July 29, 2011
MARC CHIAPPINI, APPELLANT,
BOARD OF TRUSTEES, PUBLIC EMPLOYEES' RETIREMENT SYSTEM, RESPONDENT.
On appeal from the Board of Trustees, Public Employees' Retirement System, Docket No. 2-10-218657.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted May 10, 2011
Before Judges Payne and Koblitz.
Marc Chiappini, the recipient of a Public Employees' Retirement System (PERS) pension effective February 1, 2007, appeals from a final determination of the PERS Board of Trustees that his retirement was not bona fide because he did not observe the required thirty-day break in service before commencing a PERS-covered part-time temporary teaching position with the Cumberland County College (CCC), where he remained employed under three conditional semester-long contracts from January 22, 2007 through May 31, 2008. As a consequence, the PERS Board ordered Chiappini to repay all pension benefits paid in error through June 1, 2008 and to make pension contributions from February 2007 through May 2008. A repayment of $32,479.95 was thus required. Additionally, Chiappini's life insurance, which was based on his earnings, was reduced from $12,875 to $1,000. Chiappini earned a total of $8,775 for three semesters of teaching at CCC.
Chiappini commenced employment with the Juvenile Justice Commission (JJC) as a teacher on July 5, 1983. He filed for early retirement on July 20, 2006. At its monthly meeting of August 16, 2006, the PERS Board approved Chiappini's application. Its letter to Chiappini informing him of the approval stated:
In accordance with law, you have until thirty days after (A) the effective date of your retirement, or (B) the date your retirement was approved by the Board of Trustees, whichever is the later date, to make any changes to your retirement. Also, your first check cannot be mailed until after this thirty day period. However, the benefit will be retroactive to the original effective date of your retirement. . . .
You should expect to be reenrolled in the PERS if you accept employment after retirement with the State or any of the local participating public employers in a PERS covered position and your total salary from all public employment exceeds $15,000 in a calendar year.
If you return to public employment following your retirement, you must notify our Office of Client Services immediately at (609) 292-7524.
On September 27, 2006, Chiappini filed an application to amend his retirement date from January 1, 2007 to February 1, 2007. On December 20, 2006, the Board approved the change, sending a confirmatory letter that contained the same language as we have just quoted.
On November 16, 2006, Chiappini signed a conditional contract to teach a four-credit course in plant science and a lab for CCC, a contract that was later revised to add responsibility to teach a three-credit course in earth science. The total compensation was $4275. Evidence suggests that Chiappini was "begged" to take the position when the school's regular adjunct professor required a medical leave and a full-time faculty member left the institution. Chiappini subsequently signed conditional part-time temporary teaching contracts for the following two semesters. He was not hired thereafter, because the prior adjunct professor returned. Prior to signing the first contract, Chiappini asked Kim Somers, a member of the CCC's Human Resources Department, whether acceptance of the teaching position would affect his pension, and he was assured that it would not. Somers allegedly informed him that he was ineligible for re-enrollment in the PERS. She also informed him that CCC frequently hires former PERS employees, and there has never been a problem with their pensions.
On February 7, 2008, CCC submitted a PERS pension enrollment application on behalf of Chiappini, certifying that he began employment with the college on January 22, 2007. On June 18, 2008, Virginia Martucci, Chief of the Operations Bureau, Division of Pensions and Benefits, wrote to Chiappini informing him that because he began working for CCC on January 22, 2007, his February 1, 2007 retirement was not considered "bona-fide." The letter stated that "[y]ou must have at least a 30-day break in service after your retirement date to be considered retired from the PERS. If you return to PERS covered employment within 30 days of your retirement date, your retirement is not valid, and you are considered an active employee." The Division then requested Chiappini to "make reimbursement for checks dated March 1, 2007 through June 1, 2008 in the amount of $32,479.95." On June 23, 2008, after speaking with Chiappini, Martucci informed Chiappini by letter that his retirement benefits were temporarily reinstated pending resolution of the retirement issue.
At its regular monthly meeting of August 20, 2008, the Board voted to postpone action on Chiappini's case until it obtained additional information from CCC, notably CCC's employment contracts with Chiappini for the Spring 2007, Fall 2007, and Spring 2008 semesters. At its September 18, 2008 meeting, the Board determined that Chiappini's February 1, 2007 retirement was not bona fide because Chiappini "failed to terminate all PERS-covered employment, in accordance with N.J.A.C. 17:2-2.2, N.J.A.C. 17:2-6.1(a) and N.J.A.C. 17:2-2.6(a)."
N.J.A.C. 17:2-2.2(a) states, "[a]ny employee who has enrolled in a covered position must also enroll in any other position regardless of the employee's employment status in such position if the employee meets the salary and Social Security qualifications for enrollment." N.J.A.C. 17:2-6.1(a) states, in pertinent part, "[m]embers enrolled at multiple PERS locations must retire from employment in all covered positions before a retirement shall become effective." N.J.A.C. 17:2-2.6(a) concerns the enrollment eligibility for professors and instructors, and it states that those employed on a temporary, provisional, or adjunct basis . . . who are not in regularly appointed teaching or administrative staff positions . . . shall be eligible for enrollment if they:
(1) Earned more than the minimum threshold salary [$1,500];
(2) Worked for the entire normal school year; and
(3) have their services renewed for the succeeding school year.
The Board noted that on November 16, 2006, Chiappini signed an appointment letter confirming that he would teach a class at CCC beginning on January 22, 2007. Because employment with CCC began prior to his February 1, 2007 retirement, Chiappini was "still an active PERS employee and should have been enrolled through CCC as a multiple member of the PERS." The Board then determined that Chiappini would be enrolled retroactively from February 1, 2007 through May 31, 2008; that Chiappini must repay all retirement benefits that he received during that period; that Chiappini and CCC were responsible for pension contributions for that period; and that Chiappini's retirement allowance would be recalculated to reflect his additional service time.
Chiappini timely appealed the Board's decision, and on November 13, 2008, the Board upheld the calculation of benefits and approved Chiappini's request for an administrative hearing.*fn1 The Office of Administrative Law acknowledged receipt of the case on December 5, 2008.
On July 16, 2009, a hearing was held before an Administrative Law Judge (ALJ). Following the hearing, the ALJ issued a written opinion dated February 8, 2010. In his decision, the ALJ reviewed pertinent law and administrative regulations and concluded that Chiappini's "retirement was not perfected, rather than not bona-fide, as of February 1, 2007, the approved and effective date of his retirement." The ALJ found:
The material facts are undisputed. Petitioner started working as a part-time, interim, adjunct professor at Cumberland County College, on January 22, 2007. The law required petitioner to attain a break-in-service for thirty consecutive days, subsequent to his effective retirement date, which was February 1, 2007. Petitioner had to wait until March 3, 2007, to start working in order to perfect his retirement. He started working about thirty-eight days too soon. However, petitioner did not act with malice, deceit or fraud. In fact, petitioner acted with good intentions.
In the circumstances presented, the ALJ concluded that the penalty imposed by the Board "all as a result of an inadvertent thirty-eight day mistake" was "draconian when measured against the inadvertent and de minimus mistake at hand." The ALJ stated:
Petitioner went to work thirty-eight days too soon, and earned about $300 dollars during the thirty-eight day period. This was hardly enough to cover the gas and time involved in teaching. Petitioner had a unique teaching skill that was needed by his local community college, itself facing a difficult circumstance. Two CCC staff members opted out of teaching agriculture sciences due to personal or medical issues.
The college pleaded with petitioner to fill the void, on a temporary basis. Petitioner resisted but was eventually won over by the college, albeit late in the game. The agricultural class was contingent upon enough students enrolling. And the college assured petitioner that it would not adversely impact his pension. Petitioner earned $8,775 for three semesters of teaching, which was well below the retiree annual limit of $15,000. N.J.S.A. 43:15A-57.2b. And aiding a community college in a time of need is something that should be encouraged not deterred, from a public policy standpoint.
Stating that N.J.S.A. 43:15A-54, which governs the methodology for
correcting errors, was vague in its terms, and relying on our opinion
in Burkhart v. Public Employees' Retirement System, 158 N.J. Super.
414 (App. Div. 1978), a case in which we had ordered a reduction in
payments by PERS-eligible
employees as a matter of equity, the ALJ ordered a modified remedy
that would require repayment by Chiappini only for the thirty-eight
day period in which he was prematurely working.
After the PERS Board filed exceptions on February 26, 2010, and replied to the exceptions that Chiappini filed on March 8, 2010, the Board filed its final administrative decision on March 24, 2010. The Board "amplifie[d] the factual findings to include the evidence that, prior to signing any teaching contract, Chiappini did not speak with the Division of Pensions and Benefits and no one at Cumberland County College represented to Chiappini that they had spoken with the Division of Pensions and Benefits."
The Board rejected the ALJ's determination that Chiappini's retirement was bona fide but not "perfected," determining that the ALJ's conclusion was premised on an erroneous reading of N.J.A.C. 17:2-6.3(e), which it determined pertained to circumstances in which a PERS member continued to receive a salary from the entity from which it sought to retire, not from a different entity, such as CCC, as the ALJ had found.
Addressing the ALJ's finding that Chiappini did not act with deceit, fraud or malice, the Board stated:
At no time has the PERS Board claimed that Chiappini acted with malice, and the statutes and regulations requiring an individual to cease working in all PERS- covered position[s] for thirty days for a retirement to be effective also do not have an exception for good intentions. N.J.A.C. 17:2-6.1; N.J.A.C. 17:2-6.2; N.J.A.C. 17:2-6.3. Chiappini simply did not act with the standard of conduct of a reasonable person in applying for retirement by starting to work in another PERS-covered position at CCC before his retirement from the JJC became effective. This is evidenced by his total failure to consult with the Division of Pensions and Benefits regarding the effect his employment with CCC would have on his retirement.
The Board concluded that, as the result of his work as a part-time, interim, adjunct professor, Chiappini was required to enroll in the PERS as a multiple enrollee under N.J.A.C. 17:2-2(a). Consequently, the Board found, "he did not attain the required thirty day break-in-service." The Board determined that pursuant to N.J.A.C. 17:2-6.1(a), "to retire, a multiple enrollee must retire from all PERS covered positions before a retirement can be effective." Therefore, "Chiappini's employment with CCC prevented his retirement from becoming effective on February 1, 2007" under that regulation.
The Board also rejected the ALJ's remedy of requiring Chiappini to repay thirty-eight day's worth of retirement benefits rather than the full sum plus required pension contributions. Rather, it reaffirmed its previous decision requiring Chiappini to repay all retirement benefits through June 1, 2008; to make pension contributions for the period February 2007 through May 2008; and it ordered the Division to re-calculate Chiappini's life insurance benefit based on his last year of employment.
Chiappini filed a timely notice of appeal.
Our review of the decision of the PERS Board is limited in scope. In re Herrmann, 192 N.J. 19, 27 (2007); In re Carter, 191 N.J. 474, 482 (2007). "Without a 'clear showing' that it is arbitrary, capricious or unreasonable, or that it lacks fair support in the record, an administrative agency's final quasi-judicial decision should be sustained, regardless of whether a reviewing court would have reached a different conclusion in the first instance." Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 10 (2009) (citing In re Herrmann, supra, 192 N.J. at 27). Moreover, we have held that "[a]lthough an agency's interpretation of the statute it administers is not binding upon [us], the agency's interpretation is entitled to 'substantial deference' 'provided it is not plainly unreasonable.'" McKenzie v. Bd. of Trs. of Pub. Employees' Ret. Sys., 389 N.J. Super. 456, 461 (App. Div. 2006) (quoting Merin v. Maglaki, 126 N.J. 430, 436-37 (1992)).
However, while an appellate court respects the agency's expertise, interpretation of statutes is a judicial, not an administrative, function and we are in no way bound by the agency's interpretation. Am. Fire & Cas. Co. v. N.J. Div. of Taxation, 189 N.J. 65, 79 (2006) (citing Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973)).
Chiappini contends that he was retired as of February 1, 2007 and that his employment with CCC did not affect his retirement. We do not find Chiappini's arguments persuasive.
Generally, a qualifying PERS member may elect early retirement by "filing a written application" with the PERS and thereafter "[t]he board of trustees shall retire him." N.J.S.A. 43:15A-41(b). The Administrative Code states that a member's retirement does not become effective for thirty days after the retirement date. N.J.A.C. 17:2-6.2 ("A member's retirement allowance shall not become due and payable until 30 days after the date the Board approved the application for retirement or 30 days after the date of retirement, whichever is later."). As a consequence, Chiappini's retirement did not become effective until March 3, 2007 - thirty days after his retirement date of February 1, 2007.
The Administrative Code also provides that "[a]ny employee who has enrolled in a covered position must also enroll in any other position regardless of the employee's employment status in such other position if the employee meets the salary and Social Security qualifications for enrollment." N.J.A.C. 17:2-2.2. Although an employee who has retired need not re-enroll in the PERS unless his aggregate annual compensation is greater than $15,000, N.J.S.A. 43:15A-57.2b, under the statutory scheme in effect at the time, an employee who has not retired and who accepts another PERS-eligible job must enroll in PERS if his salary exceeds $1500. N.J.S.A. 43:15A-7d(1). Chiappini commenced work at CCC on January 22, 2007, a date prior to his retirement date and thirty-eight days prior to the effective date of his retirement. Because he was still nominally employed by the JJC, he was required to re-enroll in the PERS when his CCC employment commenced. "Members enrolled in multiple PERS positions must retire from employment in all covered positions before a retirement shall become effective." N.J.A.C. 17:2-6.1(a). Chiappini did not do so. He retained his CCC employment, and as a result, his retirement from the JJC was ineffective because he lacked the requisite break in service.
Chiappini contends that because he was not eligible for the PERS as an adjunct, part-time instructor, his retirement from the JJC would be unaffected by that employment. We conclude that Chiappini has misread N.J.A.C. 17:2-2.6(a), and that he was eligible to enroll in the pension system as the result of the fact that he earned more than $1500, the minimum threshold salary for enrollment in effect at the time, he "[w]orked for the entire normal school year," and he had his "services renewed for the succeeding school year."
Chiappini initially contends that there is no evidence that his services were renewed for the succeeding year because he merely "entered into three separate contingency-based contracts to work for CCC during the Spring 2007, Fall 2007, and Spring 2008 semesters." He states that "[a]fter each semester, he had no anticipation that he would work for CCC the following semester."
However, in revising the regulation at issue, the Board noted that the purpose of the revision was to provide PERS eligibility for adjuncts whose contracts were not guaranteed from semester to semester. 37 N.J.R. 619(b) ("The Board now understands based upon comments, that adjuncts are employed on a semester by semester basis and that no matter how many years they are employed, their employment contracts last one semester."). Chiappini has offered no case law or legislative history in support of his argument to the contrary. Therefore, we decline to accept it.
Chiappini next contends that he did not work the "normal school year," which is described by N.J.A.C. 17:2-4.3(a) as the ten months running from "September through June." The school-year calendar at CCC runs from January through May, then September through December. Since CCC is in session for only nine months, Chiappini contends he could not qualify for retirement benefits under the regulation because he did not work the required ten months and was not employed for "an entire normal school year."
We disagree. In adopting N.J.A.C. 17:2-4.3, the Board simply noted that "September through June was the normal school year." 37 N.J.R. 619(b). The Board nowhere states that adjuncts teaching at public institutions whose calendars vary from that norm are ineligible for membership in the PERS. As the purpose of the revised regulation was to "benefit the adjunct professor," such a narrow reading of the regulation would appear to undermine the intention of the Board. Chiappini has again offered no case law or legislative history indicating that his narrow reading is appropriate, and we decline to accept it.
Nor does the time between semesters supply the requisite break in service. Such breaks are assumed to occur in academic employment and are included in the eligibility requirements of N.J.A.C. 17:2-2.6 in connection with the service credit provisions of N.J.S.A. 17:2-4.3.
Chiappini contends as well that he does not meet the three requirements of N.J.A.C. 17:2-2.6 because the annual income required to be PERS eligible was raised from $1,500 to $7,500 in 2008 by P.L. 2008, c. 89. That statutory amendment went into effect on November 1, 2008. Thus, the amendment does not apply to Chiappini, who already earned the $1,500 both for 2007 and for 2008 well before November 1, 2008, and so would have been eligible for PERS by the time the revised statute became effective. Thus, Chiappini has not demonstrated that his position with CCC was not PERS-eligible.
In his reply brief, Chiappini argues that because he was acting reasonably and in good faith, the Board erred in not finding his retirement "bona fide." He states that not only was his retirement already approved by the Board prior to his beginning work at CCC, but PERS's correspondence assured him that employment totaling less than $15,000 would not affect his retirement. Further, he asserts that it was reasonable for him to have relied on his new employer's representation that teaching would not impact his retirement. Last, Chiappini claims that the notices sent to him informing him of his approved retirement date did not state that he must observe a thirty-day break in service.
However, the general rule is that all parties are assumed to know the law. Widmer v. Twp. of Mahwah, 151 N.J. Super. 79, 83 (App. Div. 1977). Moreover, this court has previously determined that an employee may not rely on an employer's designation of a position for the purposes of PERS eligibility. See Vliet v. Bd. of Trs., Pub. Employees' Ret. Sys., 156 N.J. Super. 83, 85, 87-88 (App. Div. 1978). Chiappini should have asked pension authorities, not the college human resources clerk, about any possible impact teaching at CCC may have had on his pension. See id. at 89 ("Had he advised the Division of Pensions of his exact employment status he could have received more specific advice.") The argument, that Chiappini acted reasonably and in good faith, fails for these reasons.
Chiappini has not refuted the central contention of the Board, which is that once Chiappini was hired at a second PERS-eligible position, he was required to enroll in PERS for that position, and that to effectively retire, Chiappini had to have filed an application to retire from both of his PERS-eligible positions and to have maintained his retirement from all PERS-eligible positions for a period of thirty days.
Chiappini contends that the Board erred in imposing a remedy that required him to refund all pension benefits received from February 1, 2007 through May 31, 2008 and that recalculated downward his life insurance benefit as the result of his receipt of a much-reduced salary from CCC. We agree with Chiappini that the imposed remedy was excessive, given the circumstances of Chiappini's case, and that equitable considerations require a diminution in the amount that he must refund.
Courts have treated differently a party's eligibility for membership in the pension fund and the Fund's fiduciary duties to its members. The general rule is that pension statutes are to be construed liberally in favor of intended beneficiaries. Geller v. Treasury Dep't of N.J., 53 N.J. 591 (1969); but see Smith v. State of N.J., Div. of Pensions and Benefits, 390 N.J. Super. 209, 213 (App. Div. 2007) ("[A]n employee is entitled to the liberality spoken of in Geller when eligible for benefits, but eligibility is not to be liberally permitted."). We have noted that, in determining a person's eligibility for pension membership, "the Board [is] under an obligation to strictly adhere to the eligibility requirements . . . to protect the financial integrity of the PERS fund." Krayniak v. Bd. of Trs, Pub. Employees' Ret. Sys., 412 N.J. Super. 232, 242 (App. Div. 2010).
We have also expressed our concern over potential abuse of the PERS system. "[W]e recognize the dangers of manipulation of the pension system by professionals performing part-time services for government agencies and the Board's understandable desire to preserve the fiscal integrity of the PERS by vigilantly guarding against abuses." Mastro v. Bd. of Trs., Pub. Employees' Ret. Sys., 266 N.J. Super. 445, 456 (App. Div. 1993).
However, we have also applied equity where a retiree who innocently erred in receiving excess retirement benefits was faced with a substantial repayment obligation. In Vliet, supra, 156 N.J. Super. 83, we addressed the consequence to a PERS retiree who continued to work at what he believed and was told by his employer were "temporary" positions that were not PERS-eligible. In that case, for many years Vliet had held four pension-eligible positions with the Township of Chester. Id. at 84. After reaching the age of seventy, he was advised that his employment would be terminated for two of the positions, but he was asked if he would continue on in the other two positions, which were to be classified as "temporary." Ibid. Vliet agreed to do so, but only after he and a representative of the township confirmed with the PERS Board that temporary employment would not impact Vliet's pension. Id. at 85. However, neither asked the Board whether the two positions qualified as "temporary" for PERS purposes. Ibid. Vliet then formally retired and continued working at the two "temporary" positions for a period of four years. Ibid. Subsequently, the Board determined that Vliet was classified as a regularly budgeted employee and was pension-eligible, not a temporary employee who was not. As a consequence, it rescinded its approval of Vliet's retirement application and demanded repayment of the benefits paid over the course of the previous four years.
On appeal, we recognized that Vliet had failed to comply with the law. Id. at 88-89. However, while observing that he should not benefit from his noncompliance, we concluded that total reimbursement would be inequitable. Id. at 90. We further concluded that it was unlikely that Vliet would have continued in his low-paying part-time municipal jobs if he had recognized that he would have to forego more generous pension payments. Ibid. Accordingly, we required that Vliet pay to the PERS all moneys earned by him while employed by Chester Township after his "retirement" so as to restore him to full pension status as of that date. Ibid. Determining that the decision placed PERS members on notice that they could not "find sanctuary in the designation 'temporary employee,' enabling them to benefit from retirement and public employment simultaneously[,]" we declared that the remedy would not be granted in a future case. Ibid.
Turning to the present matter, which does not involve the definition of temporary employment, but rather the requirement of a thirty-day break in service, we conclude that a similar equitable remedy is appropriate. Although Chiappini did not consult with the Division of Pension and Benefits before accepting employment with CCC, we appreciate the argument that he could have been misled by the Board's statements in its two letters affirming his retirement that he should expect to be reenrolled in the PERS if he accepted employment after retirement with the State or a local participating public employer in a PERS-covered position and his total salary exceeded $15,000. Further, we note that although those letters stated that he had thirty days after the effective date of his retirement to make any changes to that retirement, the letters did not state that the retirement would be effective only at the conclusion of that period. We are additionally persuaded by the fact that, for medical reasons, Chiappini had not worked for a number of months prior to his retirement date, thereby creating an actual break in service, albeit one that was paid through the use of sick and vacation time.
This clearly is not a case of manipulation of the system by a knowledgeable individual, but rather, one in which a misunderstanding of applicable regulations has led to severe economic consequences to a retiree with relatively limited economic resources. In the circumstances, we find sufficient a requirement that he restore to PERS the salary that he earned at CCC during the years 2007 and 2008, thereby restoring him to full pension status. Chiappini's life insurance should be recalculated accordingly, without reference to the amounts received from CCC.