STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RICHARD W. HOLLAND,

Petitioner,

vs.

DEPARTMENT OF MANAGEMENT SERVICES, DIVISION OF RETIREMENT,

Respondent.

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) Case No. 02-0986

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RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on May 21, 2002, in Orlando, Florida, before T. Kent

Wetherell, II, the designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Richard W. Holland, pro se

17964 Lookout Hill Road Winter Garden, Florida 34787

For Respondent: Thomas E. Wright, Esquire

Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

STATEMENT OF THE ISSUE

Whether Petitioner was overpaid $961.87 in 1975 when he received a refund of his retirement contributions, and, if so,

whether Petitioner is required to refund that amount to the Division of Retirement before receiving any retirement benefits.

PRELIMINARY STATEMENT

By letter dated October 2, 2001, the Division of Retirement (Division or Respondent) informed Petitioner that he was overpaid $961.87 in 1975 when he received a refund of the contributions that he had made to his State retirement account. The letter further informed Petitioner that he was required to repay the amount of the overpayment, plus interest -- a total of

$4,643.62 -- before he could receive any retirement benefits.

On or about October 16, 2001, Petitioner filed a petition in which he requested a formal administrative hearing to contest the Division's determination regarding the overpayment. On March 12, 2002, the petition was referred to the Division of Administrative Hearings for the assignment of an administrative law judge to conduct the hearing requested by Petitioner.

The hearing was held on May 21, 2002. At the outset of the hearing, counsel for Respondent stipulated that the Division was no longer seeking interest from Petitioner. Thus, the only amount still at issue in this proceeding is the alleged overpayment of $961.87.

At the hearing, Petitioner testified in his own behalf and also presented the testimony of his wife, Jean Holland.

Petitioner's Exhibits P1-P9 were received into evidence. At the

hearing, Respondent presented the testimony of Ira Gaines, an administrator with the Division's Bureau of Retirement Calculations, and Willie Gavin, a records administrator with the Department of Banking and Finance. Respondent's Exhibits R1-R3 were received into evidence. At Respondent's request, official recognition was taken of Chapter 121, Florida Statutes, and Rule 60S-3.002, Florida Administrative Code.

No transcript of the hearing was filed. At the conclusion of the hearing, the parties requested and were granted until June 10, 2002, to file their proposed recommended orders. The parties' Proposed Recommended Orders were timely filed and were considered by the undersigned in preparing this Recommended Order.

FINDINGS OF FACT

Based upon the testimony and evidence received at the hearing, the following findings are made:

1. Petitioner is a law enforcement officer employed by the Florida Highway Patrol (FHP).

2. Petitioner was first hired by FHP in August 1968. He left FHP on October 15, 1975, to pursue a private venture.

3. Petitioner rejoined FHP in July 1981, and he is currently a member of the troop that patrols the Florida Turnpike.

4. Between September 1968 and December 1974, Petitioner made monthly contributions to the FHP pension fund which, at the time, was administered by FHP.

5. In 1970, when the Florida Retirement System (FRS) was created, Respondent took over the administration of the FHP pension fund, and Petitioner elected to participate in the FRS. The FRS was, and still is, administered by Respondent pursuant to Chapter 121, Florida Statutes.

6. Prior to January 1, 1975, the FHP pension fund and the FRS were "contributory," meaning that the employee was required to contribute a percentage of his or her salary to the fund, and contributions were also made by the employer. Starting on January 1, 1975, the FRS became "non-contributory," meaning that the employer made all of the contributions.

7. Petitioner's contributions to his FHP pension fund account were recorded on a four-column ledger sheet which showed the old balance, date of contribution, amount of the contribution, and the total balance. The ledger sheet was not computerized. The entries were manually typed onto the ledger sheet.

8. Petitioner's account showed a total balance of

   
   

   $4,656.71 on December 31, 1974, and because the FRS was "non- contributory" after that date, the account had the same balance on October 15, 1975, when Petitioner left FHP.

9. The total balance shown for Petitioner's account was incorrect as a result of a calculation error made when Petitioner's December 1968 contribution was entered onto the ledger sheet.

10. Prior to that contribution, the old balance reflected on the ledger sheet was $108.89. Petitioner's December 1968 contribution was $37.45, so the total balance should have been

    $146.34. However, a calculation error was made and the total balance entered on the ledger sheet was $1,108.21.

11. The effect of this error was that the balance shown in Petitioner's account was $961.87 (i.e., $1,108.21 minus $146.34) more than Petitioner had actually contributed.

12. The error was carried forward to the following month when $1,108.21 was entered as the old balance, and all subsequent entries to Petitioner's account reflected the error. As a result, Petitioner's actual contributions as of

    December 31, 1974 (and, hence October 15, 1975, when he left FHP) were $3,694.84, not $4,656.71.

13. The error was not discovered in October 1975 when Petitioner left FHP and requested a refund of his contributions. Apparently, the account was not audited prior to payment of the refund to Petitioner.

14. In October 1975, Petitioner signed a card requesting a refund of his contributions. The address listed on the card corresponded to Petitioner's address at that time.

15. The pertinent information from the card (i.e., the payee and the amount) was provided to the Comptroller by Respondent when a warrant was requested.

16. The Comptroller prepared a warrant in the requested amount and returned it to Respondent along with a computer- printed label that contained Petitioner's name and social security number, the refunded amount ($4,656.71), warrant number (173213), and the date of the warrant (November 4, 1975). The label was affixed to the refund request card, and the warrant was mailed to Petitioner.

17. The Comptroller's records show that warrant number 173213 was paid on November 21, 1975. The records do not show the payee of the warrant. Nor do the records show whether the warrant was deposited into a bank account or cashed. The cancelled warrant no longer exists.

18. Petitioner did not recall receiving a warrant in the amount of $4,656.71. Petitioner and his wife both testified that they recalled receiving only $2,500.00. Petitioner produced a deposit slip dated November 15, 1975, showing a

    $2,500.00 deposit as well as bank records which showed that

    deposit as the only large deposit into Petitioner's account between November 1975 and February 1976.

19. The source of the $2,500.00 check is not shown on the deposit slip. The Comptroller's records show no FRS warrants in that amount during the period of November 15, 1975, through November 21, 1975, when such a warrant would likely have been paid. Moreover, Petitioner conceded that he may have had another bank account at the time, although he could not locate any records for such an account.

20. Petitioner received a statement of account from Respondent in June 1974 showing the balance of his account to be

    $4,220.47 at that time. Despite having that information and despite his financial circumstances being "tight" at the time, Petitioner did not make any inquiry to Respondent as to why he received only $2,500.00. This suggests that the $2,500.00 check was not the FRS warrant.

21. The overpayment was first discovered in 2000 when Respondent conducted an audit of Petitioner's FRS account as part of its preparation of the member annual statement required by Section 121.136, Florida Statutes.

22. Petitioner was first informed of the error and the 1975 overpayment in August 2001 when he received an unsolicited telephone call from Brenda Shiver, an employee of the Respondent, regarding his retirement plans and the cost of

    "buying back" his prior service with the FHP between 1968 and 1975.

23. Petitioner has no current plans to retire. Nor does Petitioner have a current desire to "buy back" his prior service which would cost over $21,000, not including the amount at issue in this proceeding. The cost of the prior service is not at issue in this proceeding.

    CONCLUSIONS OF LAW

    
    

24. The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes. (All references to Sections are to the Florida Statutes. All references to Rules are to the Florida Administrative Code.)

25. The audit of Petitioner's FRS account that resulted in the agency action triggering Petitioner's request for an administrative hearing was initiated by Respondent, not Petitioner. Thus, unlike Wilson v. Dept. of Administration, 538 So. 2d 139 (Fla. 4th DCA 1989) (involving petitioner's assertion of right to receive credit for prior service), and Helms v. Dept. of Management Servs., DOAH Case No. 02-0354 (Recommended Order dated April 17, 2002) (involving request by petitioner for a refund of his contributions), where it was determined that the petitioner had the burden of proof, Respondent is the party

    seeking affirmative relief and a change in the status quo, i.e., a refund of the overpayment made to Petitioner in 1975.

    Therefore, it has the burden of proof in this proceeding. See Amico v. Division of Retirement, 352 So. 2d 556 (Fla. 1st DCA 1977)(agency has the burden of proof in case involving change in person's retirement status); Balino v. Dept. of Health and

    Rehabilitative Servs., 348 So. 2d 349 (Fla. 1st DCA 1977) (agency has the burden to establish that person receiving Medicaid benefits were no longer eligible).

26. The standard of proof is a preponderance of the evidence, see Section 120.57(1)(j), which means that Respondent must prove that it is "more probable than not" that an overpayment was made to Petitioner. See Black's Law Dictionary, at 1182 (6th ed. 1990) (defining "preponderance of the evidence").

27. The evidence clearly establishes that a calculation error was made in December 1968 which resulted in the balance of Petitioner's retirement account reflecting $961.87 more than Petitioner had actually contributed.

28. Although Respondent did not, and without a cancelled warrant bearing Petitioner's endorsement it could not conclusively prove that Petitioner received a refund in the amount of $4,656.71, the paper trail shown by Respondent establishes that it is more probable than not that Petitioner

    received the refund in that amount. In this regard, the evidence shows that Petitioner requested a refund of his contributions; that as a result of that request, warrant number 173213 was prepared by the Comptroller in the amount of

    $4,656.71; that the computer-generated label prepared by the Comptroller in connection with warrant number 173213 identified Petitioner as the payee of the warrant; that Respondent had Petitioner's correct address on file; that the warrant was paid on November 21, 1975; and that no FRS warrants were paid around that time in the amount of $2,500.00, which was the amount that Petitioner recalled receiving from Respondent.

29. At the hearing, Petitioner argued that Respondent's effort to recover the overpayment should be barred by the statute of limitations. There is some appeal to that argument because the events giving rise to this case occurred more than

    33 years ago (calculation error) and 26 years ago (overpayment), and as a result of the passage of time, documents (namely, the cancelled warrant) are no longer available and memories have faded. However, as Respondent points out in its Proposed Recommended Order, neither the statute of limitations nor the related equitable principle of laches apply in administrative proceedings. See Section 95.011 (defining "action" to mean a "civil action or proceeding"). And see Farzad v. Dept. of Professional Reg., 443 So. 2d 373 (Fla. 1st DCA 1983) (agency's

    disciplinary action not barred by the laches); Dept. of Community Affairs v. Goodson Paving, Inc., DOAH Case No. 99-2725 (Recommended Order dated Dec. 1, 1999)(concluding after extensive analysis that the statute of limitations and laches did not bar agency action to collect a late fee).

30. Having determined that Respondent met its burden of proof and that its effort to recover the overpayment is not time-barred, the only remaining issue is the remedy. Respondent contends that Petitioner is required to repay the overpayment prior to receiving any retirement benefits for his current 20 years of service.

31. As support for its position, Respondent cites Rule 60S-3.002(2), which provides:

    All employee retirement contributions for service credit on which benefits are to be calculated must be paid prior to the date of issuance of the first retirement benefit payment.

    
    

32. That rule is inapplicable in this case. By its terms, the rule only applies to contributions related to service credit "on which benefits are to be calculated." In this case, the contributions at issue relate to Petitioner's service from 1968 to 1975. However, Petitioner is not requesting that his retirement benefits be calculated based upon that prior service.

33. Only if Petitioner chooses to "buy back" his prior service would Rule 60S-3.002(2) be implicated. And see Section

    121.091(5)(authorizing employee who received refund of member contributions to reinstate his or her rights to the credit for that service by repaying the refunded member contributions).

    Until then, Petitioner has no rights under the FRS to the service credit represented by the refunded contributions. See Section 121.071(6)(c); Rule 60S-3.002(6). It is as if that service never occurred.

34. Respondent has not cited any basis other than Rule 60S-3.002(2) to require Petitioner to refund the overpayment as a condition of receiving retirement benefits based upon his service from 1981 to the present. Nor has the undersigned's research located any. Indeed, there is nothing in Chapter 121 or Rule Chapter 60S which specifically authorizes Respondent to seek refunds of overpayments under the circumstances of this case. Cf. Section 17.04 (assigning the Comptroller the responsibility of initiating actions to collect monies owed to the State); Section 121.091(9)(b)2.-6.(requiring retiree to repay retirement benefits under specified circumstances); Rules 3A-21.001 and 3A-21.004 (Comptroller's rules which establish procedures for recovery of non-salary sums due to the State).

35. In sum, although the evidence shows that Petitioner was overpaid $961.87 in 1975 when he received a refund of his contributions, Respondent is only authorized to require Petitioner to refund the overpayment as a condition of receiving

benefits for the service to which the contributions are related, i.e., Petitioner's service with FHP between 1968 and 1975.

There is no statute or rule that authorizes Respondent to require Petitioner to refund the overpayment as a condition upon Petitioner's receipt of benefits for his current 20 years of service.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the Division of Retirement issue a final order that increases the cost for Petitioner to "buy back" his prior service by $961.87 to reflect the 1975 refund overpayment, but eliminates the mandate that Petitioner pay that amount as a condition of receiving retirement benefits related to his current service.

DONE AND ENTERED this 24th day of June, 2002, in Tallahassee, Leon County, Florida.

T. KENT WETHERELL, II Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 24th day of June, 2002.

COPIES FURNISHED:

Richard W. Holland 17964 Lookout Hill Road

Winter Garden, Florida 34787

Thomas E. Wright, Esquire Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

Erin Sjostrom, Director Division of Retirement

Department of Management Services Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560

Monesia Taylor Brown, Acting General Counsel Department of Management Services

4050 Esplanade Way

Tallahassee, Florida 32399-1560

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.

Docket for Case No: 02-000986

Orders for Case No: 02-000986