January 11, 2012
MARCIA E. BOSSART, APPELLANT,
BOARD OF TRUSTEES OF THE TEACHERS' PENSION AND ANNUITY FUND, RESPONDENT.
On appeal from a Final Decision of the Board of Trustees of the Teachers' Pension and Annuity Fund, TPAF #1-10-86561.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 24, 2011
Before Judges Sabatino, Ashrafi and Fasciale.
Marcia Bossart, a retired public school teacher and administrator, appeals from a September 3, 2010 final decision of the Board of Trustees of the Teachers' Pension and Annuity Fund ("the Fund" or "TPAF") that confirmed a seventeen-month disqualification of her creditable service time and prospectively reduced her pension benefits. We affirm.
Bossart enrolled in the Fund in 1966 as a public school teacher and subsequently held administrative positions. She retired from public school employment in 1999 and began collecting a pension from the Fund. The issues before us involve the effect on her pension rights of contract revisions that placed Bossart on leave from her last job as Superintendent of Schools for the Princeton Regional Board of Education ("the school board").
Bossart and the school board had entered into a contract for her to serve as superintendent from 1994 through June 30, 1999. By 1997, however, philosophical differences had eroded the school board's support of her continued employment. She was presented with unfavorable options of either resigning or facing termination procedures. Bossart did not intend to retire at that time but planned to seek another position as a superintendent. In addition, her husband was battling cancer, and so, her personal circumstances did not allow a protracted dispute with the school board.
Consequently, Bossart and the school board entered into a contract addendum on January 27, 1998, by which Bossart resigned and was placed on a leave of absence until the end of her contract term, a period of seventeen months. The addendum stated:
F. Resignation. Dr. Bossart will deliver her resignation (annexed hereto and made a part hereof) upon signing of this Addendum. Her resignation will be effective midnight on June 30, 1999. The last day that she will be reporting to work in the district shall be January 30, 1998. Dr. Bossart agrees that upon execution of this Addendum, the Board may hire an Acting Superintendent of Schools, and initiate a search for a Superintendent of Schools. . ..
G. Leave of Absence. Beginning February 1, 1998, and ending on June 30, 1999, Dr. Bossart shall be placed in the position of Superintendent on Leave.
The addendum also included compensation terms beyond continued payment of Bossart's salary while she was on leave:
H. Payment to Dr. Bossart. Within five (5) business days of the signing of this Agreement and in consideration for the promises hereinafter described herein, and for her resignation, the Board shall pay the sum of $25,000.00 to Dr. Bossart.
I. Payment for Vacation and Sick Days. Within five (5) business days of the signing of this Addendum, the Board agrees to pay Dr. Bossart for all accumulated, unused vacation and sick days. . . .
The addendum recognized that Bossart was free to take another position:
J. Subsequent Employment. In the event Dr. Bossart does secure other employment in a comparable central office administrative position which is TPAF eligible, and the effective date of employment is prior to October 30, 1998, then the Board shall pay her the sum of $52,000.00 in full satisfaction of the balance of the Board's contractual obligations.
Another provision of the addendum required an exchange of mutual releases between Bossart and the school board, thus severing the employment relationship without any outstanding claims, except that the addendum did not purport to determine Bossart's pension rights:
Q. Mutual Releases. The parties hereby sever their relationship peacefully and completely by the terms of this Addendum to the Employment Contract. . . . Specifically excluded from this general release are . . . any rights [Dr. Bossart] may have arising under the Teachers' Pension and Annuity Fund and related statutes and regulations . . . .
At a meeting on January 27, 1998, the school board ratified the addendum, accepted Bossart's resignation, and appointed an Acting Superintendent to replace her as of January 31, 1998. Bossart announced in a memorandum to school staff that her "last day in the district will be Friday, January 30, 1998." In accordance with the contract addendum, the school board paid Bossart $25,000 and additional compensation for her unused vacation and sick days. After January 30, 1998, she did not report to work or perform any services for the Princeton Regional School District, but she continued to receive her contractual salary through the end of June 1999.
Bossart applied to other school districts but did not obtain another position as superintendent. As June 1999 approached, she inquired about her retirement benefits and decided to retire. In July 1999, the Fund approved her application for early retirement, and Bossart began receiving pension payments.
Approximately seven years later, the New Jersey State Commission of Investigation (SCI) issued a report pertaining to employment and compensation practices of public schools in New Jersey. The SCI report specifically referred to Bossart's 1998 addendum agreement as an example of a questionable and excessive contract granted to a school administrator.
As a result of the SCI report, the Division of Pensions and Benefits ("the Division") investigated Bossart's retirement benefits. The Division wrote to Bossart on August 20, 2007, that an error had been made in calculating her creditable service. It disqualified the seventeen months after January 1998 that she did not report to work but continued to receive a salary. The letter explained the reduction as follows:
[I]t has been determined that during the period February 1, 1998 thru June 30, 1999 your base salary of $188,341.75 as reported to the Division was non-creditable salary because it was compensation in the absence of services. This determination will also effectively reduce your years of service credit from 33 years to 31 years 7 months.
By follow-up letter, the Division confirmed reduction of Bossart's service credit time and also reduction of her final average salary for calculation of her pension benefit from $127,463 to $119,946. As a result of these reductions, the Division determined that Bossart's future pension payments would be reduced and that she had received $63,617.95 in overpaid benefits through September 1, 2007, which was "due and payable to the TPAF."
Bossart appealed the Division's determination to the TPAF Board of Trustees. The Board upheld the benefits reduction by letter dated March 11, 2008, but it waived the requirement that Bossart pay back the past overpayment.
Pursuing further administrative appeal, Bossart requested an evidentiary hearing. The matter was transferred to the Office of Administrative Law as a contested case, and a hearing was held in October 2009 before an Administrative Law Judge ("ALJ"). In July 2010, the ALJ issued a written decision recommending that Bossart be denied service and salary credit for the disputed seventeen-month period.
The Board of Trustees adopted the recommendation of the ALJ by its September 3, 2010 final decision, but with modification that effectively reaffirmed its own earlier decision. The Board concluded that Bossart would not be required to repay the overpayments, but that her creditable service time and final average salary would be reduced for calculation of future pension benefits.
Bossart filed a notice of appeal to this court. She makes several arguments that we can condense to contentions that the ALJ and the Board of Trustees erroneously interpreted the applicable law and that it is unfair to reduce her pension payments at this late date after her retirement. Bossart asserts that the Board of Trustees was mistaken in adopting the ALJ's findings that she had voluntarily agreed to be placed on a paid leave of absence and that the January 1998 contract addendum was in anticipation of her retirement. She also contends that her due process rights were violated because the Board of Trustees adopted a definition of "leave of absence" that is not contained in the statutes or regulations. She maintains further that the Fund "failed to act with reasonable diligence" to disqualify the seventeen-month leave of absence and that enforcing the pension reduction is unjust.
We begin by reviewing the relevant statutory and regulatory provisions. Under the Teachers' Pension and Annuity Fund Law, N.J.S.A. 18A:66-1 to -93, retirement benefits are calculated based on a Fund member's "final compensation." See N.J.S.A. 18A:66-44. For those who became members before May 21, 2010, "final compensation" is defined as the "average annual compensation" for either the last three years of the member's "creditable service" or three alternative consecutive years of "creditable service" that result in the "largest possible" retirement benefit for the member. N.J.S.A. 18A:66-2(f)(1).
The statute defines "compensation" as "the contractual salary, for services as a teacher as defined in this article . . . ." N.J.S.A. 18A:66-2(d)(1) (emphasis added). The definition of "teacher" includes administrative positions, and specifically, school superintendents. N.J.S.A. 18A:66-2(p).
Regulations adopted by the Board of Trustees describe what is considered "creditable compensation" for pension purposes. Relevant to this case, N.J.A.C. 17:3-4.1 states:
(a) The compensation of a member . . . shall be limited to base salary, and shall not include extra compensation.
1. Forms of compensation that have been identified as extra compensation include, but are not limited to:
xvi. Compensation in the absence of services . . . . [Emphasis added.]
The regulation further provides that the "Board may question the compensation of any member or retiree to determine its credibility where there is evidence that compensation reported as base salary may include extra compensation." N.J.A.C. 17:3-4.1(b). If a member received "extra compensation," the Board of Trustees is authorized to deny credit for that extra compensation and to require a recalculation of the member's retirement benefits. N.J.A.C. 17:3-4.1(g). Under these regulations, Bossart was not entitled to credit for the seventeen months after January 31, 1998, because she did not provide any services to the school board from that time until she retired in July 1999.
Bossart argues that the quoted regulation, N.J.A.C. 17:3-4.1(a)(1)(xvi), was amended after she retired to include the provision that "compensation in the absence of services" would not be creditable towards pension benefits. She contends her due process rights were violated by retroactive application of that regulation because she did not have notice of it at the time of her retirement.
The Board of Trustees' decision, however, does not require application of the cited regulation. The statutes we have quoted were in effect at the time of Bossart's retirement. Her salary after January 30, 1998, was not "compensation" for services as a teacher or superintendent, in accordance with N.J.S.A. 18A:66-2(d)(1), and that salary should not have been credited in determining her "average annual compensation" under N.J.S.A. 18A:66-2(f)(1). To reach these conclusions, we need not address retroactivity of the regulation, N.J.A.C. 17:3-4.1(a)(1)(xvi).
Bossart contends she was on authorized leave of absence and the time and salary during her leave must be counted as related to her services as superintendent. She argues that N.J.A.C. 17:3-4.2 recognizes creditable service time while a Fund member is on paid leave of absence.*fn1 Furthermore, she asserts that the finding by the ALJ and Board of Trustees that she was not actually on a leave of absence violated her due process rights and the Administrative Procedure Act, N.J.S.A. 52:14B-1 to -15, because the agency created a definition of "leave of absence" that is not included in applicable statutory provisions or regulations.
The Board of Trustees stated in its March 11, 2008 decision:
The Division considers acceptable reasons for a leave of absence to include, personal illness, personal reasons, maternity and/or child care. There were no expectations of Dr. Bossart returning to employment which is evidenced by the terms of the agreement. In furtherance to the Division's position that this arrangement was a "buy-out", Dr. Bossart was required, amongst other provisions, to submit her letter of resignation at the onset of the execution of the addendum.
In his decision, the ALJ stated:
Even though leave of absence is not specifically defined in the statute, its common usage implies a return to the former position or at the very least, an intention to return. It is clear that Dr. Bossart had no intention to return as the superintendent of schools since she submitted her resignation upon signing the addendum and notified her staff that her last day of service was January 30, 1998. [N.J.S.A. 18A:66-2(d)] defines compensation as salary for services. No services were provided or intended to be provided by Dr. Bossart after January 30, 1998.
Although "leave of absence" is not specifically defined in the statutes or regulations, N.J.S.A. 1:1-1 provides a general rule of construction for words and phrases used in statutes:
In the construction of the laws and statutes of this state . . . words and phrases shall be read and construed with their context and shall, unless inconsistent with the manifest intent of the legislature or unless another or different meaning is expressly indicated, be given their generally accepted meaning, according to the approved usage of the language. [Emphasis added.]
Giving the phrase "leave of absence" its "generally accepted meaning," the ALJ and the Board of Trustees found that Bossart and the school board did not contemplate that Bossart might return to her position. Bossart openly acknowledged that her last day of work was January 30, 1998. She and the school board knew the position of superintendent was no longer hers, and she would be immediately replaced. She knew she was free to accept a position in another school district, and her intent was to find another position. These facts contradict the designation of her status as a leave of absence. The indisputable fact is that her services for the Princeton Regional School District permanently ended as of January 30, 1998.
Also, the Board of Trustees' decision did not depend on a finding expressed by the ALJ that Bossart's salary after that date was paid in anticipation of her retirement. It was sufficient that Bossart was paid but did not perform any services as a teacher or administrator during the final seventeen months before her retirement.
Bossart argues that she did not voluntarily resign from her position, but that argument is both irrelevant and factually inaccurate. The reason that Bossart stopped working does not affect the statutory definition of "compensation" in N.J.S.A. 18A:66-2(d)(1), or the meaning of "creditable service" in subsection (f)(1) of the same statute. Moreover, as a factual matter, Bossart and the school board negotiated a revision of her employment contract. She received compensation in addition to that required by her existing contract, including an additional payment of $25,000 and immediate payment for her unused sick and vacation days. She cannot argue credibly that she did not voluntarily accept the additional compensation in exchange for her resignation.
Our scope of review of the decisions of the Division and the Board of Trustees are well-settled by prior cases. We are not bound by the agency's statutory interpretations "because it is the responsibility of a reviewing court to ensure that an agency's administrative actions do not exceed its legislatively conferred powers." In re Application of Virtua-West Jersey Hosp. Voorhees for a Certificate of Need, 194 N.J. 413, 422 (2008). But at the same time, we must "give substantial deference" to the agency's interpretation of a statute it is charged with enforcing. Id. at 423 (quoting Saint Peter's Univ. Hosp. v. Lacy, 185 N.J. 1, 15 (2005)). Furthermore, we must defer to the findings of fact made by an administrative agency so long as "the record contains substantial evidence to support the findings." Brady v. Bd. of Review, 152 N.J. 197, 210-11 (1997) (quoting George Harms Const. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 27 (1994)). We find no error in either the Board of Trustees' interpretation of the pertinent statutes or its findings of fact, which tracked the ALJ's well-supported findings after evidence was presented in the contested case.
Finally, arguing that the Fund failed to act with reasonable diligence in reducing her pension rights, Bossart cites Ruvoldt v. Nolan, 63 N.J. 171 (1973), and contends that enforcing the pension reduction after eight years of her retirement is inequitable. She states she "made decisions based upon her expectations of what her income would be in this stage of her life."
As previously noted, the applicable regulations provide that the Board of Trustees may investigate and adjust the compensation of any member or retiree. N.J.A.C. 17:3-4.1(b).
The Board of Trustees has the authority to deny a member credit for "extra compensation" and to require a recalculation of the member's retirement benefits. N.J.A.C. 17:3-4.1(g).
In Ruvoldt, supra, 63 N.J. at 183-84, the Supreme Court explained:
[A]dministrative agencies have the inherent power to reopen or to modify and to rehear orders that have been entered. Of course, the power must be exercised reasonably and application seeking its exercise must be made with reasonable diligence. . . . But what is a reasonable time must perforce depend on the interplay with the time element of a number of attendant factors, such as the particular occasion for administrative reexamination of the matter, the fraud or illegality in the original action and any contribution thereto or participation therein by the beneficiary of the original action, as well as the extent of any reliance or justified change of position by parties affected by the action. [Internal quotations marks and citations omitted.]
Here, the Division and the Board of Trustees acted diligently once they learned that Bossart was receiving pension benefits for service that she did not perform during the disputed seventeen months.
We have considered the "attendant factors" in this case. Id. at 183. We find no basis to disturb the Board of Trustees' conclusion that the waiver of $63,617.95 in overpayment and only prospective reduction of Bossart's benefits is equitable because of the Fund's earlier delay in adjusting her actual creditable service. Bossart is not entitled to continue receiving pension benefits that she did not earn under the pertinent statutes.