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Larosa v. State Police Retirement System

Superior Court of New Jersey, Appellate Division

September 27, 2013

MICHAEL LAROSA, SCOTT NEWKIRK, and SUSAN KAMISH, Appellants,
v.
STATE POLICE RETIREMENT SYSTEM, Respondent

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 16, 2013.

On appeal from the Board of Trustees of the State Police Retirement System, Department of the Treasury.

Lauren Sandy argued the cause for appellants (Loccke, Correia, Limsky & Bukosky, attorneys; Ms. Sandy, of counsel and on the brief).

Eileen S. Den Bleyker, Senior Deputy Attorney General, argued the cause for respondent (John J. Hoffman, Acting Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Robert H. Stoloff, Assistant Attorney General, on the brief).

Before Judges Harris and Guadagno.

PER CURIAM.

Appellants Michael LaRosa, Scott Newkirk, and Susan Kamish appeal from the September 25, 2012 decision of the Board of Trustees (Board) of the State Police Retirement System (SPRS), denying them full "creditable service" for time accumulated while members in the Public Employees' Retirement System (PERS) that was transferred to the Police and Fire Retirement System (PFRS), and later transferred to the SPRS. We reverse.

I.

A.

The genesis of the present appeal is found in the 1997 merger of the Alcoholic Beverage Control Enforcement Bureau, State Capitol Police Force, and the Bureau of Marine Enforcement into the Division of State Police in the Department of Law and Public Safety. See P.L. 1997, c. 15. At issue are the obscure workings of the State Police Retirement System Act (the SPRS Act), N.J.S.A. 53:5A-1 to -47, as interpreted by the Board.

Specifically, the parties' disagreement relates to the calculation of appellants' years of creditable service towards retirement.[1] At stake is the nature of the retirement allowance awarded —— either a service retirement, N.J.S.A. 53:5A-8(b), or a special retirement, N.J.S.A. 53:5A-27(a) —— and when appellants qualify therefor. The long-term monetary difference between a service retirement and a special retirement is great.

A service retirement occurs when an SPRS member achieves "[twenty] years of creditable service as a State policeman." N.J.S.A. 53:5A-8(b). When achieved, a service retirement provides that the retiree is eligible to receive "a total retirement allowance of 50% of . . . final compensation." N.J.S.A. 53:5A-8(b)(2).

A special retirement is the grand prize of the SPRS. It occurs when "a full-time commissioned officer, noncommissioned officer or trooper of the Division of State Police" establishes "[twenty-five] years of creditable service" in such position. N.J.S.A. 53:5A-27(a). Upon such qualification, the retiree shall receive "a total retirement allowance of 65% of . . . final compensation, plus 1% of . . . compensation multiplied by the number of years of creditable service over [twenty-five], but not over [thirty]." N.J.S.A. 53:5A-27(a)(2). In other words, under optimal conditions, a retired state trooper may qualify for a total retirement allowance of up to seventy percent of his or her final compensation.

B.

The facts that undergird our decision are undisputed.[2] We derive them from the administrative record, and from the August 30, 2012 Initial Decision[3] of the Administrative Law Judge (ALJ) who was assigned to the consolidated appeals that arose from appellants' grievances with the Board.

Each appellant became a member of the State Police on April 12, 1997, after voluntarily transferring there from Senior Inspector positions in the Alcoholic Beverage Control Enforcement Bureau (ABC). See N.J.S.A. 53:1-8.2(a). Their prior public employment histories, while not identical, are very similar.

LaRosa's State employment commenced in 1986 with the ABC, at which time he became a member of the PFRS. He transferred to the Division of Gaming Enforcement (DGE) in 1991, and became a member of the PERS. In 1994, LaRosa returned to the ABC, and all of his PERS creditable service was transferred to the PFRS. N.J.S.A. 43:2-2 (providing that "[the member] shall . . . be entitled to such credit in the way of pension and annuity as is provided by law in the second retirement system or fund, with the prior service credit to which [the member] was originally entitled in the first retirement system."

Newkirk was first employed by the State in 1982 as a probation officer, and was enrolled in the PERS. In 1984, he transferred to the ABC, becoming a member of the PFRS. Then, in 1991, Newkirk transferred to the DGE, which made him a member of PERS. Finally, in 1995, upon returning to service with the ABC, he rejoined the PFRS, with "full credit for the time in [the PERS]."

Kamish was first hired by the State as an ABC inspector in 1984, and accordingly was made a member of the PFRS. In 1991, she transferred to the DGE, and enrolled in the PERS. In 1995, she returned to the ABC, and her PERS time was transferred to the PFRS in like fashion with the others.

The following chart summarizes appellants' public service as of the date of the Board's final decision:

PROBATION OFFICER (PERS)

ABC INSPECTOR (PFRS)

DGE INVESTIGATOR (PERS)

ABC INSPECTOR (PFRS)

STATE POLICE (SPRS)

LAROSA

n/a

1986-91

1991-94

1994-97

1997-present

NEWKIRK

1982-84

1984-91

1991-95

1995-97

1997-2012

KAMISH

n/a

1984-91

1991-95

1995-97

1997-present

In 2011, appellants requested that the Board perform preretirement calculations with respect to their creditable service in the SPRS. Dissatisfied with the results, appellants requested reconsideration. On August 5, 2011, the Board determined the following:

[O]nly time in the titles listed . . . under Chapter 19, [of Public Law 1997] were credited as pure State Police service and used in the Special retirement calculation for 25 years of service credit. All other pension service credit in non[-]State Police titles was credited at 1% per year of final compensation.

Thus, none of appellants' PERS time was counted in calculating when they would qualify for special retirement. The Board viewed appellants' PERS service as not "pure State Police service, " and it was not among the specific job titles of the ABC that were permitted to transfer to the State Police pursuant to the 1997 legislation. The Board also rejected each appellant's claim that equitable estoppel principles required that their PERS time be credited toward an SPRS special retirement.

Appellants sought further administrative review, and their separate appeals were consolidated in the Office of Administrative Law. After conducting three days of hearings, the assigned ALJ issued his Initial Decision, which concluded that appellants "have failed to demonstrate that they are entitled to receive any additional credit toward their retirement than that already acknowledged by the [Board]." The Initial Decision refused to apply equitable estoppel to appellants' claims, and determined, as a matter of law, that N.J.S.A. 53:5A-6(b) required their "DGE service [to be] properly credited at the one percent per year, " which meant that such service was not calculable in determining whether an appellant qualified for special retirement.

On September 25, 2012, the Board adopted the ALJ's findings of fact and the conclusions of law. This appeal followed.

C.

Appellants continue to argue that the Board incorrectly calculated their creditable service. They maintain that N.J.S.A. 53:5A-6(a) requires both their PFRS and PERS creditable service to be transferred to SPRS, and to be treated the same as creditable service earned under the SPRS. They argue that the Board improperly applied N.J.S.A. 53:5A-6(b), which arguably applies only to "purchased credit, " instead of subsection (a). Appellants further assert that their PERS creditable service had been irretrievably converted into PFRS creditable service when they each transferred to the ABC, and thus it must be treated equivalently to their ABC service.

The ALJ and the Board disagreed with appellants' interpretation of the statute. By adopting the ALJ's findings of fact and conclusions of law, the Board found that appellants' ABC creditable service was entitled to full SPRS credit because appellants' job titles were specifically listed in N.J.S.A. 53:5A-6(a). Furthermore, PERS creditable service earned when appellants served in the DGE could also be transferred to the SPRS, but N.J.S.A. 53:5A-6(b) provided a formula for how such time should be treated because the "mathematical value" of such PERS creditable service was limited to the statute's "1% of final compensation for each year of such service credit." Thus, the PERS service credit —— treated as a "purchased credit" —— could only be applied toward an SPRS service retirement and not toward an SPRS special retirement due to the specific formula mentioned in subsection (b) relating to purchases.

The Board reprises this argument on appeal, contending that appellants' PERS creditable service was used to "purchase" PRFS creditable service, and such "purchased" time —— because it is less valuable than transferred time —— is not creditable towards an SPRS special retirement. The Board focuses its contention by arguing in its brief the following:

The result here turns on the meaning of the term "purchase" of pension credit. If appellants "purchased" PFRS credit for their DGE time, when they transferred to the ABC in 1995, then that time is not creditable towards a[n] SPRS special retirement. If that credit instead was transferred, then it is creditable towards a[n] SPRS special retirement.

II.

A.

We ordinarily defer to an administrative agency's interpretation of statutes within its implementing and enforcing responsibility. E.S. v. Div. of Med. Assist. & Health Servs., 412 N.J.Super. 340, 355 (App. Div. 2010). The Board is entrusted with the "general responsibility for the proper operation of the [SPRS]." N.J.S.A. 53:5A-29(a).

"Nevertheless, 'we are not bound by the agency's legal opinions.' Statutory and regulatory construction is a purely legal issue subject to de novo review." A.B. v. Div. of Med. Assist. & Health Servs., 407 N.J.Super. 330, 340 (App. Div.) (quoting Levine v. State Dep't of Transp., 338 N.J.Super. 28, 32 (App. Div. 2001)), certif. denied, 200 N.J. 210 (2009). For example, we will set aside an agency's interpretation that extends a statute to give it greater effect than its language permits. Oberhand v. Dir., Div. Of Taxation, 193 N.J. 558, 568 (2008). Similarly, we will reverse if the agency too narrowly interprets statutory references. Francois v. Bd. of Trs., 415 N.J.Super. 335, 353-54 (App. Div. 2010).

We are also mindful of the general principle that "pension statutes 'should be liberally construed and administered in favor of the persons intended to be benefited.'" Francois, supra, 415 N.J.Super. at 349 (quoting Klumb v. Bd. of Educ. of the Manalapan-Englishtown Reg'l High Sch. Dist., 199 N.J. 14, 34 (2009)). Nevertheless, "'an employee has only such rights and benefits as are based upon and within the scope of the provisions of the statute.'" Ibid. (quoting Casale v. Pension Comm'n of the Emps.' Ret. Sys. of Newark, 78 N.J.Super. 38, 40 (Law Div. 1963)). Thus, courts must construe pension statutes "so as to preserve the fiscal integrity of the pension funds." DiMaria v. Bd. of Trs. of Pub. Emps.' Ret. Sys., 225 N.J.Super. 341, 354 (App. Div.), certif. denied, 113 N.J. 638 (1988). "Moreover, while a person 'eligible for benefits' is entitled to a liberal interpretation of the pension statute, 'eligibility [itself] is not to be liberally permitted.'" Francois, supra, 415 N.J.Super. at 350 (alteration in original) (quoting Krayniak v. Bd. of Trs., Pub. Emps.' Ret. Sys., 412 N.J.Super. 232, 242 (App. Div. 2010)).

B.

Our Supreme Court has established the standard for statutory interpretation:

The paramount goal of all statutory interpretation is to carry out the Legislature's intent. We begin by giving the words of the statute their ordinary meaning and significance. Words, phrases, and clauses cannot be viewed in isolation; all the parts of a statute must be read to give meaning to the whole of the statute. In this way, we must construe the statute sensibly and consistent with the objectives that the Legislature sought to achieve. If the statute's plain language reveals the Legislature's intent, our interpretative mission should come to an end. We resort to extrinsic evidence, such as legislative history, only if there is ambiguity in the statutory language that leads to more than one plausible interpretation, or if a plain reading of the statute leads to an absurd result or if the overall statutory scheme is at odds with the plain language.
Nicholas v. Mynster 213 N.J. 463

The SPRS Act is the starting point of our analysis.[4] N.J.S.A. 53:5A-6(a) and (b) provide, in pertinent part, as follows:

a. Service as a full-time commissioned officer, noncommissioned officer or trooper rendered as a member, and service credit which was transferred from the former "State Police Retirement and Benevolent Fund, " shall, if the required contributions are made by the State and the member, be considered as creditable service. In addition, service as a . . . Supervising Inspector, Principal Inspector, Senior Inspector, or Inspector Recruit in the Alcoholic Beverage Control Enforcement Bureau . . . and service credit transferred from the Police and Firemen's Retirement System or the Public Employees' Retirement System shall, if the required contributions are made by the State and the member, be considered as creditable service.
b. Any member of the retirement system, who, prior to becoming a member, had established service credits in another retirement system supported in whole or in part by the State, or who had rendered service to the State prior to becoming a member, or had purchased service credits while in the Police and Firemen's Retirement System or the Public Employees' Retirement System, while serving . . . as a Supervising Inspector, Principal Inspector, Senior Inspector, Inspector, or Inspector Recruit in the Alcoholic Beverage Control Enforcement Bureau . . . for which he desires to establish credit in this retirement system, shall be permitted to purchase such credit or to transfer such previously purchased credit. If such credit is established and except as provided in subsection f., it shall be included in the computation of a retirement allowance on the basis of 1% of final compensation for each year of such service credit.

[(Emphasis added).]

Reduced to its relevant and essential language, subsection (a) unambiguously says that creditable service for purposes of the SPRS includes (1) "[s]ervice as a full-time . . . trooper rendered as a member"; (2) "service as a . . . Supervising Inspector, Principal Inspector, Senior Inspector, or Inspector Recruit in the Alcoholic Beverage Control Enforcement Bureau"; and (3) "service credit transferred from the Police and Firemen's Retirement System or the Public Employees' Retirement System." N.J.S.A. 53:5A-6(a). Plainly, all of appellants' service to the State —— including their stints in PERS —— qualify as creditable service under this subsection. The Board does not disagree, but claims that such PERS creditable service is eroded by subsection (b).

We part company with the Board's legal conclusion that subsection (b) mathematically treats appellants' PERS-earned service credits as inferior in value, and disenfranchises them from a full reckoning in a special retirement calculus. We note, before analyzing subsection (b)'s complicated language, that nowhere in the legislation does there appear the concept —— as adopted by the Board from the ALJ's Initial Decision —— of a "mathematical quantity of credit" with a lesser value assigned to PERS service credits than to other service credits.

We apply the same type of scrutiny to subsection (b) as we have done for subsection (a). Thus, subsection (b) says that an SPRS member who, "prior to becoming a member, had established service credits in another retirement system supported in whole or in part by the State prior to becoming a member, " and who "desires to establish credit in [the SPRS] shall be permitted to purchase such credit." N.J.S.A. 53:5A-6(b). If so purchased, those service credits shall be accorded "1% of final compensation for each year of such service credit." Ibid. Thus, as the Board contends, our task is to determine whether appellants purchased —— voluntarily or involuntarily —— any credits in the SPRS. We conclude that they did neither. Accordingly, subsection (b) is inapposite.

The SPRS Act does not define what it means to purchase credit in the SPRS. The Board suggests that reference to the so-called Pension Transfer Act, N.J.S.A. 43:2-2, provides guidance as to the meaning of the undefined (and supposed term-of-art) "purchase." That statute provides as follows:

When a member of any . . . retirement system or pension fund of this state changes his office or employment or is transferred in such manner as to require his withdrawal from any such retirement system or pension fund, and the change or transfer is to an office or position which entitles him to become a member of another retirement system or pension fund, he shall notify the administrative head of the retirement system of which he is a member, prior to or at the time of his withdrawal therefrom, of his intention to enter the other retirement system or pension fund. Upon his entry into the other system or fund he shall be admitted with the credit for prior service to which he was entitled in the system or fund from which he shall have withdrawn and he shall be permitted to deposit in the second retirement system or pension fund the total amount of his contributions so withdrawn from the first retirement system, and the board or administrative head of the first retirement system may transfer to the second retirement system or fund the funds or credit to which the withdrawing member was entitled. He shall, thereupon, as a member of the second retirement system, be entitled to such credit in the way of pension and annuity as is provided by law in the second retirement system or fund, with the prior service credit to which he was originally entitled in the first retirement system.

We fail to see the relevance of this statute, which never mentions the word purchase anywhere, to the interpretive chore at hand. When appellants elected to join the State Police in 1997, N.J.S.A. 53:5A-5.2 addressed the fiscal remission of appellants' PFRS accounts. This later statute controlled what were plainly interfund transfers, [5] and not purchases of anything. Even if N.J.S.A. 43:2-2 has applicability to the present issue, its plain language does not address what it means to purchase service credits under P.L. 1997, c. 19.

We are unable to agree with the Board's acrobatic argument that equates appellants' transfers from the PFRS to the SPRS as a "purchase" of service credits. In the pension context, a purchase is a voluntary act by a public employee to acquire non-working benefits. In other public retirement systems, the Legislature used the word "purchase" in several provisions of the PERS and the PFRS.[6] "'Statutes upon cognate subjects may be considered in arriving at the legislative intention, though not strictly in pari materia.'" Patterson v. Bd. of Trs., 194 N.J. 29, 45 (2008) (quoting State v. Brown, 22 N.J. 405, 415 (1956)).

Although not directly applicable to the SPRS, the common theme of the cited PERS and PFRS statutes evinces the concept of the employee having to ante up his or her personal monies to augment the State's capital in the particular retirement fund.

The hallmark of such a purchase is two-fold. First, it is founded upon a volitional act of the employee, and second, it diminishes the tangible personal assets available to the employee. Nothing of that sort happened in this case. When appellants moved from the ABC to the State Police, their PFRS service credits followed them, whether they liked it or not. Also, upon the mandatory interfund transfers, there was no effect whatsoever on the personal resources available to the employee. All that occurred was an invisible paper (or digital) transfer, which touched appellants' wallets not at all.

In summary, we are unable to subscribe to the idiosyncratic and legally unsupportable concept that the 1997 interfund transfers experienced by appellants when they became state troopers, were "purchases" within the meaning of N.J.S.A. 53:5A-6(b). That being the case, we conclude that N.J.S.A. 53:5A-6(a) controls the calculation of appellants' creditable service in the SPRS, and all of appellants' PERS creditable service is to be included in the calculation of whether (and when) they qualify for a special retirement.

Reversed and remanded to the Board for further proceedings in accordance with this opinion. We do not retain jurisdiction.


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