November 27, 2013
CARMINE A. PECORELLI, Petitioner-Appellant,
BOARD OF TRUSTEES, PUBLIC EMPLOYEES' RETIREMENT SYSTEM, Respondent-Respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 19, 2013
On appeal from the Board of Trustees, Public Employees' Retirement System, Docket No. 02-10-120776.
Carmine A. Pecorelli, appellant, argued the cause pro se.
Diane J. Weeden, Deputy Attorney General, argued the cause for respondent (John J. Hoffman, Acting Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Ms. Weeden, on the brief).
Before Judges Reisner and Carroll.
Carmine A. Pecorelli, presently age eighty-eight, is the recipient of a Public Employees' Retirement System (PERS) pension. He appeals from a September 21, 2012 final agency decision of the PERS Board of Trustees (Board) that required him to reimburse the PERS for all of the retirement benefits he received from the PERS between November 1, 2003 and August 1, 2004, which totaled $28, 275.43. We affirm the Board's decision that when Pecorelli returned to public employment following his retirement, he was required to re-enroll in the PERS pension system. However, under the unique circumstances of this case, the Board erred in failing to apply equitable principles to reduce the amount of the penalty imposed. Accordingly, for the reasons that follow, we reverse that portion of the Board's decision, and remand for reinstatement of the $13, 821 penalty imposed by the Administrative Law Judge (ALJ).
We briefly summarize the procedural history and the factual findings made by the ALJ, recognizing that the Board adopted those factual findings, and Pecorelli takes no specific exception to them.
Pecorelli commenced employment with the New Jersey Department of Commerce in 1980, and became enrolled in the PERS. He continued to work for the Commerce Department for approximately twelve years prior to submitting his retirement application to the PERS. At its regular monthly meeting of July 8, 1993, PERS approved Pecorelli for a [military] Veteran Retirement, effective October 1, 1992. The Board's approval letter to Pecorelli advised him that "[i]f you return to public employment, you must notify this office immediately." Pecorelli testified that, to his knowledge, he never received that letter.
The New Jersey State Police, Office of Emergency Management (OEM), is charged with administering Federal Emergency Management Agency (FEMA) grants of financial assistance following the occurrence of natural disasters. A December 1992 coastal storm resulted in a disaster declaration. The OEM was not adequately staffed to deal with the magnitude of claims for disaster aid engendered by the storm, and sought out temporary employees to assist in processing those claims.
Joseph P. Painting, a Senior Planner with the State Police, testified at the hearing that Pecorelli was familiar with FEMA, and he was hired as a temporary employee to process federal grant monies for storm victims. This task was originally expected to take approximately six months. Pecorelli began his work at the OEM as a "grant management specialist" on August 10, 1993. As a temporary employee, he was paid on an hourly basis, and received no health benefits, vacation time, or days off. Seventy-five percent of the funding for these temporary workers was paid by FEMA, and the remaining twenty-five percent by New Jersey. Pecorelli advised Painting that he was collecting a pension, but Painting expressed his belief that this temporary employment would not jeopardize Pecorelli's pension status.
Due to their unanticipated quantity and complexity, claims related to the 1992 disaster were not fully closed out until 2001. The OEM continued to employ Pecorelli throughout this nine-year period, until June 30, 2001, as a temporary, hourly employee, without re-enrolling him in PERS. He subsequently resumed work in the same position from April 2003 until June 4, 2004, again without being re-enrolled in the PERS pension system.
In April 2007, the Division of Pensions and Benefits (Division) reviewed Pecorelli's post-retirement earnings with the OEM as part of its ongoing audit process. As a result, it determined that Pecorelli's OEM employment violated the re-enrollment provisions of the pension statute, N.J.S.A. 43:15A-57.2, because it was a PERS-covered position, and his wages exceeded the $15, 000 allowable annual post-retirement threshold. On June 22, 2007, some fourteen years after Pecorelli commenced his OEM employment, the Division first notified him of the violation. In that letter, the Division, utilizing a five-year "look-back" period, sought the return of all benefits that Pecorelli received from November 1, 2003, through August 1, 2004, totaling $28, 275.43.
Pecorelli challenged the Division's refund demand, and on May 26, 2009, the Board upheld the Division's determination. Pecorelli timely appealed, and on June 18, 2009, the Board forwarded the matter to the Office of Administrative Law (OAL), where it was filed for determination as a contested case.
At the OAL hearing, which took place on July 12, 2011, PERS relied upon the testimony of the supervisor of the Division's external audit unit, Michael R. Czyzyk. Czyzyk had reviewed the Division's audit, and authored the June 22, 2007 violation notice to Pecorelli. He testified that temporary positions, such as that held by Pecorelli at the OEM, are PERS-eligible. Information concerning post-employment restrictions is available to retirees, and can be found in the PERS handbook and in PERS "Fact Sheet #21, " which documents were introduced in evidence. The Division's review showed that Pecorelli's employment earnings exceeded the $15, 000 allowable annual threshold during several years. However, because the "look-back" period was limited to five years, the Board only sought reimbursement for the benefits paid to Pecorelli during 2003-04. Czyzyk conceded that, in the usual course, it would have been the responsibility of an appropriate State Police official to advise Pecorelli of his employment status, and the need to re-enroll in the PERS.
As noted, Painting testified on behalf of Pecorelli, as did Colonel Carl Williams of the State Police. Williams held the rank of Major, and was in charge of the OEM, when Pecorelli was hired in 1993. Like Painting, Williams was unaware that temporary positions such as Pecorelli's were PERS-eligible, although he was not in charge of personnel matters.
Pecorelli testified on his own behalf. Recounting his testimony, and that of his witnesses, the ALJ in a comprehensive nine-page written decision noted:
Representing himself at eighty-six years of age, Pecorelli testified that after his retirement he was hired as a temporary, part-time, hourly employee by OEM in 1993, for an initial six-month assignment. His job was to process applications for disaster relief programs which were funded by the Federal Emergency Management Agency (FEMA). He recalled that when he was first hired he was paid through the Manpower agency and then through an agency called OMNI. At some point he began receiving a check for his work from the State. He did not dispute his earnings or the dates of his employment but characterized his position as a temporary, hourly employee, with varying hours. As such he did not deem his employment as something which required his enrollment in PERS and he relied upon the State Police to advise him regarding his status. He was unaware that he held a PERS covered position until he received Pensions' notification letter and he described the hardship repayment of the funds would cause him.
Although he did not dispute his employment or earnings, Pecorelli testified credibly that he was unaware his earnings placed his retirement benefits in jeopardy. Similarly, his superiors at OEM testified credibly that they assumed his status as temporary, hourly employee without benefits would not trigger negative effects on his pension.
The ALJ issued her Initial Decision on July 5, 2012. She found that there was "no dispute that Pecorelli was a retired PERS-member who received more than $15, 000 in the two calendar years at issue from public employment." The ALJ then reviewed various provisions of the New Jersey Administrative Code, and determined that Pecorelli's "temporary" employment with the OEM became PERS eligible once it extended beyond twelve months, as provided by N.J.A.C. 17:2-2.4(d). Because Pecorelli's compensation exceeded the annual limit, the ALJ agreed with the Board's conclusion that he was required to re-enroll in the PERS, and that the Board acted within its statutory and legal authority in seeking reimbursement from him.
Despite that conclusion, the ALJ also found that it would be inequitable to compel Pecorelli to return the entire amount of the retirement benefits he received during the "look-back" period, "given petitioner's age and circumstances and his reliance upon his employers." In opting instead to order a modified remedy, the ALJ reasoned:
[Pecorelli] acted in good faith. Further, as a temporary hourly employee, his reliance upon his superiors in their assessment that his employment would not place his retirement benefits in jeopardy was understandable. While both he and the State Police were in error in that regard, under the facts of this case, it would be inequitable to require the forfeiture of his retirement benefits for the period at issue. A more appropriate sum would be the amount of his earnings over $15, 000.00 for the years covered by the assessment. That is the sum of $13, 821.00 which should be payable over an income appropriate repayment period.
After the PERS Board filed exceptions on August 24, 2012, the Board issued its final administrative decision on September 21, 2012. The Board adopted the ALJ's findings of fact, and her conclusion of law that Pecorelli was employed in a PERS-covered position and was required to re-enroll in the PERS because his annual earnings exceeded $15, 000. The Board also acknowledged that there was "support [in the record] for the ALJ's conclusion that Mr. Pecorelli relied on his employers who believed that his temporary, hourly position would not affect his retirement benefits." Additionally, citing an unpublished decision of this court, the Board conceded "that there is support . . . for the idea that a significant delay in notifying members of a violation warrants the application of equity." Nonetheless, the Board "reject[ed] the ALJ's conclusions of law that Mr. Pecorelli's age and unspecified circumstances warrant the application of equitable principles. As a consequence, the Board modified the penalty imposed by the ALJ to reaffirm the original assessment determined by the Division."
This appeal followed, in which Pecorelli argues that "[t]he position of the Board is unfair, unjust, and outside the principles of equity."
Our scope of review of an administrative agency's final determination is limited. In re Carter, 191 N.J. 474, 482 (2007). We accord a "strong presumption of reasonableness" to the agency's exercise of its statutorily delegated responsibilities. City of Newark v. Natural Res. Council, 82 N.J. 530, 539, cert. denied, 449 U.S. 983, 101 S.Ct. 400, 66 L.Ed.2d 245 (1980). The burden of showing the agency's action was arbitrary, unreasonable, or capricious rests upon the appellant. See Barone v. Dep't of Human Servs., Div. of Med. Assistance & Health Servs., 210 N.J.Super. 276, 285 (App. Div. 1986), aff'd, 107 N.J. 355 (1987).
The reviewing court "should not disturb an administrative agency's determinations or findings unless there is a clear showing that (1) the agency did not follow the law; (2) the decision was arbitrary, capricious, or unreasonable; or (3) the decision was not supported by substantial evidence." In re Application of Virtua-West Jersey Hosp. Voorhees for a Certificate of Need, 194 N.J. 413, 422 (2008); see also Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 9-10 (2009).
Nevertheless, an appellate court is "in no way bound by the agency's interpretation of a statute or its determination of a strictly legal issue." Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973). If our review of the record leads us to conclude that the agency's finding is clearly erroneous, the decision is not entitled to judicial deference and must be set aside. L.M. v. Div. of Med. Assistance & Health Servs., 140 N.J. 480, 490 (1995). We may not simply rubber-stamp an agency's decision. In re Taylor, 158 N.J. 644, 657 (1999).
We are mindful that 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). However, we are also mindful that "pension statutes 'should be liberally construed and administered in favor of the persons intended to be benefited.'" Francois v. Bd. of Trs., Pub. Emps.' Ret. Sys., 415 N.J.Super. 335, 349 (2010) (quoting Klumb v. Bd. of Educ. of the Manalapan-Englishtown Reg'l High Sch. Dist., 199 N.J. 14, 34 (2009)).
Applying these principles, we have no quarrel with the Board's conclusion that when he returned to employment with the OEM following his retirement, Pecorelli was required to re-enroll in the PERS system.
N.J.S.A. 43:15A-57.2 states:
a. Except as provided in subsections b., c., and d. of this section, if a former member of the State Employees' Retirement System or the retirement system, who has been granted a retirement allowance for any cause other than disability, becomes employed again in a position which makes him eligible to be a member of the retirement system, his retirement allowance and the right to any death benefit as a result of his former membership, shall be canceled until he again retires.
Such person shall be re-enrolled in the retirement system and shall contribute thereto at a rate based on his age at the time of re-enrollment. Such person shall be treated as an active member for determining disability or death benefits while in service and no benefits pursuant to an optional selection with respect to his former membership shall be paid if his death shall occur during the period of such re-enrollment.
b. The cancellation, re-enrollment, and additional retirement allowance provisions of subsection a. of this section shall not apply to a former member of the retirement system who, after having been granted a retirement allowance, becomes employed again by: (1) an employer or employers in a position or positions for which the aggregate compensation does not exceed $15, 000 per year[.]
It is undisputed that Pecorelli was a retired PERS member who received more than $15, 000 in the two calendar years at issue from his employment at the OEM. There is also no dispute that this employment, which was originally envisioned to last only some six months, subsequently morphed into an extended assignment, given the number and complexity of claims for disaster assistance stemming from the severe 1992 coastal storm. Thus, there is ample support in the record for the Board's determination that Pecorelli's continued OEM employment rendered him PERS-eligible, necessitating his re-enrollment in the pension program.
Where we part company with the Board is in its refusal to apply equitable principles to reduce the penalty imposed, despite acknowledging the existence of facts in the record which would support equitable relief. We agree with Pecorelli that the remedy imposed by the Board was excessive, given the circumstances of his case, and that equitable considerations require a diminution in the amount that he must refund.
Courts have not hesitated to grant appropriate relief in pension cases, where considerations of equity and fairness warrant. In Vliet v. Bd. of Trs., Pub. Employees' Ret. Sys., 156 N.J.Super. 83, 90 (App. Div. 1978), we applied equity where a retiree who innocently erred in receiving excess retirement benefits was faced with a substantial repayment obligation. In Vliet, a PERS retiree continued to work at what he believed and was told by his employer were "temporary" positions that were not PERS-eligible. We held that although the retiree was not a temporary employee within the meaning of the applicable law, and was consequently not entitled to the pension payments he had received during the three-year period, requiring the retiree to make a "total reimbursement would be inequitable" as it was "unlikely" that the retiree "would have continued in part-time employment at $2000 a year if he had known that he would have to give up a pension of approximately $5300 a year". Id. at 90. See also, Hemsey v. Bd. of Trustees of the Police and Firemen's Ret. Sys., 393 N.J.Super. 524, 536 (App. Div. 2007), rev'd in part, 198 N.J. 215 (2009) (applying equitable estoppel to reverse the Board's decision that required reimbursement of retired fire chief's benefits where he relied in good faith on mistaken advice from the Division of Pensions).
Unquestionably, Pecorelli's superiors at the OEM were aware of his pension status, and he relied on their belief that his temporary, hourly position would not affect his retirement benefits. While we acknowledge that we have previously cautioned that an employee may not rely on an employer's designation of a position for the purposes of PERS eligibility, Vliet, supra, 156 N.J.Super. at 85, 87-88, that is not the only equitable consideration weighing in Pecorelli's favor. Here, it is also undisputed that it was the responsibility of an appropriate State Police official to advise Pecorelli of his employment status, and the need to re-enroll in PERS, as conceded by Czyzyk. Further, Fact Sheet #21, a publication issued by the Division in effect at the time, advised retirees who chose to return to public employment that "[y]our prospective employer should be able to tell you whether the employment you are considering is covered under the PERS." Clearly, that did not occur.
These errors are further compounded by the Board's failure to timely notify Pecorelli of the violation. See, e.g., Ruvoldt v. Nolan, 63 N.J. 171, 183 (1973) (concluding that principles of equity and fairness rendered it "clearly unjust" to apply "a substantive rule of disentitlement of pension against Ruvoldt" eight years after the fact). In dealing with the public, government must "turn square corners." F.M.C. Stores Co. v. Borough of Morris Plains., 100 N.J. 418, 426 (1985) (permitting the plaintiff-taxpayer to file its Tax Court claim after the statutory deadline). One of the hallmarks of our State's public policy jurisprudence is its insistence that units of government observe certain standards and norms that are beyond reproach. See CBS Outdoor, Inc. v. Borough of Lebanon Planning Bd./Bd. of Adjustment, 414 N.J.Super. 563, 585 (App. Div. 2010) (citing F.M.C., supra, 100 N.J. at 426 (prohibiting a municipality from taking litigational advantage of another party under the "turn square corners" doctrine); New Concepts for Living, Inc. v. City of Hackensack, 376 N.J.Super. 394, 401 (App. Div. 2005) (relying on this doctrine to permit plaintiff to appeal loss of its tax-exempt status, even if the statute of limitations period had expired).
Here, the Board's fourteen-year delay in notifying Pecorelli of the violation exceeded the standards we expect of a public agency. We glean from Pecorelli's remarks at oral argument that, had he timely been notified that his OEM employment was PERS-eligible, he would have likely re-enrolled, in an effort to enhance his retirement benefits. Pecorelli indisputably acted in good faith, and clearly was not out to manipulate the pension system. See Hemsey, supra, 393 N.J.Super. at 542. The unwitting violation of the pension statute by this now eighty-eight-year-old retiree should not result in the forfeiture of all pension benefits he received during the "look-back" period. The ALJ acted appropriately in crafting an equitable remedy which mitigated the economic hardship to Pecorelli by ordering him to repay a reduced sum equal to the amount by which his earnings exceeded the $15, 000 annual threshold.
Affirmed in part. Reversed and remanded for reinstatement of the $13, 821 penalty imposed by the ALJ.