STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HUEY G. MANGES, )

)

Petitioner, )

)

vs. ) CASE No. 95-4026

)

DIVISION OF RETIREMENT, )

)

Respondent, )

and )

)

BROWARD COUNTY, )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William J. Kendrick, held a formal hearing in the above-styled case on January 23, 1996, in Fort Lauderdale, Florida.

APPEARANCES

For Petitioner: Ronald FitzGerald, Esquire

Fleming, O'Bryan & Fleming, P.A. Post Office Drawer 7028

Fort Lauderdale, Florida 33338

For Respondent: Stanley M. Danek, Esquire

Division of Retirement Cedars Executive Center 2639-C North Monroe Street

Tallahassee, Florida 32399-1560

For Intervenor: Kevin B. Kelleher, Esquire

Governmental Center, Suite 423

115 South Andrews Avenue

Fort Lauderdale, Florida 33301 STATEMENT OF THE ISSUE

At issue is whether contributions by petitioner's employer, Port Everglades Authority, to his deferred compensation plan, which contributions would not otherwise be paid to him, are "compensation" (retirement creditable wages or salary), as that term is used in the Florida Retirement System to compute retirement benefits.

PRELIMINARY STATEMENT

This case involves a dispute between a retired employee, petitioner Huey G. Manges, under the Florida Retirement System and the Division of Retirement (Division) over the appropriate calculation of his pension payments.

Here, petitioner's average final compensation was calculated without including any amounts contributed by his employer to a deferred compensation plan. Petitioner has requested that the Division include such sums in its calculation of his average final compensation, and thereby increase his monthly retirement benefits. The Division denied petitioner's request, concluding that such payments did not constitute "compensation" (retirement creditable wages or salary), as defined by Section 121.021(22), Florida Statutes, and advised the employee of his right to a hearing under the provisions of Section 120.57, Florida Statutes, if he desired to dispute the Division's conclusion.

Petitioner duly filed a petition contesting the Division's conclusion, and the matter was referred to the Division of Administrative Hearings for the assignment of a Hearing Officer to conduct a formal hearing.

At hearing, petitioner testified on his own behalf and called Mary Meynarez and Linwood Cabot, as witnesses. Petitioner's exhibits 1 through 4, 5 (a through f), and 6 through 8 were received into evidence. 1/ Respondent called Cathy Smith as a witness, and its exhibits 1 through 6 were received into evidence. Intervenor called Andrew Deering as a witness, and its exhibit 1 was received into evidence. Official recognition was taken of page IX of Attorney General bound volume of opinions, 1992, and Attorney General Opinion 80-36, dated April 24, 1980. The documents of which official recognition has been taken were marked Hearing Officer exhibit 1.

The transcript of hearing was filed March 8, 1996, and the parties were accorded twenty days from that date to file proposed recommended orders.

Consequently, the parties waived the requirement that a recommended order be rendered within thirty days after the transcript is filed. Rule 60Q-2.031, Florida Administrative Code. The parties' proposed findings of fact, contained within their proposed recommended orders, are addressed in the appendix to this recommended order.

FINDINGS OF FACT

The petitioner

1. Petitioner, Huey G. Manges, was employed as a fire fighter by the Port Everglades Authority (the Port) in September 1961, and over the years rose through the ranks until in 1975 or 1976 he became Chief of the department. Petitioner served as Chief until 1988 or 1989, and was then promoted to Public Safety Director. As an employee of the Port, petitioner was a member of the Florida Retirement System.

   
   

   The Port's deferred compensation plan

   
   

2. In 1983, the Port adopted a deferred compensation plan for all employees. The plan provided that employees could "make contributions into the fund in an amount not to exceed 33.3 [percent] of base salary, with a maximum cap of $7500." Under the plan, the Port, as the employer, made no contribution to the plan.

3. In September 1984, the plan was amended to create a special provision for "key management persons," as an incentive to motivate them to perform in an outstanding manner and to encourage their continued commitment to the Port. At the time, it was observed that such employees have "extensive responsibilities," and "are not compensated for the many hours they work beyond the normal '40- hour' work week." As amended, the Port matched the qualified "key management person['s]" contribution on a dollar for dollar basis, not to exceed a maximum of 5 [percent] of base salary." The combined employer/employee contribution was limited to $7,500, annually. Among the positions designated as "key management persons" was the position of Fire Chief.

   
   

4. Subsequently, at a date not apparent from the record, but at least 5 years before petitioner's retirement, the plan was amended to its current format, and further refined the classes of participants. For employees, such as petitioner, who had attained senior management Grade 9 or higher under the Port's management pay plan, and who elected to participate in the plan by executing a participation agreement, the Port agreed to contribute, on behalf of the employee, "an annual amount equal to the lesser of (i) $7,500 or (ii) 10 [percent] of such Employee's Compensation," regardless of whether they contribute to the plan. For employees below senior management Grade 9, and who elected to participate in the plan, the Port agreed to make "a matching contribution equal to 100 [percent] of the amount of a Participant's annual Deferred Compensation, up to an annual maximum matching contribution of 5 [percent] of the Participant's Compensation."

   
   

5. According to petitioner, he participated in the plan from its inception, and "maxed it" each year. [Transcript, page 56]. By such testimony, it is concluded that the annual contribution to his deferred compensation account was $7,500, and that the Port's contribution varied, over the years, from a "dollar for dollar" match under the September 1984 amendment, to a full

   $7,500 contribution during the period that included, at least, petitioner's last five years of employment with the Port.

   
   

   Petitioner's retirement and subsequent events

   
   

6. In or about June 1994, petitioner applied with respondent, Division of Retirement, for retirement under the Florida Retirement System, and his request was approved effective July 1, 1994. Since that date, petitioner has duly received his monthly retirement benefits, as calculated from the Division's records at the time of his retirement.

   
   

7. On March 8, 1995, petitioner, through counsel, wrote to the Division and requested that his retirement benefits be recalculated predicated on an error he felt was committed by the Port in its contributions to the Florida Retirement System on his behalf. Such error, petitioner contended, was the Port's failure to treat the contributions it made to his deferred compensation account as retirement creditable wages, and to make the necessary contributions to the State Retirement Account. Essentially, petitioner wanted the Division to collect the contributions from the Port, and then recalculate his average final compensation to include the $7,500 annual contribution by the Port, and adjust his pension payments accordingly. 2/

   
   

8. Regarding petitioner's contention, the proof demonstrates that from the inception of the plan until May 1989, the Port, unbeknownst to the Division, had included the contribution it made to an employee's deferred compensation plan in calculating an employee's retirement creditable wages and Florida Retirement System (FRS) contributions.

9. In May 1989, Mary Meynarez, the new director of finance for the Port, wrote to the Division concerning the propriety of such treatment. That letter was in response to a conversation the Port's CPA had with the Division, wherein he was advised that employer contributions to a deferred compensation plan were not subject to FRS contributions because gross or retirement creditable wages do not include matching contributions or fringe benefits. Ms. Meynarez's letter sought written confirmation of the Division's position.

   
   

10. By letter of May 19, 1989, the Division advised Ms. Meynarez, consistent with its long established interpretation of the retirement laws, that such was the Division's position. Thereafter, the Port made no further contributions to the FRS based on its contribution to an employee's deferred compensation plan, and it submitted and received from the Division a credit adjustment for the erroneous payments for prior periods.

    
    

11. Given the Division's interpretation of the retirement laws, it concluded that the Port properly excluded the contributions it made to his deferred compensation account when calculating FRS contributions, and by letter of July 5, 1995, advised petitioner that his retirement benefits had been correctly calculated and no adjustment would be made. Such letter further advised petitioner of his right to a section 120.57 hearing if he disagreed with the Division's decision. Petitioner timely filed such a request, and this proceeding duly followed.

    
    

    Pertinent legislation and the Division's interpretation

    
    

12. Section 121.021(24), Florida Statutes, defines "average final compensation," as that term is used in deriving a members retirement benefits under the Florida Retirement System, to mean:

    
    

    [T]he average of the 5 highest fiscal years of compensation for creditable service prior to retirement, termination, or death . . .

    The payment for . . . bonuses, whether paid as salary or otherwise, shall not be used in the calculation of the average final compensation.

    
    

13. Prior to 1989, section 121.021(22) defined "compensation," as that term is used in the Florida Retirement System, as follows:

    
    

    (22) "Compensation" means the monthly salary paid a member, including overtime payments and bonuses paid from a salary fund, as reported by the employer on the wage and tax statement (Internal Revenue Service form W-2) or any similar form. When a member's compensation

    is derived from fees set by statute, compens- ation shall be the total cash remuneration received from such fees. Under no circum- stances shall compensation include fees paid professional persons for special or particular services.

14. During the course of the 1989 Legislative session, proposals were made to amend the provisions of section 121.021(22). The reason for amendment was twofold. First, pursuant to subsection 121.021(22) and (24) bonuses were included in the definition of "compensation" but excluded when calculating "average final compensation." This resulted in a conflict because retirement contributions were due on bonuses, but bonuses could not be used in calculating a member's "average final compensation." Second, the definition of "compensation" was silent with regard to the treatment of salaries paid to employees who participated in a deferred compensation, salary reduction, or tax- sheltered annuity program. Consequently, although the Division had consistently interpreted the subsection to so provide, it was felt appropriate to amend the statute to clearly provide that an employee's election to defer a portion of his salary to a deferred compensation plan did not reduce his retirement creditable wages.

    
    

15. As a consequence, pursuant to Chapter 89-126, Section 1, Laws of Florida (1989), subsection 121.021(22), effective June 26, 1989, was amended to read as follows:

    
    

    "Compensation" means the monthly salary paid a member by his or her employer for work per- formed arising from that employment, including overtime payments paid from a salary fund.

    Under no circumstances shall compensation in- clude fees paid professional persons for special or particular services or include salary payments made from a faculty practice plan operated by rule of the Board of Regents for eligible clinical faculty at the Univer- sity of Florida and the University of South Florida. [For all purposes under this chapter, the compensation or gross compensation of any member participating in any salary reduction, deferred compensation, or tax-sheltered annuity program authorized under the Internal Revenue Code shall be deemed to have been the compen- sation or gross compensation which the member would have received if he or she were not participating in such program]

    [Emphasis added].

    
    

16. Here, while recognizing that the contributions made by the Port to petitioner's deferred compensation plan may be part of a management package designed to encourage employment fidelity, the Division considers such payments fringe benefits, similar to employer paid health and life insurance, and not "compensation," as defined by subsection 121.021(22) for retirement purposes.

    
    

17. In reaching such conclusion, the Division first points to the provision of subsection 121.021(22), as amended, which provides that "[f]or all purposes under this chapter, the compensation or gross compensation of any member participating in any salary reduction, deferred compensation, or tax- sheltered annuity program . . . shall be deemed to have been the compensation or gross compensation which the member would have received if he or she were not participating in such program." Since petitioner would not have received the

    $7,500 Port contribution had he not elected to participate in the Plan, the literal application of the statutory language would exclude such payments from the definition of "compensation or gross compensation" for retirement purposes.

18. In contrast, petitioner points out that the amendment to subsection 121.021(22) relied upon by the Division was not occasioned to address the peculiarities of his situation, but was designed to clarify that the portion of the employee's salary he elected to defer would not reduce his retirement benefits. Such issue is distinct, according to petitioner, from the issue of whether employer contributions to a deferred compensation plan are "compensation" for retirement purposes.

    
    

19. While petitioner may be correct as to the purpose of the amendment to subsection 121.021(22), such does not compel the conclusion that the Division's literal application of that subsection, as excluding employer contributions from the calculation of retirement creditable wages, was not consistent with the Legislature's intent.

    
    

20. In concluding that the Division's interpretation is reasonable and consistent with the purpose and intent of subsection 121.021(22), it is observed that under that subsection "compensation" is defined to mean "the monthly salary paid a member by his . . . employer for work performed." "Monthly salary," as observed by the Division, is commonly understood and reasonably read to refer to the fixed compensation for services paid to the employee on a regular basis or, as in petitioner's case, his fixed monthly salary under the Port's management pay plan, and does not include fringe benefits, such as employer matching payments or contributions to a deferred compensation plan. 3/ Consequently, the Division's decision to exclude such benefits from the calculation of petitioner's retirement benefits under the Florida Retirement System was reasonable. 4/

    
    

    CONCLUSIONS OF LAW

    
    

21. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings. Section 120.57(1), Florida Statutes.

    
    

22. Here, petitioner is seeking the recalculation of his average final compensation to include the $7,500 annual contribution by the Port, and an adjustment to his retirement benefits based on that recalculation. As the proponent, petitioner "carries the 'ultimate burden of persuasion.'" Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778, 787 (Fla. 1st DCA 1981). See also, Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349, 350 (Fla. 1st DCA 1977), ("[T]he burden of proof, apart from statute, is on the party asserting the affirmative issue before an administrative tribunal.")

    
    

23. Generally, an administrative construction of a statute by an agency responsible for its administration is entitled to great deference and should not be overturned unless clearly erroneous. Department of Environmental Regulation

    v. Goldring, 477 So.2d 532 (Fla. 1985), All Seasons Resorts, Inc., v. Division of Land Sales, Condominiums and Mobile Homes, 455 So.2d 544 (Fla. 1st DCA 1984), and Sans Souci v. Division of Land Sales and Condominiums, 421 So.2d 623 (Fla. 1st DCA 1982). Moreover, the agency's interpretation does not have to be the only one or the most desirable one; it is enough if it is permissible. Florida Power Corp. v. Department of Environmental Regulation, 431 So.2d 684 (Fla. 1st DCA 1983). However, where the legislative intent as evidenced by a statute is clear and unambiguous, there is no need for any construction or interpretation, and the forum need only give effect to the plain meaning of its terms. Van Pelt v. Hilliard, 75 Fla. 792, 78 So. 693 (1918).

24. The fundamental rules governing construction applicable to the instant case were aptly set forth in Florida State Racing Commission v. McLaughlin, 102 So.2d 574, 575 (Fla. 1958), as follows:

    
    

    It is elementary that the function of the Court is to ascertain and give effect to the legislative intent in enacting a statute.

    In applying this principle certain rules have been adopted to guide the process of judicial thinking. The first of these is that the Legislature is conclusively presumed to have a working knowledge of the English language and when a statute has been drafted in such a manner as to clearly convey a specific meaning the only proper function of the Court is to effectuate this legislative intent.

    This rule is subject to the qualification that if a part of a statute appears to have a clear meaning if considered alone but when given that meaning is inconsistent with other parts of the same statute or others in pari materia,

    the Court will examine the entire act and those in para materia in order to ascertain the over- all legislative intent.

    When construing a particular part of a statute it is only when the language being construed in and of itself is of doubtful meaning or doubt as to its meaning is engendered by apparent inconsistency with other parts of the same or closely related statute that any matter extrin- sic the statute may be considered by the Court in arriving at the meaning of the language employed by the Legislature.

    
    

    Accord, State v. State Racing Commission, 112 So.2d 825 (Fla. 1959), and Van Pelt v. Hilliard, 75 Fla. 792, 78 So. 693 (Fla. 1918). See also State v. Webb,

    398 So.2d 820, 824 (Fla. 1981), ("It is a fundamental rule of statutory construction that legislative intent is the polestar by which the court must be guided and this intent must be given effect even though it may contradict the strict letter of the statute."), and Department of Professional Regulation v. Florida Dental Hygienist Association, Inc., 18 FLW D326 (Fla. 1st DCA 1993).

    
    

25. Here, as noted in the findings of fact, the Division's reading or interpretation of the word "compensation," as defined by subsection 121.021(22), is consistent with the plain and ordinary meaning of the words employed in the statute. Consequently, the Division's decision to exclude fringe benefits, such as an employer's contribution to an employee's deferred compensation plan, from the calculation of a member's benefits under the Florida Retirement System was reasonable.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered dismissing petitioner's petition

for formal hearing, and denying his request for additional retirement benefits.

DONE AND ENTERED this 13th day of June, 1996, in Tallahassee, Leon County, Florida.

WILLIAM J. KENDRICK, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 13th day of June, 1996.

ENDNOTES

1/ Petitioner's exhibit 9 was marked as a demonstrative exhibit, and not moved into evidence.

2/ Pursuant to Chapter 91-346, Laws of Florida, the Port Everglades authority was dissolved and its indebtedness and liabilities were assumed by Intervenor, Broward County. Such change occurred November 23, 1994, subsequent to petitioner's retirement.

3/ The rules of statutory construction require that courts give statutory language its plain and ordinary meaning, unless the words are defined in the statute. Southeastern Fisheries Association, Inc. v. Department of Natural Resources, 453 So.2d 1351 (Fla. 1984). If necessary, the plain, ordinary meaning of a word can be found by looking in a dictionary. Gardner v. Johnson,

451 So.2d 477 (Fla. 1984). "Salary" is commonly defined as "[a] fixed compensation for services, paid to a person on a regular basis." "Fringe benefits" are commonly defined as "[a]n employment benefit given in addition to one's wages or salary." The American Heritage Dictionary of the English Language, New College Edition.

4/ In reaching the foregoing conclusion, the Attorney General's Opinion (petitioner's exhibit 4) has not been overlooked. Such opinion is not, however, persuasive for a number of reasons. First, such opinion was rendered on the incorrect assumption that the Division considered employer contributions to a deferred compensation plan on behalf of an employee to be reportable for retirement contribution purposes. Consequently, the opinion did not accord due deference, as discussed in the conclusions of law, to the agency's actual interpretation. Second, the opinion's reliance on subsection 112.215(6)(b), without reference to the provisions of subsection 112.215(3), has led to an erroneous conclusion. Notably, subsection 112.215(3) only authorizes the creation of a deferred compensation plan which allows the "employee to defer all or any portion of that employee's otherwise payable compensation." The stricture placed on such plans by subsection 112.215(6)(b) requiring, as a condition to the effectiveness of a plan, that the "compensation at time of deferral will . . . be deemed compensation . . . for the purpose of the retirement system" clearly refers to the deferral contemplated by subsection 112.215(3). Consequently, the provisions of Section 112.215, Florida Statutes, do not dictate a different reading of subsection 121.021(22).

In reaching the foregoing conclusion, the efforts made during the 1995 Legislative session to amend subsection 121.021(22) to specifically provide that public funds contributed by an employer to an employee's deferred compensation plan would not be considered compensation for retirement purposes have likewise not been overlooked. Why that legislation failed to pass is, at best, speculative, and such efforts lend no meaningful insight to the resolution of the issue presented in this case.

APPENDIX

Petitioner's proposed findings of fact consist of thirteen unnumbered paragraphs, which are addressed as follows:

1 and 2. Addressed in paragraph 1.

1. Addressed in paragraphs 2 through 4.

2. Addressed in paragraph 5.

5 through 8. Addressed in paragraphs 8 through 10.

1. First sentence rejected as not relevant to the issue of "compensation" as that term is defined by subsection 121.021(22). Second sentence accepted, also not relevant. Third sentence addressed in paragraph 6. Fourth sentence rejected as recitation of testimony and contrary to the facts as found.

2. Addressed in paragraphs 9 through 11, and 17 through 20.

11 and 12. Rejected as argument. See also, endnote 4.

13. Rejected as contrary to the facts and conclusions reached.

The Division's proposed findings of fact are addressed as follows:

1 through 4. Addressed in paragraph 1.

5 through 8, 10, 11 and 13. Addressed in paragraphs 2 through 4, otherwise unnecessary detail.

9 and 12. Addressed in paragraph 5.

14 through 16. Subordinate, but addressed in paragraph 10.

1. Addressed in paragraph 9.

2. Addressed in paragraph 10.

3. Subordinate, but addressed in paragraph 8.

4. Unnecessary detail.

22 (sic) and 23 (sic). Addressed in paragraph 10.

24 (sic) and 25 (sic). Addressed in paragraph 6.

1. (sic). Unnecessary detail.

2. (sic). Addressed in endnote 2.

3. (sic) through 30 (sic). Addressed in endnote 4.

Intervenor's proposed findings of fact are addressed as follows:

1 through 3. Addressed in paragraph 6.

4 and 5. Addressed in paragraph 11.

6. Addressed in endnote 2.

7 through 14. Addressed in paragraphs 2 through 5, and 17.

15. Addressed in paragraph 9.

16 and 17. Addressed in paragraph 10.

18 through 23. Addressed in paragraph 10, otherwise unnecessary detail.

1. Addressed in paragraph 8.

2. Addressed in paragraphs 8 through 10.

3. Unnecessary detail.

4. Accepted, but unnecessary detail.

28 through 30. Addressed in endnote 4.

31. Addressed in paragraph 10.

COPIES FURNISHED:

Ronald FitzGerald, Esquire Fleming, O'Bryan & Fleming, P.A. Post Office Drawer 7028

Fort Lauderdale, Florida 33338

Stanley M. Danek, Esquire Division of Retirement Cedars Executive Center 2639-C North Monroe Street

Tallahassee, Florida 32399-1560

Kevin B. Kelleher, Esquire Attorney for Broward County Governmental Center, Suite 423

115 South Andrews Avenue

Fort Lauderdale, Florida 33301

A. J. McMullian, III, Director Division of Retirement

Cedars Executive Center Building C

2639 North Monroe Street Tallahassee, Florida 32399-1560

Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way

Tallahassee, Florida 32399-0950

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this recommended order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 95-004026

Orders for Case No: 95-004026