STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CITY OF CRYSTAL RIVER,

Petitioner,

vs.

DEPARTMENT OF MANAGEMENT, SERVICES, DIVISION OF RETIREMENT,

Respondent.

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) Case No. 03-0324

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RECOMMENDED ORDER

Pursuant to notice this cause came on for formal proceeding before P. Michael Ruff, duly-designated Administrative Law Judge of the Division of Administrative Hearings on April 24, 2003, in Crystal River, Florida. The appearances were as follows:

APPEARANCES

For Petitioner: David La Croix, Esquire

123 North Main Street Brooksville, Florida 34601-2520

For Respondent Thomas E. Wright, Esquire

Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950 STATEMENT OF THE ISSUE

The issue to be resolved in this proceeding concerns whether the Petitioner, the City of Crystal River, is required to report Myrl David Sallee as a member of the Senior Management

Services Class (SMSC) of the Florida Retirement System (FRS) for the period from June 7, 1999, through July 2000, and remit the required contributions for that period.

PRELIMINARY STATEMENT

The Petitioner City is a member employer of the Florida Retirement System (FRS). The Petitioner hired Myrle David Sallee as City Manager in June of 1999. The City's hiring contract with Mr. Sallee provided "City shall contribute an amount equal to 24 percent of salary to agreed upon retirement plan in lieu of city retirement." Because Mr. Sallee had enrolled in an alternative retirement plan with the city, operated and managed by the International City Manager's Association (ICMA), the Petitioner City did not report Mr.

Sallee's hiring nor his wages to the Respondent agency until July 2000. The City Manager, Mr. Sallee had never filed a form FRS-M10, required for enrollment in the FRS. Mr. Sallee was purportedly unaware of any obligation to participate in the FRS until June 7, 2000. On that date he completed and filed a form SMS-3, with the Division, which is an election to withdraw or not participate in the FRS because he chose to continue to participate in his employer-provided annuity program instead.

The Division there upon informed Crystal River that Mr. Sallee would be removed from the FRS effective August 1, 2000, and that contributions were due for all employment previous to that date.

The City requested a reconsideration of that decision, which was denied, and this formal proceeding thereafter ensued.

The cause came on for hearing as noticed. The Petitioner offered the testimony of Linda Stillson, Assistant Finance Director for the City of Crystal River and one exhibit, which was admitted into evidence. The Respondent presented the testimony of Kathy Smith, Benefits Administrator, Division of Retirement, and offered eight exhibits which were admitted into evidence. Official recognition was taken of Chapter 121, Florida Statues, and specifically, Section 121.021(10), (22),

(34) (42) and (52); Section 121.051; Section 121.055; Section 121.061; and Section 121.071, Florida Statutes, (2001). Official recognition was also taken of Rules 60S-1.0057 and 60S- 3.011, Florida Administrative Code.

Upon conclusion of the proceeding, the parties elected to stipulate to an extended briefing schedule and to submit Proposed Recommended Orders. Those Proposed Recommended Orders have been considered in the rendition of this Recommended Order.

FINDINGS OF FACT

1. The Petitioner, the City of Crystal River (City) is a Florida municipal corporation which has elected to participate in the Florida Retirement System (FRS). The Respondent is an agency of the State of Florida charged with administering the

   Florida Retirement System and enforcing the statues and rules which pertain thereto.

2. On June 7, 1999, the City hired Myrle David Sallee as its City Manager, pursuant to a written contract which required Mr. Sallee to begin his employment on that date. The City's contract with Me. Sallee provided, "City shall contribute an amount equal to 24 percent of salary to agreed upon retirement plan in lieu of city retirement." The term "city retirement" refers to the FRS, of which the city normally was a participating member.

3. Upon commencement of his employment, Mr. Sallee elected to have his city retirement contributions paid into a retirement plan operated and managed by the International City Manager's Association (ICMA) and the city agreed. From the date of his employment with the city until his employment terminated on June 6, 2001, the city made the required 24 percent contributions for Mr. Sallee to the ICMA plan.

4. Mr. Sallee's position as city manager was one which is required to participate in the FRS Senior Management Service Class pursuant to Section 121.055(1)(b)1, Florida Statutes, and Rule 60S-1.0057(1)(c)2, Florida Administrative Code. Persons in such a position may, however, elect to withdraw from the FRS altogether, pursuant to Section 121.055(1)(b)2, Florida Statutes. There is no rule that corresponds to such an

   unconditional withdrawal; however, Rule 69S-1.0057(2)(c), Florida Administrative Code, provides that some person eligible to participate in the Senior Management Service Class of the FRS, including city managers, may elect to participate in a lifetime annuity program provided by their employer, in lieu of being a member of the FRS Senior Management Service Class.

5. Local government employees participating in the FRS Senior Management Service Class are obligated by Rule 60S- 1.0057(3)(b)1, Florida Administrative Code, to complete and file with the division a form SMS-3 and a form FRS-M10.

6. Pursuant to Rule 60S-1.0057(3)(b)2, Florida Administrative Code, the election to withdraw from the FRS altogether and participate in an employer-provided lifetime annuity program is also made by filing a form SMS-3. According to Rule 60S-1.0057(2)(c)1, such an election is effective the first day of the month following the month in which the form SMS-3 is received by the Division.

7. Mr. Sallee was unaware of his obligation to participate in the FRS until July 7, 2000, at which time he completed and filed with the Division a form SMS-3. In his form SMS-3, Mr. Sallee elected to withdraw from the FRS and participate in an employer-provided annuity program instead.

8. Mr. Sallee never did file with the Division a from FRS-

   
   

   M10.

9. The City made a required FRS contribution for Mr.

   
   

   Sallee for July of 2000, but no other. On November 20, 2000, the Division notified the City, by letter, that FRS contributions were due for Mr. Sallee from the date of his employment, June 7, 1999, until the effective date of his election to withdraw from the FRS, August 1, 2000. By various telephone calls and letters, the City informed the Division of its position and requested relief from making the contributions payments that the Division claimed were due. On September 30, 2002, the Division notified the City, by letter, that it had not changed its position and that the letter of that date constituted final agency action, to the effect that the Division was maintaining its claim that the City owed the contribution payments at issue.

10. Rule 60S-1.002(2), Florida Administrative Code, provides that the Division "shall deny membership" in the FRS to any employee who does not comply with statutory requirements for membership or requirements for membership set forth in Chapter 60S, Florida Administrative Code. In addition to Rule 60S- 1.0057(3)(b)1, Florida Administrative Code, Rule 60S-1.002(2), Florida Administrative Code also requires an employee to file a form FRS-M10 with the Division for enrollment into the FRS. The Division has admitted that the City does not have to make FRS contributions for employees who are not me member of the FRS.

11. Within a week after Sallee was hired by the City, the City's Finance Director and Assistant Finance Director resigned their positions. According to witness Linda Stilson, during the thirteen months from when Sallee was hired on June 7, 1999, until July 7, 2000, the date he completed and filed with the Division a form SMS-3 (electing not to be a participant in the FRS) the City hired and lost another finance director; hired another finance director who left in October of 2000; hired and lost another assistant finance director; and hired Ms. Stilson as assistant finance director on May 25, 2000. It was Ms. Stilson who discovered that Mr. Sallee had not been enrolled in the FRS.

12. Although the Division put on testimony that the City had been sent notices of the general requirements for enrollment in the FRS, there was no testimony that the City had actually received such notices prior to Mr. Sallee's hiring. Rule 60S- 3.011(2) provides for the assessment of delinquent fees for FRS contributions which have not been timely made; however, Florida Administrative Code Rule 60S-3.011(4) allows the Division to waive delinquent fees because of exceptional circumstances beyond an employer's control.

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. Sections 120.569 and 120.57, Florida Statutes.

14. Because of his non-compliance with Rule 60S- 1.0057(3)(b)1, Florida Administrative Code, by his failure to file with the Division a form SMS-3 until July 7, 2000, the FRS should have denied Mr. Sallee membership in the FRS until at least July 7, 2000, in accordance with Rule 60S-1.002(2), Florida Administrative Code. Indeed he never filed a form FRS- M10 necessary for initiating enrollment into the FRS.

15. Since Mr. Sallee should never have been considered by the Division to have been a member of the FRS, according to its own rules, until at least June 7, 2000, when Mr. Sallee first complied with the rule requiring filing of a from SMS-3 regarding enrollment in the FRS, no FRS contribution should have been required for Mr. Sallee until at least July 7, 2000.

16. Because of non-compliance with Rule 60S-1.0057(3)(b)1 and 60S-1.002(2), Florida Administrative Code, through his failure to file with the Division a form FRS-M10 for enrollment into the FRS, the FRS should have denied Mr. Sallee membership in the FRS even after July 7, 2000, in accordance with Florida Administrative Code, Rule 60S-1.002(2), until such time as he

    complied with the enrollment requirements. In fact, he was never enrolled in the FRS at all.

17. Since Mr. Sallee should have never been considered by the Division to be a member of the FRS, according to its own rules, no FRS contribution for Mr. Sallee should have been required from the City at all. In fact, the Division should not have accepted the one-month contribution made by the City because Mr. Sallee had not complied with the Division rules and the Division was required to "deny membership" in the FRS to him pursuant to Rule 60S-1.002(2). Indeed, inasmuch as the City's contract of hiring with Mr. Sallee provided that the City would contribute to the agreed-upon ICMA retirement plan "in lieu of city retirement" (i.e. FRS), if the Division required Mr. Sallee to join the FRS and the City to make contribution therefor it might be construed by a court of competent jurisdiction to have engaged in a constitutionally prohibited impairment of the obligation of the City and Mr. Sallee's contract.

18. Assuming arguendo that if contributions for Mr. Sallee could be legally required from the City, the turmoil in the City's finance department and the frequent change of finance directors and assistant finance directors could, within the Division's discretion, be construed to be an exceptional circumstance suffiently beyond the City's control (especially since the employee in question would never exert a burden on the

FRS anyway) for the Division to waive any delinquent fees under Rule 60S-3.011(4), Florida Administrative Code.

RECOMMENDED ORDER

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of parties, it is, therefore,

RECOMMENDED that a final order be entered by the Division of Retirement making no assessment of FRS contributions or delinquency penalties against the City of Crystal River on behalf of employee Mr. Sallee, and that the Division return to the City the single contribution made for July 2000.

DONE AND ENTERED this 10th day of July, 2003, in Tallahassee, Leon County, Florida.

S

P. MICHAEL RUFF 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 Clerk of the

Division of Administrative Hearings this 10th day of July, 2003.

COPIES FURNISHED:

David La Croix, Esq.

123 N. Main Street

Brooksville, Florida 34601-2520

Thomas E. Wright, Esq.

Department of Management Services 4540 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

Erin Sjostrom, Director Cedars Executive Center Building C

2639 North Monroe Street Tallahassee, Florida 32399-1580

Monesia Taylor Brown Acting General Counsel 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: 03-000324

Orders for Case No: 03-000324