ROSALIE J. KERR, o/b/o )
ROBERT R. KERR, DECEASED, )
vs. ) Case No. 05-4716
Respondent. )
Pursuant to notice, a final hearing was held in this case by video teleconference on March 16, 2006, with connecting sites in Lauderdale Lakes and Tallahassee, Florida, before Errol H. Powell, a designated Administrative Law Judge of the Division of
Administrative Hearings.
For Petitioner: Joseph S. Kashi, Esquire
Sperry, Shaspiro & Kashi, P.A. 1776 North Pine Island Road Suite 324
For Respondent: Geoffrey M. Christian, Esquire
The issue for determination is whether the Florida Retirement System's retirement benefit option selected by Petitioner's deceased son should be changed from Option 1 to Option 2.
Rosalie J. Kerr requested the Department of Management Services, Division of Retirement (Retirement), through her counsel, to permit her to change the retirement option selected by her deceased son, Robert R. Kerr, from Option 1 to Option 2. By letter dated October 14, 2005, Retirement notified Ms. Kerr that her request could not be honored "after a benefit payment has been cashed or deposited," citing Section 121.091(6)(h), Florida Statutes--"The option selected or determined for payment of benefits as provided in this section shall be final and irrevocable at the time a benefit payment is cashed or deposited or credited to the Deferred Retirement Option Program as provided in Subsection (13)." Ms. Kerr contested the denial and requested a hearing. On December 30, 2005, this matter was referred to the Division of Administrative Hearings.
At hearing, Ms. Kerr testified in her own behalf, presented the testimony of two witnesses, and entered two exhibits (Petitioner's Exhibits numbered 1 and 2) into evidence.
exhibits (Respondent's Exhibits numbered 1-14) into evidence. All of the parties' exhibits were admitted into evidence without objection. The undersigned took official recognition of Chapter 21, Florida Statutes, and Florida Administrative Code Rule 60S.1
A transcript of the hearing was ordered. At the request of the parties, the time for filing post-hearing submissions was set for more than ten days following the filing of the transcript. The Transcript, consisting of one volume, was filed on April 19, 2006. The parties timely filed their post-hearing submissions on May 9, 2006. The undersigned's surgery delayed the preparation of this Recommended Order. The parties' post- hearing submissions were considered in the preparation of this Recommended Order.
Ms. Kerr is the mother of the late Mr. Kerr.
Mr. Kerr was employed by the Broward County Sheriff's Office (BSO) from January 2, 1990 through September 28, 2004. Mr. Kerr was a detective, hereinafter referred to as Det. Kerr.
As a result of being an employee of the BSO, Det. Kerr was a member of the Florida Retirement System (FRS).
During his employment, BSO, not Det. Kerr, made contributions to the FRS for his benefit.
Retirement is the agency charged with the responsibility of administering the FRS. In complying with its
duties, FRS publishes and provides an informational handbook and forms regarding retirement issues to its FRS members. FRS' staff also provide counseling to FRS members who inquire about FRS issues. A website is also maintained by FRS for its members to inquire about FRS issues and obtain information about retirement.
On July 29, 2004, Det. Kerr completed an Application for Disability Retirement (Application), which was signed and notarized. The Application indicated, among other things, that he was applying for regular disability benefits and that
Dr. Garry Friedberg was one of his treating physicians.
Det. Kerr designated Ms. Kerr as his primary beneficiary on the Application. On August 2, 2004, Retirement received the completed application.
Det. Kerr had over 16 years of creditable service, and he was, therefore, vested as a Special Risk member of the FRS and eligible for retirement benefits.
Retirement acknowledged receipt of the documents needed to make a determination on Det. Kerr's disability retirement application. Also, Retirement advised him that, if his disability retirement application was approved, further documents would be required before he could be placed on the retirement payroll.
One of the additional documents requested by Retirement was Form FRS-11o, which was FRS' Option Selection Form for its members. FRS-11o must be completed before retirement benefits can be paid. FRS-11o notices the member of four different options for payment of retirement benefits and contains a narrative describing the effect of the selection of each of the four options.
Option 1 yields the maximum monthly benefit, but when the retiree dies there is no survivor benefit.
Option 2 yields a reduced monthly benefit for 10 years, but, if the retiree dies before the end of the 10 years, the benefit is paid to the surviving beneficiary for the balance of the 10 years.
Option 3 provides a reduced benefit for the joint lifetimes of the retiree and beneficiary.
Option 4 provides a reduced benefit for the lifetime of the retiree and beneficiary, which benefit is reduced by 33 1/3 percent upon the death of either.
By letter dated August 19, 2004, Retirement advised Det. Kerr that his application for disability retirement was approved. The letter further advised him, among other things, of other documents that he had to submit, including a completed FRS-11o, before he could be placed on the retirement payroll.
By letter dated August 23, 2004, Retirement advised Det. Kerr of his estimated monthly disability retirement benefits under Option 1 ($2,364.84) and Option 2 ($2,189.13). Insufficient information was available to Retirement to calculate the estimated monthly disability retirement benefits under Options 3 and 4, so none were provided. The letter further advised Det. Kerr as to what was required for Retirement to calculate monthly estimates for Options 3 and 4. Additionally, the August 23rd letter, enclosed a blank FRS-11o for Det. Kerr to complete and return.
Furthermore, the letter included an informational document, entitled "What Retirement Option Should You Choose?," regarding making his option selection. This informational document is a standard document included by Retirement, with Retirement's estimates of disability retirement benefits. As to changing an option choice, the document provides in pertinent part:
Once you cash or deposit a benefit payment, or begin the Deferred Retirement Option Program (DROP), your [option] selection cannot be changed. Therefore, it is important to carefully study your personal circumstances before [your] decision.
Regarding Option 2, the document provided in pertinent part: [T]his option would be particularly
appropriate if you are in ill health and your future physical condition is uncertain at the time of retirement since independent
children, other heirs, charities, organizations, or your estate or trust can be designated as beneficiaries for Option 2.
The document invites FRS members to contact Retirement with any questions. No evidence was presented to demonstrate the
Det. Kerr contacted Retirement regarding questions as to the options.
On August 27, 2004, Det. Kerr completed and had notarized FRS-11o. FRS-11o reflected, among other things, the following: the selection of Option 1 by an "X" and being circled; and his marital status as being not married. The language describing Option 1 next to the selection was as follows:
A monthly benefit payable for my lifetime. Upon my death, the monthly benefit will stop and my beneficiary will receive only a refund of any contributions I have paid which are in excess of the amount I have received in benefits. This option does not provide a continuing benefit to my beneficiary.
Also, on FRS-11o was Option 2. The language describing Option 2 next to the selection was as follows:
A reduced monthly benefit payable for my lifetime. If I die before receiving 120 monthly payments, my designated beneficiary will receive a monthly benefit in the same amount as I was receiving until the monthly benefit payments to both of us equal 120 monthly payments. No further benefits are then payable.
On September 1, 2004, Retirement received Det. Kerr's FRS-11o, on which Option 1 was selected and which was properly completed, signed, and notarized. It is undisputed that
Det. Kerr's FRS-11o met all requirements as to being in a status of completion.
Typically, FRS-11o is the only indication as to a member's wishes regarding his or her option selection.
According to Retirement, usually, the disability retirement application is completed prior to receiving an estimate of benefits, and, therefore, it is not uncommon for an FRS member to designate a primary beneficiary and later select Option 1 after reviewing his or her estimate of benefits.
According to Retirement, only a member or someone acting on his or her behalf, such as a legal guardian or attorney-in-fact, can make a retirement option selection for the member.
No evidence was presented that Det. Kerr, himself, requested a change to his selection of Option 1.
On September 28, Det. Kerr resigned from the BSO.
October 1, 2004, was established as Det. Kerr's effective disability retirement date.
Det. Kerr died on October 20, 2004, less than a month after resigning, without receiving his first disability retirement benefit payment.
At the time of his death, Det. Kerr was not married and had no children. Further, no parent was his legal guardian or dependent upon him for support.
Det. Kerr's circumstances surrounding his option selection do not place his situation in the usual or typical category of FRS members referred to above by Retirement.
Det. Kerr was suffering from AIDS. His symptoms first appeared in 1995. He was being treated by Garry Friedberg, M.D., a physician whose specialty was infectious diseases.
As Det. Kerr's treating physician, on July 26, 2004, (approximately three months before Det. Kerr's death)
Dr. Friedberg completed a "Disability Insurance - Attending Physician's Statement" form, regarding Det. Kerr's medical condition. The form contained several questions, including those as to diagnosis, prognosis, and mental and cognitive limitations. Dr. Friedberg diagnosed Det. Kerr with the end- stage of AIDS, which included wasting, assistance with activities of daily living, 12 to 15 loose stools per day, and pain in his stomach. Dr. Friedberg determined Det. Kerr's prognosis as terminal. Dr. Friedberg described Det. Kerr's mental and cognitive limitations as poor memory, difficulty concentrating, and inattentiveness.
Question 5.c. of the form asked whether Det. Kerr was competent to endorse checks and direct the use of proceeds, to which Dr. Friedberg checked the yes box.
It is undisputed that Det. Kerry had a close, loving- relationship with his mother and nephews.
Det. Kerr's mother testified as to her son's desires and wishes for his retirement benefits. The undersigned finds her testimony credible. As her son's health deteriorated,
Det. Kerr made her co-owner of his home in order for the home to become hers at his death. Det. Kerr had a loving relationship with his nephews and he wanted to make sure that their education would be paid-for through his retirement benefits. Det. Kerr informed his mother that he designated her as the beneficiary of his disability retirement plan so that she could keep his house and pay for the education of his nephews.
In a letter dated May 18, 2005, Det. Kerr's healthcare providers gave insight into his medical condition and his intent regarding his disability benefits. The undersigned finds the letter persuasive. Among other things, they indicate that they were Det. Kerr's healthcare providers for several years and that, throughout 2004, Det. Kerr was administered opium to help control his chronic wasting diarrhea and administered opioid- based analgesics for chronic pain. Det. Kerr made it clear to his healthcare providers that his intent was to provide
financially for his family at the event of his death. Without question, they insist that the narcotic regimen in Det. Kerr's treatment, caused him to mistakenly mark Option 1, which was the opposite of and completely contrary to the whole intent of what he wanted to do with his disability benefits. Furthermore, they indicate that Det. Kerr intended to check Option 2 in that it would provide for Det. Kerr's family as Det. Kerr had intended.
One of Dr. Friedberg's clerical employees, John Carriere, notarized the option selection form at Dr. Friedberg's office for Det. Kerr on August 27, 2004. At that time, the employee had known Det. Kerr for approximately five years and knew what Det. Kerr's intentions were towards his (Det. Kerr's) family, concurring that Det. Kerr wanted his disability retirement benefits to provide for his (Det. Kerr's) mother and nephews. The employee observed that on that day Det. Kerr had lost considerable weight, was sweating, and was not looking well. The undersigned finds the clerical employee's testimony persuasive.
Det. Kerr was friends with Robert Brown for 16 years.
Mr. Brown is a certified financial planner but was not Det. Kerr's financial planner. The undersigned finds
Mr. Brown's testimony credible. Mr. Brown was well aware that Det. Kerr wanted to make sure that his (Det. Kerr's) mother and nephews were taken care of with his disability retirement
benefits. Det. Kerr sought advice from his friend regarding the disability retirement benefits. Mr. Brown and Det. Kerr met with the BSO's human resource counselor to discuss the different options available. Det. Kerr knew that he was dying, and he decided upon Option 2 because only it provided the benefits that he wanted for his mother and nephews upon his death.
On August 27, 2004, Det. Kerr was at Dr. Friedberg's office and was completing FRS-11o (the option selection form), and he called Mr. Brown, who was busy at work. Det. Kerr requested Mr. Brown to remind him which option number to select. Mr. Brown requested Det. Kerr to call him after working-hours, but Det. Kerr insisted that Mr. Brown talk with him then and provide the requested information. Mr. Brown, not recalling the option number that had been previously determined to be selected but recalling only what the selection provided, informed
Det. Kerr that the option decided upon was the one that left the money to his (Det. Kerr's) mother for ten years. Det. Kerr yelled back that he knew what the selection provided that he wanted, but now he only wanted the option number. Mr. Brown requested Det. Kerr to wait a few hours and call him back; but Det. Kerr did not.
Later, when Mr. Brown and Det. Kerr were together, Mr. Brown asked Det. Kerr whether he needed any assistance with the retirement paperwork. Det. Kerr responded in the negative,
indicating that he had finished the paperwork by himself and convincingly stating that the family was protected. Mr. Brown asked to review the form, but Det. Kerr did not have the form with him. With Det. Kerr so convincingly expressing himself that the family was protected, Mr. Brown did not think of the retirement paperwork again.
A finding of fact is made that Det. Kerr at all times had decided on Option 2 and at all times had intended to check Option 2.
A finding of fact is made that the medical evidence is sufficient to demonstrate that, due to Det. Kerr's terminal illness and the medications given to him, his mental capacity to make an informed choice at the time that he selected Option 1 was affected; and that he mistakenly checked Option 1, whereas Option 2 would have protected his family as he had intended, which intent had never wavered or changed.
By letter dated December 6, 2004, Retirement advised Det. Kerr's family that his estate was entitled to the disability retirement benefits due for the month of October 2004. Additionally, included with the letter was a "Joint Annuitant Information" document, and the family was advised that, if Det. Kerr had a survivor who qualified as a joint annuitant, a monthly benefit may be payable to such person.
A joint annuitant was mentioned in several of the letters from Retirement to Det. Kerr, prior to his death, regarding his disability retirement. In a letter dated July 30, 2004, related to completing FRS-11o, a joint annuitant is mentioned only in relationship to Options 3 and 4 and calculations therefor; in the Application, a joint annuitant is again mentioned only in relationship to Options 3 and 4 and calculations therefor; in a letter dated August 10, 2004, again, a joint annuitant is mentioned only in relationship to Options 3 and 4 and calculations therefor; in two letters dated August 19, 2004, a joint annuitant is again mentioned only in relationship to Options 3 and 4 and calculations therefor; in the Estimate of Retirement Benefit document, a joint annuitant is mentioned only as it relates to Options 3 and 4; in an Estimate of Disability
Retirement Benefits document, dated August 23, 2004, a joint annuitant is mentioned only as to Options 3 and 4 and calculations therefor; in a document provided to Det. Kerr by Retirement, entitled "What Retirement Option Should You Choose?" a joint annuitant is mentioned as it relates to all of the available options; in FRS-11o, a joint annuitant is mentioned only for Options 3 and 4; and in a letter dated December 6, 2004, after Det. Kerr's death, Retirement refers to a joint annuitant and includes information regarding a joint annuitant.
No information was received by Retirement as to a joint annuitant. Further, at hearing no assertion of Ms. Kerr being a joint annuitant was made.
Ms. Kerr is the personal representative of her son’s, Det. Kerr's, estate.
On September 26, 2005, Retirement received a letter from Ms. Kerr's counsel requesting Retirement to change
Det. Kerr's option selection from Option 1 to Option 2, explaining, among other things, Det. Kerr's intent but that his medical condition prevented him from following through with his intent. No mention was made in the letter of a survivor who qualified as a joint annuitant.
Retirement contends that an option selection can only be changed in the event the designated beneficiary qualifies as a joint annuitant.
On October 14, 2005, Retirement, by final agency action letter, denied the request to change Det. Kerr's option selection but erroneously cited Section 121.091(6)(h), Florida Statutes, as the statutory basis for the decision to deny the request, which stated as follows:
(h) The option selected or determined for payment of benefits as provided in this section shall be final and irrevocable at the time a benefit payment is cashed or deposited or credited to the Deferred Retirement Option Program as provided in Subsection (13).
Retirement admits that the basis for the denial stated in the final agency action letter is incorrect. No benefit payment had been issued, cashed or deposited. Retirement has never amended or sought to amend its denial-letter.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and the parties thereto pursuant to Sections 120.569 and 120.57(1), Florida Statutes (2006).
The general rule is that "the burden of proof, apart from statute, is on the party asserting the affirmative of an issue before an administrative tribunal." Florida Department of Transportation v. J. W. C. Company, Inc., 396 So. 2d 778, 788 (Fla. 1st DCA 1981). The case at hand involves Ms. Kerr asserting that Det. Kerr's retirement option benefit selection should be changed from Option 1 to Option 2. Consequently,
Ms. Kerr has the burden of proof by establishing her assertion through a preponderance of evidence. Department of Banking and
Finance, Division of Securities and Investor Protection v. Osborne Stern and Company, 670 So. 2d 932 (Fla. 1996); § 120.57(1)(j), Fla. Stat. (2006).
The evidence clearly and convincingly demonstrates, and Retirement admits, that the basis stated by Retirement in
its final agency action letter for denying to change Det. Kerr's option selection is inapplicable and incorrect.
Furthermore, the evidence demonstrates that, at no time did Retirement seek to amend its final agency action letter. In its post-hearing submission, Retirement argues, which will be subsequently addressed, that Ms. Kerr failed to present evidence demonstrating that she was a joint annuitant, which would have permitted her to make the selected option change. At no time did Retirement amend or move to amend its denial letter to state that the denial was based on Ms. Kerr’s not being her son's joint annuitant. Retirement had the opportunity to so amend but failed to do so.
Retirement is the agency mandated with the duty of administering the FRS. Retirement made a decision and presented the basis for its decision. Even though Ms. Kerr has the ultimate burden of proof, she must have notice of what it is she must prove.
Ms. Kerr has affirmatively overcome the basis for the denial of her request, and the evidence affirmatively demonstrates that Retirement has no valid basis in its denial letter or any amended denial letter for denying her request. She has affirmatively demonstrated that her request should be granted. Hence, Ms. Kerr's request should be granted.
Retirement contends that Chapter 121, Florida Statutes (2004), prohibits the changing of the selected option. To reiterate, Retirement failed to set forth this position as a basis in its denial-letter.
Section 121.091, Florida Statutes (2004), provides in pertinent part:
OPTIONAL FORMS OF RETIREMENT BENEFITS AND DISABILITY RETIREMENT BENEFITS.
Prior to the receipt of the first monthly retirement payment, a member shall elect to receive the retirement benefits to which he or she is entitled under subsection (1), subsection (2), subsection (3), or subsection (4) in accordance with one of the following options:
The maximum retirement benefit payable to the member during his or her lifetime.
A decreased retirement benefit payable to the member during his or her lifetime and, in the event of his or her death within a period of 10 years after retirement, the same monthly amount payable for the balance of such 10-year period to his or her beneficiary or, in case the beneficiary is deceased, in accordance with subsection (8) as though no beneficiary had been named.
A decreased retirement benefit payable during the joint lifetime of both the member and his or her joint annuitant and which, after the death of either, shall continue during the lifetime of the survivor in the same amount, subject to the provisions of subsection (12).
A decreased retirement benefit payable during the joint lifetime of the member and his or her joint annuitant and which, after the death of either, shall continue during
the lifetime of the survivor in an amount equal to 66 2/3 percent of the amount that was payable during the joint lifetime of the member and his or her joint annuitant, subject to the provisions of subsection (12).
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DEATH BENEFITS.
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(c) If a retiring member dies on or after the effective date of retirement, but prior to a benefit payment being cashed or deposited, or credited to the Deferred Retirement Option Program, benefits shall be paid as follows:
For a designated beneficiary who qualifies as a joint annuitant, benefits shall be paid in the optional form of payment provided in subparagraph (6)(a)3. for the joint annuitant's lifetime or, if the member chose the optional form of payment provided in subparagraph (6)(a)2., the joint annuitant may select the form provided in either subparagraph (6)(a)2. or subparagraph (6)(a)3.
For a designated beneficiary who does not qualify as a joint annuitant, any benefits payable shall be paid as provided in the option selected by the member; or if the member has not selected an option, benefits shall be paid in the optional form of payment provided in subparagraph (6)(a)1.
Section 121.021(28), Florida Statutes (2004), provides in pertinent part:
(28) "Joint annuitant" means any person designated by the member to receive a retirement benefit upon the member's death who is:
The spouse of the member;
The member's natural or adopted child who is under age 25, or is physically or mentally disabled and incapable of self- support, regardless of age; or any person other than the spouse for whom the member is the legal guardian, provided that such person is under age 25 and is financially dependent for no less than one-half of his or her support from the member at retirement or at the time of death of such member, whichever occurs first; or
A parent or grandparent, or a person age 25 or older for whom the member is the legal guardian, provided that such parent, grandparent, or other person is financially dependent for no less than one-half of his or her support from the member at retirement or at time of the death of such member, whichever occurs first.
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(46) "Beneficiary" means the joint annuitant or any other person, organization, estate, or trust fund designated by the member to receive a retirement benefit, if any, which may be payable upon the member's death.
Prior to hearing, the failure of Det. Kerr to have a joint annuitant was not raised by Retirement as a basis for declining Ms. Kerr's request. No evidence was presented that, prior to hearing, Retirement had ever considered the failure to have a joint annuitant as a basis for the denial.
To allow Retirement to change the basis of its decision without prior notice is a denial of fundamental due process.
Further, Retirement contends that, among other things, Ms. Kerr's claim also appears to be based on the principle of contractual incapacity. Retirement cites an article, which is described by Retirement as a "helpful article" and which Retirement indicates summarized the principles of contractual incapacity. The cited article is: Judge Robert W. Lee, "Public Interest Law: Mental Illness and the Right to Contract", 72 Fla. Bar J. 48, 49 (December 1998). Retirement quotes Judge Lee as follows:
Today in Florida, in the absence of an adjudication of incompetency, the standard to determine incompetency is whether the party is 'unable to understand in a reasonable manner the nature and consequences of the transaction.'
To determine whether an individual is 'unable to understand in a reasonable manner the nature and consequences of the transaction,' a court must look at a wide range of factors: 1) the party's medical and psychiatric history (e.g., past records of medical treatment and hospitalization; use of drugs); 2) medical and psychiatric diagnosis and opinions; 3) behavior and conduct at the time of the transaction (e.g., irrational or unintelligent behavior, the party's conversations); and 4) circumstances surrounding the transaction (absence of independent advice; confidential or fiduciary relationship; undue influence; the departure from the normal pattern of
similar transactions; the complexity of the transaction; and the fairness of the transaction).
The evidence demonstrates that Det. Kerr was "unable to understand in a reasonable manner the nature and consequences of the transaction" of his checking Option 1. The evidence demonstrates that Det. Kerr always intended to have his mother and nephews taken care of by his disability retirement benefits; that he sought advice as to which option would fulfill his intent, which was Option 2; that he always intended to choose Option 2; that the end stage of HIV and the medications that he was administered affected his reasoning capacity; that, even at the time of completing FRS-11o, he sought advice over the telephone from one of his friends, who was a financial planner, as to which option would protect his mother and nephews and he was informed, not of the option number, but of the consequences of what option he wanted and that, after receiving this advice, he seemed agitated and short-tempered before hanging-up the telephone; and that, after submitting FRS-11o, Det. Kerr continued to express the position that he had protected his family and had done what had been decided upon as to providing for his mother and nephews. All the factors above lead to the inescapable conclusion and the undersigned is persuaded that Det. Kerr meant to check Option 2 and that he was "unable to
understand in a reasonable manner the nature and consequences of his transaction."
Also, Retirement contends that, among other things, Ms. Kerr's claim appears to be based on the equitable principle of reformation of contract due to unilateral mistake and the principle of equitable estoppel. The undersigned is persuaded by Retirement that neither principle is applicable to the instant case.
RECOMMENDED that the Department of Management Services, Division of Retirement enter a final order granting the request of Rosalie J. Kerr and changing the retirement option selection of her deceased son, Robert R. Kerr, from Option 1 to Option 2.
DONE AND ENTERED this 10th day of July, 2006, in Tallahassee, Leon County, Florida.
ERROL H. POWELL
Filed with the Clerk of the Division of Administrative Hearings this 10th day of July, 2006.
1/ Retirement was permitted to provide to Ms. Kerr a copy of the documents for official recognition, immediately after the hearing, and Ms. Kerr was provided ten days to object, if she so desired. No objection was filed.
Joseph S. Kashi, Esquire Sperry, Shaspiro & Kashi, P.A. 1776 North Pine Island Road Suite 324
Geoffrey M. Christian, Esquire Department of Management Services 4050 Esplanade Way, Suite 160
15 days from the date of this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.
