STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SHARON R. HUBERTY, | ) | |||
) | ||||
Petitioner, | ) | |||
) | ||||
vs. | ) ) | Case | No. | 09-0640 |
STATE BOARD OF ADMINISTRATION, | ) ) | |||
Respondent. | ) | |||
| ) |
RECOMMENDED ORDER
After due notice, this cause came on for formal hearing before Daniel M. Kilbride, duly-designated Administrative Law Judge of the Division of Administrative Hearings (DOAH) in Tallahassee, Florida, on July 31, 2009.
APPEARANCES
For Petitioner: Gavin D. Burgess, Esquire
Oertel, Fernandez, Cole & Bryant, P.A. Post Office Box 1110
Tallahassee, Florida 32302
For Respondent: Brian A. Newman, Esquire
Pennington, Moore, Wilkinson, Bell & Dunbar, P.A.
215 South Monroe Street, Second Floor Post Office Box 10095
Tallahassee, Florida 32302-2095 STATEMENT OF THE ISSUES
Whether Respondent, State Board of Administration (SBA or Respondent), validly enrolled Petitioner, Sharon R. Huberty (Petitioner), into the Florida Retirement System (FRS)
“Investment Plan” (Investment Plan), when Petitioner used a telephonic hotline to “elect” to transfer her FRS assets without completing or signing any form.
Whether SBA should void Petitioner’s initial election to join the Investment Plan made via telephone in August 2002 and allow her to transfer back into the FRS Pension Plan (Pension Plan) without any cost in excess of the current value of her Investment Plan accounts.
PRELIMINARY STATEMENT
On October 20, 2008, Petitioner, a state employee, inquired to the SBA about transferring from the Investment Plan into the Pension Plan. In a letter to Petitioner, dated November 5, 2008, the SBA stated that she had actively enrolled in the Investment Plan by making her “initial election” by telephone in August 2002. The SBA informed Petitioner that she would have to use her “second election” to return to the Pension Plan. This letter advised Petitioner that it required that Petitioner transfer from her Investment Plan account and from other money as necessary, a sum representing the present value of her Pension Plan benefit at the time of such election.
On November 22, 2008, pursuant to Chapter 120, Florida Statutes (2008), and the Uniform Rules of Procedure codified as Florida Administrative Code, Chapter 28-106, Petitioner timely filed an FRS Investment Plan Petition for Hearing with the SBA.
The petition was referred to the DOAH on February 6, 2009, and ultimately to the undersigned Administrative Law Judge for formal hearing, and discovery ensued.
The hearing was originally set for April 17, 2009.
Thereafter, by unopposed motion to continue, the hearing was rescheduled for May 8, 2009. On April 27, 2009, Petitioner filed a Petition for Determination of Invalidity of Unadopted Rule, together with a Motion to Consolidate her rule challenge case with her challenge of the validity of the 2002 transfer of her FRS assets. On April 27, 2009, Petitioner also filed a motion for continuance of the hearing date. On April 29, 2009, the two cases were consolidated, and, on May 1, 2009, the hearing was rescheduled for July 31, 2009.
This cause came on for hearing as noticed on July 31, 2009. At the hearing, official recognition was taken of several rules promulgated by the SBA, including former Florida Administrative Code Rule 19-10.001 (effective May 9, 2001); former Rules 19-
10.002 and 19-10.003 (effective September 19, 2001); former Rule 19-10.001 (effective August 11, 2002); and former Rules 19-
and 19-10.003 (effective December 8, 2002). Petitioner testified in her own behalf, and Petitioner’s Exhibits 1
through 7 were admitted into evidence. Respondent presented the testimony of Daniel Beard, the director of Policy, Risk Management and Compliance with the Office of Defined
Contribution Programs in the SBA. Respondent’s Exhibits 1 through 7 were admitted into evidence.
The Transcript of the consolidated hearings was filed on August 25, 2009. Both parties timely filed their proposals. Each of the party’s proposals have been carefully considered in the preparation of this Recommended Order.
FINDINGS OF FACT
Petitioner has been employed as a corrections officer with the Florida Department of Corrections since 1997 and has been assigned to the Hendry County Corrections Institute in Fort Myers, Florida. In Florida, corrections officers are classified as “special risk” for FRS purposes. Petitioner became a member of the Pension Plan in 1997 after she moved from Wisconsin to Florida to work for the Florida Department of Corrections.
In 2000, the Florida Legislature enacted law creating a bipartite retirement system for public employees. The new system granted existing public employees the one-time option of “electing” to transfer their FRS Defined Benefit Plan assets into a newly-created FRS Defined Contribution Plan, also known as the Investment Plan. This election was termed the “first election.” Under the new optional retirement system, FRS- eligible public employees who had made a valid “first election” could, at a later date, exercise the option of making a “second election,” whereby the market value of the FRS-eligible public
employee’s Investment Plan assets would be returned to the Pension Plan, and any deficit between the value of the employee’s Investment Plan assets and the value of the Pension Plan would be paid by the employee.
The Investment Plan is a defined contribution plan, and the member bears the risk of loss of the investments he or she chooses. In contrast, the Pension Plan is a defined benefit plan, wherein retirement benefits are calculated based upon a fixed formula, not the performance of the investments, which are selected by the state. Thus, the state, not the member, bears the risk of loss of the Pension Plan investments.
In creating the Investment Plan option, the Florida Legislature emphasized through the enabling legislation, the importance of providing information and education to potential program participants.
During the 2002 “initial election” enrollment period, the SBA implemented three ways for a Pension Plan member to elect to join the Investment Plan: (1) by submitting a hard copy of the MyFRS Your Plan Choice Form, (2) by logging into the MyFRS.com website and completing the MyFRS Your Plan Choice Form electronically, or (3) by calling the MyFRS Financial Guidance Line and enrolling verbally over the telephone.
Section 121.4501, Florida Statutes (2002),1 describes the standards by which the SBA must administer the Public
Employee Optional Retirement Program (PEORP or Investment Plan). Subsection 121.4105(4)(a)1., Florida Statutes, provides, in part:
1. With respect to an eligible employee who is employed in a regularly established position on June 1, 2002, by a state employer:
a. Any such employee may elect to participate in the Public Employee Optional Retirement Program in lieu of retaining his or her membership in the defined benefit program of the Florida Retirement System. The election must be made in writing or by electronic means and must be filed with the third-party administrator by August 31, 2002, or within 90 days after the conclusion of the leave of absence whichever is later. This election is irrevocable, except as provided in paragraph (e). . . .
Thus, state employees electing to transfer from the Pension Plan into the Investment Plan must do so “in writing or by electronic means.” Further, the election must be “filed” with the third-party administrator.
Pursuant to Section 121.4501, Florida Statutes, the SBA created a form called the MyFRS Your Plan Choice Form.
In order to complete the MyFRS Your Plan Choice Form and elect to transfer from the Pension Plan into the Investment Plan, the SBA required that the employee sign the form. If an eligible employee submitted an otherwise complete MyFRS Your Plan Choice Form without signing it, the SBA would reject the
form as incomplete and not effectively enroll the employee into the Investment Plan.
For employees electing to enroll in the Investment Plan by submitting the MyFRS Your Plan Choice Form, the SBA requires that the employee sign the “Authorization” section of the form, which includes a section titled “IMPORTANT INFORMATION,” which contains several affirmative statements describing the Investment Plan participant’s rights and responsibilities. According to Daniel Beard, the form requires a signature “because there is some very important information that a member needs to take into consideration before making any choices.” This “very important information” was not provided to Petitioner at the time she used the MyFRS Financial Guidance Line to “elect” to enroll into the Investment Plan.
In 2002, the SBA contracted with a third-party administrator to create and operate a telephone hotline (MyFRS Financial Guidance Line) whereby FRS-eligible public employees could elect to transfer their Pension Plan assets into the newly-created Investment Plan via telephone.
On August 27, 2002, Petitioner contacted the telephone hotline intending to transfer her retirement assets from the Pension Plan to the Investment Plan. Petitioner’s initial election to transfer into the Investment Plan was made orally by telephone to the third-party administrator on August 27, 2002.
The SBA did not require Petitioner to complete or sign any form following her election to transfer into the Investment Plan by telephone. Petitioner did not sign or submit a form, and no form was “filed” with the third-party administrator.
At the time of her 2002 election, Petitioner understood the Investment Plan to be an alternative to the Pension Plan whereby she would have the ability to choose her own investments rather than follow the investments that the state FRS administrators picked for her. She assumed that her retirement benefits would otherwise be unchanged.
At the time of her 2002 election, Petitioner claims that she did not understand that she was effectively canceling her fixed-benefit pension plan and replacing it with a fixed- contribution, market-based investment plan and that she would no longer be eligible to receive pension benefits or to participate in the state’s deferred compensation “DROP” program.
Petitioner’s deadline to elect membership in the newly-created Investment Plan was August 31, 2002. Before this deadline expired, a Plan Choice Kit was mailed to members who were eligible to enroll in the Investment Plan.
The Plan Choice Kit included a document entitled “Your Plan Choice Form” (Plan Choice Form). The Plan Choice Form identified 39 different investment options available to members who transferred to the Investment Plan.
The Plan Choice Form advised plan members to review the material in the Plan Choice Kit before making a plan choice.
The MyFRS Choice Book (Choice Book), including the Plan Choice Kit, advised members of key differences between the Pension Plan and the Investment Plan. The Choice Book warned members that the value of an Investment Plan account is not fixed and “will vary depending on the performance of your investment. That means, the value of your account can go up, but it also can go down . . .”.
The Choice Book also advised members that they would have an opportunity to switch back to the Pension Plan if they so desired, but they would have to “buy back” into the Pension Plan with money from their Investment Plan account. The Choice Book cautioned members, “[i]f you don’t have enough money in your Investment Plan account, you can still get back in . . . but you’ll have to make up the difference from other savings.”
The Plan Choice Form advised members to review a description of their “rights and responsibilities under the FRS Pension Plan and FRS Investment Plan in the respective Summary Plan Descriptions and Florida Statutes, available through the MyFRS Financial Guidance Line at 1-866-44-MyFRS . . . or at MyFRS.com.”
The Investment Plan Summary Plan Description informed members in 2002:
You will have a one-time opportunity to switch to the Pension Plan at any point while working for an FRS employer. If you decide to switch, you must “buy back” into the Pension Plan with the money in your Investment Plan account. If you don’t have enough money in your Investment Plan account, you can still get back in . . . but you’ll have to make up the difference from your other financial resources.
The Plan Choice Form and Choice Book advised members that they could make an election to enroll in the Investment Plan online at MyFRS.com or by calling the MyFRS Financial Guidance Line and choosing option five to be connected directly to the FRS Plan Choice Administrator.
The SBA conducted numerous workshops for members to help them determine which plan to choose. Five workshops were noticed in Fort Myers, Florida, for April 8 through 12, 2002. Petitioner testified that she was not aware the workshops were offered and, therefore, did not avail herself of the information available at the workshops.
Petitioner did call her personal financial advisor at Raymond James, before the plan choice deadline expired, to discuss the investment options available to her if she chose to transfer to the Investment Plan. Petitioner’s financial advisor recommended that she invest in the following Investment Plan funds identified on the Plan Choice Form: Franklin Small-Mid Cap Growth, Fidelity Mid Cap Stock Fund, Fidelity Growth Company Stock Fund, and the T. Rowe Price Small Cap Stock Fund.
On August 27, 2002, Petitioner called the MyFRS Financial Guidance Line and spoke to an FRS Plan Choice Administrator representative (Representative). She told the Representative she wanted to transfer to the Investment Plan. She also told the Representative she wanted her Investment Plan assets to be invested in the four funds recommended by her Raymond James financial advisor and identified a beneficiary for her Investment Plan account.
Petitioner testified at hearing that she did not have a copy of the Plan Choice Form with her when she made the call to the Representative on August 27, 2002. However, it is evident from the transcript of the recording of the August 27, 2002, call that Petitioner, in fact, either did have that form or had reviewed it prior to the call.
When asked by the Representative what she had decided to elect, Petitioner replied “section one, number two.” “Section one, number two” of the Plan Choice Form is the option to transfer all of the member’s Pension Plan assets and all future contributions to the Investment Plan.
The Representative confirmed Petitioner’s “section one, number two” reference as follows:
REPRESENTATIVE: Okay. You want to go into the Investment Plan?
MS. HUBERTY: Yes ma’am.
REPRESENTATIVE: Okay. So you’re wanting to transfer your present value of your Pension
Plan and all future contributions to the Investment Plan?
MS. HUBERTY: Yes, Ma’am.
Similarly, when identifying the funds in which she wanted to invest, Petitioner referenced the funds in “section three,” the section containing the list of fund choices in the Plan Choice Form. Petitioner identified the funds in the order they are found in “section three” of the Plan Choice Form.
Petitioner claims she had another form with her during the call, but failed to produce a copy of this other form in the instant proceeding. Petitioner’s claim that she either did not receive or did not review the Plan Choice Kit prior to her enrollment in the Investment Plan is not credible.
After enrolling in the Investment Plan, Petitioner received quarterly statements indicating her membership in the Investment Plan. The quarterly statements advised Petitioner of the value of her Investment Plan account and the performance of the investment funds she selected.
Petitioner changed her beneficiary designation by submitting a written form on February 2, 2007. She called the MyFRS Financial Guidance line to clarify that one of the beneficiaries she designated was to be contingent. During the call, Petitioner did not complain or make any mention of the possibility that she might be in the wrong plan.
Petitioner’s Investment Plan account value grew from an opening balance of $40,308.63 on September 30, 2002, to a high of $144,029.62 on September 30, 2007.
As of September 30, 2008, the value of Petitioner’s Investment Plan account had declined to $121,019.94.
On October 7, 2008, Petitioner contacted the MyFRS Guidance Line and spoke with an FRS representative about the circumstances under which she had made her first election into the Investment Plan. Petitioner requested that the FRS representative send her a copy of the document that she had signed electing to switch to the Investment Plan. The FRS representative responded that Petitioner would not necessarily have signed anything and that Petitioner may have enrolled verbally over the telephone or may have filled out an electronic enrollment form.
During the October 7, 2008, telephone call, Petitioner stated that she would never have “join[ed] something where I wouldn’t be getting a pension. There’s nowhere on any form or whatever supposedly that I signed or was over the telephone that nobody ever told me that I wouldn’t be getting a pension if I joined this.” Petitioner repeated this sentiment on several subsequent telephone calls to the MyFRS Financial Guidance Line.
On November 5, 2008, the SBA sent a letter to Petitioner stating that on August 27, 2002, Petitioner “actively
enrolled” in the Investment Plan by making her “initial election” through calling the MyFRS Financial Guidance Line, effective September 1, 2002.
The SBA letter stated as follows:
In processing the election through the MyFRS Financial Guidance line, you agreed to the following statements listed on the Retirement Plan Enrollment Form:
“I want to . . . take the FRS Investment Plan 100% Transfer Option. That means I switch to the new FRS Investment Plan and transfer the present value of my FRS Pension Plan benefit to the new FRS Investment Plan. I will also have future employer contributions sent to my new FRS Investment Plan.”
“I understand that I can find a description of my rights and responsibilities under the FRS Pension Plan and the FRS Investment Plan in the respective Summary Plan Descriptions, Florida Statutes, available through the MyFRS Financial Guidance Line . . . or at MyFRS.com. I understand that the value of my FRS Pension Plan benefit which will be initially transferred to my Investment Plan account will be an estimate. Then, within
60 days of that transfer, there will be a reconciliation pursuant to Florida law which will use my actual FRS membership record. The actual amount could be more or less than the estimate you received.”
“Your choice will be final at 4:00 p.m. (Eastern Time) on the first day of your Choice period if you file prior to the beginning of your Choice period. Otherwise it will be final on the day it is received. You must file before the applicable deadline noted on page 1. See Your Choice Book for more details on when your Choice period begins, and on the second chance opportunity
you have during your career with the FRS to change your selection.”
The attestations and warnings listed on the SBA’s November 5, 2008, letter to Petitioner were taken from the MyFRS Your Plan Choice Form, Section 4: Authorization.
However, the Representative who received Petitioner’s August 27, 2002, telephone call had not verbally, or subsequently in writing, provided Petitioner with the information, attestations and warnings that the SBA listed on its November 5, 2008, letter to her, or those which are included in the MyFRS Your Plan Choice Form.
On the August 27, 2002, telephone call to the MyFRS Financial Guidance Line, Petitioner did not verbally attest that she agreed to any statements from the MyFRS Your Plan Choice Form, Section 4: Authorization.
The Representative who assisted Petitioner on
August 27, 2002, did not advise her that she could speak with a financial services expert from Ernst & Young to discuss the distinctions between the Investment Plan and the Pension Plan.
The Representative who assisted Petitioner on August 27, 2002, did not:
Refer Petitioner to Section 121.4501, Florida Statutes.
Confirm that Petitioner understood the terms and conditions of the “second election.”
Confirm that Petitioner understood that there might be a cost if she decided later to transfer from the Investment Plan back into the Pension Plan.
Confirm that Petitioner understood that under the terms of the Investment Plan, she would not be eligible to receive monthly pension checks during her retirement.
Provide any disclosures about where Petitioner could find information concerning her rights as a participant in the Investment Plan.
Confirm that Petitioner understood that under the terms of the FRS Investment Plan, she would not be eligible to participate in the state’s deferred compensation “DROP” program.
Confirm that Petitioner understood that she should review the fund profiles and the Investment Fund Summary before choosing investment funds.
Had Petitioner been required to complete and sign the MyFRS Your Plan Choice Form, she would necessarily have been presented with such information and had the opportunity to affirmatively state that she understood her rights as a participant in the Investment Plan. The form also references Section 121.4501, Florida Statutes, which is the governing statute of the Investment Plan.
Therefore, Petitioner’s alleged “election” by telephone was not the functional equivalent of her having completed and signed the MyFRS Your Plan Choice Form, and Petitioner’s alleged “election” was voidable. Petitioner did
not complete any kind of form that met the requirements of Florida Administrative Code Rule 19-10.001, 19-10.002, or 19- 10.003, which were in effect at the time of her alleged election.
The MyFRS telephone hotline used to enroll FRS- eligible public employees into the Investment Plan at the time of Petitioner’s alleged “election” did not require that employees complete a written or electronic enrollment form in order to transfer their Pension Plan assets into the Investment Plan. However, no one affiliated with the SBA provided her with any misleading information about the Investment Plan.
The SBA did not require that an FRS-eligible public employee sign any form in order to transfer his or her FRS assets from the Pension Plan to the Investment Plan, but did require that Investment Plan participants complete and sign a “Beneficiary Designation Form” in order to change the beneficiary designation on an Investment Plan participant’s account.
On November 22, 2008, Petitioner filed a petition for hearing with the SBA seeking to return to the Pension Plan at no cost over the value of her Investment Plan account.
As of July 15, 2009, the balance of Petitioner’s Investment Plan account was $104,238.10.
As of July 16, 2009, Petitioner’s cost to “buy back” into the Pension Plan was $184,658.81. Based upon this value, Petitioner would have to contribute $80,420.70 in addition to the value of her Investment Plan account if she exercised her second election to transfer back to the Pension Plan.
Subsection 121.4501(4)(a)1., Florida Statutes, governed Petitioner’s enrollment in the Investment Plan in 2002. This provision provides in pertinent part:
Any such employee may elect to participate in the [Investment Plan] in lieu of retaining his or her membership in the defined benefit program of the Florida Retirement System. The election must be made in writing or by electronic means and must be filed with the third-party administrator by August 31, 2002. . . .
The SBA construed the phrase “by electronic means” used in Subsection 121.4501(4)(a)1., Florida Statutes, to mean the election could be made by computer or by telephone. The SBA considers a telephone call to be “electronic” because the telephone calls to the Plan Choice Administrator are recorded.
However, Petitioner received her bachelor’s degree in 1976 and completed a semester of coursework toward a Masters of Business Administration degree in 1977.
When Petitioner moved from Wisconsin to Florida in 1977, she “rolled-over” her Wisconsin retirement plan account into an Individual Retirement Account (IRA) with the assistance of a Raymond James financial advisor.
CONCLUSIONS OF LAW
DOAH has jurisdiction over the parties and subject matter of this cause, pursuant to Subsection 120.57(1), Florida Statutes (2009).
Petitioner, as the party seeking affirmative relief in this administrative proceeding, has the burden to demonstrate entitlement to the relief request by a preponderance of evidence. Young v. Department of Community Affairs, 625 So. 2d 837 (Fla. 1993). Florida Department of Transportation v. J.W.C., Inc., 396 So. 2d 778, 788 (Fla. DCA 1981).
Under the auspices of Subsection 121.4501(4)(a)1., Florida Statutes, the SBA created and administrated a telephonic hotline which allowed FRS-eligible pubic employees to enroll in the Investment Plan verbally by telephone. Petitioner was transferred from the Pension Plan and enrolled into the Investment Plan when she elected to enroll in the Investment Plan through the use of this telephonic hotline. As a result of Petitioner’s enrollment into the Investment Plan, she has lost substantial pension and retirement benefits to which she would otherwise have been entitled under the Pension Plan. Further, when Petitioner petitioned the SBA to return her to the Pension Plan without penalty, the SBA responded that Petitioner had effected a valid election to switch from the Pension Plan into the Investment Plan. As such, Petitioner is substantially
affected by the SBA’s decision and has standing to petition for relief.
Any claim by the SBA that Petitioner is estopped from bringing her petition must be rejected, as the SBA has known or should have known that the method by which Petitioner “elected” to transfer into the Investment Plan was invalid. See Schueler v. Franke, 522 So. 2d 904 (Fla. 2d DCA 1988).
This case is governed by Chapter 121, Florida Statutes, and in particular Section 121.4501, Florida Statutes.
Section 121.4501, Florida Statutes, sets forth the requirements for membership in the Investment Plan and also establishes the sole process for the transfer of membership from the Pension Plan into the Investment Plan. Section 121.4501, Florida Statutes, was designed to provide participants in the Pension Plan the opportunity to transfer into the Investment Plan. The statute provided an initial transfer period for existing employees during the calendar years 2002 and 2003, the so-called “first election period.” Thereafter, in accordance with Subsection 121.4501(4)(e)2., Florida Statutes, there is provided a “second election” after the first election period has elapsed, giving FRS members a second chance to elect a transfer from one plan to the other, at their discretion, but with potential costs involved if the “second election” was returning assets from the Investment Plan into the Pension Plan, and those
Investment Plan assets were less than the equivalent value of the Pension Plan given the employee’s average salary times years of service upon the date of the second election transfer.
Subsection 121.4501(4)(e)2., Florida Statutes, requires Petitioner to “buy back” into the Pension Plan if she chooses to switch plans. Subsection 121.4501(4)(e)2., Florida Statutes, provides:
If the employee chooses to move to the defined benefit program, the employee must transfer his or her [Investment Plan] program account and from other employee moneys as necessary, a sum representing the present value of that employee’s accumulated benefit obligation immediately following the time of such movement, determined assuming that attained service equals the sum of service in the defined benefit program and service in the [Investment Plan]. Benefit commencement occurs on the first date the employee would become eligible for unreduced benefits, using the discount rate and other relevant actuarial assumptions that were used to value the Florida Retirement System defined benefit plan liabilities in the most recent actuarial valuation. For any employee who, at the time of the second election, already maintains an accrued benefit amount in the defined benefit plan, the then-present value of such accrued benefit shall be deemed part of the required transfer amount described in this subparagraph. The division shall ensure that the transfer sum is prepared using a formula and methodology certified by an enrolled actuary.
Subsection 121.4501(8)(a), Florida Statutes, obligates the SBA to administer the Investment Plan. The SBA is not authorized to depart from the requirements of this statute when
exercising its jurisdiction. See Balezentis v. Department of Management Services, Division of Retirement, Case No. 04-3263 (DOAH March 2, 2005, adopted in toto Final Order April 4, 2005),
2005 WL 517476.
The SBA’s construction and application of the provisions of Section 121.4501, Florida Statutes, are entitled to great weight and will be followed by courts, unless clearly erroneous or amounting to an abuse of discretion. See Okeechobee Health Care v. Collins, 726 So. 2d 775, 778 (Fla. 1st DCA 1998).
However, when the clear provisions of the statute are in conflict with the SBA’s interpretation of the statute, the agency’s construction and application of the statute must be rejected. Cf. Willette v. Air Products, 700 So. 2d 397, 401 (Fla. 1st DCA 1997). In this case, the SBA’s interpretation of the term “in writing or by electronic means” such as to permit a telephone transfer (although recorded) from the Pension Plan to the Investment Plan without completing and signing a form is clearly erroneous.
The SBA’s hotline contravened Section 121.4501, Florida Statutes, and the SBA rules adopted to implement Section 121.4501, Florida Statutes. For reasoning, see the companion Rule Challenge, Huberty v. State Board of Administration, Case No. 09-2268RU (DOAH October 1, 2009).
The legislative intent of Section 121.4501, Florida Statutes, was for a physical form providing for full disclosure of participants’ rights and responsibilities under the Investment Plan.
The SBA’s implementation of a telephonic election process is an unadopted rule and cannot be relied upon for authority.
As such, Petitioner’s August 2002 “election” by telephone contravened the provisions of the statute and, therefore, was not valid.
However, Petitioner knew or should have known that at the time of her election to participate in the Investment Plan, her participation was in lieu of participation in the defined benefit program of the FRS. See § 120.4501(3), Fla. Stat. Petitioner is not entitled to sit back, watch the market, and then decide to take action to unwind her Investment Plan election when the stock market declines. Petitioner elected membership into the Investment Plan with the assistance of a private and self-selected financial advisor. Petitioner admits to receiving quarterly statements advising her of the performance of her selected investments. Petitioner did not complain about her Investment Plan membership when her account value grew from $40,000 in 2002 to over $140,000 in 2007; rather, she waited until her investments declined significantly
to complain she was in the wrong plan. Petitioner also changed her beneficiary designation before she complained that she was in the wrong plan. Petitioner’s testimony that she was not aware that she was enrolled in the Investment Plan and was no longer in the Pension Plan until she complained to the SBA about her election in 2008 is not credible.
Even though Petitioner’s enrollment into the Investment Plan in 2002 was deficient, Petitioner waived the right to complain about it by waiting for more than six years. Felder v. Department of Management Services, Division of Retirement, Case No. 03-0486 (DOAH October 6, 2003, adopted in toto Final Order December 12, 2003), 2003 WL 22322026. In Felder, the Administrative Law Judge found the petitioner waived his right to complain that his enrollment in the State University Optional Retirement Program was invalid because he did not sign the required enrollment form. The petitioner in Felder waited 20 years to complain about the validity of his election and took action during that time that was inconsistent with a decision to terminate his optional retirement status.
Similarly, in this case, Petitioner selected funds based upon the recommendation of a private financial advisor and monitored her investment performance for over six years before she decided to question her status as an Investment Plan member. Accordingly, even if Petitioner’s enrollment was somehow
deficient, her post-election conduct ratified her initial decision.
Although, the SBA’s construction of the phrase “by electronic means” found in Subsection 121.4501(1)(a)1.a., Florida Statutes, is an unadopted rule, Petitioner argues that the SBA cannot rely upon this unadopted rule to deny her request to be placed back in the Pension Plan at no additional cost.
Petitioner’s reliance on Subsection 120.57(1)(e), Florida Statutes, in this proceeding is misplaced. Subsection 120.57(1)(e), Florida Statutes, provides:
An agency or an administrative law judge may not base agency action that determines the substantial interests of a party on an unadopted rule. The administrative law judge shall determine whether an agency statement constitutes an unadopted rule.
This subparagraph does not preclude application of adopted rules and applicable provisions of law to the facts.
First, the SBA did not take agency action affecting Petitioner’s substantial interests when it allowed her to make her election telephonically. On the contrary, the SBA gave effect to Petitioner’s intent to join the Investment Plan, which is clearly and unmistakably articulated in the transcript of her August 27, 2002, telephone call to the MyFRS Financial Guidance Line. The fact that six years of market performance has shown Petitioner’s decision to be unwise in hindsight does not change her clear instructions to the SBA in 2002. Petitioner has
failed to satisfactorily explain why the SBA is to blame for her enrollment in the Investment Plan or her decision to ignore the myriad of educational materials available to her before she made the choice. Subsection 120.57(1)(e), Florida Statutes, has no application in this proceeding.
Finally, Petitioner contends that allowing her to make her election telephonically violates various rules in effect in 2002. The rules cited by Petitioner govern asset transfers between the Pension Plan and the Investment Plan and have no application in the instant case. See former Fla. Admin. Code R. 19-10.001, 19-10.002, and 19-10.003. Even if these rules were intended to limit the means by which members are allowed to effectuate plan choice, they are of no assistance to Petitioner in this proceeding. An agency is empowered to waive a rule requirement when the application of a rule would lead to an unfair result or create a substantial hardship on an individual.
§ 120.542, Fla. Stat.
The fact that Petitioner’s decision has proven to be imprudent with the passage of time does not abrogate the agency’s authority to waive a rule requirement to give effect to her desired election at the time it was made.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is
RECOMMENDED that the State Board of Administration enter a final order, as follows:
Allowing Petitioner to transfer her accumulated retirement assets from the Pension Plan to the Investment Plan by telephone without completing or signing a form was improper and invalid.
By taking no action for six years after the SBA enrolled her in the Investment Plan, Petitioner has waived her right to transfer back into the Pension Plan without any cost in excess of the current value of her Investment Plan accounts and must comply with requirements of Subsection 121.4501(4)(e), Florida Statutes, if she desires to make a “second election.”
DONE AND ENTERED this 1st day of October, 2009, in Tallahassee, Leon County, Florida.
S
DANIEL M. KILBRIDE
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 1st day of October, 2009.
ENDNOTE
1/ All references to Florida Statutes are to Florida Statutes (2002), unless otherwise indicated.
COPIES FURNISHED:
Ash Williams, Executive Director and Chief Investment Officer
State Board of Administration
1801 Hermitage Boulevard, Suite 100 Post Office Box 13300
Tallahassee, Florida 32317-3300
Bruce Meeks, Inspector General State Board of Administration
1801 Hermitage Boulevard, Suite 100
Tallahassee, Florida 32308
Gavin D. Burgess, Esquire
Oertel, Fernandez, Cole & Bryant, P. A. Post Office Box 1110
Tallahassee, Florida 32302
Brian A. Newman, Esquire Pennington, Moore, Wilkinson,
Bell & Dunbar, P.A.
215 South Monroe Street, Second Floor Post Office Box 10095
Tallahassee, Florida 32302-2095
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within
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.
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 07, 2010 | Agency Final Order | |
| Oct. 01, 2009 | Recommended Order | Although Petitioner did not validly enroll in FRS Investment Plan in 2002, it was her intention. Failure to act for six years prevents her from transferring back to Pension Plan without any cost. Recommend denial of petition. |
REBECCA HERNANDEZ vs DEPARTMENT OF MANAGEMENT SERVICES, DIVISION OF RETIREMENT, 09-000640 (2009)
KIMBERLY A. CAMPBELL vs STATE BOARD OF ADMINISTRATION, 09-000640 (2009)
LEE HAYES BYRON vs DEPARTMENT OF MANAGEMENT SERVICES, DIVISION OF RETIREMENT, 09-000640 (2009)
STACY MCLEAN vs STATE BOARD OF ADMINISTRATION, 09-000640 (2009)
WILLIE JAMES vs STATE BOARD OF ADMINISTRATION, 09-000640 (2009)
