Before Judges Muir, Jr., Wallace, Jr. &
The opinion of the court was delivered by: Wallace, Jr., J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
On appeal from the Public Employees' Retirement System Board of Trustees.
This appeal involves a regulation of the Public Employees' Retirement System (PERS), namely N.J.A.C. 17:2-3.13. PERS sought to clarify that certain beneficiaries of a deceased employee must elect to receive a retirement allowance or to collect a full insurance benefit, but not both. Appellant, the New Jersey Education Association (NJEA), contends the regulation conflicts with the statute it purports to implement and is therefore invalid. We disagree and affirm.
Before addressing whether the regulation is consistent with the underlying statutes, some background is required. The Public Employees' Retirement System provides benefits to a broad category of public employees. Among these benefits are a death benefit and a retirement allowance. The death benefit is generally one-and-one-half times the final salary for a PERS member who dies prior to retirement, but is reduced to 3/16 of the final salary for a member who dies after retirement. The retirement allowance is a periodic payment that continues through the remainder of a retiree's life or the life of the retiree's beneficiary. PERS members who have active status at the time of their death receive no retirement allowance, although the beneficiary receives a return of the member's contributions to the system.
Prior to 1984, in order for a member (or the member's beneficiary) to receive a retirement allowance, the member had to survive the effective date of his or her retirement by at least thirty days. See N.J.S.A. 43:15A-50. At the same time, the life insurance death benefit would be reduced from one-and-one-half times the final salary to 3/16 of the final salary on the thirty-first day following the member's retirement unless the member "converted" the group life insurance coverage to an individual policy. See N.J.S.A. 43:15A-93. Thus, the two statutes effectively allowed an employee or the employee's beneficiary to receive either the higher death benefit and no retirement allowance or the smaller death benefit and the retirement allowance.
Amendments to N.J.S.A. 43:15A-50 in 1984 and in 1995 eliminated the thirty-day survival requirement, so that the retirement allowance could, upon the beneficiary's request, become effective even though the member did not survive the effective retirement date by thirty days. As amended, N.J.S.A. 43:15A-50 provides in part:
Except in the case of members who have elected to receive (1) a deferred retirement allowance pursuant to section 38 (C. 43:15A-38) or (2) early retirement allowances pursuant to subsection b. of section 41 (C. 43:15A-41) after separation from service pursuant to section 38, if a member dies within 30 days after the date of retirement or the date of board approval, whichever is later, his retirement allowance shall not become effective and he shall be considered an active member at the time of death. However, if the member dies after the date the application for retirement was filed with the system, the retirement will become effective if:
c. The deceased member had designated a beneficiary under an optional settlement provided by this section; and
d. The surviving beneficiary requests in writing that the board make such a selection. Upon formal action by the board approving that request, the request shall be irrevocable.
The board may select an Option 3 settlement, on behalf of the beneficiary of a member who applied for and was eligible for retirement but who died prior to the effective date of the retirement allowance, if all of the above conditions, with the exception of c., are met.
The gist of this statute is that if a member does not live at least thirty days past the effective retirement date or approval date, whichever is later, the member is treated as if he or she were an active member at the time of death, thereby denying the beneficiary a retirement allowance. However, subsection d grants relief from this ...