On appeal from Final Determination of the Board of Trustees of the Public Employees' Retirement System.
Antell, J. H. Coleman and Simpson. The opinion of the court was delivered by Simpson, J.A.D.
William T. Hiering, Sr. appeals from a final determination of the Board of Trustees of the Public Employees Retirement System (Board and PERS) that $56,000 remuneration he received in 1980 as General Counsel of the Ocean County Utilities Authority (OCUA) and Municipal Prosecutor of the Borough of Seaside Heights was not creditable for pension purposes under N.J.S.A. 43:15A-6r. Hiering was born on December 27, 1915, is a veteran of World War II, became a member of PERS in 1950, and had 31 years and one month of creditable service at his retirement date of March 1, 1981. As a veteran, he qualifies under N.J.S.A. 43:15A-61a or b for a retirement allowance of 1/2 of the compensation received during his last year of creditable service. Presumably he would also qualify for regular service retirement of 31/60 of his "final compensation" pursuant to N.J.S.A. 43:15A-48a and b, but under N.J.S.A. 43:15A-6h the pension would be calculated upon his average annual compensation for the 3 years of service producing the largest possible benefit. The veteran's pension would be $28,500 if the $56,000 qualifies ($40,000 as General Counsel and $16,000 as Municipal Prosecutor) since there is no question about his $1000 compensation as an agent for the Division of Alcoholic Beverage Control. A regular pension would be considerably less if the $56,000 is not creditable. It would then be based upon compensation for prior service as a state legislator, estimated to be about $11,000 per year.
The Board initially rejected Hiering's application on March 18, 1981 citing N.J.A.C. 17:2-4.1, and the matter was referred to the Office of Administrative Law on June 18, 1981 following a request for hearing. Hearings were held by the Administrative Law Judge (ALJ) on November 29, 1982 and June 7, 1983.
On September 6, 1983 the ALJ filed her Initial Decision which reversed the Board and found the $56,000 creditable for Hiering's last year of public employment. On October 27, 1983 the Board rejected the ALJ Initial Decision, affirmed its original denial of the application, and directed its Secretary to prepare "consistent" proposed findings of fact and conclusions of law. These were approved by the Board on November 15, 1983 and the present appeal followed.
In rejecting the conclusion of the ALJ, the Board found that ". . . the salaries received by [Hiering] in 1980 constitute salary adjustments granted primarily in anticipation of retirement. As such the salaries are excluded from being considered 'compensation' within the meaning of that term as defined in N.J.S.A. 43:15A-6(r)." This statute provides:
r. "Compensation" means the base or contractual salary, for services as an employee, which is in accordance with established salary policies of the member's employer for all employees in the same position but shall not include individual salary adjustments which are granted primarily in anticipation of the member's retirement or additional remuneration for performing temporary or extracurricular duties beyond the regular work day or the regular work year. In cases where salary includes maintenance, the retirement system shall fix the value of that part of the salary not paid in money which shall be considered under this act.
The original Board determination cited N.J.A.C. 17:2-4.1 which provides:
(a) Only a member's base or contractual salary, plus the value of maintenance, if applicable, shall be subject to pension and group life insurance contributions and creditable for retirement and death benefits in the system.
(b) The board shall reserve the right to question any salary to determine its creditability where it is evident from the record that a salary reported for benefits includes extra compensation.
(c) Such extra compensation shall be considered not creditable for benefits and all contributions made thereon shall be returned without interest.
(d) Some of the forms of compensation that have been defined as extra compensation are as follows: overtime, bonus, longevity lump sum payments, individual retroactive salary adjustments or individual adjustments to place a member at maximum in his salary range in the final year of service, increments granted for retirement credit or in recognition of the ...