April 19, 2012
JEAN BROOKS MARSH FOR JOHN MARSH (DECEASED), PETITIONER-APPELLANT,
PUBLIC EMPLOYEES RETIREMENT SYSTEM, RESPONDENT-RESPONDENT.
On appeal from the Board of Trustees of the Public Employees' Retirement System, Department of Treasury, Agency Docket No. PERS #2-10-185828.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 7, 2012
Before Judges Fuentes and Haas.
Appellant Jean Brooks Marsh is the widow of John Marsh, a former employee of Trenton Psychiatric Hospital. As a State employee, decedent was enrolled in the Public Employees Retirement System (PERS) Pension. The question raised in this appeal concerns PERS's demand for reimbursement of approximately $270 monthly overpayments received by decedent from November 2003 to April 2009, totaling $17,359.14.
Appellant does not question that decedent received overpayments during the relevant time period. Her challenge on appeal concerns only the demand for reimbursement. Relying on our decision in Indursky v. Board of Trustees, 137 N.J. Super. 335 (App. Div. 1975), appellant argues that the Division of Pension and Benefits should be estopped from seeking reimbursement here because she and decedent relied in good faith upon the correctness of the payments over a period of years. Under these circumstances, appellant argues it would be unduly punitive, unfair, and unjust to demand reimbursement. Characterizing the overpayments as a debt owed by decedent to PERS, appellant also questions the constitutionality of holding her responsible for her late husband's debt.
After reviewing the record before us and mindful of our standard of review, we affirm.
Appellant was decedent's second wife. Decedent divorced his first wife, Alice Marsh, via a final judgment of divorce issued by the Family Part in May 1996. As part of a settlement agreement in the matrimonial action, the court awarded Alice Marsh a $56,280.50 interest in decedent's pension plan. To effectuate this award, the court entered a Qualified Domestic Relations Order (QDRO) on January 30, 1997, directing that payments of Alice Marsh's $56,280.50 interest in decedent's Pension Plan commence upon decedent's retirement or his attainment of retirement age, whichever occurred first.
On May 6, 2002, decedent applied for early retirement,*fn1
and selected benefit "Option 2," which, upon his death,
permits his sole beneficiary to continue to receive "a lifetime
monthly retirement allowance equal to 100% of [decedent's $2,177.07]
monthly allowance." Decedent listed his "friend,"*fn2
appellant Jean Gillardon Brooks, as his sole beneficiary. On September
18, 2002, the PERS Board of Trustees approved decedent's application
for early retirement.
On November 19, 2002, the Division of Pensions and Benefits sent decedent a letter explaining that effective December 1, 2002, his monthly payment benefits would be reduced by $541.67, to $1,635.40, to reflect a court-ordered support obligation due to his former wife Alice Marsh. On December 9, 2002, decedent received a letter that provided the following itemization of the deductions taken from his monthly benefits payment: (1) federal income tax of $147.23; (2) NJ income tax of $40.00; (3) health benefits of $0.00; (3) loan repayment of $262.91; (4) dental insurance of $0.00; and (5) a "monthly allowance" payable to Alice Marsh of $541.67. The letter also noted that the amount payable to decedent after applying the deductions was $1,635.40 a month, subject to cost-of-living adjustments after being retired for two years.
On September 8, 2003, the Family Part entered a second QDRO directing the Division of Pensions and Benefits to withhold $540 from decedent's "monthly retirement allowance for equitable distribution payments to Alice Marsh up to a maximum of $65,145.50." By letter dated September 30, 2003, the Division confirmed to decedent that $540 would be deducted from his monthly retirement allowance as ordered by the court in the second QDRO.
The key error that triggered the overpayment to decedent appears to have occurred in a letter dated October 18, 2003, sent to decedent by Paul M. Makuch, Pension Benefits Specialist II, Retirement Bureau of the Division of Pensions and Benefits. In this letter (referenced: "Equitable Distribution/Termination of Support Allowance") Makuch confirmed to decedent that the Division was "in receipt of a Court Order" mandating the deduction of $540 from decedent's "gross monthly allowance." This $540 deduction would then be paid to "Alice Marsh for equitable distribution . . . [with a] ceiling of $65,145.00."
Of particular relevance here, Makuch also informed decedent that the Division had received "a Court Order" (presumably referring to an entirely separate order) directing it "to terminate the support allowance (CS40692445A) made payable to Ms. Alice Marsh, through the New Jersey Family Support Payment Center." Makuch noted that "these changes are effective on [decedent's] November 1, 2003 check reflecting the month of October." He concludes the letter by informing decedent that his "regular allowance will be increased from $1,635.40 to $1,906.15." (Emphasis added.)
Alice Marsh died on December 12, 2008. On July 8, 2009, the Division of Pensions and Benefits sent decedent a letter stating:
An audit of your account revealed that the monthly retirement benefits you received from November 1, 2003 to April 1, 2009, were incorrect. Effective November 1, 2003, a portion of your pension benefit was payable to Alice Marsh for equitable distribution per a court order. Also, the child support payments you were making were terminated as of the same date. The revised benefit payable to you was calculated incorrectly.*fn3
You have been overpaid $17,359.14 (regular allowance of $16,679.28 and cost-of-living adjustment of $679.86) for this period.
The Division gave decedent the option to refund the payment in one lump sum, or have $293 deducted from each pension payment "until all balances are satisfied." The letter also informed decedent that, due to his former wife's death, his pension benefits would be restored to the full amount. Correspondence continued between the parties until the matter came for disposition before the Board of Trustees of the PERS. At a regular meeting held on November 13, 2009, the Board denied decedent's request to waive reimbursement of overpayment.
Decedent appealed the Board's decision arguing that he had not been aware of any overpayment prior to the Division's letter of July 8, 2009, and requested a stay until the matter was formally reconsidered. Decedent died on December 29, 2009. On January 20, 2010, the Board referred the matter to the Office of Administrative Law as a contested case.
The parties stipulated to the facts described herein before an Administrative Law Judge (ALJ). Appellant also testified that she was the one who received the pension checks as well as the letters about the pension adjustments, even during the time her husband lived. In her view, the $300 increase was not an error by the Division; it merely reflected that decedent was no longer paying for child support. According to appellant, she spoke with a representative of the Division after Alice Marsh died to make sure decedent received the $540 that had been withheld for payments to Alice Marsh.
Appellant testified that the monthly pension benefits are her principal source of income. Based on her familiarity with decedent's affairs, she anticipated receiving a monthly pension benefit at around $2,152 prior to deductions. In this light, the monthly deduction demanded by the Board would cause her great financial hardship.
After considering this evidence, the ALJ found the error that resulted in the overpayment was an obvious one that should have been easily detectable by decedent. In the first monthly payment of $2,177.07, the Division deducted $541.07 as child support obligation. When the support obligation of $541.07 was eliminated, the equitable distribution award of $540 was instituted, resulting in an obvious increase to decedent of merely $1.07. Inexplicably, the Division mistakenly increased the monthly pension benefit from $1,635 to $1,906.15, resulting in an overpayment of $271.15.
N.J.S.A. 43:15A-54 provides in relevant part:
If any change or error results in an employee or beneficiary receiving from the retirement system more or less than he would have been entitled to receive, then on discovery of the error, the retirement system shall correct it and, so far as practicable, adjust the payments in such a manner that the actuarial equivalent of the benefit to which he was correctly entitled shall be paid.
After noting the statute's straight forward edict, the ALJ rejected appellant's argument that the PERS Board is precluded from seeking reimbursement here under the equitable principles we articulated in Indursky v. Board of Trustees, supra. The Board adopted the ALJ's findings and recommendations. Because we are in complete agreement with the Board's decision, it is useful at this point to elaborate on the ALJ's analysis.
Because appellant's position before the ALJ, the PERS Board, and this court relies heavily on our decision in Indursky, we begin our discussion with a review of the salient facts in Indursky.
In 1950, attorney Harry Indursky was permanently appointed to the part-time position of counsel for the Jersey City Housing Authority at an annual salary of $4,000. Indursky, supra, 137 N.J. Super. at 337-38. Five years later in 1955, Mr. Indursky was admitted to the PERS, after he paid $1,217.64 to purchase "credit back to the commencement date of his employment." Ibid.
In 1964, Mr. Indursky applied for an ordinary disability retirement due to a heart condition and certified his annual salary as $4,550. Id. at 338. In December 1964, a PERS physician certified Mr. Indursky totally and permanently disabled. Ibid. In January 1965, the PERS Board wrote to Mr. Indursky informing him that his retirement application was being reviewed and asking "whether he intended to continue in private law practice and, if so, what would be his estimate of his annual income." Ibid. After expressing some surprise over the nature of the inquiry, Mr. Indursky advised the Board that he intended to continue practicing law, although not on a full-time basis, and was unable to estimate his income from it. Ibid.
Mr. Indursky resigned as attorney for the Housing Authority in February 1965. Ibid. Thereafter, the PERS Board advised him that his retirement application had been approved retroactive to December 1, 1964, with a maximum monthly benefit of $95.63 "subject to a reduction when he became eligible for Social Security benefits." Ibid. Pursuant to prevailing legal standards of the time, on November 9, 1967, the PERS Board requested that Mr. Indursky submit to a physical examination with a Board-appointed physician. Id. at 340. The PERS physician reported on January 12, 1968 that Mr. Indursky remained totally and completely disabled. Ibid.
In March 1968, in response to the Board's request, Mr. Indursky certified again that he was gainfully employed as a lawyer, estimating his gross annual salary to be $15,000, before taking into consideration expenses such as office rent, telephone, stamps, etc. Ibid. Mr. Indursky also emphasized that his previous employment with the Housing Authority had been on a part-time basis, and that his income from the practice of law had been significantly reduced since experiencing his heart condition. Ibid.
Mr. Indursky concluded his response to the Board by stating that "he would appreciate hearing from the System as to whether he could expect continuance of his pension." Id. at 341. The Board responded on April 24, 1968, as follows:
Your letter of March 10, 1968 was presented to the Board of Trustees for their consideration. The Board requested a legal opinion in this matter and held decision pending an opinion from the Attorney General's office. We will advise you when the Board takes action in this matter. [Ibid.]
At this point in Indursky, we noted that almost six years passed before the Board took "action" in the matter. During this six-year hiatus, Mr. Indursky continued to certify his income as a lawyer on an annual basis, from 1968 to 1973. His income grew during these years from $15,000 in 1968, to a high of approximately $40,000 in 1972. Ibid.
On April 1, 1974, the PERS Board wrote to Mr. Indursky informing him that the Attorney General had finally responded to the Board's 1968 inquiry:
The Attorney General's office has ruled that the system must consider the total earnings of the disability pensioner regardless of the nature of his former employment.
On the basis of this opinion, the Board of Trustees found that, and under the provisions of [N.J.S.A.] 43:15A.44, you were not entitled to receive a pension in the years 1967 through March 31, 1973 at which time you had passed age 60.
The allowance which you have been receiving is composed of 2 benefits, the pension and an annuity. Only the pension portion of the allowance is in concern. The initial allowance granted $95.63 represented a pension of $70.52 and an annuity of $25.11.
The Board of Trustees is, therefore, obligated to correct this discrepancy and discontinue any additional payments until this matter is settled. Our records show that the total overpayment amounts to $5,302.32. [Id. at 341-42.]
Against these facts, we held that, by waiting for almost six years, the PERS Board failed to take reasonably diligent action to ascertain the status of the appellant's entitlement to disability benefits. By contrast, the appellant "did essentially everything the Board asked of him, and indeed questioned whether the continuance of his benefits would be dependent on his prior part-time employment status." Id. at 343 -44.
The salient facts in Indursky are in sharp contrast to the controlling facts here. Decedent did not take any action to apprise the Board of the possibility of an overpayment when his monthly benefit payment increased by approximately $270, despite clear evidence that the actual difference in his favor was $1.07. In contrast to the six-year paralysis by the Board in Indursky, the Board here acted with reasonable dispatch once it discovered the erroneous overpayment.
In addition to the clear authority to recover overpayments conferred by N.J.S.A. 43:15A-54, administrative agencies have "inherent authority to reopen and modify previous orders," limited only by the exercise of "reasonable diligence[.]" Skulski v. Nolan, 68 N.J. 179, 195 (1975). In determining whether an administrative agency's modification occurred with reasonable diligence, we look to: (1) whether there was a particular occasion for administrative reexamination of the matter; (2) whether there was fraud or illegality in the original action, together with any contribution or participation in this wrongdoing by the beneficiary of the original action; and (3) the extent of any reliance or justified change of position by the party affected by the action. Id. at 196 (relying on Ruvoldt v. Nolan, 63 N.J. 171, 183-84 (1973)). The party challenging the validity of the administrative decision bears the burden of showing that the decision was "arbitrary, unreasonable or capricious." Boyle v. Riti, 175 N.J. Super. 158, 166 (App. Div. 1980).
Mindful of this standard of review, we are satisfied that the Board acted properly by seeking reimbursement from appellant of pension benefits received by decedent based on an indisputable error in calculation. The concerns for fairness and due diligence that animated our decision in Indursky are not applicable here. These same reasons underlie our rejection of appellant's argument based on the doctrine of equitable estoppel, which as a matter of public policy, is ordinarily rarely invoked against a governmental entity. Sellers v. Bd. of Trs., Police & Firemen's Retirement Sys., 339 N.J. Super. 51, 58 (App. Div. 2008).
Finally, relying on Jersey Shore Medical Center - Fitkin Hospital v. Estate of Baum, 84 N.J. 137 (1980), appellant argues that holding her responsible for her late husband's debts violates the equal protection doctrine of the United States Constitution. This argument lacks sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). Pension benefits are not personal funds of the beneficiary until they are actually made payable. Reiser v. Pension Com. of Employees Retirement Sys., 147 N.J. Super. 168, 194 (Law Div. 1976); see also Prince v. Folsom, 168 F. Supp. 392, 398 (D.N.J. 1958). Appellant's future benefits are subject to modification to enforce the public policy embodied in N.J.S.A. 43:15A-54.