On appeal from the Board of Trustees of the Public Employees' Retirement System, Department of Treasury, PERS #2-10-191025.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Carchman, Fisher and Baxter.
Harold Knox appeals from an October 25, 2010 final agency decision of the Department of the Treasury, Division of Pensions and Benefits (Treasury) that required Knox to reimburse the Public Employees' Retirement System (PERS) for all of the retirement benefits he received from PERS between July 1, 2003 and November 14, 2006, which totaled $258,191. Treasury concluded that because Knox waited fourteen days after retirement, rather than the required thirty days, before beginning employment covered by the PERS pension system, he was obliged to forfeit all of the pension benefits he received after he retired as an assistant prosecutor in the Union County Prosecutor's Office (UCPO).
In light of Treasury's conclusion that Knox acted in good faith and made an honest mistake by returning to public employment sixteen days too soon, Treasury's insistence that Knox refund $258,191 constitutes an arbitrary and capricious agency decision. This is especially so in light of the uncontroverted evidence in the record that before Knox accepted the work in the UCPO that ultimately led to the refund demand, Knox received assurances from the UCPO that the position in question would not affect his pension; and, in relying on the assurances of his employer, Knox followed the recommendation of PERS to request advice from his employer if in doubt about his pension status. We reverse the decision issued by Treasury, and remand for reinstatement of the decision rendered by the Administrative Law Judge (ALJ).
Knox began his employment as an assistant prosecutor with the UCPO on September 10, 1973, at which time he enrolled in PERS. He remained employed with the UCPO for thirty-one years. On February 18, 2003, Knox filed a retirement application with PERS, in which he expressed his intention to retire effective July 1, 2003. PERS approved that application at its regular monthly meeting on May 21, 2003, and issued an approval letter notifying Knox that should he return to public employment after his retirement, he was obliged to "notify [the PERS] Office of Client Services immediately . . . ."
On June 19, 2003, approximately two weeks before his effective retirement date, Knox negotiated a contract with the UCPO, calling for him to return to work as a "seasonal employee in the forfeiture unit" at a salary of $20,000 per year, based upon twenty hours of work per week, with no fringe benefits.
In accordance with that contract, Knox retired from the UCPO on June 30, 2003 and returned to employment with the UCPO on July 14, 2003 as a "seasonal employee." Prior to beginning work on July 14, 2003, Knox reviewed Fact Sheet #21 (Fact Sheet), a publication issued by the New Jersey Division of Pensions and Benefits. The Fact Sheet in effect at the time of Knox's retirement informed retirees of the limitations placed on retirees who choose to return to public employment. In relevant part, the Fact Sheet stated:
Working for private industry, the federal government, or a government agency in another State will not normally affect your PERS retirement benefits. . . . Returning to public employment in New Jersey after retirement, however, could affect your benefits as shown in the following information. [(Emphasis added).]
While the Fact Sheet did discuss issues such as the limitations on annual earnings ($15,000), waiting period before resuming employment (thirty days) and other factors relied on by respondent, the Fact Sheet qualified those limiting provisions by repeated references to non-PERS covered employment as well as advice to consult the prospective employer if in doubt about whether such a return to public employment would impact eligibility for PERS retirement benefits. The Fact Sheet stated:
Your prospective employer should be able to tell you whether the employment you are considering is covered under the PERS.
As we have noted, Knox began his employment as a "seasonal employee" with the UCPO on July 14, 2003. He continued this employment arrangement through 2006 in a series of yearly contracts at an annual salary of $20,000.*fn1
On July 25, 2007, Michael R. Czyzyk, the supervisor of the external audit unit of the Division of Pensions and Benefits (Division), notified the County of Union by letter that the Division was in the process of conducting an audit to determine whether certain County of Union retirees had violated the "return to employment provisions" of N.J.S.A. 43:15A-57.2; and Czyzyk requested specified information concerning those six individuals, of whom Knox was one. The County's response of September 18, 2007 specified that Knox was a "Seasonal Asst/Legal Researcher" who had been hired in that capacity on July 14, 2003.
On October 24, 2007, Czyzyk notified Knox that his post-retirement employment violated the reenrollment provisions of the pension statute, N.J.S.A. 43:15A-57.2, because his employment did not qualify as "seasonal" under N.J.A.C. 17:2-2.3,*fn2 and because he had not "observe[d] a 30-day post-retirement break in service prior to resuming employment in a PERS covered position[.]" For that reason, the Division "d[id] not consider [his] retirement valid." Czyzyk's October 24, 2007 letter notified Knox that the Division was seeking the return of $258,191, which was the total amount of pension benefits paid to Knox during the period from July 1, 2003, the effective date of his retirement, to November 14, 2006, the date that he left his part-time post-retirement position with the UCPO. Although Knox requested that Treasury rescind its refund demand, Treasury declined to do so.
When Knox continued to challenge Treasury's refund demand, Treasury transferred the matter to the Office of Administrative Law, where the matter was assigned to ALJ Barry E. Moscowitz, who heard testimony on October 30 and December 29, 2009. ALJ Moscowitz admitted in evidence the Fact Sheet along with Knox's employment records, ...