IN THE MATTER OF THE ESTATE OF ERIC LEVINSON

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

IN THE MATTER OF THE

ESTATE OF ERIC LEVINSON.

_______________________________

May 6, 2016

Argued April 20, 2016 Decided

Before Judges Alvarez and Manahan.

On appeal from New Jersey Department of Treasury, Division of Pensions and Benefits, Docket No. 1-557437.

Richard J. Shaklee argued the cause for appellants Dennis and Deborah Levinson (McLaughlin, Stauffer & Shaklee, P.C., attorneys; Mr. Shaklee, of counsel and on the brief).

Jeff S. Ignatowitz, Deputy Attorney General, argued the cause for respondent State of New Jersey(Robert Lougy,Acting Attorney General, attorney; MelissaH. Raksa,Assistant AttorneyGeneral, ofcounsel; Mr. Ignatowitz, on the brief).

PER CURIAM

The Estate of Eric Levinson (Estate) appeals from a final decision by the Acting Director of the Division of Pensions and Benefits (Division) denying a non-contributory life insurance benefit to the Estate after the death of Eric Levinson. Having considered the uncontroverted facts and guided by our standard of review and applicable law, we affirm.1

The facts of this case are undisputed and were stipulated by written agreement between the parties before the Administrative Law Judge (ALJ). Eric Levinson was employed by the Ocean Township Board of Education (OTBOE). On February 1, 2006, while employed in this capacity, Levinson was enrolled in the Teachers' Pension and Annuity Fund (TPAF), until he was terminated on June 30, 2007, at the conclusion of the 2006-07 school year.

Thereafter, on July 3, 2007, Levinson was employed as a teacher at Mercer Arts Charter High School (MACHS). MACHS's application to become a charter school was approved by the Department of Education (DOE) in January 2007, and the DOE granted MACHS a charter on August 30, 2007.

In order for MACHS to become a participating employer and enroll its employees in TPAF or any other pension system, the State, through the Division Director, was required to apply to the Social Security Administration (SSA) to amend its agreement2 under Section 218 of the Social Security Act to add the newly established entity. MACHS would not qualify as a participating employer in the pension system until the Section 218 amendment was approved by the Secretary of Health and Human Services. MACHS's charter was revoked prior to the fulfillment of the requirements necessary for the Division to secure amendment of the Section 218 agreement.

The Division provides new public employers such as MACHS with guidelines to obtain the status as a participating employer and to allow enrollment by its employees in the pension system. MACHS was provided with the guidelines which state

1. The new public entity must submit to the Division a resolution from the governing body stating that the employer will be responsible for the remittance of the employer's share for Social Security coverage. A copy of the statute or ordinance that created or authorized the creation of the entity must accompany the resolution.

2. The new public entity must provide a statement which includes

a. The Employer Identification Number (EIN) from the IRS.

b. The effective date requested for Social Security coverage (usually the date of the employer's first hire).

c. The number of employees to be covered.

d. The name, address, phone number, fax number and title of the person who will be the Division's contact (usually the certifying officer).

3. After the required information is received, the Division executes a formal modification to extend Social Security coverage under Section 218 of the [S]tate's Social Security coverage agreement.

4. The Secretary of Health, Education and Welfare approves the modification. This process may take two or more months.

5. Once the Division receives notice of the successful modification, a copy of the modification is sent to the contact person. Copies of the modification are also sent to the Enrollment Bureau, the State Health Benefits Bureau and the Publications/Benefits and Employer Education (PBE) Unit of the Client Service Bureau within the Division.

The Division also publishes "Fact Sheets" made available on the Division's website for the purpose of informing employers about pension issues. Fact Sheet #50, titled "Charter Schools" provides that

Charter schools are independent public entities as established under the "Charter School Program Act of 1995" (Chapter 426, P.L. 1995). Therefore, each charter school must comply with the requirements applicable to local governmental employers regarding Social Security and State pension enrollment.

Every charter school must participate in the State pension systems and assume liability for required employer contributions.

Fact Sheet #50 mirrored the guidelines and detailed the specific information and documentation required to process the school's registration.

Notwithstanding MACHS's approval as a charter school, it failed to provide the required information or documentation during its operation. Therefore, the requisite Section 218 agreement was not modified to add MACHS as a participating employer.3 Further, and without the Division's knowledge or approval, MACHS was withholding pension contributions from its employees' salaries without authority. Despite withholding the monies, MACHS did not remit any payments to the Division.

A few weeks after Levinson passed away on December 1, 2007, the Estate applied for Levinson's death benefits. Just prior to the application, the DOE Commissioner advised MACHS that its charter had been revoked and ordered that MACHS cease operations within ten days. On January 7, 2008, the Division responded that the amount of Levinson's group life insurance benefit was zero but the Estate was due the return of his accumulated pension deductions totaling $1561.62, withheld while Levinson was employed at OTBOE. Thereafter, Virginia Martucci, Chief of the Division's Operations Bureau, wrote to Levinson's parents that MACHS "was not established as a valid employer under the TPAF" so "Mr. Levinson was not an active employee" of TPAF at the time of his death and no life insurance benefit was payable.

For the next year, the Estate and the Division exchanged correspondence, as did the Estate and MACHS representatives. In January 2009, the Estate provided the Division with a resolution of MACHS's Board of Trustees dated October 1, 2007, accepting "liability for the employer's portion of the social security and pension costs in order to enroll in the New Jersey State Pension and Benefits Plan[,]" as well as "a list of employees of [MACHS] and the pension withholdings that [MACHS] withheld from salary for those employees indicating amounts withheld from the pay of Eric Levinson among others." The Division, through Martucci, replied that notwithstanding the MACHS resolution, none of the other requirements for MACHS participation in the TPAF were satisfied.

The Division maintained this position despite continued communications between counsel for MACHS and the Division. The communications included an email from MACHS's counsel which attached a copy of an October 26, 2007 letter from Wellington Davenport, MACHS's Board Secretary and Business Administrator, citing steps taken by MACHS to enroll in the pension system.4

Despite the Estate continuing to press a claim for life insurance benefits, the Division maintained its position that since Levinson was not an active member of TPAF at the time of his death, no benefits existed. The Division Director reiterated that this was due to MACHS's failure to complete the process of enrollment before its charter was revoked. The Division, by correspondence from Martucci, noted it could not "go back and establish [MACHS] as a participating employer" since MACHS was "defunct."

Subsequent to the Estate's appeal, the matter was transferred to the Office of Administrative Law (OAL) as a contested case. The parties each moved for a summary decision based on a stipulated factual and documentary record. The ALJ issued an initial decision on August 21, 2014, recommending denial of a death benefit payment. The ALJ held that since MACHS was not a participating TPAF employer, Levinson was not a "member in service" when he died. Citing N.J.S.A. 18A:66-38(b), the ALJ concluded that the "member in service" requirement exempts teachers who are disabled due to "sickness or injury arising in the course of employment" or "on an official leave of absence" for varying reasons. However, the Estate did not allege that either exception applied.

The ALJ further held the Division's decision in denying the Estate's request to enroll MACHS retroactively was not erroneous. The ALJ determined that the Estate's argument "misplaces the burden on the Division to show that it could not enroll employees of a defunct school in the TPAF." The ALJ also noted that since MACHS never contributed to the pension fund, permitting retroactive enrollment would negatively impact the pension fund and its members.

The ALJ rejected the Estate's equitable argument that the Division should be required to enroll MACHS retroactively. The ALJ reasoned that MACHS no longer existed and, therefore, could not contribute to the fund. The ALJ found the fault in this case "lies with MACHS for unlawfully withdrawing funds from employees' paychecks" and for failing to provide requisite documentation to the Division.5

Finally, the ALJ rejected the Estate's argument that the Division did not "comply with due process requirements in depriving petitioners of a property interest." The ALJ held that because Levinson was not a "member in service" of the TPAF, neither he nor his Estate had a vested property interest in the death benefits, and since the matter was transferred to the OAL, the Estate was afforded due process.

The Estate filed exceptions to which the Division replied. The Acting Director, Florence J. Sheppard, issued the Division's final administrative decision on November 18, 2014, adopting the factual findings and conclusions of law in the ALJ's Initial Decision. The Acting Director modified the initial decision only to the extent she was directed by the TPAF Board.

The Acting Director held that the issue before the ALJ whether Levinson was a "member in service" hinged on whether MACHS was a TPAF participating employer. Because the Division, and not the TPAF Board, is responsible for administering the State's Section 218 agreement and enrolling new locations in the pension system, the Acting Director determined that the Division was the final decision maker.

The Acting Director noted the Division is the agency designated by the Social Security Integration Act, N.J.S.A. 43:15A-1 to -3, to administer the State's Section 218 agreement. She also noted that no public employee may be enrolled in a State pension plan unless and until the public employer is "included in the coverage agreement between the State of New Jersey and the [SSA.]"

In order to be included in the coverage agreement, the Acting Director held "the employer [must] complete certain preliminary steps and provide required information" to the Division. The Division "then executes a formal modification under Section 218 of the [S]tate's Social Security coverage, and the modification is forwarded to the Secretary of Health [and Human Services]." (citing N.J.S.A. 18A:66-126.10). This process generally takes "at least two months." The Acting Director concluded

It is undisputed that these steps were never completed, and therefore MACHS was never a TPAF participating employer. Therefore, Mr. Levinson was not a member in service of TPAF at the time of his death, because MACHS was not a TPAF employer. Further, and contrary to [the Estate's] arguments, MACHS, having ceased to exist due to the revocation of its charter, cannot retroactively enroll as a TPAF employer.

This appeal followed.

The Estate raises the following points on appeal

POINT I

THE FINAL AGENCY DECISION, WHICH INCORPORATES THE INITIAL DECISION OF THE ADMINISTRATIVE LAW JUDGE, APPLIES AN INCORRECT PRESUMPTION IN FAVOR OF NONPAYMENT OF DEATH BENEFITS, WHEREAS THE CORRECT PRESUMPTION SHOULD BE THAT WHERE THE STATUTORY CRITERIA FOR PAYMENT IS SATISFIED, ABSENT REASON IN LAW OTHERWISE, PAYMENT SHOULD OCCUR.

POINT II

THE FINAL AGENCY DECISION APPLIES AN INCORRECT PRESUMPTION AGAINST APPLICABILITY OF THE DEATH BENEFIT STATUTES BASED ON PENSION CONTRIBUTIONS NOT BEING RECEIVED BY THE DIVISION.

POINT III

THE DIVISION IMPROPERLY PREVENTED THIS MATTER FROM GOING TO THE BOARD OF TRUSTEES, TPAF.

POINT IV

THE FINAL AGENCY DECISION, ADOPTING THE INITIAL DECISION, APPLIES AN INCORRECT PRESUMPTION AGAINST MACHS BEING ALLOWED TO RETROACTIVELY BECOME A PARTICIPATING EMPLOYER WITH THE PENSION SYSTEM.

We first address our standard of review of the Board's decision. Our scope of review in an appeal from the final decision of an administrative agency is limited. In re N.J. Dep't of Envtl. Prot. Conditional Highlands Applicability Determination, 433 N.J. Super. 223, 235 (App. Div. 2013) (citing Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 9 (2009)). The court "must sustain the agency's action in the absence of a 'clear showing that it is arbitrary, capricious, or unreasonable, or that it lacks fair support in the record[.]'" Ibid. (quoting Circus Liquors, supra, 199 N.J. at 9). On questions of law, review is de novo. Ibid. (quoting Russo v. Bd. of Trs., Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011)). We are "in no way bound by the agency's interpretation of a statute or its determination of a strictly legal issue." Mayflower Sec. Co., Inc. v. Bureau of Sec., 64 N.J. 85, 93 (1973). An administrative board has the authority "to adopt, reject or modify the recommended report and decision of the ALJ, . . . and an appellate court is only entitled to review those findings and recommendation in its overview of the record for the purpose of determining whether or not the [b]oard's findings are supported by substantial credible evidence." N.J. Dep't of Pub. Advocate v. N.J. Bd. of Pub. Utils., 189 N.J. Super. 491, 507 (App. Div. 1983) (citing In re Silberman, 169 N.J. Super. 243, 255-56 (App. Div. 1979), aff d, 84 N.J. 303 (1980)).

Predicated upon our review of the record, we conclude the Division's final decision was not arbitrary, capricious or unreasonable, and the decision was supported by sufficient credible evidence in the record. R. 2:11-3(e)(1)(D). We affirm the Board's decision substantially for the reasons stated by the ALJ in the initial decision. We add only the following.

Pursuant to N.J.S.A. 18A:66-6.1, TPAF membership is required for all teachers in New Jersey. At the time of Levinson's death on December 1, 2007, Levinson was a member of TPAF, based on his previous service and contributions as a teacher with OTBOE which ended in June 2007. See N.J.S.A. 18A:66-4.

Although a member of TPAF, Levinson was not a "member in service" at the time of his death and did not qualify for the payment of contributory and non-contributory life insurance benefits. N.J.S.A. 18A:66-38(a) and (b) state that the beneficiary of a "member in service" is paid the "member's accumulated deductions at the time of death together with regular interest" and an "amount equal to 1 1/2 times the compensation upon which contributions by the member to the annuity savings fund were based in the last year of creditable service." N.J.S.A. 18A:66-53(e) provides for a contributory insurance option, which provides for death benefits equal to two times the amount of the last year's compensation, also requires the member to be "in service" at the time of death.

The Estate argues that benefits should be paid due to the remedial nature of pension benefits. While we recognize that pension statutes are to be construed liberally based upon their remedial character, Bumbaco v. Bd. of Trs., Pub. Emps.' Ret. Sys., 325 N.J. Super. 90, 94 (App. Div. 1999), certif. denied, 163 N.J. 75 (2000), eligibility is not liberally permitted, Smith v. Dep't of Treasury, Div. of Pensions & Benefits, 390 N.J. Super. 209, 213 (App. Div. 2007). Our Supreme Court has held that "[a]n administrative agency may not under the guise of interpretation extend a statute to include persons not intended, nor may it give the statute any greater effect than its language allows." Kingsley v. Hawthorne Fabrics, Inc., 41 N.J. 521, 528 (1964); see also GE Solid State, Inc. v. Dir., Div. of Taxation, 132 N.J. 298, 306 (1993).

In Francois v. Bd. of Trs., Pub. Emps.' Ret. Sys., 415 N.J. Super. 335, 349-50 (App. Div. 2010), we recognized

[I]n spite of liberal construction, an employee has only such rights and benefits as are based upon and within the scope of the provisions of the statute. . . . Thus, pension statutes are [also] to be construed so as to preserve the fiscal integrity of the pension funds. Moreover, while a person eligible for benefits is entitled to a liberal interpretation of the pension statute, eligibility [itself] is not to be liberally permitted. An inappropriate allowance of benefits tends to place a greater strain on the financial integrity of the fund in question and its future availability for those persons who are truly eligible for such benefits.

[(citations and internal quotations omitted).]

It is indisputable that MACHS did not comply with the requisite steps to permit participation as an employer. Upon the revocation of the charter, MACHS further lacked a designated certifying officer to enroll employees. N.J.S.A. 18A:66-32; N.J.A.C. 17:3-1.5.

Absent federal approval per Section 218 and given MACHS's "defunct" status, even if the Division consented to the retroactive status the Estate argues for, its action would be unauthorized as beyond its powers. The ALJ concluded succinctly that "because MACHS'[s] charter was revoked prior to becoming a participating employer and submitting funds to TPAF, Eric Levinson's estate is not entitled to retroactive benefits." We agree.

Affirmed.

1 We grant the Estate's motion to supplement the record to include Resource No. 9, a document authored and distributed by the United States Social Security Administration.

2 N.J.S.A. 43:22-3.

3 There is nothing in the record to support that Levinson had knowledge of MACHS's failure to comply with these requirements.

4 The Division argued during the administrative proceedings that it did not receive this letter. When Davenport called the Division in January 2008, after the charter was revoked, he did not mention any attempts by MACHS to enroll in this pension system.

5 The ALJ noted as well that the Estate filed an action in the Superior Court against MACHS which was settled.