vs.
Respondent.
Case No. 20-0740
The final hearing in this matter was conducted before Administrative Law Judge Jodi-Ann V. Livingstone of the Division of Administrative Hearings (DOAH), pursuant to sections 120.569 and 120.57(1), Florida Statutes (2019),1 on June 10, 2020, in Tallahassee, Florida.
For Respondent: Ruth E. Vafek, Esquire
The issues in this case are whether Petitioner was properly enrolled in the Florida Retirement System (FRS) Hybrid Option Plan (Hybrid Option) in 2002, and whether he should be retroactively re-enrolled in the Florida
1 All statutory references are to the 2019 version of the Florida Statutes, except where indicated otherwise.
Retirement System Pension Plan (Pension Plan) without having to pay a “buy-in” amount.
By letter dated January 15, 2020, the State Board of Administration (Respondent or SBA) advised Petitioner, Robert Marinak (Petitioner or Mr. Marinak), that it was denying his Request for Intervention to move his
retirement account from the Hybrid Option to the Pension Plan. Mr. Marinak timely filed a Florida Retirement System Investment Plan Petition for Hearing (Petition). On February 12, 2020, SBA transmitted the Petition to DOAH for the assignment of an Administrative Law Judge to conduct a chapter 120 hearing.
Prior to the hearing, the parties submitted a Joint Pre-hearing Stipulation, which has been accepted and incorporated into the Findings of Fact of this Recommended Order. The final hearing was held on June 10, 2020, with both parties present. At the final hearing, Mr. Marinak represented himself and testified on his own behalf. Respondent called
Ms. Allison Olson, Director of Policy Risk Management and Compliance in the Office of Defined Contribution Programs at SBA, as its witness.
Respondent’s Exhibits R-1 through R-6 were admitted into evidence, without objection.
At the close of the hearing, the parties were advised of a ten-day timeframe following DOAH’s receipt of the hearing transcript to file post- hearing submittals. On June 26, 2020, the court reporter filed a one-volume hearing Transcript. On June 29, 2020, Mr. Marinak filed Petitioner’s Proposed Recommended Order. On July 6, 2020, Respondent filed State Board of Administration’s Proposed Recommended Order. Both submissions were duly considered in preparing this Recommended Order.
Mr. Marinak began employment with the Marion County Public School System, an FRS-participating employer, in 1989. At that time, the Pension Plan was the only retirement program available for eligible employees, and, thus, Petitioner was enrolled in the Pension Plan.
The Pension Plan is administered by the Florida Division of Retirement (Division of Retirement), which is housed within the Department of Management Services. The Pension Plan is a defined benefit plan; the benefit is formula-based. The formula used for calculating a pension plan benefit is based on total years of service at the time of retirement, membership class, and average final compensation.
Mr. Marinak has been continuously employed by an FRS-participating employer from 1989 to present.
In 2002, the FRS Investment Plan (Investment Plan) became available to employees participating in FRS. The Investment Plan is administered by Respondent. The Investment Plan is a defined contribution plan; the benefit is based on gains and losses due to market performance.
Mr. Marinak was provided a choice window of September 1, 2002, through November 30, 2002, to remain in the Pension Plan or switch to the Investment Plan.
The parties stipulate that the Plan Choice Administrator at the time, now doing business as Voya, has records indicating Mr. Marinak elected the Hybrid Option by means of a telephone call on November 27, 2002. Voya no longer has a recording of the call. SBA does not have a recording of the telephone call either.
The Hybrid Option is as its name indicates—it is a hybrid of the Pension Plan and the Investment Plan. When the Investment Plan was introduced in 2002, Pension Plan participants, with at least five years of service, could elect to enroll in the Investment Plan with a zero balance. With the election of the Hybrid Option, retirement funds from all years of service
prior to the election remain in the Pension Plan; everything from the election forward is administered under the Investment Plan. Hybrid Option participants will receive the resulting defined benefit from the Pension Plan (earned prior to the election) upon retirement, plus the benefits from the investments in the Investment Plan after the election.
The Pension Plan portion of the Hybrid Option remains with, and continues to be administered by, the Division of Retirement. The Investment Plan portion is administered by Respondent.
Mr. Marinak disputes electing to enter the Hybrid Option. He credibly testified that he did not desire to transfer to the Investment Plan and has no recollection of authorizing such a transfer.
Beginning at least as early as 2005, Respondent sent or otherwise made available to Mr. Marinak quarterly “FRS Investment Plan” statements. Mr. Marinak testified that he received these statements, but did not know what they meant.
The earliest FRS Investment Plan statement documented by Respondent as having been sent to Mr. Marinak covered the period of January 1, 2005, to March 31, 2005. Mr. Marinak did not inquire about the statement or file a complaint with Respondent after receiving this statement.
Beginning at least as early as 2008, the Department of Management Services sent or otherwise made available to Mr. Marinak annual “FRS Pension Plan – Hybrid Option” statements. These statements were sent to Mr. Marinak’s address of record at the time the statements were mailed. Mr. Marinak testified that the addresses where the statements were sent were, indeed, his addresses.
Since the transfer in 2002, Mr. Marinak has updated his beneficiary designations for both the Pension Plan and Investment Plan portions of his Hybrid Option.
In November 2008, Mr. Marinak communicated by e-mail with personnel at the Division of Retirement about the status of the Pension Plan and the years of service used to calculate his benefits.
In December 2008, in response to his inquiry, the Division of Retirement prepared and provided to Mr. Marinak an Estimate of Retirement Benefit. The “Comments” section of the Estimate of Retirement Benefit stated as follows:
This estimate is based on retirement at 30 years of service. It represents your 13.40 years of service in the Florida Retirement Pension Plan (8/1989 through 11/2002). You will have to terminate all employment with FRS employer to receive this benefit. You have an additional 6.00 years in the Hybrid Investment Plan through 11/2008; the years in the Hybrid Option are not used in calculating your monthly retirement benefit from the pension plan, which is why they are not reflected in your Member Annual Statement.
Mr. Marinak did not inquire about the comment or file a complaint after receiving the Estimate of Retirement Benefit.2 Mr. Marinak testified that he saw the comment, but not being an expert in retirement financing, he did not comprehend what it meant.
Mr. Marinak did not present documentary evidence or an audio recording demonstrating that he did not elect to transfer from the Pension Plan to the Hybrid Option.
In early 2019, Mr. Marinak, nearing retirement, reviewed his retirement account and recognized that he was enrolled in the Hybrid Option. He contacted the Division of Retirement for guidance on how to switch back into the Pension Plan.
The Division of Retirement informed Mr. Marinak that he may utilize a one-time “second election” to move back into the Pension Plan, but must
pay a sum of approximately $160,000 as a “buy-in” amount to do so. This sum is derived from an actuarial calculation conducted by the Division of Retirement.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this cause pursuant to sections 120.569 and 120.57(1).
Mr. Marinak initiated this matter, alleging he did not consent to be enrolled in the Hybrid Option in 2002. Consequently, he believes that he should be re-enrolled in the Pension Plan without having to pay the “buy-in” amount quoted to him by the Division of Retirement.
The burden of proof in an administrative proceeding, absent a statutory directive to the contrary, is on the party asserting the affirmative of the issue. Dep’t of Transp. v. J.W.C. Co., 396 So. 2d 778 (Fla. 1st DCA 1981); see also Dep’t of Banking & Fin., Div. of Sec. & Investor Prot. v. Osborne Stern & Co., 670 So. 2d 932, 935 (Fla. 1996). The standard of proof is the preponderance of the evidence standard. § 120.57(1)(j), Fla. Stat.
Section 121.4501(8)(g), Florida Statutes, provides, in relevant part:
The state board shall receive and resolve member complaints against the program, the third-party administrator, or any program vendor or provider; shall resolve any conflict between the third-party administrator and an approved provider if such conflict threatens the implementation or administration of the program or the quality of services to employees; and may resolve any other conflicts. The third-party administrator shall retain all member records for at least 5 years for use in resolving any member conflicts. The state board, the third-party administrator, or a provider is not required to produce documentation or an audio
2 It is worth noting that if Mr. Marinak had filed a complaint after receiving the Estimate of Retirement Benefit, it would have been over six years after his enrollment in the Hybrid Option.
recording to justify action taken with regard to a member if the action occurred 5 or more years before the complaint is submitted to the state board. It is presumed that all action taken 5 or more years before the complaint is submitted was taken at the request of the member and with the member’s full knowledge and consent. To overcome this presumption, the member must present documentary evidence or an audio recording demonstrating otherwise. (emphasis added).
Under Florida law, SBA is not required to maintain a recording of the telephone call to justify enrolling Mr. Marinak in the Hybrid Option, as this action was taken more than five years before he made a complaint.
Approximately 17 years passed before Mr. Marinak complained to SBA about his enrollment in the Hybrid Option. As such, his decision is presumed to have been made with his full knowledge and consent. To overcome the presumption, Mr. Marinak had the burden to present documentary evidence or an audio recording to support his position that he did not elect to make the transfer and prove that his enrollment in the Hybrid Option was made without his full knowledge and consent.
Mr. Marinak did not meet that burden.
Understandably, if, as Mr. Marinak testified, no phone call to make the election took place, it would be impossible for him to have such a recording. Similarly, taking Mr. Marinak’s position that he neither sought out nor authorized the transfer to the Hybrid Option, he likely would have no documentary evidence to demonstrate such.
The documents that were presented by SBA establish that Mr. Marinak received, for a period of more than ten years prior to his
complaint, statements which showed that he was enrolled in the Hybrid Option. He was put on notice that he had an Investment Plan component, and had multiple opportunities to ask about it before the five-year period expired.
In addition to his contention that he did not elect to transfer from the Pension Plan to the Hybrid Option in 2002, Mr. Marinak took issue with Respondent’s assertion that he did so over the telephone.
In November 2002, when SBA contends that Mr. Marinak elected to transfer to the Hybrid Option, section 121.4501(4), Florida Statutes (2002), provided, in relevant part:
(b)1. With respect to an eligible employee who is employed in a regularly established position on September 1, 2002, by a district school board employer:
a. Any such employee may elect to participate in the Public Employee Optional Retirement Program[3] 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 November 30, or, in the case of an active employee who is on a leave of absence on July 1, 2002, by November 30, 2002, or within 90 days after the conclusion of the leave of absence, whichever is later.
In State Board of Administration v. Huberty, 46 So. 3d 1144 (Fla. 1st DCA 2010), the Court held that SBA’s interpretation of “by electronic means,” to include permitting an employee to make that election by telephone, is consistent with the plain language of the law.
In accordance with his contention that he did not authorize the 2002 change from the Pension Plan to the Hybrid Option, Mr. Marinak seeks to be re-enrolled in the Pension Plan. Florida law authorizes such a change, but with conditions. Section 121.4501(4)(f) provides, in relevant part:
After the period during which an eligible employee had the choice to elect the pension plan or the investment plan, or the month following the receipt of the eligible employee’s plan election, if sooner, the employee shall have one opportunity, at the
[3] The Public Employee Optional Retirement Program is the Investment Plan.
employee’s discretion, to choose to move from the pension plan to the investment plan or from the investment plan to the pension plan.
Section 121.4501(4)(f)2. provides, in relevant part, conditions for that second election:
If the employee chooses to move to the pension plan, the employee must transfer from his or her investment plan 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 pension plan and service in the investment plan. Benefit commencement occurs on the first date the employee is eligible for unreduced benefits, using the discount rate and other relevant actuarial assumptions that were used to value the pension 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 pension plan, the then- present value of the accrued benefit is deemed part of the required transfer amount. The division must ensure that the transfer sum is prepared using a formula and methodology certified by an enrolled actuary. A refund of any employee contributions or additional member payments made which exceed the employee contributions that would have accrued had the member remained in the pension plan and not transferred to the investment plan is not permitted. (emphasis added).
SBA does not have statutory authority to allow Mr. Marinak to utilize his second election without paying the sum representing the present value of that employee’s accumulated benefit obligation immediately following the time of such movement—that is the “buy-in” amount. The payment of this “buy-in” amount, when an employee elects to move from the Investment Plan back to the Pension Plan, is expressly required by statute.
Florida law provides no avenue for re-enrollment into the Pension Plan, by way of Mr. Marinak’s second election, without the payment of the “buy-in” amount. In discharging its responsibilities, SBA must act within the parameters established by the Legislature. SBA has only the authority conferred on it by the Legislature. See Pesta v. Dep’t of Corr., 63 So. 3d 788, 790 (Fla. 1st DCA 2011) (observing that administrative agencies have only such powers as statutes confer); Schiffman v. Dep’t of Prof’l Reg., Bd. of Pharm., 581 So. 2d 1375, 1379 (Fla. 1st DCA 1991) (“An administrative agency has only the authority that the legislature has conferred it by statute.”).
In sum, Mr. Marinak did not rebut the presumption that the initial election to transfer from the Pension Plan to the Hybrid Option, which occurred in 2002 (that is, more than five years prior to Mr. Marinak’s initial complaint in 2019), was made with his full knowledge and consent. Moreover, SBA has no authority to grant Mr. Marinak a second election to re-enroll in the Pension Plan without paying the statutorily mandated “buy-in” amount.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the State Board of Administration enter a final order dismissing Petitioner’s Florida Retirement System Investment Plan Petition for Hearing.
DONE AND ENTERED this 27th day of July, 2020, in Tallahassee, Leon County, Florida.
JODI-ANN V. LIVINGSTONE
Division of Administrative Hearings this 27th day of July, 2020.
Ruth E. Vafek, Esquire Ausley McMullen
Herbert M. Hill
Law Office of Herbert M. Hill, P.A. Post Office Box 2431
Ash Williams, Executive Director and Chief Investment Officer State Board of Administration
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.
