July 15, 2008
HOWARD A. REED, JR., PETITIONER-APPELLANT,
BOARD OF TRUSTEES, TEACHERS' PENSION AND ANNUITY FUND, RESPONDENT-RESPONDENT.
On appeal from the Board of Trustees of the Teachers' Pension and Annuity Fund, Department of Treasury.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 27, 2008
Before Judges Sapp-Peterson and Messano.
Petitioner, Howard A. Reed, a former teacher, is six months short of the ten-year service credit needed to collect an ordinary disability retirement pension from respondent, the Teachers' Pension and Annuity Fund (TPAF). He appeals a final administrative determination by the Board of Trustees, Teachers' Pension and Annuity Fund (Board), denying his request to receive pension credit for periods of employment with the Paterson Board of Education (Paterson) from December 1988 to March 1989 and from June 1990 to April 1991. We reverse.
Reed commenced employment with Paterson as a school teacher on August 18, 1978, and, effective September 1, 1978, he became a member of TPAF under account #347109. In February 1982, Reed injured his knee during the course of a basketball instruction. As a result of the injury, Reed underwent surgery to reconstruct torn ligaments. He later developed a bacterial infection and other complications that necessitated additional surgery, ultimately resulting in a total knee replacement. While Reed was under treatment, he received his full salary for one year following the accident. From April 1, 1983 through October 31, 1985, Reed received temporary disability benefits on which Paterson paid pension contributions.*fn1 Reed never resumed employment with Paterson. As of October 31, 1985, Reed had been a member of TPAF for seven years and four months.
On September 1, 1986, Reed accepted part-time employment with the Hawthorne Board of Education (Hawthorne) and continued his membership in TPAF under his original account #347109. Reed resigned from his position with the Hawthorne School District on June 30, 1988. By that time, Reed had been a member of TPAF under account #347109 for eight years and eleven months. In December of that same year, Reed reopened his workers' compensation claim for the injury he sustained while employed with Paterson and received benefits from December 1988 to March 1989 and from June 1990 to April 1991.*fn2
On July 20, 1990, TPAF forwarded to Reed a "MEMBER'S EXPIRATION NOTICE" for membership #347109. The notice advised Reed that his account in TPAF "will EXPIRE September 30, 1990 unless you return to public service in New Jersey." Reed did not return to public service until April 8, 1991, when he accepted a position as a teacher with the Elizabeth Board of Education (Elizabeth). Reed enrolled in TPAF as a new member under a new membership #427347 because his previous membership #347109 had expired. Reed resigned from his position with Elizabeth on September 1, 1992, and accepted a position as a head football coach for a high school located in Delaware.*fn3
At the time of his resignation, Reed had been a member of TPAF under his membership #427347 for seventeen months.
As early as November 1985, Reed began to ask questions about his pension account. In a letter dated October 15, 1991, Reed wrote to the Department of Treasury, Division of Pensions (Pensions), expressing his understanding that "during the times I was out of work and receiving compensation[,] that during these times the Paterson Board of Education should have been contributing to my pension fund." Pensions responded to Reed's letter in correspondence dated December 23, 1991. The letter confirmed Reed's entitlement to pension contributions from Paterson on his behalf if Reed was "receiving periodic workers' compensation benefits instead of regular salary payments" and stated that if this information was confirmed, Paterson would be billed for those periods in which it did not make the requisite payments. The letter advised Reed that as of December 23, 1991, he had been credited with "81 months, or 6 years and 9 monhts, of service credit under your original retirement account (TPAF #347109)." The letter also advised Reed that the eighty-one months of service credit did not include any additional time to which Reed may have been entitled that was the subject of Pensions' inquiry to Paterson. In addition, the letter explained why Reed was assigned a new pension number when he commenced employment with Elizabeth:
Upon your return to employment with Elizabeth Board of Education you were assigned a new retirement account (TPAF #427347). The new account was established because your original account remained inactive since June 1988. New Jersey Pension regulations call for an account that remains inactive for more than two years to be closed unless the member received at least ten years of service credit prior to the inactivity. Therefore, unless you are eligible for at least an additional 3 years and 3 months of service credit for the period you claim to be on workers' compensation, you will be forced to withdraw your contributions to the original retirement account. You may then be eligible to purchase this prior service credit under your current retirement account. But, we will have to wait until the matter of your workers' compensation claim is resolved.
The question of Paterson's pension contributions was not resolved at that time, and letters continued to go back and forth between Reed, and later his attorney, and Pensions and Paterson. On February 2, 1993, Pensions notified Paterson of a shortfall in Reed's pension account under #347109 and directed Paterson to remit a $1,908.38 payment to Pensions on Reed's behalf. In a letter dated February 22, 1993, Reed continued to claim that because he was paid wages by the Paterson workers' compensation administrator for the periods December 14, 1988 through February 21, 1989 and March 27, 1990 through April 7, 1991, he was entitled to pension contributions from Paterson for those periods as well. He claimed further that had Paterson done so, his TPAF membership #347109 would not have been converted because he would have acquired the requisite ten-year period of service necessary to preserve his membership rights, benefits and privileges in the retirement system.
On August 10, 1994, Pensions sent Reed a letter in response to correspondence it had received from him about the status of Paterson's pension contributions on his behalf.*fn4 In this letter, Pensions advised Reed,
This is in response to your most recent letter concerning the status of your contributions due in your behalf from Paterson Board of Education.
On July 25, 1994 I spoke on the phone simultaneously with Mr. Frank Pepe, Secretary of the Board of Education[,] and Linden Smith of Paterson's Risk Management. Mr. Pepe was very concerned with fulfilling Paterson's obligation to pay your contribution from April 1, 1983 - April 30, 1985. He asked Mr. Smith to follow up on the payment.
As of the writing of this letter it is not paid. This is usual procedure because it takes five to six weeks for the process to be complete.
There is also correspondence from Reed to Paterson dated January 8, 1995, listing the dates, based upon his "old bank records and reconstruct[ion]," that he received workers' compensation payments. In the letter, Reed also once again explained his understanding that he should have been credited with pension contributions from Paterson on his behalf.
The next correspondence from Reed concerning the matter was sent to Pensions in October 1998 alerting Pensions to the fact that Paterson had never made the pension contributions. Thereafter, it appears that there was no further written correspondence from Reed to Pensions or Paterson until April 30, 2005. At that time, Reed's attorney wrote to Pensions and Paterson seeking to "clarify [Reed's] entitlement to a State Pension for many years of service as a teacher with the Paterson, Hawthorne and Elizabeth school systems." Reed's attorney summarizes the history of Reed's efforts to resolve the matter.
In correspondence dated May 25, 2006, Pensions responded to counsel's letter by addressing the status of Reed's two TPAF membership accounts. The letter did not address Reed's claim that he was entitled to additional contributions from Paterson. Reed's counsel sent further correspondence in a June 7, 2005 letter that specifically addressed the additional periods of contribution to which Reed believed he was entitled. In a letter dated June 28, 2005 from Fred Polio, Administrative Analyst 2 - Accounting, Polio advised Reed's counsel that the periods December 1988 to March 1989 and June 1990 to April 1991 do not qualify for retirement credit. Our records show that Mr. Reed resigned his position with the Paterson City Board of Education on March 31, 1983. Although Mr. Reed resigned March 31, 1983, because he received periodic Workers' Compensation benefits from April 1983 through October 1985, we consider that he was officially off the Paterson City Board of Education payroll October 31, 1985. It is our position that [the] employer-employee relationship between the Paterson City Board of Education ended October 31, 1985 and that the Paterson City Board of Education is not responsible to pay pension contributions on Mr. Reed's behalf for any periods after October 31, 1985. For your reference, I refer you to James v. [Bd.] of Trustees of the [Pub.] Employees' [Ret.] [Sys.], 164 [N.J.] 396 (2000), and I have enclosed a copy of an Application for Withdrawal showing Mr. Reed's date of resignation.
Reed appealed the decision from Pensions to the Board.
The Board concluded that Reed was not entitled to the credit he sought and determined that it "was able to reach its findings of fact, and conclusions of law on the basis of the retirement system's enabling statutes and regulations and without the need for an administrative hearing." The Board acknowledged that the record revealed conflicting resignation dates, but found that the correct resignation date was October 31, 1985, the last date Reed received workers' compensation benefits in connection with his initial claim. The Board further determined that because Reed was not in the course of active service when he reopened his workers' compensation claim, "Paterson [had] no obligation to remit pension contributions on [his] behalf for this time period [December 1988 to March 1989 and from June 1990 to April 1991]." The ensuing appeal followed.
Reed raises the following points for our consideration:
THE RECORD IS DEVOID OF ANY EVIDENCE THAT REED KNOWINGLY AND VOLUNTARILY RESIGNED FROM HIS POSITION AS A TEACHER WITH THE PATERSON BOARD OF EDUCATION AND CONSEQUENTLY IT REMAINED LIABLE TO CONTINUE PAYMENT OF PENSION CONTRIBUTIONS ON REED'S BEHALF PURSUANT TO N.J.S.A. 18A:66-32.1(a) WHILE REED WAS IN RECEIPT OF WORKERS' COMPENSATION TEMPORARY DISABILITY.
ONCE THE BOARD RESOLVED THAT REED WAS INELIGI[BLE] TO ACCRUE ADDITIONAL SERVICE CREDIT PURSUANT TO N.J.S.A. 18A:66-32.1(a), IT HAD AN AFFIRMATIVE OBLIGATION WHICH IT BREACHED TO PERMIT HIM TO PURCHASE HIS PRIOR PATERSON AND HAWTHORNE SERVICE AND THEREBY QUALIFY FOR AN ORDINARY DISABILITY RETIREMENT.
Our scope of review of administrative decisions is narrowly circumscribed. In re Taylor, 158 N.J. 644, 656 (1999) (quoting Goodman v. London Metals Exch., Inc., 86 N.J. 19, 29 (1981)). Our role is to determine "'whether the findings made could reasonably have been reached on sufficient credible evidence present in the record' considering 'the proofs as a whole,' with due regard to the opportunity of the one who heard the witnesses to judge their credibility." Ibid. (quoting Close v. Kordulak Bros., 44 N.J. 589, 599 (1965)). We may not engage in an independent assessment of the evidence, ibid. (quoting State v. Locutor, 157 N.J. 463, 471 (1999)), and we will accord a strong presumption of reasonableness to the decision of an administrative agency. Smith v. Ricci, 89 N.J. 514, 525 (1982).
Although we give great deference to administrative decisions, Shuster v. Bd. of Review, Dept. of Labor, 396 N.J. Super. 240, 246 (App. Div. 1997) (citing In re Freshwater Wetlands Prot. Act Rules, 180 N.J. 478, 488-89 (2004)), we do not act simply as a rubber stamp of the agency's decision. In re Berwick Ice, Inc., 231 N.J. Super. 391, 397 (App. Div. 1989) (citing New Jersey Guild of Hearing Aid Dispensers v. Long, 75 N.J. 544, 575 (1978)). An administrative decision will be reversed when it is found to be "arbitrary, capricious or unreasonable or it is not supported by substantial credible evidence in the record as a whole." Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980).
N.J.S.A. 18A:66-32.1(a) provides:
a. If any member of the retirement system receives periodic benefits payable under the workers' compensation law during the course of his active service, in lieu of his normal compensation, his regular salary deductions shall be paid to the retirement system by his employer. . . . The moneys paid by the employer shall be credited to the member's account in the annuity savings fund and shall be treated as employee contributions for all purposes. The employer will terminate the payment of these moneys when the periodic benefits payable under the workers' compensation law are terminated or when the member retires.
The member for whom the employer is making such payments, will be considered as if he were in the active service.
Under the clear language of the statute, an employer is required to make regular salary deductions payable to the retirement system where two conditions have been met. First, the employee must be "receiv[ing] periodic benefits payable under the workers' compensation laws." N.J.S.A. 10A:66-32.1(a). Second, those payments are received by the employee "during the course of [the employee's] active service, in lieu of normal compensation." Ibid. At the time Reed reopened his workers' compensation claim, he had met only one of the conditions. He was receiving benefits under the workers' compensation laws. He was not, however, in active service with Paterson at that time. The record demonstrates that Reed resigned from Paterson and had secured new employment with Hawthorne.
In a letter dated November 27, 1985, Reed sought clarification of his pension contributions and indicated in the letter that he had resigned from Paterson in July 1985, had been receiving workers' compensation for "the last three years[,]" and "under[stood] during that period of time the Paterson Board of Education was still required to make their contributions." In earlier correspondence to Pensions dated February 14, 1985, Reed's attorney acknowledged that Reed had tendered his resignation because "[a]t one point, it appeared that he would not be able to return to teaching[.]" The letter also stated that Reed would be seeking reinstatement because of his medical progress, but, nonetheless, was renewing his request to withdraw his pension funds or, alternatively, "permission to borrow against said monies." Moreover, Reed was employed by the Hawthorne School District from September 1986 through June 1988. Thus, Reed's claim that he did not voluntarily resign is not supported by the record and was properly rejected by the Board.
The Board also correctly concluded that Reed's first TPAF account #347109 was properly closed after two years, in accordance with N.J.S.A. 18A:66-7 and N.J.A.C. 17:3-7.2, because Reed, after resigning from employment with the Hawthorne School District, did not obtain employment as a teacher until more than two years later. As such, his first TPAF account expired and he was required to withdraw his contributions.
Further, Reed's reliance upon James, supra, to support his contention that Paterson was required to make pension contributions during the period he received workers' compensation benefits in connection with the second claim is misplaced. While James holds that under certain circumstances, termination from employment does not end an employer's obligation to continue to make pension contributions on behalf of the employee, James expressly noted that workers' compensation benefits received after a voluntary resignation do not reinstate an employee to active service for pension purposes. James, supra, 164 N.J. at 412.
Reed's final contention is that he should have been permitted to purchase prior service credits because he was unable to make an informed decision to do so until the Board resolved whether Paterson was required to make pension contributions for the period of time he received benefits in connection with the reopened claims. To support this contention, Reed references Fiola v. New Jersey Dept of Treasury, Division of Pensions, 193 N.J. Super. 340 (App. Div. 1984).
In Fiola, supra, we reversed the Police and Firemen's Retirement System Board's (PFRS) denial of the plaintiff's deferred retirement application despite the fact that the plaintiff, a former firefighter, did not submit his application for a deferred retirement allowance until more than seven years after his separation from employment. Id. at 351. We found that the documents PFRS sent to its members who had separated from employment did not fully apprise them of all appropriate options but, instead, the documents were "intended to encourage exercise of withdrawal option and consequent termination of any further pension opportunity and continued insurance benefits" and were not "calculated to assist [a] member in preserving his deferred retirement rights if that is what he wishe[d] to do." Ibid. We also concluded that the documents did not state clearly and unequivocally that an application for deferred retirement allowance would be barred if not made within two years after separation from service. Ibid.; N.J.S.A. 43:16A-11.2. While we recognized the deference we must accord to an administrative agency's interpretation of its enabling statute, we also observed,
It is virtually axiomatic that statutory pension provisions are to be liberally construed in favor of public employees and that pensions represent not merely the gratuity of a benevolent governmental employer but rather that they constitute deferred compensation earned by the employee during his years of service. See Masse v. [Pub.] Employees [Ret.] Sys., 87 N.J. 252, 259-61 (1981); Uricoli v. Police & Fire [Ret.] Sys., 91 N.J. 62, 70-73 (1982). Forfeiture of earned pension rights, therefore, constitutes a drastic penalty which the New Jersey Supreme Court has become increasingly loath to permit even in the case of employee misconduct unless that penalty has been clearly mandated by the Legislature. See, e.g., Masse v. [Pub.] Employees [Ret.] Sys., supra,; Uricolo v. Police & Fire [Ret.] Sys., supra,; Eyers v. [Pub.] Employees' [Ret.] Sys., 91 N.J. 51 (1982). [Id. at 347-48.]
Here, Reed points to correspondence he received from Joseph Zisa, an administrative analyst with Pensions, in December 1991 in which Zisa told him that he would have to wait until his workers' compensation claim was resolved before a decision could be made as to his eligibility to purchase prior service credit under his then existing retirement account with Elizabeth, #427347. Because the issue of his resignation was not resolved until September 8, 2006, Reed contends that he has demonstrated "good cause" and should be permitted to purchase the prior service credits.
In Zisa's letter, Reed was clearly placed on notice of the circumstances that would trigger his entitlement to pension contributions. Zisa stated that Paterson would only be required to make pension contributions "if [Reed was] receiving periodic workers' compensation benefits instead of regular salary payments." There is no dispute that when Reed reopened his workers' compensation claim in December 1988, he was not receiving any regular salary payments from Paterson. Thus, the benefits he received were not in lieu of salary. Next, Reed was told that he would have to withdraw his contributions to account #347109 unless he was "eligible for at least an additional 3 years and 3 months of service credit for the period you claim to be on workers' compensation[.]" It was therefore clear that his eligibility was premised upon credits he would receive based upon his employment relationship with Paterson if he prevailed in his claim for those credits rather than based upon combining his service with Paterson and Hawthorne with his Elizabeth service. Finally, Reed was told that he if he was forced to withdraw his contributions to the original retirement account, he may "be eligible to purchase this prior service credit under your current retirement account." Thus, Pensions made clear that the purchase of prior service credit was possible through his "current" employment.
It is, however, the last part of Zisa's letter that we find was confusing. It offered Reed the option of purchasing prior service credits from Paterson through his "current" employment with Elizabeth if he was unable to claim an "additional 3 years and 3 months of service credit[,] but neglects, as was the case in Fiola, supra, to advise that any purchase of service credits must be done while Reed was still an active member of TPAF because "only active members of [TPAF] who are currently contributing, or who have contributed within the last two years . . . shall be eligible to make application for purchase of credit . . . ." N.J.A.C. 17:3-5.1. Instead, Zisa told Reed that the issue of whether he would be eligible to purchase prior service credits would have to "wait until the matter of your workers' compensation claim is resolved."
At the very least, this last statement could reasonably have led Reed to believe that his ability to consider the purchase of prior service credit was an option of last resort in the event he did not prevail on his claim of entitlement to additional pension contributions from Paterson, irrespective of his employment status. Moreover, it is unclear which "workers' compensation claim" Zisa was referencing, the compensation claim for his personal injuries that was resolved in 1994, or Reed's claim to entitlement to pension contributions on his behalf from Paterson, which was not resolved until years later. Further, Paterson compounded the problem by its failure to timely respond to the numerous inquiries over the years from Reed, his attorney, and Pensions relative to his claims.
Pensions memorialized its initial inquiry in a letter dated December 17, 1991:
This is in response to your request to confirm our phone discussion on December 11, 1991.
Mr. Reed claims he was injured in an accident on the job while employed at Paterson Bd. of Ed. loc. #600 in February, 1982. He claims he received Workers' Compensation for three years instead of his normal salary. Under these circumstances Paterson Bd. of Ed. is obligated to pay his pension contribution.
Our records indicate he has no contribution credited from April 1, 1982 - June 30, 1986. Please furnish us with documents that support his receiving Workers' Compensation showing the dates the benefit began and ended.
There is no record of any response to this correspondence to Pensions from Paterson. In February 1993, Pensions notified Paterson of a shortfall in contributions based upon an audit it had conducted. Paterson did not resolve the shortfall, despite repeated inquiries from Pensions and Reed, until September 2005, and sent no written correspondence to Pensions or Reed until January 2006.
In our view, had Paterson timely responded to Pensions' December 17, 1991 letter, Reed, who at the time was employed by Elizabeth, would have been in a position to make an informed decision whether he should purchase prior service credits because he would have known that he was not going to receive service credit for the periods during which he received additional benefits. Paterson's fourteen-year delay in definitively responding to inquiries deprived Reed of the ability to make an informed decision to purchase prior service credits. Additionally, Reed's ability to make an informed decision was further hindered by Zisa's ambiguous statement in his December 23, 1991 letter to Reed that whether he was eligible to purchase prior service credits would have to "wait until the matter of your workers' compensation claim is resolved."
While the Board correctly concluded that Reed was not in active service when he reopened his workers' compensation claim and that the two membership accounts could not be combined because his first membership account "expired prior to [Reed's] enrollment with Elizabeth[,]" the Board did not consider whether the particular facts of this case warranted equitable relief. We are therefore constrained to remand this matter to the Board for further fact-finding, which includes specifically addressing the nearly fifteen-year delay in resolving Reed's pension contribution claim and whether such delay warrants permitting Reed the option to purchase service credits as if he were still employed with Elizabeth under the formula set forth in N.J.S.A. 18A:66-9 based upon Reed's age and salary at the time of that employment.
Reversed and remanded for further proceedings consistent with this opinion.