STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SHEAH RARBACK AND MAE RARBACK, )

)

Petitioners, )

)

vs. ) CASE NO. 86-3653

) DEPARTMENT OF ADMINISTRATION, ) DIVISION OF RETIREMENT, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, W. Matthew Stevenson, held a formal hearing in this cause on May 12, 1987, in Miami, Florida. The following appearances were entered:

APPEARANCES

For Petitioner: Stewart Marcus, Esquire

2251 S.W. 22nd Street Miami, Florida 33145

For Respondent: Burton M. Michaels, Esquire

Assistant Division Attorney Division of Retirement

2639 North Monroe Street Building C, Suite 207 Tallahassee, Florida 32303

The issue is whether Paul Rarback's designation of beneficiary for his vested state retirement account should be reformed to show his wife, Mae Rarback, as beneficiary as though she had originally been designated the beneficiary and joint annuitant.

PROCEDURAL BACKGROUND

This cause came on for final hearing on May 12, 1987. At the final hearing, the Petitioner presented the testimony of one witness. In addition, Petitioner's Exhibit 1 was duly offered and admitted into the record.

Respondent's Exhibits 1, 2, and 3 were duly offered and admitted into evidence. At the conclusion of the hearing, both parties indicated that they would waive the right to submit post-hearing proposed findings of fact. Neither party ordered a written transcript of the proceedings.

FINDINGS OF FACT

Based upon my observation of the witness and her demeanor while testifying, the documentary evidence received and the entire record compiled herein, I hereby make the following findings of fact:

1. Petitioner, Sheah Rarback is the daughter, and Petitioner Mae Rarback is the wife of Paul Rarback, deceased. Paul Rarback and Mae Rarback were married for over forty (40) years.

   
   

2. Paul Rarback commenced employment in a permanent position with the Human Resources Department, Metropolitan Dade County, in December of 1973. Mr. Rarback was employed as a food services manager.

   
   

3. On December 23, 1973, Paul Rarback enrolled with the Florida Retirement System and submitted a Personnel History Record Form FRS-MIO to the Division of Retirement. On the form, Paul Rarback listed his two grandsons, Hod and Caynon Rabino, as beneficiaries and Sheah Rarback as contingent beneficiary for the purpose of receiving benefits in the event of his death.

   
   

4. On February 1, 1985, Paul Rarback requested an Application for Disability Retirement from his employer because of polymyositis (muscle atrophy).

   
   

5. On February 23, 1985, Paul Rarback's employment with Metropolitan Dade County officially ended. Rarback's personnel file indicated that his employment was terminated with a code E/G, which is a retirement code.

   
   

6. On March 18, 1985, Paul Rarback completed his

   "Application for Disability Retirement," Division of Retirement Form FR-13. Rarback listed his daughter Sheah Rarback as the beneficiary and chose "Option 1: Maximum Benefit."

7. The FR-13 form listed four different options as follows: Option 1: Maximum Benefit

   Full benefit payable to the member for his lifetime. If death occurs before the total benefits paid to member equals the contributions made, the difference, if any, is refunded to beneficiary in a lump sum payment.

   
   

   Option 2: Ten Years Certain

   Lifetime benefit to member, but not less than 120 monthly payments to someone. A decreased retirement benefit payable to a member during his lifetime and, in the event of his death within a period of ten (10) years after his retirement, the same monthly amount shall be payable for the balance of such ten (10) year period to his beneficiary, or in case the beneficiary is deceased, in accordance with Section 121.091(8), Florida Statutes, as though no beneficiary has been named.

   
   

   Option 3:

   A reduced monthly benefit payable to the retired

   member for his lifetime and upon his death a monthly benefit in the same amount is payable to his joint annuitant (spouse or other dependent designated at retirement), if living, for the lifetime of that person.

   
   

   Option 4:

   A reduced monthly benefit payable to the retired member while he and his joint annuitant are both living. Upon the death of either the retired member or his joint annuitant, the monthly benefit payable to the survivor for the lifetime of that person is reduced to two-thirds of the original benefit even if it is the retired member who is the survivor.

   
   

8. During the previous ten years, Mae Rarback had become increasingly senile, was unable to care for herself and had been placed in various nursing homes. Mae Rarback is presently in Douglas Gardens Nursing Home, Miami, Florida, where she has been for the past four years.

   
   

9. By letter dated June 27, 1985, the Division of Retirement advised Paul Rarback that it intended to deny his request for disability retirement benefits because the medical documentation submitted did not support his claim of permanent and total disability. In addition, Rarback was advised that he could apply for early service retirement, with a reduction in benefits of 5 percent for each year under age 62 or in the alternative, he could request a refund of his retirement contributions and cancel his membership with the system. The last paragraph of the letter stated in part as follows:

   
   

   . . . before a final decision is made, the Director wants you to have the opportunity to submit additional medical evidence or a written statement, if you wish to challenge the grounds on which he intends to act. If you chose to submit additional evidence or written statement, it will be considered in making the final decision.

   
   

10. On June 29, 1985, Paul Rarback died in Miami, Florida.

    
    

11. By letter dated February 26, 1986, the Respondent advised Sheah Rarback, through her attorney, that according to their files, the primary beneficiary of Paul Rarback's account was Sheah Rarback, designated on March 28, 1985.

    
    

12. On or about July 23, 1986, Petitioner Sheah Rarback received notification from the Division of Retirement that she would receive only the accumulated contribution of Paul Rarback to the retirement account in the amount of $887.67.

    
    

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction of the parties to, and the subject matter of, this proceeding. Chapter 120, Florida Statutes.

14. The Respondent, Division of Retirement, is charged with the responsibility of signing contracts and otherwise administering the Florida Retirement System pursuant to the "Florida Retirement System Act," Chapter 121, Florida Statutes.

    
    

15. The Petitioners, in the Second Amended Petition for Administrative Hearing, allege that Paul Rarback elected Option 1 without its meaning or consequences being explained to, or understood by, him; that at the time of making said application, Paul Rarback was upset, under medication and in a poor mental state; and, that although Sheah Rarback was designated as the beneficiary by Paul Rarback, it was understood that all funds received by Sheah Rarback would be for the use and benefit of Paul Rarback's wife, Mae Rarback. Petitioners seek to have the designation of beneficiary changed to Mae Rarback and to have the option selected changed from Option 1 to an option more favorable to Mae Rarback and which would allow for continued monthly payments to her.

    
    

16. The options contained in the application for disability retirement were taken directly from Sections 121.091(6)(a)(1)-(4), Florida Statutes. The options were not written in the exact language of the statute, but instead, were paraphrased to be more easily understood by the layman.

    
    

17. Option 1 provides a monthly benefit payable to the retiree for his lifetime and pays the maximum monthly amount which can be received. Upon the death of the retiree, the Option 1 benefit ceases and the beneficiary receives only a refund of any retirement contributions made in excess of the amount the retiree received in monthly benefits. There is no continuing payment to the named beneficiary under Option 1.

    
    

18. Option 2 provides a monthly benefit that is less than the Option 1 benefit, and payable to the retiree for his lifetime. In the event the retiree dies before receiving benefits for ten years (120 months), the same monthly benefit would be paid to the designated beneficiary until the total number of months that the benefits have been paid to both the retiree and the beneficiary equals 120 months. No further benefits are then payable.

    
    

19. Option 3 provides a monthly benefit that is less than the Option 1 benefit and payable to the retiree for his lifetime. Upon the retiree's death, the same monthly benefits would be paid to the retiree's joint annuitant (named beneficiary), if living, for the lifetime of that person. The person named as beneficiary or joint annuitant must be a spouse or other financial dependent of the retiree.

    
    

20. Option 4 provides a monthly benefit that is less than the Option 1 benefit, and is payable to the retiree while both the retiree and his joint annuitant (the named beneficiary) are living. As with Option 3, the person named as beneficiary or joint annuitant must be a spouse or dependent. Upon the death of either the retiree or his joint annuitant, the monthly benefit payable to the survivor for the lifetime of that person is reduced to two-thirds of the original benefit.

    
    

21. Each retirement option has its advantages and its disadvantages. The advantage of an Option 1 selection is that it provides the largest monthly payment for which the retiree is eligible. The disadvantage is that it provides no continuing monthly benefit to a spouse or other financial dependent upon the retiree's death.

22. Although Sheah Rarback testified that at the time Paul Rarback made his election of Option 1 he had become disoriented," his "thinking was unclear" and he "seemed to be a different person," the evidence presented did not establish that Paul Rarback's mental state was so impaired that he was unable to understand the risks inherent in selecting from among the various options. The evidence was also insufficient to show that Paul Rarback intended to name Mae Rarback as the beneficiary but instead named Sheah Rarback in error.

    
    

23. The consequences of the election of each option were adequately explained in the application. Certainly, the selection of an appropriate option is a difficult decision in any event. But, Paul Rarback's option selection should not be analyzed in retrospect in order to determine its wisdom or reasonableness. Under the circumstances which existed at the time of the selection of the option, especially Mae Rarback's poor physical condition, choosing Option 1 and naming Sheah Rarback as beneficiary could have been a very wise and prudent choice for Paul Rarback to make.

    
    

24. Although there was some question as to whether Paul Rarback had officially retired at the time of his death, the outcome of this case would remain unchanged. Rule 22B-4.008(2), Florida Administrative Code, provides that:

    
    

    If the death of a member occurs . . . after he has completed ten or more years of creditable service . . . but prior to his actual retirement, the following shall apply:

    1. If the member's designated beneficiary is not his spouse or other dependent who

qualifies as a joint annuitant, the administrator shall refund the member's accumulated contribu- tions to the member's designated beneficiary. . .

Thus, because Sheah Rarback did not qualify as a joint annuitant (spouse or other dependent), her only entitlement would be the refund of Paul Rarback's accumulated contributions.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:

That Petitioners' request that the designation of beneficiary be reformed to allow Mae Rarback to receive the benefits from her deceased husband's retirement account as though she had originally been designated the beneficiary and joint annuitant be DENIED and the petition DISMISSED.

DONE AND ORDERED this 5th day of June 1987, in Tallahassee, Florida.

W. MATTHEW STEVENSON Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 5th day of June 1987.

COPIES FURNISHED:

Stewart Marcus, Esquire 2251 S.W. 22nd Street Miami, Florida 33145

Burton M. Michaels, Esquire Assistant Division Attorney Division of Retirement

2639 North Monroe Street Building C - Suite 207 Tallahassee, Florida 32303

Adis Vila, Secretary Department of Administration

435 Carlton Building Tallahassee, Florida 32399-1550

Augustus D. Aikens, General Counsel Department of Administration

530 Carlton Building Tallahassee, Florida 32399-1550

Docket for Case No: 86-003653

Orders for Case No: 86-003653