The Issue The central issue is whether the Petitioner is entitled to modify her deceased husband's retirement benefit option.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received and the entire record compiled herein, I make the following findings of fact. Petitioner is the surviving spouse of Lamar W. Whaley, Jr., deceased. From 1972 to 1990, Mr. Whaley was employed by the Hillsborough County Board of County Commissioners (Board) and as such was a member of the Florida Retirement System. Mr. Whaley retired from his position as a minibus driver with the Board on June 29, 1990. In anticipation of his retirement, Mr. Whaley filed an FR-9 Form with the Division of Retirement (Division). The FR-9 Form, entitled "Request for Audit," was signed by Mr. Whaley and dated November 6, 1989. The FR-9 Form is used by members of the Florida Retirement System who want estimates of the monthly payments which they will receive after they retire. The FR-9 Form provided a space where Mr. Whaley could list the name and birthdate of a joint annuitant. On the FR-9 Form, Mr. Whaley named the Petitioner and the Petitioner's birthdate in these spaces. On the line immediately after the spaces provided for name and birthdate of the joint annuitant, the FR-9 expressly states that "This is not an official beneficiary designation." By listing a joint annuitant and that individual's birthday on the FR-9 Form, the Division is able to calculate the monthly benefits that would be payable to a member under each of the four retirement options available. In response to Mr. Whaley's audit request, the Division calculated the amount of the monthly payments he and/or his survivor would receive under the four retirement options available. On or about November 22, 1989, the Division sent Mr. Whaley information which reflected an estimate of the monthly benefits he and/or his survivor would receive under each of the four retirement options from which he was eligible to select. Included with the estimate of retirement benefits sent to Mr. Whaley, was a document entitled, "What Retirement Option Should I Choose?". This information sheet listed sent to Mr. Whaley listed and described the four different options. In 1990, members of the Retirement System contemplating retirement were provided a Division Form FR-11, Florida Retirement System Application for Service Retirement (Application). The application listed the four different options and provided a brief description of each. Next to Option 1 was the following: "Benefit for the Member Only." A further notation on the application read, "SEE THE REVERSE SIDE FOR AN EXPLANATION OF THESE OPTIONS." The Application adequately described the consequences of the election of each option. The explanation read as follows: Option 1: A monthly benefit payable to you for your lifetime. This option does not provide continuing benefit to a beneficiary. Upon your death, the monthly benefit will stop and you beneficiary will receive only a refund of any contributions you paid which are in excess of the amount you received in benefits. If you wish to provide a beneficiary with a continued monthly benefit after your death, you should consider selecting one of the other three options. The option 1 benefit is the maximum form of lifetime payment and all other optional payments are derived by applying actuarial factors to the option 1 benefit. Option 2: A reduced monthly benefit payable to you for your lifetime. If you die before receiving 120 monthly benefit payments, your designated beneficiary will receive a monthly benefit payment in the same amount as you were receiving until the total monthly benefit payments to both you and your beneficiary equal 120 monthly payments. No further benefits are then payable. Option 3: A reduced monthly benefit payable to you for your lifetime. Upon your death, your joint annuitant (spouse or financial dependent), if living, will receive a lifetime monthly benefit payment in the same amount as you were receiving. No further benefits are payable after both you and your joint annuitant are deceased. Option 4: An adjusted monthly benefit payable to you while both you and your joint annuitant (spouse or financial dependent) are living. Upon the death of either you or your joint annuitant, the monthly benefit payable to the survivor is reduced to two- thirds of the monthly benefit you were receiving when both were living. No further benefits are payable after both you and your joint annuitant are deceased. (Emphasis in original text.) On January 12, 1990, Mr. Whaley executed an Application. The Application listed the Petitioner as beneficiary and indicated that the retirement option selected was Option 1. In selecting Option 1, Mr. Whaley rejected all other options. The fact that Petitioner was listed on the application as a beneficiary is of no consequence given that Mr. Whaley chose Option 1. An explanation on the back of the retirement application expressly states, "This option does not provide continuing benefit to a beneficiary." Because Mr. Whaley chose Option 1, Petitioner, as his beneficiary, would have been entitled only to a refund of Mr. Whaley's contributions in the event that Mr. Whaley's contribution exceeded the amount of monthly benefits paid to him before prior to his death. Petitioner did not assert, nor did the evidence establish that the refund provision in Option 1 applies in the instant case. Petitioner stated that Mr. Whaley could read and was not mentally impaired at the time he completed the retirement application, yet Petitioner testified that the agency did not explain to Mr. Whaley the benefits of the plan which he selected. According to the testimony of Stanley Colvin, administrator and supervisor of the Division's Survivor Benefits Section, staff members are available to provide counseling to members who come in or call with questions relative to their retirement. There is no record that Mr. Whaley ever contacted the Division with questions regarding the various options. The pastor of the church which Petitioner is a member testified that Mr. Whaley may have needed help to understand the ramifications of legal documents. Mr. Whaley's daughter also testified that her father may not have understood the retirement option he chose. Both the pastor and Mr. Whaley's daughter testified further that in conversations with Mr. Whaley, he had indicated to them that he had taken care of the legal work necessary to ensure that his was family was taken care of in the event of his death. Notwithstanding the testimony of Petitioner and others, there is no evidence that at the time Mr. Whaley selected Option 1 he did not fully understand the nature and effect of his selection. Neither does the evidence support the claim that the selection of Option 1 by Mr. Whaley was inconsistent with his desire or intention at the time the choice was made. At the time of Mr. Whaley's retirement, he was in good health. Given this fact it is not unusual that he selected the option that would provide him with the maximum monthly benefit. Statements by Mr. Whaley that he had taken care of matters and that "things were in order" do not provide substantial evidence that the selection of Option 1 by Mr. Whaley was made only because he did not fully understand the consequences of his choice. The testimony revealed that upon Mr. Whaley's death, the Petitioner was the beneficiary of his life insurance policy and also the recipient of benefits under his social security. Under these circumstances, Mr. Whaley's selection of Option 1 was not necessarily inconsistent with his statement that things "were in order" or his listing Petitioner as beneficiary on the Application. On several documents provided to and/or completed by Mr. Whaley, it was clearly stated that once a member begins to receive his benefit, the option selection cannot be changed. The information sheet, "What Retirement Option Should You Choose?," mailed to Mr. Whaley on or about November 22, 1989, contained the following provision: Option Choice Cannot Be Changed Once you begin to receive your benefit your option selection cannot be changed. Therefore, it is important to carefully study your personal circumstances before making your decision . . . . The Application submitted to the Division by Mr. Whaley on or about January 25, 1990, contained a statement that "[o]nce you retire, you cannot add additional service nor change options." Finally, the Acknowledgment of Retirement Application sent to Mr. Whaley by the Division on or about February 8, 1990, provided in relevant part the following: ONCE YOU RETIRE, YOU CANNOT ADD ADDITIONAL SERVICE OR CHANGE OPTIONS. RETIREMENT BECOMES FINAL WHEN ANY BENEFIT CHECK IS CASHED OR DEPOSITED! Mr. Whaley received his first retirement check on or about the last working day in July 1990. Petitioner testified that Mr. Whaley cashed this check in July or August of that same year. By cashing that check, Mr. Whaley was precluded from thereafter changing his retirement option. By selecting Option 1, Mr. Whaley received the maximum benefits payable to him during his lifetime. However, under the provisions of retirement Option 1, upon Mr. Whaley's death, his beneficiary, the Petitioner is not entitled to receive any benefits.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Division of Retirement enter a final order denying the request of Petitioner to modify the retirement benefits elected by Mr. Whaley, the deceased husband of Petitioner. RECOMMENDED this 1st day of August, 1995, in Tallahassee, Florida. CAROLYN S. HOLIFIELD 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 1st day of August, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-0059 To comply with the requirements of Section 120.59(2), Fla. Stat. (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. 1a-1c. Rejected as not being supported by competent and substantial evidence. Respondent's Proposed Findings of Fact. 1-6. Accepted and incorporated herein. 7-8. Accepted. 9-11. Accepted and incorporated herein. COPIES FURNISHED: Gladys Whaley 3807 East Norfolk Street Tampa, Florida 33604 Robert B.Button, Esquire Division of Retirement Legal Office Cedars Executive Center-Building C 2639 North Monroe Street Tallahassee Florida 32399-1560 A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 Paul A. Rowell, Esquire General Counsel Department of Management Services 4050 Esplanade Way, Suite 265 Tallahassee, Florida 32399-0950
The Issue The sole issue in this cause is whether or not the payments received from Gadsden County by Petitioner, as set forth on pages 4 through 8 of her Amended Petition, for services rendered as Official Court Reporter pursuant to Chapter 29, Florida Statutes, constitute "compensation" within the meaning of that term in Chapter 121, Florida Statutes.
Findings Of Fact On April 27 and May 1, 1992, respectively, the Respondent and the Petitioner submitted to the Hearing Officer their Proposed Recommended Orders including proposed Findings of Fact. In the Appendix to Recommended Order, the Hearing Officer submitted recommended rulings thereon. The following constitutes the rulings in this Final Order on those proposed Findings of Fact. The Petitioner's and Respondent's proposed Findings of Fact Nos. 1, 2, 3, 4, 5, 6, and 7, are hereby accepted and adopted in that they track the stipulated facts contained in the PREHEARING STIPULATION dated and filed March 30, 1992. The Petitioner's proposed Findings of Fact Nos. 8, 9, 10, and 11, are hereby rejected in that they are conclusions of law and were not contained within the stipulated facts contained within the PREHEARING STIPULATION, and are, therefore, not based upon competent substantial evidence. The actual employment position held by the Petitioner as an employee of the judicial branch of the State of Florida is clearly identified on Florida Retirement System Form FR-11, which was executed by the Petitioner on January 24, 1990, and certified by the Chief Judge of the Second Judicial Circuit (Exhibit 6 attached to the PREHEARING STIPULATION), whereon the "Title of Position held" is stated to have been "Official Court Reporter, Second Judicial Circuit of Florida assigned to Gadsden County." The supplemental salary that was paid to the Petitioner by the County required paper work identifying her as a county employee for payroll purposes only; but, as a matter of law, she held her State position as an official court reporter solely at the pleasure of the Judges of the Second Judicial Circuit pursuant to Section 29.01, Florida Statutes. In the Conclusions of Law in this Final Order, this issue shall be fully analyzed. RULINGS ON HEARING OFFICER'S RECOMMENDED CONCLUSIONS OF LAW Recommended Conclusion of Law No. 1 is hereby accepted as a proper statement of applicable law. Recommended Conclusion of Law No. 2 is hereby accepted as a correct statement of applicable law. Recommended Conclusion of Law No. 3 is hereby rejected in that it erroneously concludes that the Petitioner's salary and fees were authorized and set by statute, when, they had to have been authorized and set pursuant to Rule 2.070, Florida Rules of Judicial Administration. The conclusion of the Hearing Officer is incorrect because under Rule 2.070, Florida Rules of Judicial Administration, the compensation of, and the fees in question to be charged by, court reporters are authorized and set by such judicial rule. Rule 2.070, Florida Rules of Judicial Administration, adopted generally by reference the annual salary for court reporters set forth in Section 29.04, Florida Statutes, for a 60-hour work month. That judicial rule then goes on to provide for overtime at the rate of $10.00 per hour. That Rule 2.070, Florida Rules of Judicial Administration, also provides that the fees in question (for transcripts and depositions) to be charged by court reporters should be set in each circuit by administrative order, and, in the absence of such order, as provided by law. Such court reporters' fees, therefore, are set pursuant to said judicial Rule 2.070, which authorizes the charging of such fees in accordance with a circuit administrative order, and, in its absence, as provided by law. The setting of such fees and the authorization to charge same arise from said judicial Rule 2.070, and not from Chapter 29, Florida Statutes. The fee schedule set forth in Chapter 29, Florida Statutes, derives its legal efficacy not from its legislative enactment alone, but from its judicial approval in said Rule 2.070 in the event that a local circuit administrative order setting such fees has not been entered. In such instance, the fees are not set by statute, but by judicial approval of a statutory fee schedule. The judicial branch has set such fees, not the legislative. Thus, any such fees were not set by statute. The citations by the Hearing Officer in recommended Conclusion of Law No. 4 of Rules 22B-1.004(4)(b)1., and 22B-6.001(49), Florida Administrative Code, are rejected as being inapplicable to the proceeding at bar inasmuch as the Petitioner as an Official Court Reporter appointed pursuant to Section 29.01, Florida Statutes, was an employee of the State of Florida and was not an employee of Gadsden County. Under said Section 29.01 all official court reporters are appointed by and serve at the pleasure of the Chief Judge and a majority of the Judges of the Court in which the reporter is serving. Provision is made in Section 29.04, Florida Statutes, for the respective counties to provide funds necessary to pay the cost of reporting in criminal cases as necessary to provide competent reporters in such proceedings, but any such monies paid to such official court reporters would be paid to state employees. The judicial branch of government in Florida is a State court system. Official Court Reporters are hired and retained by the State Judges in a Circuit, and their employment is not determined or continued to any extent whatsoever by any Board of County Commissioners. Under Section 29.04(3), Florida Statutes, provision is made for the counties to supplement the funds necessary to pay the cost of reporting in criminal cases as necessary to provide competent reporters in such proceedings. The counties are a source of funding, and are not employers of the Official Court Reporters. In the case of Matter of Compensation of Hunter, 635 P.2d 1371 (Or. App. 1981), the Court of Appeals of Oregon held that where court reporters are appointed and hold their offices at the pleasure of the Judges, and are officers of the Court subject to the direction and control of the Judges, those court reporters are employees of the State of Oregon and not of the counties. At page 1373 of 635 P.2d the Court held: "The right to control is also important from a policy standpoint. The judges of the State of Oregon benefit directly from the services of the court reporters. They not only perform reporting duties in court, but are also the judges' official secretaries. See ORS 8.330. The State benefits most directly from court reporters' services, and it should be responsible for providing their workers' compensation insurance." Recommended Conclusion of Law of No. 5 is hereby rejected as a conclusion of law in that is a recitation of the relative positions of the parties and is not of any recommended holding or ruling by the Hearing Officer. Upon the reasoning and authorities set forth in Paragraph No. (3), above, recommended Conclusion of Law No. 6 is hereby rejected in that the fees in question were not authorized or set by legislative statute but were, in fact, authorized and set pursuant to judicial Rule 2.070, Florida Rules of Judicial Administration. The first three sentences of recommended Conclusion of Law No. 7 are hereby rejected in that they misconstrue the first sentence of Section 121.021(22), Florida Statutes, that states: "`Compensation', means the monthly salary paid a member, including overtime payments 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." [Emphasis supplied] A form 1099 is not a form on which an employer reports salary paid from a salary fund to an employee, but, rather is a form utilized to report payments of income to an independent contractor. The "similar form" in that statute refers to an employer's wage and tax statement, which may be a form W-2, which is not the equivalent to a form 1099. As hereinafter discussed in Conclusions of Law Nos. (11), (12), and (13) of this Final Order, Official Court Reporters are "professional persons" within the meaning of that term in Section 121.021(22), Florida Statutes. The recommended Conclusion of Law of the Hearing Officer that the transcribing of criminal proceedings do not constitute "special or particular services" does not comport with either judicial Rule 2.070, Florida Rules of Judicial Administration, or a 1957 Opinion of the Attorney General of Florida. Under said judicial Rule 2.070 the basic salary for a court reporter is set in subsection (g) together with provision for the payment of overtime for hours in excess of 60 worked per month. In subsection (e) of Rule 2.070, provision is made for fees for what would constitute special or particular services by a court reporter, and the fees that may be charged for same. In a 1957 Opinion of the Attorney General of Florida (1957 0p. Att'y. Gen. Fla. 057- 109 (April 26, 1957)), the Attorney General of Florida analyzed Section 122.02, Florida Statutes, the predecessor to Section 121.021(22), Florida Statutes, as to what constituted compensation under the State and County Officers and Employees Retirement System (SCOERS). The opinion of the Attorney General was that hourly wages plus overtime would be included within the monthly compensation. But, at the end of that opinion the Attorney General concluded: "We conclude that in the case mentioned in the question the employing authority has prescribed the formula for fixing the monthly compensation or salary. It may vary depending upon the hours employed in discharging the routine work of the employment but the formula is fixed and applicable mathematically. This is not a situation where fees are paid for special or particular services. It is a regular retainer made depending upon the actual hours engaged in performing the month by month routine duties as School Board Attorney. It has no reference to fees for handing special items such as bond validation or other litigation." Under Rule 2.070, Florida Rules of Judicial Administration, official court reporters are paid their basic salary and overtime for their court appearances in reporting the proceedings. But, if they are to furnish transcripts of proceedings or depositions, which work would be done after their regular working hours, then the fees for such special or particular services are to be set by local circuit administrative order, or in the absence of same, as provided by law. These special or particular services that the court reporters are performing for such additional fees are not performed during their regular working hours, which by said Rule 2.070, is limited to 60 hours per month. And the last sentence of Recommended Conclusion of Law No. 7 that the Petitioner was a county employee is hereby rejected upon the grounds and reasoning set forth in Paragraph No. (4) above. The Hearing Officer's Recommended Conclusion of Law No. 8 (misnumbered as "7") is hereby rejected upon the grounds and for the reasons set forth in Paragraph Nos. (3) through (7) set forth above.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that respondent enter a final order approving petitioner's request for additional retirement benefits by including in the calculation of average final compensation those fees received by petitioner between January 1973 and February 1990 as set forth on pages 4 through 8 of her amended petition. RECOMMENDED this 24th day of June, 1992, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this day of June, 1992. APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-3168 Petitioner: Accepted in finding of fact 1. Accepted in finding of fact 2. 3-4. Accepted in finding of fact 3. 5-6. Accepted in finding of fact 4. 7. Accepted in finding of fact 5. 8-11. Accepted in finding of fact 3. Respondent: Accepted in finding of fact 1. Covered in preliminary statement and in finding of fact 2. 3-4. Accepted in finding of fact 3. 5-6. Accepted in finding of fact 4. 7. Accepted in finding of fact 5. COPIES FURNISHED: A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, FL 32399-1560 John A. Pieno, Secretary Department of Administration 435 Carlton Building Tallahassee, FL 32399-1500 Edgar Lee Elzie, Esquire P. O. Box 82 Tallahassee, FL 32302 Burton M. Michaels, Esquire Cedars Executive Center, Building C 2630 North Monroe Street Tallahassee, FL 32399-1560
Findings Of Fact Jean E. Preus is a registered real estate broker and was so registered at all times here relevant. Tax Shelter Real Estate, Inc., and Tax Shelter Real Estate of America, Inc., are corporate brokers registered by the Florida Board of Real Estate and were so registered at all times here relevant. Tax Shelter Real Estate, Inc., and Tax Shelter Real Estate of America, Inc., are wholly owned subsidiaries of another corporation controlled by S. William Preus, the husband of Respondent. The family owns the majority, if not all, of the stock in this controlling corporation. S. William Preus is president of Corporate Financial Planning of Florida, whose business is primarily providing computer printouts and expertise to insurance agents setting up retirement plans for clients. Preus holds the degree of Chartered Life Underwriter (CLU) although at present he sells no insurance, but deals primarily with the insurance companies in assisting their agents. On 28 October 1980 at the request of insurance agents, Edward LaGrave and Don Hansman, S. William Preus, enroute from a seminar in Daytona to his office in St. Petersburg, met with the owners of Peebles Tractor Company in Winter Haven, Florida, to present information on a Keogh Plan for employees of Peebles. Jean E. Preus accompanied her husband to this meeting. LaGrave and Hansman provided Preus with a list of employees of Peebles, their ages and salaries, from which it was determined that some $27,000 per year could be invested in an employee retirement plan such as a Keogh Plan. In the presentation Preus used prototype trust documents prepared by Lincoln Trust Company and, if the Peebles Tractor Company opted for the plan he presented, it was his intention to forward the application to Lincoln Trust to serve as trustee of the plan. Preus had purchased one or more time-sharing condominium units and was impressed with the appreciation he had noticed in the selling price of such units in the past two years. He was especially impressed with the Bahia Mar development at which he had purchased a unit and who had additional time-sharing units to sell. Time-sharing is those housing units sold to various individuals for one week out of the year as a vacation home with the capability of swapping usage with similar units in other places. At Bahia Mar the unit owner sold one- week usage per year on a 99-year lease with the property managed by the developer and rented if the owner does not want to occupy the unit during his week's ownership. Preus proposed time-sharing units as a suitable investment vehicle for the Peebles Tractor Company employees retirement fund and Jean E. Preus showed pictures of the condominium units they owned at Bahia Mar. Peebles was not interested in purchasing time-sharing units for their employees' retirement fund and no sales were made. Had Peebles bought any of the Bahia Mar units, Respondents would have received a ten percent commission. Preus had obtained the Lincoln Trust forms from Lincoln Trust Company at an earlier date by simply requesting the forms. He obtained additional forms from Flagship Bank in a similar fashion. William A. Preus, the adult son of Respondent who also works with his father, had called Lincoln Trust before the October 28 meeting and learned the fees had been changed since the forms he had on hand were printed. He amended the forms used by S. William Preus to reflect this change in the fees charged by Lincoln Trust Company when the presentation was made to Peebles Tractor Company. The day following the Peebles meeting Preus contacted Lincoln Trust Company and learned they would no longer accept financed real estate in an employee retirement plan for which they served as trustee. Specifically, they would not accept funds to invest in financed time-shared condominium units. Formerly, Lincoln Trust had accepted financed raw land at Sugarwood Mills (in Florida) in such a retirement plan (Exhibit 11). In order to protect employee benefit plans Congress enacted the Employees Retirement Income Security Act (ERISA), 29 USCS 1001, et seq. Tax advantages accrue to those plans complying with ERISA, the federal tax laws and regulations promulgated pursuant thereto. All investments are not acceptable; however, the principal requirement is that funds placed in such accounts be prudently invested. Regulations have been promulgated disqualifying investments and certain personal property such as gold coins in ERISA plans, which type investment was formerly allowed. No regulations specifically authorize or bar ERISA investments in time-shared condominium units. Although trustees such as Lincoln Trust Company will not accept time-shared units in ERISA accounts, testimony was presented that Flagship Bank of Tampa would accept such investments in ERISA accounts. No evidence was presented that Jean E. Preus made any representations regarding the acceptability of time-shared units in an employee retirement account. According to her testimony she has no knowledge of ERISA plans and her participation in the October 28 1980, meeting was limited to showing pictures of and describing the time-shared unit she owned at Bahia Mar.
Findings Of Fact The Respondent, State of Florida, Division of Retirement, is charged with the general administration and the responsibility for the proper operation of the retirement system, and for implementing the provisions of Chapter 238, Florida Statutes. The Division of Retirement was created in 1972, and is the trustee of the annuities savings trust fund and the pension accumulation trust fund of which Petitioners are beneficiaries. In this capacity Respondent is successor to prior trustees, the Teachers Retirement System and the State Board of Administration. Subsection 238.07(2)(d), Florida Statutes, provides for a teacher's retirement upon reaching the age of 50 after 25 years of service (known as Plan D). Petitioners retired in 1973 an 1974, having satisfied the requirements of Plan D and are receiving retirement allowances under this plan. The allowance consists of a pension funded by the State of Florida and an annuity funded by member contributions. Petitioner, Rex C. Bishop, was a teacher in the Dade County Public School System from 1949 until his retirement under Plan D in 1974. At retirement on August 1, 1974, Mr. Bishop began receiving an annual retirement allowance of $5,656.40 which included an annual pension of $3,477.65 and an equal annuity of $2,178.75. The annuity was financed by the member's accumulated contributions plus accrued interest of $34,422.07, resulting in a monthly benefit of $471.37 under the option chosen by Mr. Bishop. Petitioner, Jessie N. Karp, was a teacher in the Alachua County Public Schools from 1950 until 1969, at Lake City Community College from 1969 through 1972, and the University of Florida, Gainesville, Florida, from 1972 until her retirement in 1973 under Plan D. At retirement on July 1, 1973, Mrs. Karp began receiving an annual retirement allowance of $4,158.85 which included an annual pension of $2,676.67 and an annual annuity of $1,482.18. The annuity was financed by the member's accumulated contributions plus accrued interest of $25,111.13, resulting in a monthly benefit of $346.58 under the option chosen by Mrs. Karp. Petitioner, Stanley G. Rosenberger, was a member of the faculty of the University of Florida, Gainesville, Florida, from 1947 until his retirement in 1974 under Plan D. At retirement on January 1, 1975, Mr. Rosenberger began receiving an annual retirement allowance of $7,446.33 which included an annual pension of $4,708.44 and an annual annuity of $2,737.89. The annuity was financed by the member's accumulated contributions plus accrued interest of $41,572.08, resulting in a monthly benefit of $620.53 under the option chosen by Mr. Rosenberger. Plan D provides for a pension to be funded from monies paid by the State equal to one one-hundredth (one percent) of the average final compensation times the number of years served. Plan D also includes a variable annuity funded by the member's accumulated contributions. The total benefit or retirement allowance is not a fixed percent of average salary because the annuity is variable. However, Plan D was designed to provide an annual retirement benefit equal to approximately one-half of the average final compensation after twenty-five years of service at age fifty. This would require an annuity of one percent, which would approximately match the state funded pension. 1/ When Mr. Rosenberger, who was the only Petitioner to testify in this proceeding, elected to participate in Plan D effective in 1947, he was advised by the personnel administrators at both the Florida Agricultural Extension Service and the University of Florida that he would receive half of his average income at the retirement age of 50 after 25 years of service. This information was consistent with the goal of Plan D as established in Chapter 238, Florida Statutes. An actuary had assisted in setting up Plan D in 1947, based on 1939 data. However, no actuary was utilized again until about 1955. By the early 1950's, it became apparent to retirement system administrators that Plan D was not obtaining the funds required for the one percent annuity. Factors contributing to annuity benefits of less than one percent included increasing average salaries, low earnings on investments, and a limitation on contribution rates. The rate of contribution to Plan D as initially set by the actuarial firm of George Buck & Company, New York, was 9.24 percent to 13.58 percent of salary depending upon the member's age at entry into Plan D. That rate of contribution was later raised to 9.49 percent to 13.83 percent based on a legislative increase in the Survivor's Benefit Fund under Subsection 238.09(5), Florida Statutes (1957). The actuarial funding of a one percent annuity would ultimately have necessitated raising the contribution rate to between fifteen and twenty percent of salary during the years of active employment. Rather than increase contribution rates to levels considered prohibitive, retirement system administrators closed Plan D to new members on July 1, 1951. When the annuity funding problems became apparent to administrators, various meetings were held with teachers' groups and letters were mailed to personnel officials in the state school system to advise Plan D members that they could not expect the proposed one percent annuity to be realized. However, retirement system officials did not attempt to inform individual members of the Plan D annuity shortfall since mailing addresses were not maintained. Petitioner Rosenberger first became aware of the shortfall in 1972, when he began preparing for retirement. Until 1957, the funds were invested by the Board of Trustees of the Teachers Retirement System. During this period, investments were limited by law to government guaranteed securities. Interest was distributed to member accounts by determining total earnings in the annuity trust fund, subtracting expenses, and distributing the remainder proportionally to each member's account. The interest credited to members' accounts from 1947 to 1957 did not exceed three percent. After 1957, the State Board of Administration assumed responsibility for investing all state funds including retirement funds. Interest credited to member accounts increased from three percent in 1957 to seven percent in 1974. During comparable years, U.S. Treasury Note interest payments generally exceeded these annual interest credits by one to two percentage points. High grade corporate bond interest rates and new home mortgage yields were substantially higher than the interest credited to member accounts during comparable years. The annuities Petitioners now receive are the actuarial equivalent of their accumulated contributions on the basis of the assumptions in effect at the time of their retirement in 1973 and 1974. Had Petitioners retired before an annuity rate table change in 1972, they would have received a 15 percent higher annuity with respect to their final salaries. These reduced rates resulted from changes in mortality assumptions and interest rates, and cost of living escalation mandated by the Legislature. As a result of changes in the system and the early funding shortfalls, each Petitioner suffers a deficit in anticipated retirement benefits in excess of $1,000 annually. However, each Petitioner had the opportunity to make a lump sum contribution to the retirement trust account in order to assure a retirement allowance equal to one-half of his or her prospective average final compensation. See Subsection 238.09(1)(f), Florida Statutes. Mr. Rosenberger specifically declined the limp sum contribution option when it was called to his attention. The remaining Petitioners were presumably aware of this provision and likewise declined.
Recommendation From the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Administration, Division of Retirement, enter a final order dismissing the Petition. 2/ DONE AND ENTERED this 12th day of May, 1981, in Tallahassee, Leon County, Florida. R. T. CARPENTER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of May, 1981.
The Issue The central issues in this case are (1) whether Petitioner is eligible for membership in and retirement benefits from the Teachers' Retirement System; and (2) whether Petitioner is entitled to receive as a refund contributions paid by his employing agency and, if so, how much and at what interest rate.
Findings Of Fact Petitioner, currently sixty-six years old, was employed as a professor of economics and finance at the University of South Florida (USF), Tampa, Florida, from September 1965 through August 31, 1981, when he terminated employment. As a member of the teaching faculty, Petitioner automatically became a compulsory member of the Teachers' Retirement System (TRS) and remained a member throughout his tenure at USE. When Petitioner originally enrolled in the TRS in September 1965, he signed an enrollment form entitled "Teachers' Retirement System of Florida, Enrollment Blank New Teachers." The form provided general information concerning the TRS, and included information about contributions, service credit, and service retirement benefits under the TRS. The enrollment form provided in part the following: I understand that the full amount of deductions from my compensation for annuity purposes with compound interest will be returned to me if I leave the service without a retirement benefit or will be paid to my beneficiary if I die in active service. At all times relevant hereto, the TRS required that members make contributions of six-quarter percent of their total salaries to their retirement accounts. Of this amount, six percent went into the TRS member's retirement account and the quarter percent was allocated to the Survivors' Benefits Fund. In addition to the contributions made by TRS members, employers were required to contribute matching funds to the TRS Retirement Fund. While employed at USF, the prescribed six quarter percent of Petitioner's salary was deducted, with six percent appropriately posted to his TRS retirement account. During the time Petitioner was employed at USF, the employer contribution paid by USF to match Petitioner's contribution was $23,846.06. Had Petitioner remained a member of TRS, he would have been eligible to begin receiving benefits in February 1993. While employed at USF, Petitioner was given the option to transfer from the TRS to the newly created Florida Retirement System on five different occasions: December 1970; June 1971; July 1972; January 1975; and January 1979. Through information disseminated by Respondent, TRS members were notified that by transferring to the "new" Florida Retirement System, they would become mandatory members of the federal Social Security System. Petitioner chose to remain in TRS rather than transfer to the Florida Retirement System, thereby foregoing membership in the federal Social Security System. In August 1981, prior to his normal age of retirement, Petitioner terminated his employment with USF and requested that Respondent refund Petitioner's retirement contributions. In making the request, Petitioner completed and signed a form entitled, "Request for Refund," FRS M81. Completion of this form is a requisite for receiving retirement refunds and applies to members of any of the Florida retirement systems. The Request for Refund states: I hereby make application for refund of my accumulated contributions in the Florida Retirement Systems. I do waive for myself, my heirs and assignees all rights, title and interest in the Florida Retirement Systems. On the reverse side of the Request for Refund card, is the following: Under the provision of the Florida Statutes, a member MUST terminate employment before he can obtain a refund. * * * The refund process may be started upon receipt of this application. It may be necessary to issue a second refund after all payrolls on which a member's name appears are received and audited by the Retirement System Office. A member who has ten or more years of creditable service has a vested interest in retirement and may leave his contributions on deposit indefinitely and qualify for deferred retirement. Pursuant to Petitioner's request, the Division refunded $22,153.10 to Petitioner in October 1981. The refund, which was provided in three warrants, included all employee contributions and earned interest posted to Petitioner's retirement account as of the date of the refund. Petitioner's refund was provided in three separate warrants because the system in place, in 1981, was incapable of generating a single check for an amount in excess of $9,999.99. In late 1995 or early 1996, Petitioner called the Division of Retirement to inquire about his benefits under the TRS. Petitioner made after this call after he reviewed his Social Security wage earning history and learned that no contributions had been posted to his Social Security account during the sixteen years he had been employed at USF. Upon reviewing the Petitioner's request, Respondent discovered that $1,692.96 remained in Petitioner's TRS account. Of the amount remaining in Petitioner's account, $292.63 represented Petitioner's employee contributions, and $1,400.33 was earned interest. Respondent's failure to refund Petitioner's $292.63 and the interest earned thereon as soon as these moneys were posted to Petitioner's account was the result of an unintentional accounting error. Under the procedures used by the Division at that time, Petitioner's most recent employee contributions were not posted to his account until November or December 1981. The interest earned on Petitioner's employee contributions were not posted to Petitioner's account until the end of the 1981/1982 fiscal year. This matter is addressed in the Request for Refund which notified members that "it may be necessary to issue a second refund" after all payrolls on which the member's name appears have been posted. After discovering this inadvertent accounting error, Respondent initially agreed to refund Petitioner the outstanding $1,692.96. Subsequently, the Division of Retirement agreed to pay Petitioner $1,692.96 plus six a-half percent interest from October 1981, for a total amount of $4,088.31. The six and a- half percent interest rate is the current rate established by Respondent. Pursuant to Petitioner's request, Respondent has not yet refunded Petitioner's outstanding employee contributions and interest, pending the culmination of this proceeding. At the time Petitioner completed and signed the Request for Refund, it was his intention to obtain all of his contributions and interest. It was not until Petitioner's inquiry in 1995 or 1996 that he became aware that a small amount of his employee contributions and interest thereon had not been refunded. Petitioner believes that because Respondent did not refund all moneys due him, some $1,692.96, he retained membership in the TRS and is now able to retire from that system with a partial benefit. Alternatively, Petitioner asserts that he is entitled to receive as a refund, all contributions paid into his retirement fund, including the contributions paid by USF. According to Petitioner, his understanding and belief in this regard is based on an explanation provided to him by Dr. John Milliken, the Dean of the College of Business at USF. Petitioner's understanding in this regard was not correct. At some point prior to Petitioner's terminating his employment at USF, he reviewed a Summary Plan Description (SPD) which was issued by the Division of Retirement in 1980. One section of the SPD, Refund of Contributions, provides in relevant part: If a member terminates employment he may elect to receive a refund of all the contributions he has made to the retirement system, except those made to the Survivors' Benefit Trust Fund. Furthermore, the first paragraph of the Summary Plan Description states: This brochure contains basic information on the Teachers' Retirement System, established by Ch. 238, Florida Statutes. It is not intended to be a comprehensive review of the Teachers' Retirement System and should not be used in place of the law on questions of interpretation and appli-cation. Any question which are not answered by this brochure may be addressed to the Div. of Retirement, . . . . Based on Petitioner's reading of the provision of the SPD quoted in paragraph 20 above, it was his "judgment" and "impression" that any refund prior to retirement, would include both employee and employer contributions and the interest on these contributions. At no time did Petitioner verify his interpretation with the Division of Retirement or the USE Personnel Office.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division of Retirement enter a final order finding that Petitioner, John C. Deiter, is (1) ineligible for retirement benefits under the Teachers' Retirement System and (2) is not entitled to receive employer contributions and interest thereon. DONE AND ENTERED this 3rd day of September, 1997, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELDK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of September, 1997. COPIES FURNISHED: Murray B. Silverstein, Esquire POWELL, CARNEY, HAYES and SILVERSTEIN, P.A. Barnett Tower One Progress Plaza, Suite 1210 St. Petersburg, Florida 33701 Stanley M. Danek, Senior Attorney Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399 A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399
The Issue Whether Petitioner is entitled to purchase leave of absence retirement credit on behalf of James Gapinski, Petitioner's ex- husband and a deceased member of the Florida Retirement System.
Findings Of Fact Petitioner, Geraldine Gapinski, is the former spouse of James Gapinski, deceased. At the time of his death, Mr. Gapinski was an employee of Florida State University and a "vested" Florida Retirement Service (FRS) member. Petitioner is an employee of the Florida Department of Law Enforcement (FDLE) and an active member of FRS. Mr. Gapinski was continuously employed by Florida's Univeristy System from approximately 1970, until his death on November 20, 2000, with the exception of a period from September 10, 1976 to June 9, 1977, during which period he took an approved leave of absence. During the period September 10, 1976 to June 9, 1977, no contributions were made by Mr. Gapinski or on Mr. Gapinski's behalf to FRS toward his accruing retirement benefits and he earned no creditable service in FRS for this eight month period he was on his leave of absence. On May 4, 2000, Mr. Gapinski requested an audit and estimate of retirement benefits from Respondent. At the time of his request for an audit and estimate, Mr. Gapinski and Petitioner had begun a dissolution of marriage proceeding (divorce). At all times material, each litigant had independent legal counsel, and each lawyer was aware that Mr. Gapinski's FRS benefits were "on the table" for division of the marital estate in the course of the divorce proceedings. At all times material, Mr. Gapinski was terminally ill with cancer. On September 14, 2000, Mr. Gapinski applied for participation in the Deferred Retirement Option Program (DROP). His application (DROP Form DP11) requested a DROP "begin date" of September 1, 2000, and designated each of Mr. Gapinski's two adult daughters as 50 percent primary beneficiaries. Petitioner, who at that time was still married to Mr. Gapinski, was not even designated a secondary beneficiary. The application, which Mr. Gapinski signed, stated in pertinent part, I understand that the earliest date my participation in the DROP can begin is the first date I reach my normal retirement date as determined by law . . . I cannot add additional service, change options, or change my type of retirement after my DROP begin date (emphasis in original). The application also specified eight required acts before Mr. Gapinski could retire and become a DROP participant, including, but not limited to, 4. A check payable to FRS for any amount you owe, or a written statement that you do not wish to claim the service . . . . On September 15, 2000, Respondent provided James Gapinski with two estimates of benefits. Estimate No. 1 showed the benefit Mr. Gapinski would be entitled to if he chose to purchase the one year leave of absence for $6,820.52, providing for a DROP beginning date of September 1, 2000. This estimate further advised that 6.5 percent per annum would be posted on June 30, 2001. It also stated, Comments: The amount due is to purchase service for your leave of absence from September 10, 1976 to June 9, 1977. This amount must be paid for a DROP begin date of September 1, 2000. Mr. Gapinski was also notified of the need to purchase his leave of absence credit in a letter from Respondent dated September 15, 2001, stating, in pertinent part, as follows: The following items are pending. The amount due is to purchase service for your leave of absence from September 10, 1976 to June 9, 1977. If you do not elect to pay the above amount due and purchase the service it represents, we must have written notification of your intent. * * * Completion of the Option Selection for FRS members, . . . AFTER YOUR FIRST MONTH OF DROP PARTICIPATION YOU CANNOT ADD ADDITIONAL SERVICE, CHANGE OPTIONS, CHANGE YOUR DROP BEGIN DATE OR CHANGE YOUR TYPE OF RETIREMENT. * * * Estimate No. 2 sent to Mr. Gapinski on September 15, 2000, showed the benefit Mr. Gapinski would be entitled to if he chose not to purchase his leave of absence and waited until March 1, 2001, to participate in DROP, when he would accrue 30 years of service without counting the gap left by his 1976-1977 leave of absence. This estimate also stated: Comments: This estimate does not include the purchase of your leave of absence and is provided for comparison purposes. It is provided for DROP purposes with a March 1, 2001, DROP begin date (see the enclosed DROP brochure). If you do not elect to pay the amount due and purchase the service it represents, we must have written notice of your intent. Apparently, neither attorney ever saw any of the foregoing papers. The thrust of Petitioner's attorney's actions and advice was to obtain survivorship retirement benefits, not necessarily DROP benefits, for Petitioner. On October 23, 2000, Petitioner's attorney was told by telephone by Ms. Ferguson, a representative of Respondent, that Petitioner must make a non-party request to release Mr. Gapinski's retirement information to her. So far as this record shows, no third party request was ever made, but that day, Petitioner's attorney and Ferguson also generally discussed retirement pay-out options that Mr. Gapinski could elect, and Petitioner's attorney was generally aware that the DROP process was not complete. On October 24, 2000, Petitioner's attorney discussed by telephone, retirement, divorce, and survivorship benefit issues and life insurance payment options with Ms. Hudson, a representative of Respondent. On October 26, 2000, Petitioner's attorney discussed, by telephone, retirement options and steps to be taken, with both Ms. Ferguson and Mr. Helms, another of Respondent's representatives. Mr. Helms told her the DROP application was not complete but if the couple were still married, Option No. 3 would give the most benefit for survivorship benefits. During the October 2000, conversations, Petitioner's attorney made each of Respondent's representatives aware of the impending divorce and of Mr. Gapinski's impending death, but the attorney did not specifically inquire how soon the lapsed time payment must be made and none of Respondent's representatives volunteered information on that issue. At Mr. Gapinski's request, the divorce proceeding was bifurcated. Prior to the divorce, Petitioner's attorney had done independent research and was aware that Mr. Gapinski had to pay the $6,820.52, in order to perfect the DROP program and in order to complete 30 years of creditable service in order to be eligible for survivorship benefits on his retirement. This information was communicated to Petitioner by her attorney and whether or not Petitioner would be willing to pay half the amount was discussed. Petitioner stated she would be willing to pay half the amount owed. As a condition to her agreement to bifurcate the divorce proceeding, that is, as a condition to letting Mr. Gapinski out of the marriage but reserving jurisdiction in the Circuit Court to resolve certain disputes concerning assets and entitlements, Petitioner required that the couple enter into an "Agreement" on October 27, 2000, which provided, in pertinent part, as follows: BIFURCATION: The Husband shall be entitled to bifurcation of the dissolution action. The marriage of the parties shall be dissolved with the Court reserving on all remaining unresolved issues not addressed in this agreement. In light of the Husband's health, the Wife shall schedule and appear at an ex parte hearing to dissolve the marriage, to obtain Court-ordered approval of this agreement, and to ensure the Court's reservation of jurisdiction to hear any and all issues pertinent to support and the division of property not yet settled by the parties. * * * B. The Wife further agrees that all marital assets awarded to her in this cause (including proceeds from the Husband's retirement and life insurance in the event the Husband predeceases her), shall be placed in an inter vivos trust, from which she may draw living, personal, and medical expenses, during her life, with the parties' adult daughters named as the irrevocable beneficiaries of the remainder of such trust. C. The Husband agrees to bequeath sufficient marital assets, awarded to him in this cause, to the parties' adult daughters to aid in their comfort and support. HUSBAND'S RETIREMENT: The Husband shall elect an option on his retirement with the State of Florida that provides for survivorship benefits for the benefit of the Wife. The wife shall be entitled to all such retirement survivorship benefits which, like the other assets she receives in this bifurcated action, shall be placed in an inter vivos trust for her living, personal and medical expenses, during her life, with the adult daughters as irrevocable beneficiaries of the remainder of the trust. The Husband shall, simultaneously with the signing of the agreement, execute such documents as are necessary to create retirement survivorship benefits in accordance with this term. Should the Husband fail to execute the survivorship option on his retirement or should he ever change such option in contravention of this term, the Husband agrees that the obligation of this term is binding upon his estate, which estate shall be responsible for paying such retirement survivorship benefits to the Wife. The Agreement could have, but did not, specifically require that the leave of absence be purchased by either Mr. Gapinski or Petitioner. Petitioner's and Mr. Gapinski's Agreement does not bind the Respondent, which was in no way privy to that Agreement. Petitioner and Mr. Gapinski's marriage was dissolved on November 1, 2000. Petitioner's attorney provided Mr. Gapinski, through his counsel, with DROP forms (FST-12 and FRS-11o). On November 1, 2000, Mr. Gapinski executed Option 2 for his DROP retirement on these forms, naming Petitioner as his sole primary beneficiary and negating his prior designation of his adult daughters as beneficiaries. Option No. 2 provides for a reduced monthly benefit payable for the FRS member's (Mr. Gapinski's) lifetime. If the member dies before receiving 120 monthly payments, his designated beneficiary (Petitioner) would receive a monthly benefit in the same amount until the monthly benefit payments to both of them equaled 120 monthly payments, when payments would terminate. Option No. 2 is available for regular service retirements as well as DROP retirements. Option No. 3 is also available for regular service retirements and DROP retirements. Option No. 3 would have provided a reduced monthly benefit payable for Mr. Gapinski's lifetime, and upon his death, his joint annuitant, if living, would receive a lifetime monthly benefit payment in the same amount as Mr. Gapinski was receiving. Then, no further benefits would be payable after both he and his joint annuitant were deceased. There are exceptions to the foregoing general description, none of which matter to the case at bar. Option No. 3 would clearly provide more money to Petitioner if she were eligible. On November 2, 2000, Petitioner's attorney had three short telephone conversations with Mr. Helms, who opined that since Mr. Gapinski had signed up for DROP while the couple were still married, Petitioner could still get Option No. 3, with DROP retroactive to September 1, 2000, but that the leave of absence must be paid for. Apparently, Petitioner's attorney did not ask what would happen if the gap was not paid for before Mr. Gapinski died and no representative of Respondent volunteered that information. The thrust of Petitioner's case continued to be to persuade Mr. Gapinski to pay the whole amount due and to change his Option election to No. 3. On or about November 3, 2000, Mr. Helms sent an estimate letter based on selecting a September 1, 2000, retirement date with Option No. 1, to Mr. Gapinski. This estimate letter stated Mr. Gapinski had 30.11 years of creditable service. It did not mention DROP or any pay back. It did state that no lump sum retirement or cash value payments were available. (Second page of attachment to Exhibit P-11). On November 3, 2000, Petitioner's attorney wrote Mr. Gapinski's attorney that Mr. Gapinski was considered by Respondent to be in the DROP program as of September 1, 2000, not March 1, 2001, as supposed before the divorce, but he had not bought back his leave by paying $6,820.52, and requested that Mr. Gapinski change his Option Election Form to Option No. 3 and authorize the payment of the $6,820.52 to Respondent. On or about November 9, 2000, Petitioner's attorney sent the already-executed FST-12 (Beneficiary Designation Form) and FRS-11o (Option Selection for FRS Members) showing Option No. 2 to Respondent. Mr. Helms acknowledged receipt. On or about November 9, 2000, Mr. Helms told Petitioner's attorney that the forms were correct and anyone could pay the $6,820.52. The attorney felt Mr. Gapinski was enrolled in DROP but that the $6,820.52 was still needed. On November 15, 2000, Petitioner's attorney sent Mr. Helms a letter memorializing their conversation, in which Mr. Helms had indicated it was not necessary for Petitioner to sign below the Option No. 2 selection paragraph on FRS 11o as long as she was aware of the option Mr. Gapinski had selected. On November 20, 2000, Mr. Gapinski passed away without anyone having purchased his leave of absence credit. Mr. Gapinski was only 57 years of age when he died. DROP retirement or regular service retirement with full benefits is possible at 62 years of age or upon attaining 30 years of creditable service. Mr. Gapinski remained in regular employment until his death. Because he had not purchased the leave of absence credit, Mr. Gapinski died with only 29 years and 9 months of creditable service for purposes of retirement. In other words, he was 3 months and ten days short of the 30-year retirement mark necessary to activate DROP or regular service retirement. Petitioner never communicated directly with Respondent until after Mr. Gapinski's death. Mr. Gapinski's will provided for the effective disinheritance of Petitioner to the extent provided by law. On December 14, 2000, Petitioner's attorney spoke by telephone with Mr. Helms, who told her he thought Petitioner could still pay the leave of absence money but he would call her back. On December 15, 2000, Stanley Colvin, another of Respondent's representatives, telephoned Petitioner's attorney to say Petitioner could not pay the amount after Mr. Gapinski's death. At no time prior to Mr. Gapinski's death did any representative of Respondent affirmatively represent to anyone that Petitioner could pay the money after Mr. Gapinski's death or the conditions under which no benefits would be paid or specifically what would happen if Mr. Gapinski died before the money was paid by someone. By a December 15, 2000, letter, Respondent notified Petitioner that since Mr. Gapinski had elected not to purchase the leave of absence, he could not have reached the required 30 years of service necessary to participate in the DROP program until March 1, 2001. It further stated that since Mr. Gapinski's death occurred before completion of the required months necessary to participate in DROP, his DROP application was cancelled and his choice of Option No. 2 was nullified. Moreover, Mr. Gapinski was viewed as an active FRS member on the date of his death, and because Petitioner, though designated as his beneficiary was not also a joint annuitant, she could only receive a refund of Mr. Gapinski's retirement contributions in the amount of $4,719.19,and was not eligible to receive Option No. 3. Respondent did not send a similar letter to prior beneficiaries, the decedent, or his estate/personal representatives. Petitioner requested a review, and on February 2, 2001, Respondent issued its proposed final agency action letter, to the same effect as the December 15, 2000, letter. Respondent did not send a similar proposed final agency action letter to prior beneficiaries, the decedent, or his estate/personal representatives. However, the undersigned notes that Mr. Gapinski's adult daughters, who also were his joint personal representatives, were present in the courtroom on September 24, 2001, the first day of hearing. As of the second day of hearing on October 21, 2001, the estate had been closed and the personal representatives had been discharged. Mr. Larry Hunnicutt, Benefits Administrator for the Bureau of Retirement Calculations, Division of Retirement, testified by deposition. He indicated that Respondent Division of Retirement has no rules in place specifically addressing DROP. Therefore, in DROP cases, Respondent interprets and applies Chapter 121, Florida Statutes, and the existing rules addressing regular service retirement. In practice, Respondent gives DROP applicants a 90-day grace period from the date of application in which to finalize all the outstanding documents or other requirements for DROP eligibility, including payments of amounts due, even though there are no provisions in place authorizing a grace period for DROP applicants. If there are money amounts due, the member must pay up during this period. If the member fails to pay up during this period, the DROP application and the option selected for DROP is cancelled by a certified letter, but the designated beneficiary remains intact. Herein, because the amounts were not paid before Mr. Gapinski died, and because it would serve no purpose to notify the decedent, who could no longer complete his DROP requirements, Respondent did not send the deceased member a cancellation of his DROP application and Option No. 2 selection. Rather, it treated the DROP application and option selection as null and void and notified his ex-wife, the designated beneficiary, of what Respondent understood to be her rights. In this notification, Respondent applied the statutes as its personnel understood them to apply to a member who dies in active service prior to reaching either 62 years of age or 30 years of creditable service. Respondent would have permitted Petitioner to pay the money on Mr. Gapinski's behalf only during his lifetime. If the amount due had been paid, and Petitioner were qualified for Option No. 2, she would receive approximately $500,000 plus cost of living increases as opposed to $4,719.19. She would receive considerably more if she qualified for Option No. 3.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Management Services, Division of Retirement enter a final order denying Petitioner's request to purchase leave of absence credit on the account of James Gapinski. DONE AND ENTERED this 14th day of December, 2001, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS 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 14th day of December, 2001.
The Issue Whether Respondent is estopped from denying Petitioner's request to rescind her choice to change retirement plans (2nd Election) and requiring her to remain in the Florida Retirement System (FRS) Pension Plan; and, if so, what are Petitioner's options? Because of the complicated nature of FRS and Petitioner's unique circumstances, the issues and parties' positions are summarized herein. After being hired by the University of Florida, Petitioner had three retirement plan options: (1) State University System Optional Retirement Program (SUSORP), (2) FRS Investment Plan (Investment Plan), or (3) FRS Pension Plan (Pension Plan). Petitioner had been an FRS member in a previous job and switched from the Investment Plan to the Pension Plan solely because she was told she could only participate in SUSORP if she first became a Pension Plan member. The Division now admits there is no authority for this requirement, but argues it is not responsible for Petitioner's decision to switch from the Investment Plan to the Pension Plan. Rather, it blames another state agency and non-government agents for her belief that she could not participate in SUSORP unless she first bought into the Pension Plan. Ultimately, the issues in this proceeding are: (1) whether Petitioner was required to switch from the Investment Plan to the Pension Plan to participate in SUSORP; (2) whether the Division is responsible for Petitioner's belief that this was a requirement; and (3) if so, whether Petitioner's funds used to buy into the Pension Plan can be returned to the Investment Plan or transferred to her SUSORP account. PROCEDURAL HISTORY On May 30, 2018, Petitioner, Lee Hayes Byron, elected to switch her FRS plan from the Investment Plan to the Pension Plan. On November 1, 2019, Respondent, Department of Management Services, Division of Retirement (the Division), issued a letter to Petitioner denying her request to essentially rescind this election and/or have her "cost associated with buying into the FRS Pension Plan from the FRS Investment Plan transferred to SUSORP." On November 25, 2019, Ms. Byron submitted a request for an administrative hearing to the Division. Respondent forwarded Petitioner's request to DOAH on December 11, 2019. The matter was originally scheduled for hearing for February 5, 2020, but was continued three times: once at the Division's request and twice due to the state of emergency related to the COVID-19 health crisis. A final hearing was held on April 29, 2020, by Zoom. Petitioner testified on her own behalf and Petitioner's Exhibits P1 through P7 were admitted into evidence without objection.1 The Division offered the testimony of Joyce Morgan (Division Bureau Chief of Contributions), and Respondent's Exhibits R1 through R8 were admitted into evidence without objection. The final hearing was recorded by a court reporter, but neither party ordered a transcript. Petitioner requested 30 days to submit her proposed recommended order, and the Division had no objections to Petitioner's request. By requesting and agreeing to the extension of time, the parties waived the requirements in section 120.57(3)(e), Florida Statutes (2019), for the rendering of a recommended order within 30 days of the hearing. See Fla. Admin. Code. R. 28-106.216(2).2 1 Exhibit P7 is a disk with numerous audio files of telephone conversations between Petitioner and Division employees, other State employees, representatives, and agents. 2 All references to statutes and administrative rules are to the 2019 versions of the Florida Statutes and Florida Administrative Code unless otherwise noted. Accordingly, the proposed recommended orders were due no later than May 29, 2020. Both parties submitted timely Proposed Recommended Orders (PROs), which have been considered in the preparation of this Recommended Order.
Findings Of Fact Petitioner, Lee Hayes Byron, is currently employed by the University of Florida and eligible to participate in the Investment Plan, Pension Plan, or SUSORP. She is in an optional (not a mandatory) SUSORP position. Respondent, the Division, is a part of the Department of Management Services (DMS). The Division, as part of DMS, is the state entity responsible for oversight and administration of the Pension Plan and SUSORP. See §§ 121.125 and 121.035, Fla. Stat. The Division authorizes provider companies to assist SUSORP members with investments. See § 121.035, Fla. Stat.; Fla. Admin. Code R. 60U-1.011(4). The State Board of Administration of Florida (SBA) is the state agency responsible for oversight and administration of the Investment Plan.3 SBA is not a party to this proceeding. In coordination with DMS, SBA is responsible for dissemination of information regarding the FRS plans. See § 121.4501(10), Fla. Stat. SUSORP is a defined contribution plan authorized by section 121.35, Florida Statutes. The plan is an optional retirement plan in which 3 There was evidence that prior to attempting to undo her election with the Division, Petitioner requested an agency hearing with SBA, which was held on May 21, 2019. The SBA Hearing Officer recommended that SBA grant Petitioner relief by allowing her to rescind the 2nd election. On September 17, 2019, SBA issued a Final Order rejecting the SBA Hearing Officer’s recommendation. Petitioner has appealed the SBA’s Final Order, which is now pending at the Second District Court of Appeal in the matter of Lee Hayes Byron v. State Board of Administration, Case No. 2D19-3930. "eligible employees" of the State University System can elect to participate in lieu of the Pension Plan or Investment Plan. One of the benefits SUSORP offers over the FRS plans is the employer contribution rate is greater. SUSORP and the Investment Plan require an employee to contribute a minimum pretax contribution and allow additional funds to be contributed. Both the Investment Plan and SUSORP allow the employee to allocate the money in the plan account among approved investment funds.4 The ultimate benefit from the Investment Plan and SUSORP received by the employee upon retirement depends on both the amount contributed and the financial markets. The employee is responsible for managing his or her SUSORP or Investment Plan account through approved providers. In comparison, the Pension Plan requires a fixed pretax contribution by an employee. The Pension Plan is responsible for investing the contributions and accumulated funds in the member's pension account. Upon retirement, the employee receives a lifetime monthly benefit using a formula based on his or her length of service and salary. The employee has no control over how the money in the pension account is invested but is guaranteed a fixed, predictable benefit. PETITIONER'S FRS HISTORY Ms. Byron originally enrolled in FRS as an employee of Sarasota County on July 11, 2005. At that time she had the option to participate in either the Investment Plan or Pension Plan. On December 28, 2005, Ms. Byron made a timely election to participate in the FRS Investment Plan, effective January 1, 2006. As part of the FRS system, she had one more chance to switch to the Pension Plan. The subsequent decision to change FRS plans is referred to as the "2nd Election." On April 20, 2018, Petitioner began employment with the University of Florida in a SUSORP-eligible position. At this point, as explained in the 4 SBA recommends acceptable SUSORP investment products to the DMS; the DMS has final approval of such products. See § 121.035(6)(c), Fla. Stat. Conclusions of Law, Petitioner would begin participation in SUSORP unless she opted to remain in the FRS System (in either the Investment Plan or Pension Plan) or failed to enroll in a SUSORP-approved investment fund. See § 121.35(3), Fla. Stat. INFORMATION AND COMMUNICATIONS A handout distributed by the Division titled, "Florida Retirement System (FRS) Investment Plan • Members With a Remaining FRS Election Inquiring About State University System Optional Retirement Program (SUSORP) Membership" (SUSORP Handout) provides information for an Investment Plan member who wants to participate in SUSORP. The SUSORP handout states in relevant part: You will need to use your 2nd (and last) election to transfer from the Investment Plan to the Pension Plan before you will be eligible to elect participation in the SUSORP. * * * There is a cost associated with using your 2nd election to transfer to the Pension Plan. * * * The estimated transfer cost is calculated using your salary, service credit, membership class, and other actuarial assumptions used in the annual FRS actuarial valuation. The payment for the amount of the transfer cost is required to complete the transfer to establish your Pension Plan membership. The amount of money liquidated from your Investment Plan account to pay for your transfer cost will not transfer to the SUSORP. If the value of your Investment Plan account is less than the transfer cost, you may use personal resources including a direct transfer from a qualified plan … to make up the difference. Any personal resources paid will not transfer to the SUSORP. * * * Your membership in SUSORP will not begin until you have completed the transfer process and will be entirely funded by future (after the transfer) employer and employee contributions submitted on your behalf. * * * Your SUSORP account will begin with a zero balance and will be funded by future employer and employee contributions. The Division's witness, Ms. Morgan, confirmed the SUSORP Handout is a Division document. Ms. Morgan further stated that although this version of the SUSORP Handout was not provided to Petitioner, it was the Division's position at the time she was eligible for participation in SUSORP. Ms. Morgan also conceded that there is no statutory authority for the requirement that an employee would need to use his or her 2nd Election to transfer from the Investment Plan to the Pension Plan before becoming eligible to elect participation in SUSORP. As explained in the Conclusions of Law, this is an unpromulgated requirement that has no statutory authority, and therefore cannot be applied to determine Petitioner's substantial interests. The Division approves provider companies to provide information and investment products to SUSORP members. See Fla. Admin. Code R. 60U- 1.012(1)(a). AXA Advisors (AXA) is one of the provider companies listed on the SUSORP Enrollment Form. See Form ORP-ENROLL-1, available at https://www.flrules.org/Gateway/reference.asp?No=Ref-06117. On April 24, 2018, Petitioner received an email from Patrick Ashe with AXA. Mr. Ashe described AXA as a resource to help Petitioner select the best retirement plan: Pension, Investment, or SUSORP. Mr. Ashe eventually spoke to Ms. Byron on the phone and sent her FRS information. He also provided her with contact information for the Division and an FRS general phone number. On May 3, 2018, Mr. Ashe provided Petitioner with a document titled, "Welcome to the Florida Retirement System for State University System SUSORP-Eligible Employees" (Comparison Brochure), dated January 2018. The Division alleges the Comparison Brochure is published by SBA, not the Division. Although SBA is responsible for providing educational information about retirement options to eligible employees, it must do so in coordination with DMS. See § 121.4501(10)(a) and (10)(c)7., Fla. Stat. Regardless of who published the Comparison Brochure, it is clear that it is an official document used to advise SUSORP members, and AXA was authorized to advise Ms. Byron regarding her FRS retirement options and SUSORP. The Comparison Brochure explains the differences between SUSORP, the Investment Plan, and the Pension Plan. The Comparison Brochure also provides deadlines for the election to participate in each plan. According to the Comparison Brochure, from the date of hire, a SUSORP-eligible employee has 90 days to choose to participate in SUSORP. If he or she does not elect to participate in SUSORP, the employee has until 4:00 p.m. (E.S.T.) on the last business day of the eighth month after the month of hire to choose between the Investment Plan and the Pension Plan. If the employee does not make an election, FRS automatically enrolls the employee in the Investment Plan. As explained in the Conclusions of Law, this is contrary to the SUSORP statute. Regarding changes made after an initial election, the Comparison Brochure provides: SUSORP Plan Investment Plan Pension Plan Can I change plans after I make my initial election? No. If you elect the SUSORP, you will remain in this plan for as long as you remain at this employer in a SUSORP-eligible position. You have a one-time 2nd Election that you can use during your FRS career to change to the other FRS retirement plan, provided you are actively employed by an FRS-participating employer at the time your 2nd Election is received.4 (Footnote in original, see ¶20 below). The Comparison Brochure explains that once an employee chooses to participate in SUSORP, the employee cannot change to a different plan, and will remain in SUSORP as long as the employee is in a SUSORP eligible position. Once an employee elects to participate in the Investment Plan or the Pension Plan, he or she has only one opportunity (the 2nd Election) during his or her entire FRS career to change between the Investment and Pension Plans. Regarding changing to SUSORP from the Investment Plan or Pension Plan, footnote 4 in the Comparison Brochure explains: If you are enrolled in the Investment Plan and move to a SUSORP-eligible position, you must use your 2nd Election (if available) to buy back into the Pension Plan in order to enroll in the SUSORP. You are not permitted to make a direct transfer from the Investment Plan to the SUSORP (unless in a mandatory SUSPORP position). Again, during the hearing, Ms. Morgan admitted there was no statutory authority for the requirement that Petitioner use her 2nd Election to buy into the Pension Plan before she could enroll in SUSORP. On May 4, 2018, Mr. Ashe sent Ms. Byron a follow-up email that explained the procedure to switch from the Investment Plan to the Pension Plan so she could enroll in SUSORP: It sounds like you are currently in the Investment Plan so if you decide to stay in that plan just verify with [FRS] that you want to make sure you automatically are re-enrolled in that plan. If you elect to switch to either the Pension or the SUSORP plan then we would just fill out the 1 page 2nd election form and fax that to FRS to utilize the switch. That would put you in the Pension Plan. From there if you would like to enroll in the SUSORP plan then I will get those forms to you and we will get that set up. … The main factor on whether the switch would be in your best interest would be based on the differential between the Pension and Investment Plans at your current number of years in the FRS system. * * * In the Investment Plan the university is contributing 3.3% to match your mandatory 3% contribution and in the SUSORP plan they would contribute 5.14% in addition to your 3% contribution. The differential involved in switching to the Pension Plan so that you could then enroll in the SUSORP plan would be the major factor in whether picking up the extra employer contribution would be beneficial in the long run. (emphasis added). Mr. Ashe's email erroneously indicated Ms. Byron must use her 2nd Election to go into the Pension Plan before she could enroll in SUSORP. He also acknowledged she should weigh whether the cost to buy into the Pension Plan was worth the extra contributions available if she ultimately decided to go into SUSORP. In this email, Mr. Ashe reiterated he had the authority to provide the SUSORP paperwork and "get that set up." Ms. Byron testified she believed Mr. Ashe was authorized by the Division to advise and enroll her into SUSORP. Although the Division argues other people who spoke with Ms. Byron were not Division employees, it does make this same assertion regarding Mr. Ashe. See Resp. PRO, ¶¶ 44-47 (claiming Ernst and Young's employee was an SBA agent, not a Division agent). Given that AXA was a approved by the Division as a provider company, the undersigned finds that AXA and Mr. Ashe were authorized by the Division to provide Ms. Byron with information about SUSORP and administer her SUSORP account. See § 121.35(6), Fla. Stat. On May 29, 2018, Ms. Byron called the FRS Financial Guidance Line and was put in contact with "Mike with Ernst & Young." During the call, Ms. Byron explained to Mike that she was in the Investment Plan, but wanted to "move to the SUSORP." Specifically, she called because she understood she would "have to maybe pay a fee to get into the pension plan and then move to the SUSORP." She had been told that she should call the FRS Financial Guidance Line to figure out what that fee might be. Mike confirmed Petitioner would need to be a member of the Pension Plan before getting into SUSORP. Again, this information is not accurate and contrary to the SUSORP statute and Division rules. He also stated there is a 90-day window for her to move to SUSORP. During the call, Mike could not give Petitioner a quote for the buy in cost of switching from the Investment Plan to the Pension Plan and indicated it could take up to six weeks to get that information. He also informed her it could take a full month to process the paperwork and payment amount to become a Pension Plan member. He urged her to submit the 2nd Election form to switch from the Investment Plan to the Pension Plan before the end of the month (May 31, 2018), and then not to pay the cost if she concluded it is was too much or did not want to go forward with the switch. Ms. Byron: Okay. So, what is the risk of submitting the [2nd Election] form? I know I only get one chance to make the change. If I submit the form and change my mind, does that count as my chance? Mr. Mike: I mean, you have the full month following to rescind. * * * Ms. Byron: And if I don't submit the form, then nothing happens. If I do submit the form, and I don't want to pay it, I have to not pay it and nothing happens … [i]f it automatically happens and I still don't want to do it, I have a month. Mr. Mike: Yeah. Based on the information she received from Mr. Ashe and her conversation with Mike, Ms. Byron understood she had 90 days, or until July 19, 2018, to buy into the Pension Plan and then elect to participate in SUSORP. Because she had been led to believe only Pension Plan participants could elect to participate in SUSORP, she reasonably concluded she would need to use her 2nd Election to change from the Investment Plan to the Pension Plan before she could participate in SUSORP. On May 31, 2018, Ms. Byron submitted a "2nd Election Retirement Plan Enrollment Form" (2nd Election form) by facsimile to the number designated on that form. Ms. Byron selected the following option: Option 1: Change from the FRS Investment Plan or Hybrid Option to the FRS Pension Plan. I want to transfer from the Investment Plan to the Pension Plan and use my existing Investment Plan account balance and possibly other personal resources to 'buy' into the Pension Plan. The 2nd Election form does not make any reference to SUSORP. On May 31, 2018, Petitioner called the FRS Financial Guidance Line to confirm that the 2nd Election form was received by FRS. During this call, Ms. Byron was transferred to Misty, who identified herself as an Investment Plan administrator. Ms. Byron indicated she wants to make sure the 2nd Election form had been received, but Misty could not confirm this. Misty explains it may take a few hours to show up "in her system." Ms. Byron was concerned she may not be talking to the right person. Ms. Byron: Okay. Now, am I –are you sure I'm with the right person? Because I'm switching from investment to the pension with the intention of eventually switching to SUSORP. Ms. Misty: You're switching from investment plan to pension with the intention of switching to the [sic] something entirely outside of the pension? Ms. Byron: To SUSORP. Ms. Misty: Okay. I don't know what that is, I apologize. Let's go ahead and get you over to pension just to be sure since they are a separate department. * * * Ms. Byron: Who's in charge of switching from the investment to the pension? Ms. Misty: We [SBA and the Division] would both be involved in it. (emphasis added). She then instructed Ms. Byron to press Option 4 for the Pension department when she returned back to the automated system. From this conversation and the other conversations Ms. Byron had with people on the FRS Financial Guidance Line, the undersigned finds both the Division (as the agency administering the Pension Plan) and SBA (as the agency administering the Investment Plan) were responsible for processing Ms. Byron's 2nd Election form. On June 4, 2018, FRS sent Ms. Byron a "Confirmation of 2nd Election – Pension Plan" (Confirmation). It indicated that her election to move from the Investment Plan to the Pension Plan was effective as of June 1, 2018, but that it was not finalized. The Confirmation informed Petitioner "you will need to buy into the FRS Pension Plan using the available balance in your FRS Investment Plan account. If your account is not sufficient to cover the cost of the buy in, you will need to submit personal funds." Although the Confirmation did not state whether it was sent from SBA or the Division, the second page indicated: If you feel this retirement Plan election was made in error, you may be able to cancel it. Please call the MyFRS Financial Guidance Line at 1-866-446- 937, Option 2. Failure to notify us no later than 4:00 PM EST on the last business day of the month following your election month will void your right to cancel this election. The Confirmation directed members to contact the Division (not SBA) at the same number, Option 3, for specific questions. Based on the date of the submittal of her 2nd Election form (May 31, 2018), Ms. Byron had until June 29, 2018, to rescind her 2nd Election form, and thereby reverse her decision to go from the Investment Plan to the Pension Plan. At this point, however, even though she had executed the 2nd Election form, Petitioner's election transfer from the Investment Plan to the Pension Plan was not final because she had not submitted the buy in payment. The Confirmation did not address what would happen if the buy in amount was not submitted, or if it was, what would happen if an employee canceled the 2nd Election and did not remain in the Pension Plan. The Confirmation did not make any reference to SUSORP. On June 18, 2018, Ms. Byron spoke with Leah at the Division. In this call, Ms. Byron explained she received the Confirmation, but she had not received a bill for the buy in amount. Leah replied that a letter with the amount was generated on June 14, 2018, but has not been mailed out. Ms. Byron was concerned about the last day she has to rescind the election. Ms. Byron: So what is my deadline for canceling? I'm just panicking about if it's – if it's not what I want to do because I don't have the bill yet, when can I cancel the second election? Ms. Leah: Typically they give you a 60-day period. Let me double check. One moment. Okay. So you'll have until no later than the last business day of the month following the election. During the call, Ms. Byron pressed Leah on the letter with the buy in figure, and questioned her as to why the Confirmation was sent if the election was not final. Leah determined the letter was issued by the Investment Plan (SBA), not by the Pension Plan (the Division), and transferred Ms. Byron to Rick with the Investment Plan. It is apparent from the audio recording that Ms. Byron was exasperated (justifiably), but remained patient. Once transferred to Rick, Ms. Byron was informed that any questions regarding the buy in had to go through the Pension Plan. Rick offered to transfer her back to the "pension department." On June 21, 2018, before the deadline to rescind her 2nd Election, Mr. Ashe sent Ms. Byron two documents: (1) a SUSORP enrollment form, and a risk tolerance questionnaire to identify Ms. Byron's investment strategy for SUSORP. There was no discussion of the buy in payment to transfer into the Pension Plan. On July 3, 2018, Ms. Byron called the FRS Financial Guidance Line and was transferred to Durriya with Ernst & Young. During this call, Ms. Byron explained she received an invoice for the buy in amount to switch to the Pension Plan and needed a "letter of acceptance" for the financial firm handling her Investment Plan to release the funds. Durriya said could not help her and offered to transfer Ms. Byron to someone else. Durriya transferred Ms. Byron to Phyllis at the Division who was able to help her. Phyllis stated she would request for the letter and it would be mailed to Ms. Byron as soon as possible. Ms. Byron expressed concern that the letter might not get to her by July 19, 2018, the date she needed to elect to participate in SUSORP. Ms. Byron: So help me with the deadline. I was hired April 20th. I have made my intention known to go into the SUSORP, but I can't physically do that with the money until all of this happens. And I'm worried it won't happen by July 20th, July 19th, which is my deadline for selection. Am I going to be okay? Ms. Phyllis: Let's see. Okay. So you have until August 16th for us [the Division], but you need it by July 19th? Ms. Byron: That's when my selection of the – which plan I want to be in has to be in. And I submitted my, I want to be in SUSORP [ ], but I can't physically be in … SUSORP until all the money's there [Pension Plan]. Does that matter? * * * Ms. Phyllis: Okay. So, basically you are switching from investment to pension and then to SUSORP, right? Ms. Byron: Yeah. (emphasis added). Phyllis did not advise Petitioner she could start participation in SUSORP without first switching from the Investment Plan to the Pension Plan or buying into the Pension Plan. At this point, Petitioner's 2nd Election was not finalized because she had not submitted the buy in funds. Had she been informed that she did not have to be in the Pension Plan first, Petitioner could have simply not submitted the buy in funds, kept her existing funds in the Investment Plan, and started in SUSORP. Rather, Phyllis advised she would place a notation in the system that Ms. Byron was attempting to make an election to participate in SUSORP, and "asked them to rush it." Ms. Byron then asked Phyllis about the deadline for her to get into SUSORP. Phyllis could not help her, but offered to transfer her to the Optional Retirement Program department. What is clear from the call is that Ms. Byron is very concerned about getting the buy in funds to the Division to participate in the Pension Plan because she believed she had to be a Pension Plan member before the SUSORP election deadline. On August 3, 2018 (after both the deadline to rescind her 2nd Election form and the deadline to enroll in SUSORP had passed), Ms. Byron contacted the Division and spoke to Leah. At the outset of the call, Ms. Byron informed Leah that called to see if her 2nd Election status was final because she had submitted the funds to buy into the Pension Plan. Although it is unclear from the record how much Petitioner paid to buy into the Pension Plan, she used her entire savings from her Investment Plan plus additional monies. The Investment Plan was valued at approximately $138,000. Leah confirmed the switch from the Investment Plan to the Pension Plan had gone through, and advised Ms. Byron that she had 13 years of service under the Pension Plan. Ms. Byron was audibly upset and stated, "Well, I actually didn't want to end up in the pension, I wanted to end up in the SUSORP, so how do I make sure that that choice is recorded? We had to do the pension first and transfer it to SUSORP." From the audio recording, it is clear Leah was confused. Leah then placed Ms. Byron on hold and had a separate call with another Division employee, Phyllis. Leah relayed the conversation with Ms. Byron to Phyllis and Phyllis suggested Leah call another extension. Leah then checked back in with Ms. Byron to let her know she was still looking for someone who can help her. Ms. Byron agreed to stay on hold. On a separate line (which Ms. Byron could not hear), Leah received an automated recording announcing that she had reached the "Florida Division of Retirement Optional Program O-R-P unit." Leah then spoke with Jim at the Division. Leah explained to Jim that Ms. Byron did not want to remain in the Pension Plan, but rather wanted to transfer to SUSORP. Leah remained confused. [Mr. Jim]: You don't transfer to SUSORP. You're either in it or you're not in it. There is no way to buy into it … there's no way to get from investment by going through pension to get to SUSORP. You take a job that's eligible for SUSORP and you make the choice to be in it or not. * * * Ms. Leah: Well, she had questions about the forms that she would need to submit, but doesn't look like she's going to be – Mr. Jim: Just put up the wall. She's not going to be able to do it. What Jim told Leah is consistent with the SUSORP statute: it does not matter whether one is in the Investment Plan or Pension Plan; one is in SUSORP when he or she is eligible. Jim seemed to be telling Leah that what Ms. Byron wanted (to have her retirement funds in SUSORP) was not possible, but that Leah should not do anything about it. Jim agreed to speak with Ms. Bryon but joked with Leah that it was Friday, and he had one hour left on his shift. He also sarcastically told Leah she may want to stay on the line as it might be "entertaining or educational." Again, Ms. Byron did not hear this conversation between Leah and Jim. Leah then patched Ms. Bryon through to Jim. At this point, Ms. Byron, Jim, and Leah were all on the call. Ms. Byron: I submitted my second election form to go from investment to pension with the intention of going into SUSORP and I need to check if you have all my forms necessary to make that happen. Jim: So, you've just taken a job with one of the universities?Ms. Byron: Yes. Mr. Jim: Okay. It looks like everything's in place. Jim informed Ms. Byron a letter of acceptance to SUSORP was mailed to her on July 5, 2018, and that she could call back to make sure everything had been processed in a few days. He did not tell Ms. Byron what he had explained to Leah: "You don't transfer to SUSORP. You're either in it or you're not in it." After Ms. Byron ended the call, Jim and Leah continued to discuss Ms. Byron's situation. Mr. Jim: Great. Understand now, Ms. Byron just spent a whole bunch of money. That money's gone except that it purchased her some years of pension service. Ms. Leah: Right. Mr. Jim: Okay. Her new SUSORP account starts at zero. Oh, did I hear a great intake of breath? Ms. Leah: Are you serious? Mr. Jim: Absolutely serious. At no point during the conversation between Ms. Byron and Leah or Jim was Ms. Byron informed she did not have to use her 2nd Election and buy into the Pension Plan before she could participate in SUSORP. In fact, at no time during these numerous emails and telephone conversations did anyone affiliated with DMS, the Division, AXA, Ernst & Young, or SBA tell Ms. Byron that she was essentially enrolled in SUSORP (unless she choose to go with an FRS plan or failed to pick a provider) when she started the position at the University of Florida. No one told her that she did not need to exercise her 2nd Election or buy into the Pension Plan to participate in SUSORP.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of Retirement, enter a final order rescinding Petitioner's 2nd Election and either: (1) return the buy in monies to the Investment Plan, (2) transfer the buy in monies from her Pension Plan to SUSORP, or (3) refund these monies to Petitioner. DONE AND ENTERED this 26th day of June, 2020, in Tallahassee, Leon County, Florida. S HETAL DESAI 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 26th day of June, 2020. COPIES FURNISHED: Lee Hayes Byron 2414 River Ridge Drive Sarasota, Florida 34239 Thomas E. Wright, Esquire Office of the General Counsel Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399 (eServed) William Chorba, General Counsel Office of the General Counsel Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399 (eServed) David DiSalvo, Director Division of Retirement Department of Management Services Post Office Box 9000 Tallahassee, Florida 32315-9000 (eServed)
The Issue Whether Petitioner may purchase retirement credit for the period of time from his suspension date to his reinstatement date as creditable service in the Florida Retirement Service.
Findings Of Fact Petitioner, Philip J. Cobb, was employed by the Pinellas County Board of County Commissioners (County) in May 1985, as a property manager. As a permanent employee of the County, Petitioner was enrolled as a member of the regular class of the Florida Retirement System (FRS). In order to vest and be eligible to receive retirement benefits under state law, Petitioner needed to complete ten years of creditable service. Petitioner continued to work for the County until he was terminated on August 1, 1992. The reason Respondent terminated Petitioner was because he allegedly failed to support his supervisor and was insubordinate. At the time Petitioner's employment with the County was terminated, he had earned approximately seven years and two months of creditable service and was thirty-four months short of vesting in the FRS. Petitioner challenged his termination by instituting legal proceedings against the County, alleging that his termination was illegally motivated by age discrimination. The lawsuit, Case No. 94-1054-CIV-T-21C, was filed in June 1994, in the U. S. District Court for the Middle District of Florida, Tampa Division, and sought Petitioner's reinstatement to his former position. At the time of his termination, Petitioner was sixty-seven years old, and at the time of this proceeding he was one day shy of being seventy-three years old. After discovery had been undertaken and prior to the case being set for trial, the Court ordered the parties into mediation. During settlement negotiations, the parties specifically discussed the importance of Petitioner purchasing credit in the FRS as necessary for vesting. In light of this consideration, before of the Agreement was finalized, counsel for Petitioner contacted Respondent regarding the cost of Petitioner's purchasing the service credit required to vest in the FRS. In a letter dated November 30, 1995, from Maurice Helms, Chief, Bureau of Retirement Calculations, to counsel for Petitioner, Mr. Helms noted that Petitioner had only 7.25 years of creditable service in the FRS, not the ten years required to vest. Nevertheless, the letter stated, "If [Petitioner] were eligible to purchase the service credit required to vest and then retire, we estimate the cost would be $30,273.69". This projected amount was considered in negotiations and was represented in the settlement amount. In January 1996, as a result of the mediation, Petitioner and the County entered into a Settlement Agreement, Release and Disclaimer (Agreement), in exchange for Petitioner's dismissing his lawsuit. Paragraph Two of the Agreement provides that the County would make a lump sum payment distribution of $64,000.00 to Petitioner. Of the total amount, $34,000.00 was designated as back pay and liquidated damages. The remaining $30,00.00 was for "fees and other costs associated with the above-captioned case." Further, the County agreed to rescind Petitioner's termination, convert the termination to a suspension without pay, and reinstate Petitioner to his former position. Finally, the Agreement included a provision that Petitioner would resign from that position on the date he was reinstated. Paragraph Three of the Agreement provides that the $64,000.00 is not a "mere recital, but is the cash consideration for this Agreement and the full and final release affected thereby." Notwithstanding the provision in the Agreement that the $34,000.00 is for back pay and liquidated damages, Paragraph Three of the Agreement expressly states that the settlement amount paid by the County and accepted by Petitioner was not to compensate Petitioner for back wages, benefits, or other forms of compensation. Rather, the settlement amount was part of the compromise to settle and compromise the matter. In this regard, Paragraph Three of the Agreement provides in pertinent part the following: ...The parties hereto recognize that substantial questions of law and of fact exist as to any possible claim or claims by Cobb for any compensation, back pay, forms of compensation, benefits or damages, liquidated/compensatory or otherwise, interest and any other claim for relief; therefore, [this settlement is being made purely on a compromise basis in order to avoid further trouble, litigation and expense, and the settlement amount is considered to be a part of the compromise, paid by Defendant and accepted by Cobb not to compensate Cobb for back wages, benefits or other forms of compensation, but to settle and compromise the matter relative to the trouble, interference, damage, and expense which would have been and would otherwise continue to be claimed and/or associated therewith]. [Emphasis supplied.] Paragraph Eleven of the Agreement addresses changes in Petitioner's employment status and delineates the method by which the County would accomplish these changes. That paragraph provides the following: The parties hereto further agree that, without any waiver of the sufficiency of the grounds and cause for Cobb's termination, and [in settlement of all claims of Cobb as set forth hereinabove, a personnel action form will be prepared changing Cobb's termination action on July 31, 1992, to a suspension without pay through the date this Agreement is signed. Additionally, a personnel action will be issued reinstating Cobb to paid status effective the date this Agreement is signed.] Cobb agrees to sign and submit the attached letter of resignation, effective the date he signs this Agreement, and further agrees to waive any pay and/or benefits to which he may be entitled from Defendant since July 31, 1992. [Emphasis supplied.] After the Agreement was executed and pursuant to the terms thereof, the County prepared and processed the required paperwork which effectively rescinded Petitioner's termination, changed the termination to a suspension without pay, and reinstated Petitioner to paid status. Petitioner did not return to work with the County, but resigned on the day he was reinstated. Petitioner's resignation was consistent not only with the terms of the Agreement, but with Petitioner's intentions at the time he was being considered for employment by the County. At or near the time Petitioner was initially employed by the County, he indicated to County officials that he was committed to remaining with the County for ten years so that he could vest in the FRS. Based on his understanding of the Agreement, Petitioner did not intend to return to work with the County after the Agreement was executed. Petitioner believed that the County's action of rescinding his termination, changing his status to suspension without pay, and reinstating him provided him with more than the thirty-four months he needed to vest in the FRS. Had Petitioner not been terminated by the County, he would have vested in the FRS in May 1995, and would have thereupon retired. Although the Agreement provided that Petitioner would resign, there is no indication that the County was opposed to Petitioner's returning to work. In fact, one of the negotiators for the County, testified that "I am not sure that Pinellas County didn't want Mr. Cobb to return to employment. We wanted to settle the lawsuit that was pending. " After the Agreement was finalized, in a letter dated February 12, 1996, Petitioner provided Respondent with a copy of the executed Agreement and "copies of personnel actions completed in accordance therewith." The letter requested that Respondent do the following: (1) reinstate Petitioner in FRS in accordance with Section 121.011(3), Florida Statutes, and Rule 60S-2.016, Florida Administrative Code; and (2) provide Petitioner "with the amount of his required contributions for retirement credit for his period of suspension up to and including the date of his vesting." Petitioner was prepared to pay into the State Retirement Fund the contribution required to receive retirement credit. On March 5, 1996, Respondent issued a letter to Petitioner denying him the right to make contributions for retirement for the period of suspension without pay, July 31, 1992, through the date of his reinstatement, January 22, 1996. The denial letter stated that the purported "reinstatement" did not occur. As rationale for its position, Respondent found that: (1) after being "reinstated", Petitioner never performed work in a regularly established position and, therefore, was not compensated for services or work performed; (2) the County never intended to reinstate Petitioner "to employment with pay, nor was there an expectation of Petitioner to be "made whole" by the County; and (3) Petitioner and the County never intended to "enter into an employer and employee relationship retroactively for the period in question." Respondent stated that the purported reinstatement of Petitioner "was more in the nature of a ruse or sham to achieve a goal other than gainful employment." Moreover, Respondent believed that "neither the member nor the employer intended to enter into a regular employer and employee relationship." Respondent thus concluded that the reinstatement was not "bona fide" and was solely for the purpose of allowing Petitioner to vest in FRS and obtain retirement benefits. Respondent also objected to the form of Petitioner's reinstatement of employment with the County, declaring that it was not a "bona fide" as signified by his failure to receive back pay for the period of suspension and his failure to enter into an employer-employee relationship with the County for the equivalent of one calendar month. Respondent acknowledged that once Petitioner's termination was changed to a suspension without pay Rule 60S-2.016, Florida Administrative Code, applies to the case. This rule is interpreted by Respondent to require that for reinstatement to occur, an individual must work in a regularly established position for at least one calendar month following the suspension. Respondent admits that the "one calendar month" requirement is not contained in either Section 121.011(3)(e), Florida Statutes (1991), or in Rule 60S-2.016, Florida Administrative Code, both of which govern retirement credit for periods of suspension without pay. Nevertheless, Respondent's interpretation of Rule 60S-2.016, Florida Administrative Code, is that a person must work thirty days after a suspension without pay to be deemed "reinstated". Respondent derives this interpretation by applying language from the rule that governs granting credit for leaves of absence. Respondent's interpretation of "reinstatement," as it relates to members who have been suspended without pay, is not evident from the language of the applicable statute or rule and may be ascertained only upon reviewing individual member files. The Florida Retirement System currently has 600,000 active members and 140,000 retirees, for a total of 740,000 files.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Division of Retirement enter a Final Order that awards Petitioner retirement credit for the period of time from his date of suspension to his date of reinstatement subject to his purchasing retirement credit for that period of time. DONE and ENTERED this 30th day of October, 1996, in Tallahassee, Florida. CARLOYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-647 Filed with the Clerk of the Division of Administrative Hearings this 30th day of October, 1996. COPIES FURNISHED: Robert F. McKee, Esquire Kelly and McKee, P.A. 1718 East Seventh Avenue, Suite 301 Tampa, Florida 33675-0638 Stanley M. Danek, Esquire Department of Management Services Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399 Paul A. Rowell General Counsel Department of Management Services Division of Retirement 4050 Esplanade Way Tallahassee, Florida 32399-0950 A. J. McMullian, III, Director Department of Management Services Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560
The Issue The issues to be resolved in this proceeding concern whether the Petitioner's deceased wife, Dorothy Bazzel, made a valid selection of retirement "option 1" instead of "option 2"; whether that apparent selection was a mistake and, consequently, whether the Petitioner should be allowed to receive retirement survivors benefits in accordance with "option 2", as provided for under section 121.091(6), Florida Statutes.
Findings Of Fact The Petitioner, Joe Bazzel, is a resident of Blountstown, Florida, and is retired. His wife, now deceased, was Dorothy Bazzel. She was a longtime teacher in the Bay County school system, with more than 46 years continuous creditable service in the Florida Retirement System and as a teacher. She retired on July 1, 1988. The Respondent is an agency of the State of Florida charged with administering and enforcing the statutes, embodied in Chapter 121, and related rules, by which operation of the Florida Retirement System, including determinations of entitlement to and payment of benefits, is accomplished. Mrs. Bazzel underwent surgery for breast cancer on January 11, 1987. She had been diagnosed by Dr. Dixon McCloy, of Panama City, with breast cancer sometime in January of that year. Her progress after surgery was satisfactory, and she kept all appointments, had required x-rays, examinations and mammograms thereafter, by which her physicians monitored her progress. She had expressed to several persons of her acquaintance a desire to retire by the end of the 1987-1988 school year. In order to prepare for that event, she contacted her brother-in-law, Ray Bazzel, who testified in this case, and asked him to contact the Division of Retirement in Tallahassee, Florida, to obtain an estimate of her expected retirement benefits. He made that request to Ms. Loreen Vause, an employee of the Division, on July 16, 1987, by telephone. The Division of Retirement has an ongoing program which automatically generates an estimate of benefits for members who have certain amounts of creditable service and are of a certain age. When Mr. Bazzel made his request for an estimate of benefits for Mrs. Bazzel, the Division was already in the process of preparing a benefit estimate for her through its routine program. That estimate was forwarded to Mrs. Bazzel on July 22, 1987, and it stated as follows: This is a routine audit of your account. Noting the many years of service you have, we are furnishing you an estimate of your benefits as if you terminate your employment on June 30, 1988, and retire effective July 1, 1988. This is furnished for informational purposes only. By means of that estimate, Mrs. Bazzel was informed as to the benefit amounts which she would receive under all four retirement options. See Respondent's exhibit 8 in evidence. Ray Bazzel would visit Mrs. Bazzel on occasion during his visits to Panama City. She was described by him in his testimony to be a very private person not given to talking much about her illness or the operation. She did discuss the possibility of her retirement on one occasion with him, sometime during the summer of 1987. They discussed all four retirement options, and he explained the options in detail to her. He advised her that she would have to make a decision as to which option she would take, but he was never advised by Mrs. Bazzel nor anyone else as to which option she had actually selected until after her death. He did not know that she had made application for retirement on January 14, 1988. Harold Bazzel is a nephew of the Petitioner. He testified that he did not know that Mrs. Bazzel had made an application for retirement and did not know what option she selected until after her death. Richard Locker was the personnel officer with the school board where she was employed and knew Mrs. Bazzel personally and professionally. He was the principal for six years at Cove Elementary School where both his wife, Nan Locker, and Mrs. Bazzel taught. Mr. Locker had a policy of discussing retirement issues with Florida Retirement Service members on his staff and advising them of correct procedures to follow, as to the paperwork involved, and as to the full retirement options which they could select. He advised all members who were employed at his school to call the Division of Retirement in Tallahassee for more information. He never advised anyone of which option they should take because each case is an individual case, and he did not feel comfortable advising an employee or friend which option to take and then later have that person accuse him of advising the wrong option. Mr. Locker saw Mrs. Bazzel after her surgery and stated that after the surgery, she appeared to be in good health. He saw her in May of 1988 and stated that she was very optimistic and appeared capable of teaching the next year. She did not seem moody or depressed in any way to him. He believed that she exhibited an attitude that her treatment had been a success and that her health had been restored. He discussed with her the possibility of her retiring at the end of the 1987-88 school year, and he believed that she would retire at that time. In two telephone calls, he and Mrs. Bazzel discussed the four different retirement options. She appeared to know what he was talking about and to understand those options. He felt that she understood that option 1 would pay the highest benefit amount to her of the four options. He, however, did not really know what option she had chosen until after the Petitioner, her husband, informed him after Mrs. Bazzel's death. Based upon the testimony of Ray and Harold Bazzel and that of Richard Locker, concerning their contact and discussions with and advice to Mrs. Bazzel, it is found that Mrs. Bazzel was aware of the four options and the differences between them. She was aware that option 1 provided the highest benefit to the retiring member for the lifetime of that member and that it would cease at the death of the member with no further benefits being payable to any person. On January 14, 1988, the Petitioner, Joe Bazzel, drove his wife to the offices of the school board, where she completed the forms necessary for her retirement. She talked with Vicky Poole, the records clerk, who helped teachers and administrators complete necessary retirement forms as part of her job duties. Ms. Poole had worked at the school board offices for approximately seven years and had an established procedure for informing prospective retirees of all information needed to process retirement applications. As part of her instructions to them, she would ask each potential retiree to inform her of the option they wanted to select, who their beneficiary would be and where the checks were to be sent. She would inform them when they would start receiving checks, would discuss with them their sick leave balance "payoff", and what steps they needed to take to obtain social security benefits. This discussion with prospective retirees would take up to one-half hour if the retirement form had not been partially completed before the retiree came into the office, or about 15 minutes if the form had already been partially completed. If Mrs. Bazzel already understood the retirement options and had formed an opinion of what she wanted to do concerning retirement and the selection of an option, and if the form had already been partially completed, then the entire process on January 14, 1988 could have occurred in a few minutes. It was Ms. Poole's practice to sit next to the prospective retiree, obtain the necessary information, and type it on the retirement form at that time. She would then advise the member of the various options by referring to the back of the retirement form (Respondent's exhibit 12 in evidence) or to a pamphlet explaining the options issued by the Division of Retirement. Both of those documents contain a narrative description of the retirement options. Ms. Poole did not choose a retirement option or advise a prospective retiree of which option to choose. The retiree must choose his or her own option. Ms. Poole would never advise a person concerning which option to take and had been advised by the Division of Retirement never to give such advice on option selection. If Ms. Poole perceived that a prospective retiree was indecisive about option selection or did not appear to understand the options or the consequences of such election, she would advise that person to speak with someone else who was knowledgeable about the retirement system and about the retiree's financial situation, such as a friend or relative. If a prospective retiree was still indecisive or unsure of the meaning of options or which option to select, Ms. Poole would hold the form and not complete it without being sure in her own mind that the retiree understood the option and knew what it meant. In her standard procedure, she would go over each item on the form at least two and up to four times with a retiree. If they were very certain of the option they wanted to select, she would then finish the form and have the person sign it and give it to Ms. Bolinger to notarize. Ms. Poole realized that the choice of an option was an important decision and conducted her interview with the retiree accordingly. She testified in this regard as follows: If they said well I'm looking at 2 and 3, that's waivering. If they said I want option 1, I typed 1 in and I would say it several times as I typed it in. I mean I was very well aware that this selection was for the rest of their life and could affect someone else. I was very well aware of that. So, I would repeat it several times and when I was complete, when the form was complete, I'd give it back and go over it again, again reemphasizing the option. If they did waiver, I would briefly go over the options and there was time, I always mention, you know, there's time to do this, to choose your option, perhaps you want to talk to someone. I could not advise them. That's what I did. Ms. Poole remembered that Mrs. Bazzel came into the office but did not remember if the retirement forms had already been completed or partially completed prior to the visit. She testified that there was no doubt in her mind that Mrs. Bazzel chose option 1 and no doubt that she knew what option 1 meant. Ms. Bolinger began to work with the school board dealing with retirement applications in 1984. She is now the records clerk who handles retirement matters for teachers and school administrators. This is the same job that Ms. Poole performed in January of 1988. Ms. Bolinger notarized the retirement form of Mrs. Bazzel. Ms. Bolinger learned her job from Ms. Poole and testified that the retirement form was always completed in the office before a retirement clerk and was never sent to anyone. She stated that the clerk would ask the member if they understood each of the options, and the clerk would be sure that the member did understand them. It was the practice to ask such a retiring person if he or she was familiar with the options. If the retiree seemed the least bit confused, Ms. Bolinger testified that the clerk would discuss each option all over again with the prospective retiree, give him the form with the options listed on the back, and they would then discuss each one and make sure that the prospective retiree understood each option before continuing the process of executing the requisite forms. Thus, Ms. Poole and Ms. Bolinger or any school board clerk follows a routine practice of examining and discussing in detail each retirement option with a prospective retiree and makes sure that person understands the wording of the four options and what the four options mean before making a selection, answering any questions the prospective retiree might have and advising them to seek counsel from a qualified person if the prospective retiree remains unsure of which option to elect. After the forms are completed, the clerks, including Ms. Bolinger and Ms. Poole, when she was performing that function, examine the forms with the retiring member to make sure that all information is correct. "We wait until they check the whole thing and this is exactly what they want, and I watch them sign it." The signature is the last item which is placed on the retirement form. If the retiring member appears unsure about the options, Ms. Poole and Ms. Bolinger will ask them to go home and think about it and think it all through before they decide. Like Ms. Poole, Ms. Bolinger leaves the option selection up to the retiring member and does not attempt to advise persons about which option to select, merely giving them the information concerning the effect of selecting a particular option. In her capacity as a notary, Ms. Bolinger stated that if a person did not look like they knew what they were doing in executing the form, she would not notarize the form. If they did not appear to understand that they were applying for retirement, or which facet of it they were applying for, she would, likewise, not notarize the form. She would not notarize a signature after the fact of the signature being placed on the form. Ms. Bolinger was shown a copy of Petitioner's exhibit 7, in evidence, which is a copy of the retirement form that did not have her notary signature. She observed that her notary stamp was on that copy but that her name had merely been signed in the wrong place, possibly because she was new to those duties concerning retirement clerk matters. She testified, however, that her signature was correctly placed on the form, she believes, that same day. See pages 17 and 37 of Petitioner's exhibit 7, in evidence. On January 14, 1988, Mrs. Bazzel completed two forms: FR-11, "Application for Service Retirement", and FR-9, "Request for Audit", (see Respondent's exhibits 9 and 10, in evidence). Both of those forms contain Mrs. Bazzel's signature and are dated with the same date, January 14, 1988. The FR- 11 form had that date written on it in three places. The two forms were then filed with the Division of Retirement. They were acknowledged by the Division as being received on the next day, January 15, 1988, according to the form FST- 40C, "Acknowledgment of Retirement Application", which has January 15, 1988 as the received date. See Respondent's exhibit 11 and the testimony of Stanley Colvin, in evidence. The Petitioner testified that he believes the retirement application forms referenced above were suspect as to accuracy because, according to his testimony, he took his wife to the school board offices on a Friday to sign the forms after the end of the teaching day on either January 8th or January 15th, and states that generally he remembers that it was a Friday because that was the day they had the habit of leaving the Panama City area to visit relatives for the weekend. However, the forms are dated January 14, 1988 in several places. The forms in evidence and the testimony of Ms. Colvin establish that the application documents were received on January 15th in the offices of the Respondent agency. Thus, they could not have been signed on Friday, January 15th. If they had been signed on Friday, January 8th, the record leaves no explanation as to why all of the forms were dated January 14th. The Hearing Officer can only logically find that, indeed, the forms were signed by Mrs. Bazzel on January 14, 1988 and received in the offices of the Division in Tallahassee, Florida, on January 15, 1988. The date of January 20, 1988, appearing on the documents, was established to be the date they were received in the bureau within the department which actually performs benefit calculations, not the date it was first received by the department. The evidence establishes that Mrs. Bazzel selected option 1, the retirement option which provides no survivor's benefits. None of the exhibits in evidence can support a finding that she chose or intended to choose option 2, which provides survivor's benefits. The application for service retirement shows an election for option 1 and the acknowledgment of receipt of that retirement application, FST-40C, shows that option 1 was selected, as well as the letter that informed Mrs. Bazzel that she was being added to the retirement payroll in the category of option 1 benefits. On August 1, 1988, the day after the first retirement warrant would have been received by Mrs. Bazzel, Ray Bazzel called the offices of the Division of Retirement to state that Mrs. Bazzel had checked the wrong number of income tax exemptions and wanted to change them. In order to know how many exemptions she had, he would have had to see the stub from that first retirement warrant. The stub would have depicted the gross amount of the benefit, which was the same amount as that provided for option 1, and not the gross amount attributable to option 2. See FST-40C form, in evidence as Respondent's exhibit 8. Additionally, in a conversation with one of her closest friends, Nan Locker, Mrs. Bazzel led Ms. Locker and friends at school to believe that her surgery had alleviated her medical problem with cancer and that she was in good health. During a conversation they had approximately nine months before Mrs. Bazzel's death, Mrs. Bazzel, in talking about retirement with Ms. Locker, who was also contemplating retirement, made a comment as follows: "Well, I've got my retirement and Joe's got his." This comment was made sometime in the fall of 1989 before Mrs. Bazzel's death in July of 1990. Although the Petitioner introduced exhibits 1, 2 and 4 in an attempt to show that his wife meant to select option 2 and that some mistake was made by the school board or the Division in preparing and submitting the documentation setting up Mrs. Bazzel's retirement benefit situation; in reality, those exhibits merely show that Mrs. Bazzel possibly did some calculations as to the difference in monthly amounts between option 1 and option 2. The exhibits can only show that she may have been aware of the difference in monthly benefit amounts between the two options, but they do not show that she intended to select option 2. Indeed, the evidence and testimony, considered in its totality, shows that her selection of option 1 was a voluntary, knowing selection. The evidence also shows that Mrs. Bazzel was mentally and medically competent to make that selection, freely and voluntarily. Her visits with Dr. McCloy, her treating physician, in the first half of 1988, to monitor her health situation after the cancer surgery, were normal and showed nothing unusual as far as any recurrence of cancer was concerned. Her chest x-rays were negative for recurrent cancer. On June 3, 1988, she was diagnosed as having a small duodenal ulcer, but no indication of recurrent cancer was present. Dr. McCloy treated her for the ulcer with medication; and by August 10, 1988, her symptoms attributable thereto had largely been alleviated. Her visits to Dr. McCloy were routine for the remainder of 1988 and 1989, with normal results. It was not until March of 1990 that she was diagnosed with a spot on the left rib, which proved to be recurrent cancer, probably attributable to the original breast cancer. She deceased as a result of this condition on July 9, 1990. Dr. McCloy testified that he never advised Mrs. Bazzel that her cancer was terminal because he believed that it had been successfully treated after the surgery and for a long period of time thereafter he had no evidence of its recurrence. Therefore, he had not advised her that she was terminally ill during the period of time she was making the retirement decisions, applying for and receiving her first retirement check during essentially the first half of 1988. Dr. McCloy's testimony further establishes, without doubt, that Mrs. Bazzel was alert, possessed her full intelligence and faculties, and understood the significance of his medical instructions, and understood his advice as to her health status. Accordingly, it has been established that Mrs. Bazzel did not have a recurrence of cancer until it was diagnosed in March of 1990, long after she had made the relevant retirement decisions pertinent hereto, and that she knew and was fully aware of her medical condition during the process of applying for her retirement benefits. She, therefore, understood the steps she took for retirement application and benefit receipt purposes, and was not medically or mentally impaired to make those decisions. It was established that she began her teaching career as a member of the Teacher Retirement System, pursuant to Chapter 238, Florida Statutes. She subsequently transferred into the Florida Retirement System under Chapter 121, Florida Statutes, during an open enrollment period. While a member of the Teacher Retirement System, she paid $12,870.33 in total contributions, plus interest, which accumulated on those contributions in the amount of $8,561.97, for a total on deposit in her account of $21,432.30. During the period of her retirement before her death, Mrs. Bazzel received total benefits in the amount of $49,551.95. She, therefore, received $28,119.65 more in benefits than she had paid into the Teacher Retirement System in contributions, plus accumulated interest. It was proven that the distance to the residence or places of business of the deponents, whose depositions were admitted into evidence, comports with the standard of Rule 1.330, Florida Rules of Civil Procedure. Since the locations of the deponents as potential witnesses accorded with the 100 mile standard, their depositions were admitted in lieu of live testimony.
Recommendation 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 the parties, it is therefore, RECOMMENDED that a Final Order be issued by the Division of Retirement determining that the Petitioner, Joe Bazzel, is not entitled to have the retirement option selected by Dorothy Bazzel changed from option 1 to option 2. DONE AND ENTERED this 15th day of September, 1992, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of September, 1992. APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-5774 Petitioner's Proposed Findings of Fact 1-5. Rejected as not being in accord with the preponderant weight of the evidence. 6. Accepted but not itself materially dispositive. 7-11. Rejected as not being in accord with the preponderant weight of the evidence. Respondent's Proposed Findings of Fact 1-25. Accepted. 26-30. Accepted. COPIES FURNISHED: A.J. McMullian, III, Director Division of Retirement Cedars Executive Center, Bldg. C 2639 North Monroe Street Tallahassee, FL 32399-1560 Mr. Larry Strong Acting Secretary Department of Management Services Knight Building, Suite 307 Koger Executive Center 2737 Centerview Drive Tallahassee, FL 32399-0950 Joe Bazzel P.O. Box 46 Blountstown, FL 32424 Stanley M. Danek, Esq. Division of Retirement Cedars Executive Center 2639 North Monroe Street, Bldg. C Tallahassee, FL 32399-1560
The Issue The issue for determination is whether the Florida Retirement System's retirement benefit option selected by Petitioner's deceased son should be changed from Option 1 to Option 2.
Findings Of Fact Ms. Kerr is the mother of the late Mr. Kerr. Mr. Kerr was employed by the Broward County Sheriff's Office (BSO) from January 2, 1990 through September 28, 2004. Mr. Kerr was a detective, hereinafter referred to as Det. Kerr. As a result of being an employee of the BSO, Det. Kerr was a member of the Florida Retirement System (FRS). During his employment, BSO, not Det. Kerr, made contributions to the FRS for his benefit. Retirement is the agency charged with the responsibility of administering the FRS. In complying with its duties, FRS publishes and provides an informational handbook and forms regarding retirement issues to its FRS members. FRS' staff also provide counseling to FRS members who inquire about FRS issues. A website is also maintained by FRS for its members to inquire about FRS issues and obtain information about retirement. On July 29, 2004, Det. Kerr completed an Application for Disability Retirement (Application), which was signed and notarized. The Application indicated, among other things, that he was applying for regular disability benefits and that Dr. Garry Friedberg was one of his treating physicians. Det. Kerr designated Ms. Kerr as his primary beneficiary on the Application. On August 2, 2004, Retirement received the completed application. Det. Kerr had over 16 years of creditable service, and he was, therefore, vested as a Special Risk member of the FRS and eligible for retirement benefits. Retirement acknowledged receipt of the documents needed to make a determination on Det. Kerr's disability retirement application. Also, Retirement advised him that, if his disability retirement application was approved, further documents would be required before he could be placed on the retirement payroll. One of the additional documents requested by Retirement was Form FRS-11o, which was FRS' Option Selection Form for its members. FRS-11o must be completed before retirement benefits can be paid. FRS-11o notices the member of four different options for payment of retirement benefits and contains a narrative describing the effect of the selection of each of the four options. Option 1 yields the maximum monthly benefit, but when the retiree dies there is no survivor benefit. Option 2 yields a reduced monthly benefit for 10 years, but, if the retiree dies before the end of the 10 years, the benefit is paid to the surviving beneficiary for the balance of the 10 years. Option 3 provides a reduced benefit for the joint lifetimes of the retiree and beneficiary. Option 4 provides a reduced benefit for the lifetime of the retiree and beneficiary, which benefit is reduced by 33 1/3 percent upon the death of either. By letter dated August 19, 2004, Retirement advised Det. Kerr that his application for disability retirement was approved. The letter further advised him, among other things, of other documents that he had to submit, including a completed FRS-11o, before he could be placed on the retirement payroll. By letter dated August 23, 2004, Retirement advised Det. Kerr of his estimated monthly disability retirement benefits under Option 1 ($2,364.84) and Option 2 ($2,189.13). Insufficient information was available to Retirement to calculate the estimated monthly disability retirement benefits under Options 3 and 4, so none were provided. The letter further advised Det. Kerr as to what was required for Retirement to calculate monthly estimates for Options 3 and 4. Additionally, the August 23rd letter, enclosed a blank FRS-11o for Det. Kerr to complete and return. Furthermore, the letter included an informational document, entitled "What Retirement Option Should You Choose?," regarding making his option selection. This informational document is a standard document included by Retirement, with Retirement's estimates of disability retirement benefits. As to changing an option choice, the document provides in pertinent part: Once you cash or deposit a benefit payment, or begin the Deferred Retirement Option Program (DROP), your [option] selection cannot be changed. Therefore, it is important to carefully study your personal circumstances before [your] decision. Regarding Option 2, the document provided in pertinent part: [T]his option would be particularly appropriate if you are in ill health and your future physical condition is uncertain at the time of retirement since independent children, other heirs, charities, organizations, or your estate or trust can be designated as beneficiaries for Option 2. The document invites FRS members to contact Retirement with any questions. No evidence was presented to demonstrate the Det. Kerr contacted Retirement regarding questions as to the options. On August 27, 2004, Det. Kerr completed and had notarized FRS-11o. FRS-11o reflected, among other things, the following: the selection of Option 1 by an "X" and being circled; and his marital status as being not married. The language describing Option 1 next to the selection was as follows: A monthly benefit payable for my lifetime. Upon my death, the monthly benefit will stop and my beneficiary will receive only a refund of any contributions I have paid which are in excess of the amount I have received in benefits. This option does not provide a continuing benefit to my beneficiary. Also, on FRS-11o was Option 2. The language describing Option 2 next to the selection was as follows: A reduced monthly benefit payable for my lifetime. If I die before receiving 120 monthly payments, my designated beneficiary will receive a monthly benefit in the same amount as I was receiving until the monthly benefit payments to both of us equal 120 monthly payments. No further benefits are then payable. On September 1, 2004, Retirement received Det. Kerr's FRS-11o, on which Option 1 was selected and which was properly completed, signed, and notarized. It is undisputed that Det. Kerr's FRS-11o met all requirements as to being in a status of completion. Typically, FRS-11o is the only indication as to a member's wishes regarding his or her option selection. According to Retirement, usually, the disability retirement application is completed prior to receiving an estimate of benefits, and, therefore, it is not uncommon for an FRS member to designate a primary beneficiary and later select Option 1 after reviewing his or her estimate of benefits. According to Retirement, only a member or someone acting on his or her behalf, such as a legal guardian or attorney-in-fact, can make a retirement option selection for the member. No evidence was presented that Det. Kerr, himself, requested a change to his selection of Option 1. On September 28, Det. Kerr resigned from the BSO. October 1, 2004, was established as Det. Kerr's effective disability retirement date. Det. Kerr died on October 20, 2004, less than a month after resigning, without receiving his first disability retirement benefit payment. At the time of his death, Det. Kerr was not married and had no children. Further, no parent was his legal guardian or dependent upon him for support. Det. Kerr's circumstances surrounding his option selection do not place his situation in the usual or typical category of FRS members referred to above by Retirement. Det. Kerr was suffering from AIDS. His symptoms first appeared in 1995. He was being treated by Garry Friedberg, M.D., a physician whose specialty was infectious diseases. As Det. Kerr's treating physician, on July 26, 2004, (approximately three months before Det. Kerr's death) Dr. Friedberg completed a "Disability Insurance - Attending Physician's Statement" form, regarding Det. Kerr's medical condition. The form contained several questions, including those as to diagnosis, prognosis, and mental and cognitive limitations. Dr. Friedberg diagnosed Det. Kerr with the end- stage of AIDS, which included wasting, assistance with activities of daily living, 12 to 15 loose stools per day, and pain in his stomach. Dr. Friedberg determined Det. Kerr's prognosis as terminal. Dr. Friedberg described Det. Kerr's mental and cognitive limitations as poor memory, difficulty concentrating, and inattentiveness. Question 5.c. of the form asked whether Det. Kerr was competent to endorse checks and direct the use of proceeds, to which Dr. Friedberg checked the yes box. It is undisputed that Det. Kerry had a close, loving- relationship with his mother and nephews. Det. Kerr's mother testified as to her son's desires and wishes for his retirement benefits. The undersigned finds her testimony credible. As her son's health deteriorated, Det. Kerr made her co-owner of his home in order for the home to become hers at his death. Det. Kerr had a loving relationship with his nephews and he wanted to make sure that their education would be paid-for through his retirement benefits. Det. Kerr informed his mother that he designated her as the beneficiary of his disability retirement plan so that she could keep his house and pay for the education of his nephews. In a letter dated May 18, 2005, Det. Kerr's healthcare providers gave insight into his medical condition and his intent regarding his disability benefits. The undersigned finds the letter persuasive. Among other things, they indicate that they were Det. Kerr's healthcare providers for several years and that, throughout 2004, Det. Kerr was administered opium to help control his chronic wasting diarrhea and administered opioid- based analgesics for chronic pain. Det. Kerr made it clear to his healthcare providers that his intent was to provide financially for his family at the event of his death. Without question, they insist that the narcotic regimen in Det. Kerr's treatment, caused him to mistakenly mark Option 1, which was the opposite of and completely contrary to the whole intent of what he wanted to do with his disability benefits. Furthermore, they indicate that Det. Kerr intended to check Option 2 in that it would provide for Det. Kerr's family as Det. Kerr had intended. One of Dr. Friedberg's clerical employees, John Carriere, notarized the option selection form at Dr. Friedberg's office for Det. Kerr on August 27, 2004. At that time, the employee had known Det. Kerr for approximately five years and knew what Det. Kerr's intentions were towards his (Det. Kerr's) family, concurring that Det. Kerr wanted his disability retirement benefits to provide for his (Det. Kerr's) mother and nephews. The employee observed that on that day Det. Kerr had lost considerable weight, was sweating, and was not looking well. The undersigned finds the clerical employee's testimony persuasive. Det. Kerr was friends with Robert Brown for 16 years. Mr. Brown is a certified financial planner but was not Det. Kerr's financial planner. The undersigned finds Mr. Brown's testimony credible. Mr. Brown was well aware that Det. Kerr wanted to make sure that his (Det. Kerr's) mother and nephews were taken care of with his disability retirement benefits. Det. Kerr sought advice from his friend regarding the disability retirement benefits. Mr. Brown and Det. Kerr met with the BSO's human resource counselor to discuss the different options available. Det. Kerr knew that he was dying, and he decided upon Option 2 because only it provided the benefits that he wanted for his mother and nephews upon his death. On August 27, 2004, Det. Kerr was at Dr. Friedberg's office and was completing FRS-11o (the option selection form), and he called Mr. Brown, who was busy at work. Det. Kerr requested Mr. Brown to remind him which option number to select. Mr. Brown requested Det. Kerr to call him after working-hours, but Det. Kerr insisted that Mr. Brown talk with him then and provide the requested information. Mr. Brown, not recalling the option number that had been previously determined to be selected but recalling only what the selection provided, informed Det. Kerr that the option decided upon was the one that left the money to his (Det. Kerr's) mother for ten years. Det. Kerr yelled back that he knew what the selection provided that he wanted, but now he only wanted the option number. Mr. Brown requested Det. Kerr to wait a few hours and call him back; but Det. Kerr did not. Later, when Mr. Brown and Det. Kerr were together, Mr. Brown asked Det. Kerr whether he needed any assistance with the retirement paperwork. Det. Kerr responded in the negative, indicating that he had finished the paperwork by himself and convincingly stating that the family was protected. Mr. Brown asked to review the form, but Det. Kerr did not have the form with him. With Det. Kerr so convincingly expressing himself that the family was protected, Mr. Brown did not think of the retirement paperwork again. A finding of fact is made that Det. Kerr at all times had decided on Option 2 and at all times had intended to check Option 2. A finding of fact is made that the medical evidence is sufficient to demonstrate that, due to Det. Kerr's terminal illness and the medications given to him, his mental capacity to make an informed choice at the time that he selected Option 1 was affected; and that he mistakenly checked Option 1, whereas Option 2 would have protected his family as he had intended, which intent had never wavered or changed. By letter dated December 6, 2004, Retirement advised Det. Kerr's family that his estate was entitled to the disability retirement benefits due for the month of October 2004. Additionally, included with the letter was a "Joint Annuitant Information" document, and the family was advised that, if Det. Kerr had a survivor who qualified as a joint annuitant, a monthly benefit may be payable to such person. A joint annuitant was mentioned in several of the letters from Retirement to Det. Kerr, prior to his death, regarding his disability retirement. In a letter dated July 30, 2004, related to completing FRS-11o, a joint annuitant is mentioned only in relationship to Options 3 and 4 and calculations therefor; in the Application, a joint annuitant is again mentioned only in relationship to Options 3 and 4 and calculations therefor; in a letter dated August 10, 2004, again, a joint annuitant is mentioned only in relationship to Options 3 and 4 and calculations therefor; in two letters dated August 19, 2004, a joint annuitant is again mentioned only in relationship to Options 3 and 4 and calculations therefor; in the Estimate of Retirement Benefit document, a joint annuitant is mentioned only as it relates to Options 3 and 4; in an Estimate of Disability Retirement Benefits document, dated August 23, 2004, a joint annuitant is mentioned only as to Options 3 and 4 and calculations therefor; in a document provided to Det. Kerr by Retirement, entitled "What Retirement Option Should You Choose?" a joint annuitant is mentioned as it relates to all of the available options; in FRS-11o, a joint annuitant is mentioned only for Options 3 and 4; and in a letter dated December 6, 2004, after Det. Kerr's death, Retirement refers to a joint annuitant and includes information regarding a joint annuitant. No information was received by Retirement as to a joint annuitant. Further, at hearing no assertion of Ms. Kerr being a joint annuitant was made. Ms. Kerr is the personal representative of her son’s, Det. Kerr's, estate. On September 26, 2005, Retirement received a letter from Ms. Kerr's counsel requesting Retirement to change Det. Kerr's option selection from Option 1 to Option 2, explaining, among other things, Det. Kerr's intent but that his medical condition prevented him from following through with his intent. No mention was made in the letter of a survivor who qualified as a joint annuitant. Retirement contends that an option selection can only be changed in the event the designated beneficiary qualifies as a joint annuitant. On October 14, 2005, Retirement, by final agency action letter, denied the request to change Det. Kerr's option selection but erroneously cited Section 121.091(6)(h), Florida Statutes, as the statutory basis for the decision to deny the request, which stated as follows: (h) The option selected or determined for payment of benefits as provided in this section shall be final and irrevocable at the time a benefit payment is cashed or deposited or credited to the Deferred Retirement Option Program as provided in Subsection (13). Retirement admits that the basis for the denial stated in the final agency action letter is incorrect. No benefit payment had been issued, cashed or deposited. Retirement has never amended or sought to amend its denial-letter.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of Retirement enter a final order granting the request of Rosalie J. Kerr and changing the retirement option selection of her deceased son, Robert R. Kerr, from Option 1 to Option 2. DONE AND ENTERED this 10th day of July, 2006, in Tallahassee, Leon County, Florida. S ERROL H. POWELL 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 10th day of July, 2006.
