Shawn Brand, Relator, vs. Minnesota State Retirement System, Respondent.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A03-1219

 

Shawn Brand,

Relator,

 

vs.

 

Minnesota State Retirement System,

Respondent.

 

 

Filed May 18, 2004

Affirmed Hudson, Judge

 

Minnesota State

Retirement System

 

Wilbur W. Fluegel, Fluegel Law Office, Suite 1260, 701 Fourth Avenue South, Minneapolis, Minnesota 55415 (for relator)

 

Mike Hatch, Attorney General, Jon K. Murphy, Rory Foley, Assistant Attorneys General, 445 Minnesota Street, Suite 900, St. Paul, Minnesota 55101-2127 (for respondent)

 

            Considered and decided by Hudson, Presiding Judge; Kalitowski, Judge; and Stoneburner, Judge.

U N P U B L I S H E D   O P I N I O N

HUDSON, Judge

            Relator, Shawn Brand, challenges the decision of the Minnesota State Retirement System Board that the Board had fulfilled its fiduciary duty to relator by fully informing her of the consequences of transferring her Minnesota State Retirement System (MSRS) retirement account to a private mutual fund, thereby forfeiting her right to an MSRS pension upon her retirement.  Because the Board fulfilled its duty to relator, we affirm. 

FACTS

            Relator Shawn Brand worked for the Minnesota Department of Natural Resources for a number of years.  In 1999, she left state employment and began researching options for transferring her MSRS retirement funds to a private retirement account.  Relator requested a rollover/refund application, and received a letter, dated July 15, 1999, explaining how much she would receive if she chose to close her MSRS account.  The letter also explained relator's estimated monthly pension benefit at ages 55, 62, and 65, should she leave her employee contributions in her MSRS account.  Finally, the letter informed relator that if she chose a refund, she would forfeit any right to an annuity benefit upon her retirement.

            Relator took no action to roll over the account until 2002, when she again requested a refund application.  She received a letter dated March 5, 2002, that was virtually identical to the July 1999 letter, except that it had updated the value of her account and her pension benefit.  Relator completed and signed the application, and rolled $24,391.02, the amount of her employee contributions to her MSRS account, into a private retirement fund. 

            Several months later, relator spoke with a friend who was a state employee.  When relator told her friend about her retirement rollover, the friend expressed concern that relator may have lost money by closing her MSRS account.  Relator contacted MSRS staff and requested that her MSRS account be reinstated if it was true that she had lost what she termed the "state's match" contributions to her retirement account.  MSRS employee Bill Greffin responded, and explained to relator that her MSRS retirement plan had been a defined-benefit plan, and that there were no "matching" funds allocated to her account.  He also pointed out that the MSRS letters and the refund application informed her that closing her MSRS account would result in the loss of the future annuity.

            After failed attempts to convince MSRS Executive Director David Bergstrom to reinstate her account, relator petitioned for review by the MSRS Board (the Board).  She alleged that the Board, through Greffin, had violated its fiduciary duty to her as a beneficiary of the MSRS fund by failing to disclose the amount of the employer's contributions to her account and to fully inform her of the consequences of closing her account.

            The Board held a hearing at which relator argued that Greffin repeatedly told her that she would "not lose any money" in the rollover transaction.  She said she did not understand that she would be losing half her retirement.  Relator acknowledged that she did not know the difference between a defined benefit and a defined contribution retirement plan, and that although she worked for the state for well over 12 years, she did not truly understand the nature of her retirement account.

            The Board voted to deny relator's request for reinstatement of her account, finding that she was fully informed as to the consequences of accepting a refund, and that she signed the refund application form, thereby acknowledging that she would forfeit all rights to future MSRS benefits.  This certiorari appeal follows.

D E C I S I O N

            Decisions of the MSRS Board are quasi-judicial and may be reversed by writ of certiorari to this court.  Minn. Stat. § 352.031, subd. 9 (2002).  This court reviews the Board's decision to determine whether it was "arbitrary, oppressive, unreasonable, fraudulent, under erroneous theory of law, or without any evidence to support it."  Stang v. Minn. Teachers Ret. Ass'n Bd. of Trs., 566 N.W.2d 345, 347 (Minn. App. 1997).  If any interpretation of the Board's fiduciary duties under Minn. Stat. § 356 A. 05 (2002) is necessary, it is an issue of law that this court reviews de novo.  See Frost-Benco Elec. Ass'n  v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984).

            Relator argues that the Board breached its fiduciary duty to her, a member of the MSRS retirement fund, by failing to fully inform her of the consequences of rolling over her retirement account.  Relator does not argue that she did not receive the full amount of her employee contributions in the rollover.  Rather, she argues that the Board, through Greffin, should have told her that she would lose the "employer match" contributions made to the MSRS general fund on her behalf.  We agree with relator that the Board owes each individual member of the MSRS fund a fiduciary duty, but we conclude that the Board met its duty to relator by fully disclosing the consequences of accepting a refund from an MSRS account.

The letters sent to relator on July 15, 1999 and March 5, 2002 both stated:

 

Instead of taking a refund, you can leave your money in the retirement fund and receive a lifetime deferred annuity beginning as early as age 55.  In addition, after you retire your annuity payments are increased annually based on the cost of living and on investment performance.  Once you take a refund, all rights to a retirement annuity and survivor coverage are forfeited. 

 

(Emphasis added.)  And, the refund application that relator signed and had notarized states that the participant understands "that taking a refund results in the loss of all service credit and any rights to MSRS benefits."  From these documents, relator should have been aware that by taking a refund from her MSRS account, she was giving up some future benefit.  That benefit is in the nature of a lifetime annuity that begins to pay monthly upon the MSRS member's retirement. 

At its core, the dispute here appears to stem from relator's misunderstanding of the nature of the MSRS defined-benefit plan.  Relator did not, and could not, "lose" the employer's contributions to the MSRS general fund, because no employer contributions were allocated to her.  The record reflects that the state's contributions to the MSRS general fund, although based on each employee's salary, are not placed into a specific account for each employee, and do not indicate the amount of any employee's future annuity payments.  Relator's retirement annuity benefit would have been calculated according to a formula based on her years of service and average salary while working for the state; not on any "matching" amounts contributed to the general fund by the employer.  Relator did not "lose money" by effecting this rollovershe lost the opportunity for a future benefit, and the documents she received from MSRS before the rollover warned her of that consequence. 

The Board, through Greffin, fully informed relator that choosing to close her MSRS account and withdraw her employee contributions would result in the loss of any future MSRS benefits.  The Board's fiduciary duty to relator was met, and the Board did not act in an arbitrary or capricious manner in denying relator's request to reinstate her MSRS account.

Because we affirm the Board's denial of relator's reinstatement request, it is unnecessary for us to address whether the Board would have the authority to grant reinstatement to relator under the confines of Minn. Stat. § 352.23 (2002). 

Affirmed.