SHELDON GOLDSTEIN v. DIVISION OF PENSIONS AND BENEFITS (2011)

Claimant, Sheldon Goldstein, appeals from a final decision of the Director of the Division of Pensions and Benefits (Division) that upheld an administrative ruling denying Goldstein's application to resume participation in the Alternate Benefit Program (ABP).   We reverse.

None of the critical facts of the matter are in dispute.   The factual background as presented by claimant was taken as the basis of the Director's decision.

Claimant is a physician and a recognized specialist in cardiac anesthesiology.   He was employed by the University of Medicine and Dentistry of New Jersey-Robert Wood Johnson (UMDNJ-RWJ) from 1992 until 2004.   During that period, he was a participant in the ABP, one of the pension programs available to State employees, described in the Division's five-page handbook for program members as “a defined contribution retirement program for eligible employees of the public institutions of higher education in New Jersey.”

According to the handbook:

The program allows members to direct their own retirement accounts while offering portability of accumulated contribution balances.   Vested members [ 1] 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.

Six “investment carriers” are designated to manage the accounts of ABP members.   One of them is the Teachers Insurance and Annuity Association/College Retirement Equities Fund (TIAA/CREF), the entity selected by claimant during the twelve-year term.   Claimant asserts:

[B]oth during his employment with [UMDNJ-RWJ] and thereafter, [TIAA/CREF] was the sole point of contact for the administration of his account.   He had no dealings with the Division;  in fact, every piece of correspondence related to his retirement account came from [TIAA/CREF].

Indeed, the ABP handbook instructs:  “For additional information about the investment options available to ABP members, contact the Investment Carriers listed[.]”

Claimant was not employed at UMDNJ-RWJ from 2004 to 2007.   Beginning in mid-2007, he made inquiries with TIAA/CREF about transferring funds to an investment manager of his choice, Merrill Lynch, which was not one of the “investment carriers” designated by the ABP. He asserts that never once, during an extended series of conversations with “no fewer than seven TIAA/CREF representatives[,]” was he told that such a transfer of funds would be considered a “retirement,” barring him from future participation in the ABP. Several such transfers were effected in September and October, 2007.

Claimant further asserts that, around the same time, he was negotiating for a return to the UMDNJ faculty, and officially resumed employment with UMDNJ on December 24, 2007.   In the process of arranging for this resumption of employee status, claimant conferred with a representative of one of the other ABP-approved “investment carriers,” learning only then that the previous transfer could bar him from future ABP participation.   He communicated with Merrill Lynch immediately, ordering that his recently transferred funds not be invested.   Merrill Lynch offered to undertake an institution-to-institution transfer back to TIAA/CREF.

After his re-employment with UMDNJ-RWJ, claimant sought resumption of his participation in the ABP. The Division denied the request, deeming the transfer of funds from claimant's ABP account with TIAA/CREF “to be a distribution from the ABP under N.J.S.A. 18A:66-175” and, therefore, a retirement under the terms of the program.   The Division representative's letter concluded:  “As a retired member of ABP you are prohibited from participating in the ABP per the provisions of N.J.S.A. 18A:66-170.”

Claimant filed an internal appeal of this decision with the Director of the Division, who held an “informal hearing” to determine “whether or not there is good cause to reopen this matter.”   Claimant provided a detailed oral statement setting out the background of the matter.   Tape recordings from TIAA/CREF of its representatives' conversations with claimant were not available, either on claimant's request or the Division's.

Following his study of the record, the Director reported his decision in a March 23, 2009 letter addressed to claimant's counsel.   He stated:  “even assuming that the information you assert is correct, the Division (for ABP) is not bound by information provided by any [of the] six vendors which provide benefits through the Alternate Benefit Program.”   The Director referred to various provisions in the governing statutes, and recited the whole of N.J.S.A. 18A:66-175, which declares:

Membership or participation in the alternate benefit program shall terminate and the individual shall be considered retired once he has elected to receive a cash distribution upon separation from service or an annuity option from the designated insurer or insurers or a designated mutual fund company or companies, as appropriate.

The Director continued:  “Because the concept of a rollover being a deemed distribution was not clear, the Division issued regulations which set forth this concept.”   He then set out the text of N.J.A.C. 17:7-4.8:

An election to receive cash distribution, as set forth in N.J.S.A. 18A:66-175, will include an election to transfer, or rollover, funds upon separation from service to an investment provider or to investment products not offered as part of the Alternate Benefit Program.[ 2]

He went on to summarize the sources of information available to members of the ABP, quoting an excerpt from the ABP handbook and another from the Division's website.

The Director noted claimant's statement that he had “never contacted the Division before he made the transfer․  Nor did he visit the website or seek information from his employer.”   The Director recounted that claimant had stated he did not recall receiving the ABP handbook, relying, instead, on the information he received from TIAA/CREF representatives and emphasizing that, in a number of conversations with those representatives, he was never advised “of the consequences of a transfer regarding future employment in an ABP position and his inability to be reinstated in the ABP.”

Stating that “members of the ABP are governed by statute and regulations [,]” the Director determined:  that the ABP's investment carriers are “simply ․ vendors” and that “any lack of information or even misinformation [conveyed by them] cannot bind the Division to ignore the clear language of the statute.”   He held:

Our denial of continued or reestablished membership in the ABP is based upon N.J.S.A. 18A:66-170.   Since the transfer is deemed to be a distribution from the ABP under N.J.S.A. 18A:66-175, [claimant]'s status under ABP is considered to be retired.   As a retired member of ABP he is prohibited from participating in the ABP per the provisions of N.J.S.A. 18A:66-170.

In his March 23, 2009 letter decision, the Director advised that a further internal appeal lay with the Division.   Claimant pursued that remedy in a timely fashion.   In a letter dated June 24, 2009, the Director, on behalf of the Division, rendered a “Final Administrative Determination.”   This decision, also in the form of a letter to claimant's counsel, began with the following passage:

By letter dated May 7, 2009, you ․ request[ed] that the Division reconsider and reverse it position.  [Footnote omitted.]   The basis for your assertion that [claimant]'s decision was not an “informed decision” was that he was not aware of the exclusionary rule and made an informed decision based on it.   You further assert that the Division should neither expect or assume that participants visit its website, discuss such matters with their employers or obtain and review every detail of the ABP handbook.   If we cannot expect participants to review any of the information that we have provided regarding the statutes governing the ABP, your argument renders us powerless to make obligatory the very statutes that we are charged to enforce.

The remainder of this letter decision essentially reiterated the text of the Director's March 23 letter decision.

In this appeal from the final administrative determination, claimant argues:

POINT I

[CLAIMANT]'S DECISION TO ROLLOVER HIS ABP BENEFITS TO A MERRILL LYNCH IRA WAS NOT AN INFORMED DECISION.

POINT II

THE DIVISION ERRONEOUSLY CONCLUDED THAT TIAA-CREF WAS NOT AN AGENT OF THE DIVISION.

POINT III

THE DOCTRINE OF EQUITABLE ESTOPPEL PRECLUDES THE DIVISION FROM ARGUING THAT [CLAIMANT] IS “RETIRED” FROM THE ABP.

While the Division must enforce the State's pension statutes, its obligation to do so must be understood “in the context of the Legislature's intention to provide public retirees with a variety of options in selecting a retirement-benefit plan.”  Steinmann v. State, 116 N.J. 564, 574 (1989).   In discharging its responsibilities, the Division should not “act antagonistically to the best interests of its members.”  Fiola v. State, 193 N.J.Super. 340, 351 (App.Div.1984).   Rather, “statutory pension provisions are to be liberally construed in favor of public employees[.]”  Id. at 347;  see also Estate of Hagel v. Board of Trustees, 226 N.J.Super. 182, 186 (App.Div.1988).   A pension board “may honor a pensioner's request to reopen [a] retirement selection ․ if a showing of good cause, reasonable grounds, and reasonable diligence has been made.”  Steinmann, supra, 116 N.J. at 573.

“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 575.   Had the Director made a determination that claimant's assertions regarding his lack of information were not, in fact, borne out, a different case on appeal would have been presented, and our responsibility would have been to assess whether substantial evidence supported that determination.   See, e.g., Gerba v. Board of Trustees, PERS, 83 N.J. 174, 189 (1980).   But here, accepting claimant's proffered state of facts as the Director did, and in the absence of countervailing evidence, the choice was clear.   Claimant was entitled to the relief he sought because he had shown “good cause” for his request to undo the earlier choice he had made.   The “good cause” derives from the fact that, when claimant made his transfer-of-funds election, he lacked a sufficient basis to make an informed choice.   See Steinmann, supra, 116 N.J. at 576.   The provisions of the ABP's five-page handbook are unclear and ambiguous in this regard.   The lack of understanding evinced by TIAA/CREF representatives serves only to emphasize this absence of transparency.

In the circumstances presented in this case, claimant was entitled to relief under the “good cause” standard applied in Steinmann and Fiola, as well as other cases decided by the Supreme Court and this court in a variety of contexts, applying less unremitting tests to the members of various pension systems than the strict compliance approach the Division used here.   See, e.g., Duvin v. State, 76 N.J. 203, 207-08 (1978)(changing pension status, PERS ³ );  Geller v. Department of the Treasury, 53 N.J. 591, 597-98, 600 (1969)(equities govern repurchase of membership rights, TPAF ⁴ );  Outland v. Board of Trustees, 326 N.J.Super. 395, 404-06 (App.Div.1999)(reopening retirement selection, TPAF);  Estate of Hagel v. Board of Trustees, supra, 226 N.J.Super. at 186-189 (availability of death benefits, PERS).

We must always have regard for the possibility that allowing a claimant to prevail would impair the financial integrity of the pension system involved or otherwise derogate the public interest.   See, e.g., Fiola, supra, 193 N.J.Super. at 350.   We sought the Division's perceptions in this regard at oral argument.   No such harm could be identified.

Having determined that claimant is entitled to the relief he seeks on a “good cause” basis, we need not address either of the other arguments he has advanced.   For some of the same reasons we are reluctant to apply equitable estoppel principles against a public agency, see Middletown Twp. PBA v. Township of Middletown, 162 N.J. 361, 367 (2000);  Summer Cottagers' Ass'n v. City of Cape May, 19 N.J. 483, 503 (1955);  Boyd v. Department of Insts. and Agencies, 126 N.J.Super. 273, 275 (App.Div.), certif. denied, 65 N.J. 281 (1974);  but see Skulski v. Nolan, 68 N.J. 179, 198-99 (1975), we do not base this result on the notion that a private party can be seen, because of certain circumstances, to be functioning as an agent of a public entity, especially where there has been no express grant by the public entity of authority to act as agent.

Reversed and remanded for the enrollment of claimant as a current member of the ABP and for the application of such benefits as have been earned.   We do not retain jurisdiction.

FOOTNOTES

FN1. The handbook also states:  “A member is vested in the ABP when beginning the second year of employment at the member's institution of higher education[,] or if the member has an existing qualified retirement account from a previous employer, the member is immediately vested.   Once vested, all of the contributions and accumulations in the member's account belong to the member and will provide benefits to the member when he or she is eligible to receive them.”.  FN1. The handbook also states:  “A member is vested in the ABP when beginning the second year of employment at the member's institution of higher education[,] or if the member has an existing qualified retirement account from a previous employer, the member is immediately vested.   Once vested, all of the contributions and accumulations in the member's account belong to the member and will provide benefits to the member when he or she is eligible to receive them.”

FN2. The meaning and effect of a regulation may be no broader than permitted by the legislation upon which it is based.   See Praxair Technology, Inc. v. Director, 201 N.J. 126, 140 (2009)..  FN2. The meaning and effect of a regulation may be no broader than permitted by the legislation upon which it is based.   See Praxair Technology, Inc. v. Director, 201 N.J. 126, 140 (2009).

FN3. Public Employees' Retirement System..  FN3. Public Employees' Retirement System.

FN4. Teachers' Pension and Annuity Fund..  FN4. Teachers' Pension and Annuity Fund.

PER CURIAM