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Cookson v. Board of Trustees

March 8, 2010


On appeal from the Board of Trustees of the Public Employees' Retirement System, Department of Treasury, Docket No. 809892.

Per curiam.


Argued February 1, 2010

Before Judges Lisa and Coburn.

Petitioner Gail Cookson appeals from a final agency decision of the Board of Trustees (Board) of the Public Employees' Retirement System (PERS), rejecting her request to re-enroll in PERS. Cookson initially enrolled in PERS on September 10, 1988, the day she commenced employment as a deputy attorney general, serving in the New Jersey Division of Law. She voluntarily resigned from the Division of Law in 1999, and made a final contribution to her PERS account on September 30, 1999. By the time of her resignation, Cookson had accumulated ten years and nine months of service credit in her PERS account. She has never withdrawn her PERS contributions and therefore has a vested entitlement to a deferred retirement allowance when she reaches the age of sixty. N.J.S.A. 43:15A-38. On May 9, 2007, the New Jersey Legislature enacted Public Law 2007, Chapter 92 (hereinafter "Chapter 92"), which introduced dramatic changes to the system of public pensions in New Jersey. L. 2007, c. 92. Chapter 92 created the Defined Contributions Retirement Program ("DCRP") as an alternative to PERS. L. 2007, c. 92, § 1. Chapter 92 became effective on July 1, 2007. L. 2007, c. 92, § 49.

On January 7, 2008, Cookson was appointed as an administrative law judge by Governor Corzine with the advice and consent of the Senate. The appointment was her first government service since her resignation from the Division of Law in 1999. Due to an error on the part of the Division of Pensions and Benefits (the "Division"), she was initially re-enrolled in PERS. Accordingly, the Division deducted PERS contributions from her first two paychecks. When the Division determined that she was required by statute to participate in DCRP and not PERS, it returned the two PERS deductions and notified her that she was required to enroll in and contribute to DCRP.

Cookson requested reconsideration of the Division's determination, and the Division denied her request. Cookson then filed a timely appeal of the Division's denial with the Board. The Board denied Cookson's request to re-enroll in PERS. Cookson filed a notice of appeal challenging the Board's decision and the matter was referred to the Office of Administrative Law as a contested case before an administrative law judge (the ALJ).

The parties filed cross-motions for summary decision pursuant to N.J.A.C. 1:1-12.5 and submitted a joint stipulation of facts. The ALJ filed a comprehensive written initial decision affirming the Board's determination, and the Board eventually adopted the ALJ's recommendation and this appeal ensued.

Before addressing Cookson's arguments, it will be helpful to discuss the history of the pension schemes implicated in this appeal. PERS, which was established by statute in 1954, L. 1954, c. 84, is one of five state-administered defined benefits retirement systems in New Jersey. Both the employee and her employer are required to make contributions to the employee's personal retirement account. A government employee enrolled in PERS, known as a PERS "member," accrues service credits while working. A PERS member's right to a retirement allowance funded by both her own contributions as well as her employer's vests upon accrual of ten years of service credits. N.J.S.A. 43:15A-38.

At some point it was recognized that the state pension systems, including PERS, were struggling with $18 billion in unfunded liabilities. In response, a Joint Legislative Committee on Public Employee Benefits Reform ("Joint Committee") was formed to make recommendations for new legislation designed to control pension costs and eliminate abuses. The Joint Committee's Final Report was released on December 1, 2006.

On July 1, 2007, the New Jersey Legislature enacted Chapter 92 with the express purpose of "implementing various recommendations of the Joint . . . Committee[.]" L. 2007, c. 92. On the advice of the Joint Committee, Chapter 92 created the DCRP and mandated that certain new government employees enroll in DCRP rather than PERS. DCRP is a "defined contribution plan," which, like a 401(k), does not provide a guaranteed retirement allowance. Instead, the benefit is based on contributions by the employee and employer, the employee's wage history, and investment earnings. Chapter 92 mandates that government officials appointed by the Governor with the advice and consent of the Senate enroll in the DCRP, with certain limited exceptions. N.J.S.A. 43:15C-2(a)(2).

In Point I, Cookson argues that she falls under one of these limited exceptions -- a "grandfather" provision set forth in N.J.S.A. 43:15A-7(b) -- due to her status as a vested PERS beneficiary. In Point II, Cookson argues that if the grandfather provision does not operate to allow her to re-enroll in PERS, then Chapter 92 is void as a violation of her constitutionally- and statutorily-protected vested right to re-enroll. In Point III, Cookson argues that the Board's actions with regard to her attempted re-enrollment in PERS violated the Administrative Procedure Act ("APA"), N.J.S.A. 52:14B-1 to -25.

We first address whether Cookson is entitled to re-enroll in PERS pursuant to the "grandfather" provision set forth in N.J.S.A. 43:15A-7(b).

In Point I, Cookson argues that she is entitled to re-enroll in PERS by virtue of the grandfather provision, which reopens active PERS membership to certain government employees who were "members" of PERS prior to the enactment of Chapter 92 and "continuously thereafter." N.J.S.A. 43:15A-7(b). In support of this proposition, Cookson contends that she remained a member of PERS continuously through her appointment as an administrative law judge. She relies primarily on N.J.S.A. 43:15A-8(a), a statutory provision that reinstates PERS membership where a government employee resumes service within ten years of its discontinuation.

The Board contends that Cookson does not fall within the exception granted by the grandfather provision of N.J.S.A. 43:15A-7(b) because she was no longer a member of PERS when she was appointed an ALJ. According to the Board, her membership in PERS terminated after two years pursuant to the plain language of N.J.S.A. 43:15A-7(e), which provides that "[m]embership of any person in the retirement system shall cease if he shall discontinue his service for more than two consecutive years." The ALJ dismissed Cookson's appeal based upon this same reasoning in his initial decision in favor of the Board.

Following the enactment of Chapter 92, N.J.S.A. 43:15C-2 and N.J.S.A. 43:15A-7 govern eligibility for participation in DCRP and PERS, respectively. ...

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