JUDITH LINNETT v. PUBLIC EMPLOYEES RETIREMENT SYSTEM

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Superior Court of New Jersey, Appellate Division.

JUDITH LINNETT, Petitioner–Appellant, v. PUBLIC EMPLOYEES' RETIREMENT SYSTEM, Respondent–Respondent.

DOCKET NO. A–5926–11T3

-- December 10, 2013

Before Judges St. John and Leone. Bucceri & Pincus, attorneys for appellant (Gregory T. Syrek, of counsel and on the brief). John J. Hoffman, Acting Attorney General, attorney for respondent (Lisa A. Puglisi, Assistant Attorney General, of counsel;  Christopher M. Tattory, Deputy Attorney General, on the brief).

Petitioner Judith Linnett appeals from an order by the Board of Trustees of the Public Employees' Retirement System (PERS), a part of the Division of Pensions and Benefits (Division) within the Department of the Treasury.   That order affirmed the denial of her request to reactivate and transfer her PERS account.   We affirm.

I.

In 2005, petitioner began working as an adjunct lecturer at Hudson County Community College and Montclair State University.   In 2006, she enrolled separately in PERS for each position, causing her to have multiple PERS accounts.   In December 2006, she applied to purchase twelve months of “temporary/substitute” PERS service credit based on her earlier employment at the community college.   In January 2007, she applied to purchase forty-four months of “former membership” PERS service credit based on her employment by the Hillside Board of Education from 1978 to 1981.   She purchased those service credits by paying $1,523.89 and $3,189.16, respectively, after February 2007.

Meanwhile, on February 1, 2007, petitioner began a full-time position as a counselor in the Union County vocational high school.   Based on that position, she enrolled in the Teachers' Pension and Annuity Fund (TPAF).   She ceased working at the community college and the university, and stopped contributing to her PERS account.

In a letter dated February 25, 2010, the Division notified petitioner “of the expiration of your pension fund account with [PERS].” The letter showed that her last contribution had been March 9, 2007, and that her account expiration date had been March 9, 2009.   The letter stated:

When you terminate employment, State law permits you to maintain inactive membership in the pension plan for a maximum of two years from the date of your last pension contribution.   After two years your account expires and you lose the right to all membership benefits except for withdrawal of your contributions.   Therefore, you should review the following options and take the appropriate action as it relates to you and to your account before the expiration date shown above.

This letter, however, was sent eleven months after the account's expiration date.

Petitioner complained to the Division that she had not been notified before the March 9, 2009 expiration date.   On March 28, 2010, she requested an interfund transfer to move her PERS account credits and purchased service credits into her TPAF account.   The Board of Trustees of PERS denied her request, citing N.J.S.A. 43:15A–7 and her failure to request an interfund transfer until more than a year after the expiration of her PERS account.

An evidentiary hearing was held before an Administrative Law Judge (ALJ), who affirmed the Board's denial.   On June 21, 2012, the Board adopted the ALJ's findings of fact and conclusions of law.   Petitioner appeals.

II.

“We recognize the standard for review of an administrative agency decision is limited.”  In re Van Orden, 383 N.J.Super. 410, 417 (App.Div.2006).

“We will only reverse a decision of an administrative agency if it is arbitrary, capricious, or unreasonable.   We must defer to an agency's expertise and superior knowledge of a particular field.   We may not substitute our judgment for that of the agency even though we might well have reached a different conclusion.   If the original findings are supported by substantial credible evidence in the record as a whole, we must accept them.”

[Id. at 417–18 (citations omitted).]

We must hew to that standard of review.

III.

PERS is governed by statutes, N.J.S.A. 43:15A–1 to –141, and regulations, N.J.A.C. 17:2–2.1 to –8.16. Under the statutes, “[m]embership of any person in the retirement system shall cease if he shall discontinue his service for more than two consecutive years.”  N.J.S.A. 43:15A–7e;  see also N.J.S.A. 43:15A–41a (a member “shall cease to be a member two years from the date he discontinued service as an eligible employee”).   Under this statute, petitioner's membership in PERS expired by March 2009, two years after she stopped her state employment and PERS contributions.   See James v. Bd. of Trs. of the Pub. Emps. Ret. Sys., 164 N.J. 396, 402 (2000);  Duvin v. N.J. Dep't of Treasury, Pub. Emps. Ret. Sys., 76 N.J. 203, 207 (1978).

At that time, the regulations provided that a member is not eligible to make an interfund transfer of service credit if the member's “account has expired;  that is, it has been more than two years from the date of the last contribution and the member is not vested.”  N.J.A.C. 17:2–7.1(c)(5)(iii) (2005);  see 33 N.J.R. 2677(a).1  Under this regulation, petitioner's request for an interfund transfer in March 2010 was untimely.

Petitioner states she was unaware of these statutory and regulatory requirements.   However, “[a]s New Jersey courts have long recognized, ‘[i]gnorance of the law furnishes no excuse to a person either for a breach or for an omission of a duty[.]’ ”  Kalogeras v. 239 Broad Ave., L.L.C., 202 N.J. 349, 367 (2010) (quoting Bowen v. Pursel, 109 N.J. Eq. 67, 73 (E. & A.1931)).

Furthermore, these requirements were set forth in the PERS Member Handbook (May 2010 ed.).2  The Handbook explicitly stated that membership in PERS ends “[i]f you have not been contributing to the retirement system for two consecutive years.”  Id. at 41.   The Handbook also stated that an interfund transfer was possible only if “[i]t has not been more than two consecutive years since your last pension contribution.”  Id. at 6–7.   The Handbook was available on the internet and in print from State employers.   Petitioner states that she was unaware of the Handbook's existence, but conceded that she never contacted the Division or checked its online system.

Petitioner testified that an official in Union County incorrectly told her that her PERS and TPAF accounts would be linked.   However, a Union County official cannot bind PERS, which is a State entity;  even another State agency “can[not] bind PERS regarding its authority or the pension laws.”  Francois v. Bd. of Trs., 415 N.J.Super. 335, 352 (App.Div.2010).   Because “petitioner had no communications with PERS, and [she] relied on nothing [she] was told by PERS,” she cannot claim PERS is estopped by any statements made to her.   Ibid.

Petitioner contends that she should be allowed to transfer her PERS service credit to her TPAF account because she was not notified of the impending expiration of her PERS account prior to its expiration.   However, as the Division notes, there is no statute or regulation requiring such notice to PERS members.

“[P]ension statutes should be liberally construed and administered in favor of the persons intended to be benefited,” but “an employee has only such rights and benefits as are based upon and within the scope of the provisions of the statute.”  Francois, supra, 415 N.J.Super. at 349 (citations and quotation marks omitted).   We decline to read a notice requirement into the statute.   The Legislature and the Division are well aware of how to require notice, and created such requirements elsewhere in PERS, but did not create a notice requirement in this situation.   See, e.g., N.J.S.A. 43:15A–50a;  N.J.A.C. 17:2–3.1;  see generally Piermount Iron Works, Inc. v. Evanston Ins. Co., 197 N.J. 432, 440 (2009) (citing statutes and regulations requiring notice before the expiration of insurance policies).   Further, the agency tasked with interpreting that statute has found no such requirement.   See Lally v. Pub. Emps. Ret. Sys., 246 N.J.Super. 270, 272–73 (App.Div.), (affirming PERS's refusal to extend the two-year period in N.J.S.A. 43:15A–7e because “an administrative agency's interpretation of a statute it is charged with enforcing is entitled to great weight”), certif. denied, 126 N.J. 332 (1991).3

PERS did send petitioner a notice advising her of the impending expiration of her two PERS accounts, and notifying her of the options she could exercise before the March 7, 2009 expiration date.   Unfortunately, PERS sent the expiration notice to petitioner on February 25, 2010, eleven months after the expiration date.   A Division representative testified that an automated system generates and mails such notices to the vast majority of PERS members in a timely manner.   For members with multiple PERS accounts, like petitioner, however, the notices have to be created and mailed manually, and the timing of mailing is dependent on staffing.   This arrangement apparently caused a delay of more than eleven months, and prevented the notice from reaching petitioner before expiration.

The Division asserts this delay is irrelevant because it sent the 2010 notice to petitioner as a courtesy.   Petitioner, however, points to the Handbook, which states:

If your membership has been inactive for 18 months, you are not vested, and you have not filed for and received a withdrawal of contributions, the Division of Pensions and Benefits will send an Expiration Notice to your last known address (and a copy to your last employer in case they have a more current address).   The Expiration Notice is a reminder that your money is still being held in the retirement system.   When notified, you should file an Application for Withdrawal since contributions left in the system for over two years do not accrue interest.

If two consecutive years have passed and the Division of Pensions and Benefits has been unable to contact you — or you do not reply to the Expiration Notice by submitting an Application for Withdrawal — your account will expire.

Should you return to covered employment before the two-year period ends, you have the option of ․ an Interfund Transfer if you otherwise qualify (see page 6).

[Id. at 41.]

Although the Handbook states that the Division will send an expiration notice before the expiration of the two-year period, petitioner cannot use that language in the Handbook to establish equitable estoppel against PERS. “ ‘Equitable estoppel is rarely invoked against a governmental entity,’ ” and in any event requires “ ‘reliance by the party seeking estoppel to his or her detriment.’ ”  In re Johnson, 215 N.J. 366, 378–79 (2013) (quoting O'Malley v. Dep't of Energy, 109 N.J. 309, 316–17 (1987)).   Petitioner did not rely on these statements in the Handbook, because she was unaware that the Handbook existed before her account expired.

We note that an employee manual issued by a private employer can create an implied contract even with employees who were unaware of the manual's existence.   See Woolley v. Hoffmann–La Roche, Inc., 99 N.J. 284, 285–86, 297–304 & n.10, modified on other grounds, 101 N.J. 10 (1985).   It is not clear, however, “whether a public agency may be bound by an implied contract or whether the manual here represented such a contract.”  Golden v. Cnty. of Union, 163 N.J. 420, 431 (2000).

In any event, the quoted statements in the Handbook cannot create the right petitioner seeks here — to request an interfund transfer after the two-year period ends.   The Handbook states that a notified party can make “an Interfund Transfer if you otherwise qualify” based on the limitations set forth on page 6. Handbook, supra, at 41.   The discussion of interfund transfers, which begins on page six of the Handbook, clearly states that an interfund transfer is possible only if “[i]t has not been more than two consecutive years since your last pension contribution.”  Id. at 6–7.   Petitioner cannot claim a right under the Handbook that contravenes the clear language of the Handbook.   See Nicosia v. Wakefern Food Corp., 136 N.J. 401, 411 (1994) (“An employee may not select among the provisions of a employment manual to determine which provision should give rise to enforceable contractual obligations.”).

Moreover, petitioner's claim that the Handbook creates a right to request an interfund transfer after the two-year period would contradict the plain language of N.J.A.C. 17:2–7.1. That regulation “trumps whatever implied contract may have existed” under the Handbook.   See Golden, supra, 163 N.J. at 431.   Indeed, the Handbook's foreword contained the disclaimer that “if there is a conflict with statutes governing the plan or regulations implementing the statutes, the statutes and regulations will take precedence.”   Handbook, supra, at i;  see Falco v. Cmty. Med. Ctr., 296 N.J.Super. 298, 323–24 (App.Div.1997) (finding a similar disclaimer effective), certif. denied, 153 N.J. 405 (1998).

Petitioner nonetheless argues that applying the two-year limitation is rigid, unfair, and inequitable.   She cites cases ruling that “the Board may honor a pensioner's request to reopen [a] retirement selection after it is due and payable if a showing of good cause, reasonable grounds, and reasonable diligence has been made.”   E.g., Steinmann v. N.J. Dep't of Treasury, Div. of Pensions, TPAF, 116 N.J. 564, 573 (1989);  Duvin, supra, 76 N.J. at 207;  Skulski v. Nolan, 68 N.J. 179, 195–96 (1975);  Ruvoldt v. Nolan, 63 N.J. 171, 183–84 (1973);  Van Orden, supra, 383 N.J.Super. at 419–20.   Those retirement selection cases “were bottomed on the inherent power of an administrative agency, in the absence of legislative restriction, to reopen or to modify and to rehear orders previously entered by it.”  Duvin, supra, 76 N.J. at 207.   Here, petitioner does not seek to reopen a decision by the Division.   Instead, she seeks to evade the legislative restriction that PERS membership expires two years after an employee leaves State service, N.J.S.A. 43:15A–7e, and the regulatory restriction on interfund transfers after the expiration of that two-year period, N.J.A.C. 17:2–7.1. The retirement selection cases do not authorize such evasion.

Moreover, petitioner is not trying to overturn a mistaken retirement selection, which can deprive a retiree of “substantially higher [monthly] benefits” for the rest of his or her life.  Duvin, supra, 76 N.J. at 207.   Rather, she is trying to transfer service credit for a relatively brief period from one fund to another.   A person seeking to reopen a decision “must demonstrate extreme hardship.”  Buono v. Bd. of Trs., 188 N.J.Super. 488, 493 (App.Div.), certif. denied, 94 N.J. 522 (1983).   Petitioner has not done so.   Instead, the PERS representative testified that petitioner will be able to withdraw her PERS contributions through January 2007, and purchase her PERS service credit for her TPAF account, though likely at a higher price.

There are other dissimilarities from the retirement selection cases.   In Steinmann, a retiree could not obtain the information she needed to make an informed choice among retirement options because the Board would not do the calculations needed by the retiree until after the retiree made her choice.   Steinmann, supra, 116 N.J. at 576–78.   By contrast, petitioner could have learned about the upcoming expiration of her PERS membership and the need to request an interfund transfer by reading the statute and regulation, obtaining the Handbook, or consulting the Division.   Nothing then prevented petitioner from making a timely request for an interfund transfer.   See Van Orden, supra, 383 N.J.Super. at 420–21 (a family court order required a retiree to select retirement benefits for his spouse, but when she later relinquished any interest in such benefits he “was unable to undo the court-mandated selection”).   Further, petitioner did not rely on any determination by the Division, as in Skulski, supra, 68 N.J. at 196–200, and Ruvoldt, supra, 63 N.J. at 183–84.

Even if the retirement selection cases applied here, they would not help petitioner.   Petitioner did not exercise reasonable diligence.   Despite changing jobs and pension plans, and thereafter purchasing service credits for PERS, she took no action to determine the status of her PERS accounts for three years, until the Division contacted her.   According to the Handbook, the Division intended to contact petitioner sooner.   However, as set forth above, the Division was not required to do so.   Therefore, we find no good cause or reasonable grounds to permit petitioner to evade the two-year limitation.   Because “the equitable grounds cited in Steinmann ” and the other retirement selection cases are not presented here, “we find nothing to warrant adopting [petitioner's] argument for equitable tolling of the two-year time period provided by N.J.S.A. 43:15A–7e.”  James v. Bd. of Trs., Pub. Emps. Ret. Sys., 323 N.J.Super. 100, 110 (App.Div.1999), rev'd on other grounds, 164 N.J. 396 (2000).

Affirmed.

FOOTNOTES

1.  FN1. Subsequently, a July 2010 amendment “substituted ‘is inactive’ for ‘has expired’ and deleted ‘and the member is not vested.’ ”  N.J.A.C. 17:2–7.1 (History);  see 42 N.J.R. 1612(b);  41 N.J.R. 4667(a).   In any event, petitioner was not vested, which requires ten years of service in PERS. N.J.S.A. 43:15A–38.   She had earned less than two years of service credits in PERS and purchased less than five years of PERS service credits.

2.  FN2. The parties rely on the May 2010 edition of the Handbook, the pertinent provisions of which were the same in the prior 2005 edition.

3.  FN3. Petitioner also complains that she did not receive annual statements from PERS. However, she cites no statute or regulation requiring annual statements.

PER CURIAM

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