appeals from the May 28, 2004 decision of the Director of the Division of Pensions and Benefits denying her application to revoke two elections she made, in 1999 and 2001, to enroll in the Alternate Benefit Program (ABP), which entailed her waiver of any rights to benefits under the Teachers' Pension and Annuity Fund (TPAF) and the Public Employees' Retirement System (PERS). We reverse and remand for the development of such additional record as may be necessary, and for appropriate findings and conclusions based on the record applying prevailing legal standards.

On appeal, petitioner also raises, for the first time, a question regarding her eligibility for ABP. This, too, is a question to be resolved on remand, based on the record developed.

Because of the limitations of the proceedings to date, we take the facts of the matter as presented by the parties in their briefs and as gleaned from the documents comprising the record on appeal.

Before she resigned on March 1, 1999, petitioner was a high school teacher and member of the TPAF. She alleges that she had been a member of TPAF since 1988 and that her pension in that system had "vested."

In November 1998, petitioner's husband died following a heart attack, after which petitioner went on medical leave from her teaching position. Later that month, petitioner was offered a job at Rutgers University. She remained on medical leave until March 1, 1999, when she resigned her teaching position and began working for Rutgers as a program associate for a 4-H organization. On that date, petitioner filled out an application to withdraw from TPAF and to transfer her pension contributions to ABP, as well as an enrollment application for ABP. In her applications, petitioner signed an Election of Retirement Coverage form, which included the following clause:

I wish to transfer my pension contributions to the Alternate Benefit Program and waive my statutory right to remain in or transfer to the Public Employees' Retirement System. I understand that my decision is irrevocable. I wish my accumulated pension deductions and any contingent reserve funds to which I am entitled to be invested with the one investment carrier designated below.

Petitioner designated TIAA-CREF as her investment carrier. Rutgers began making petitioner's payroll deductions accordingly.

On May 31, 2000, petitioner resigned from Rutgers in order to accept a new job with the Department of Agriculture, a PERS-qualified position. Apparently, petitioner transferred from ABP to PERS.

Petitioner changed jobs again in January 2001, returning to Rutgers as a Project Manager. She enrolled in ABP again, withdrew from PERS, and transferred her PERS contributions to ABP.

Petitioner took no further action until February 26, 2004, when she sent a letter to the Division asking that she be permitted to revoke her March 1, 1999 election to transfer from TPAF into ABP. She insisted that, had she been aware of the consequences, she would have transferred, at the time, into PERS instead.

In her letter, petitioner attributed her error to the stress of her husband's death and to the advice of an unnamed woman from Rutgers:

I received a call from Rutgers University regarding a position that I had applied for. After 3 1/2 months on medical leave I resigned from teaching on March 1, 1999 and transitioned to Rutgers. I received a call from administration asking me which pension fund I wanted to transfer into. I was vested in the TPAF and a member from 1988 - 1999. Still numb from my husband's tragic death and on medication for my mental instability, I made the decision to transfer my vested TPAF pension to ABP based upon the suggestion from the woman on the other end of the phone, who had said that I could possibly do a whole lot better in the ABP than PERS. Thinking this would be a supplemental deduction for my pension I agreed. Being consumed with keeping my life together personally and financially, I never gave it a thought until a conversation with my colleague brought me to the realization of what I did when I made that decision. Now I have come to discover that all of those years I had put into the TPAF are lost and I have started from the beginning in my forties. It is very difficult, on my small salary to deduct the necessary money from my pay to put into the ABP to provide for retirement and still support my family.

Being an intelligent and educated woman, I would have never done anything so absurd if I'd known what I was doing. I am able to provide documentation that will verify my claim that I was in no state of mind to make a decision that would have cost me so much.

By letter of March 25, 2004, the Manager of Fiscal Resources for the Division of Pensions and Benefits denied petitioner's request, stating: "there are no provisions under New Jersey Statutes allowing for a reversal of a valid enrollment into the Alternate Benefit Program (ABP) based upon a hardship." He added that petitioner had had the opportunity to join PERS when she began at Rutgers in March 1999, but that she had waived her right to do that by joining ABP instead.

Petitioner filed an appeal of that determination with the Division. On May 28, 2004, the Division issued its final agency decision, upholding the denial of petitioner's request to revoke her waiver of TPAF and PERS rights. The Director acknowledged the documentation of petitioner's state of mind, but he found nothing to indicate that her condition rendered her "in any way impaired" from making a valid waiver agreement. The Director noted further that the pension statutes "do not permit the revocation of your voluntary election under any circumstances."

The Director found no disputed questions of fact and saw no need for a hearing. He stated that his decision was grounded on the pension statutes.

The Director's letter informed petitioner of the forty-five-day period for appeal. See R. 2:4-1(b). On July 26, 2004, petitioner, pro se, filed a notice of appeal. The Division has made no motion to dismiss the appeal as untimely. Instead, issue was joined and the parties have fully briefed the matter.

In her brief on appeal, petitioner states that she is willing to "face the financial consequences" that may result from the recission of her elections to enroll in ABP. She offers two reasons why she should be entitled to this remedy: her stress over her husband's death rendered her incapable of making an informed choice between ABP and PERS; and, she was not eligible to enroll in ABP and thus should not have been allowed to do so. As we have noted, petitioner raised only the first ground with the agency, and, thus, that was the only basis considered by the Director in denying her claim. The eligibility question should be addressed on remand, for, if petitioner was enrolled in a program for which she was not eligible, the questions over the validity of her choice will be rendered moot. A pension fund owes a fiduciary duty to its members, a duty that would be thwarted if it were to determine eligibility status by erroneous standards. See Mount v. Trustees, Public Employees' Retirement System, 133 N.J. Super. 72, 86 (App. Div. 1975); cf. Gladden v. Board of Trustees, Public Employees' Retirement System, 171 N.J. Super. 363, 371 (App. Div. 1979)(one cannot waive a right to join a pension system for which she did not know she was eligible).

Our understanding of the issues is informed by the statute and regulations governing ABP. First enacted in 1967, the enabling statute is now codified at N.J.S.A. 18A:66-167 to -173. It is intended to benefit

All full-time officers and all full-time members of the faculty of the University of Medicine and Dentistry of New Jersey, Rutgers, The State University, the Newark College of Engineering, the State and county colleges and all regularly appointed teaching and administrative staff members in applicable positions, as determined by the Director of the Division of Pensions in the Department of the Treasury[.]

[N.J.S.A. 18A:66-170.]

Its purpose is "to provide mobility of pension credit from within the academic community in and outside the State." N.J.S.A. 18A:66-172. In order to insure uniform eligibility criteria, the Legislature empowered "the Director of the Division of Pensions to establish regulations which shall provide for such uniformity." N.J.S.A. 18A:66-172.

The regulations, N.J.A.C. 17:7-1.1 to -5.2, confer upon the Director of the Division "the responsibility to determine eligibility for participation in the Alternate Benefit Program." N.J.A.C. 17:7-2.1(e). The categories of eligible employees include full-time faculty and "professional administrative staffs" of the covered institutions. N.J.A.C. 17:7-2.1(a). The latter category is defined as including "any employee whose minimum qualifications for hiring include a baccalaureate degree or its equivalent, but shall not include career service employees as defined by the Department of Personnel." N.J.A.C. 17:7-2.1(a)1.

When, as here, a TPAF member becomes employed in a job that renders her eligible to join PERS, she must withdraw from TPAF and transfer to either ABP or PERS. N.J.S.A. 18A:66-170; N.J.A.C. 17:7-2.1(e)1.

Two documents published in 2004, available from the Division's website (www.state.nj.us/treasury/pensions/abp1.htm), illuminate the nature of ABP. The Alternate Benefit Program Member Handbook, with Fact Sheet #38, describes ABP in detail. Its opening paragraph summarizes its principal features:

The Alternate Benefit Program (ABP) is a defined contribution retirement program for eligible employees of the public institutions of higher education in New Jersey. In addition to retirement benefits, the ABP provides members with life insurance and disability coverage. The program allows members to direct their own retirement accounts while offering portability of accumulated contribution balances. Vested members are permitted to allocate and transfer employer and employee contributions to any one or a combination of authorized investment carriers. The variety of investment choices and distribution methods offered by the authorized carriers provide members flexibility in meeting their retirement goals.

[p. 1 of Alternate Benefit Program Member

Handbook.]

The second document is entitled, "Considerations for Choosing between the PERS and ABP." The introduction to this document states:

The purpose of this booklet is to assist newly eligible employees currently participating in the Public Employees' Retirement System (PERS), Teachers' Pension Annuity Fund (TPAF), or Police and Firemen's Retirement System (PFRS) in determining whether the PERS or the Alternate Benefit Program (ABP) is the better system for them.

And, that introduction includes a caution with a pertinent emphasis:

If you are currently in the TPAF or PFRS, you must transfer to either the PERS or ABP. These are one time decisions which are irrevocable for the balance of your employment with your current employer. Accordingly, you are urged to consider this choice carefully and to discuss it with your financial advisor.

One of the questions to be resolved on remand is whether petitioner had the benefit of guidance of this type when she made her elections.

Aside from the question of petitioner's eligibility for ABP, the Director did not decide the matter by determining whether petitioner had made an informed choice to transfer into that program. The Director's stated reasons for denying petitioner's application were:

You have indicated that you were acting under stress at the time you made the election to enroll in the ABP and waive your benefit rights under the TPAF and PERS. However, New Jersey statutes governing the retirement plans do not permit the revocation of your voluntary election under any circumstances.

Additional documentation provided by you with your request for appeal supports your claim that you were under stress at the time and medical evidence you provided indicates that you were under treatment for stress related conditions but do not indicate that you were in any way impaired to make legal decisions during the time period in question that would prevent you from entering into a waiver agreement at the root of your claim. Since you filed a valid waiver of retirement benefits under the TPAF and PERS when electing to enroll into the ABP, you are unable to re-establish retirement benefits under the TPAF or PERS for service transferred to the ABP.

Therefore, your request to revoke your waiver of benefits under TPAF and PERS has been denied.

As noted above, I have reviewed your written submissions including your written request of appeal. Because this matter does not entail any disputed questions of fact, I was able to reach my findings of fact and conclusions of law in this matter on the basis of the retirement system's enabling statutes and without the need for an administrative hearing. Accordingly, this correspondence shall constitute the Final Administrative Determination of this office. (Emphasis supplied.)

The Director's basic rationale that the "statutes governing the retirement plans do not permit the revocation of your voluntary election under any circumstances[,]" was manifestly incorrect. Although the literal terms of N.J.S.A. 18A:66-167 to -173 do not address revocation of an election, case law recognizes the right to rescind a choice when it is established that the employee's choice was not really an "informed" one.

In Steinmann v. State, 116 N.J. 564 (1989), a teacher applied for and began receiving an accidental disability pension. At the time of her application, TPAF did not inform her that her benefit would be reduced by a workers' compensation award she was collecting. Nearly three years later, she discovered that, because of the workers' compensation offset, she would have been entitled to a larger benefit had she selected an early-retirement pension. Her petition to convert to that plan was denied by the TPAF Board, and we affirmed.

The Supreme Court reversed. The Court was guided by the principles that public-employee pension benefits represent deferred compensation, not a gratuity; that pension statutes should be liberally construed in favor of public employees; and that forfeiture of earned pension rights is a drastic remedy that should be avoided unless clearly intended by the Legislature. Id. at 572-73. "It is well established that the Board may honor a pensioner's request to reopen her retirement selection after it is due and payable if a showing of good cause, reasonable grounds, and reasonable diligence has been made." Id. at 573.

One element of "good cause" is a default in the pension boards' and the Division's obligations to provide the employee with sufficient information to make an "informed choice" among pension options. Id. at 576-77.

It is highly unlikely that the Legislature would offer public employees the option of selecting among various service retirement benefits and disability benefits without intending that a retiree be able to make an informed choice about which benefit would be most advantageous. Since 1971 the Legislature has permitted retirees to choose among these alternate benefit plans while receiving workers' compensation benefits, see, e.g., L.1971, c.121, 16 (codified at N.J.S.A. 18A:66-32.1b), subject to an offset in the case of disability benefits. A review of the statutory benefit plans authorized by the Legislature reflects a clear purpose to afford public employees a wide array of reasonable retirement options consistent with their personal circumstances. It is self-evident that the Legislature assumed that public employees would be in a position to make informed decisions about the relative merits of their retirement options.

[Id. at 574-75.]

On the facts presented in Steinmann, the Supreme Court ruled that the petitioner could not have made an informed choice because the Board had not advised her of the impact of her workers' compensation award, a calculation necessary to a determination of which pension category would be more advantageous to her. Id. at 577. Hence, the petitioner had demonstrated "good cause" to change her selection. Id. at 577-78.

We applied the informing principles of Steinmann in favor of another petitioner in Outland v. Board of Trustees, Teachers' Pension and Annuity Fund, 326 N.J. Super. 395 (App. Div. 1999). After the petitioner, a teacher, was assaulted by a student, she became disabled and could not return to work. She began receiving workers' compensation benefits. On her employer's advice, she withdrew her accumulated TPAF contributions "in order to avoid taxes." Id. at 398. Over two years later, she applied for an accidental disability pension, which was denied because she had withdrawn her contributions. Id. at 399.

We held that the instructions the pension system had provided with the application form for withdrawal of the petitioner's TPAF contributions were inadequate because they did not provide "information indicating a possible waiver against filing an application for an accidental disability pension at a later date." Id. at 405. Moreover, the withdrawal application form had expressly indicated that an employee receiving workers' compensation remains an active member of TPAF. Id. at 405. We were

unable to determine the reason the Board concluded appellant was able to withdraw as an active member in the face of the instruction that a person receiving worker[s'] compensation benefits would continue as an active member. It is clear that appellant was not presented with information concerning the consequences of receiving workers' compensation benefits at the same time she attempted to withdraw her funds. Without that information, appellant could not make an informed choice. The application was at best, ambiguous. Consistent with the view expressed in Steinmann, the good cause standard should be "sufficiently flexible to accommodate the legislative purpose of affording public employees the right to make informed choices among the statutorily authorized retirement options." Steinmann, supra, 116 N.J. at 576, 562 A.2d 791. We conclude that appellant demonstrated good cause for the Board to consider her application for disability benefits.

[Id.at 406.]

In the instant case, the existing factual record may not be adequate for considering whether petitioner could demonstrate "good cause" for her allegedly mistaken selection of ABP. More importantly, the Director applied an incorrectly unremitting standard to his evaluation of her petition when he held that a revocation was not permitted "under any circumstances." The Steinmann principles establish that the Division and the respective pension boards are required to inform petitioner clearly about the relative merits of switching from TPAF to ABP on the one hand, or to PERS on the other hand. On remand, the Director must make his determination employing the correct legal standard based upon a record addressing the pertinent factual issues, including the extent to which petitioner was adequately informed about the differences between the several choices available to her, and with full consideration of the effects of petitioner's 2001 transfer from PERS to ABP as well as her 1999 election.

We, therefore, remand for the development of a record on the two questions presented: whether petitioner was eligible to join ABP on the critical dates, and whether she has satisfied the "good cause" tests of pertinent case law for revoking her selections.

Petitioner is entitled to a fair opportunity to submit support for the propositions she advances. Clearly, the burden is upon her to make the showings required to nullify her choices to enroll in ABP. Of course, the Director may not decide the matter without affording petitioner a fair opportunity to make her case.

We do not decide at this time whether the supportive showings petitioner has already made in her appeal to the Director should be supplemented on reconsideration; and, we will not mandate a particular mode for developing whatever additional record may be deemed necessary. We leave it to the Division in the first instance to determine, pursuant to the Administrative Procedure Act, N.J.S.A. 52:14B-1 to -25, and cognate legislation, N.J.S.A. 52:14F-1 to -21, what procedures are best suited to that end.

Reversed and remanded. We do not retain jurisdiction.

 

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A-6467-03T3

May 1, 2006