VERONICA VARGAS v. BOARD OF TRUSTEES, ETC. (PUBLIC EMPLOYEES' RETIREMENT SYSTEM) ( 2022 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2398-20
VERONICA VARGAS,
Petitioner-Appellant,
v.
BOARD OF TRUSTEES,
PUBLIC EMPLOYEES'
RETIREMENT SYSTEM,
Respondent-Respondent.
_________________________
Argued September 12, 2022 – Decided September 21, 2022
Before Judges Mawla and Marczyk.
On appeal from the Board of Trustees of the Public
Employees' Retirement System, Department of the
Treasury, PERS No. xx7232.
Justin P. Kolbenschlag argued the cause for appellant
(Pashman Stein Walder Hayden, PC, attorneys; Justin
P. Kolbenschlag, of counsel and on the briefs; Joshua
P. Law, on the briefs).
Robert E. Kelly, Deputy Attorney General, argued the
cause for respondent (Matthew J. Platkin, Acting
Attorney General, attorney; Donna Arons, Assistant
Attorney General, of counsel; Robert E. Kelly, on the
brief).
PER CURIAM
Petitioner Veronica Vargas appeals from a March 18, 2021 final decision
of the Board of Trustees (Board) of the Public Employees' Retirement System
(PERS), which denied her request to reopen her retirement application to remove
her ex-husband as her pension survivor beneficiary. We affirm.
I.
We derive the following from the summary judgment record. Petitioner
worked for the State of New Jersey for over thirty-three years. She married Rick
Vargas (Rick)1 on September 10, 2011. Petitioner did not have any children
with Rick, but she had one adult daughter from a prior relationship. On October
24, 2014, petitioner filed for her PERS service retirement, which would become
effective on February 1, 2015. Petitioner claims she was initially inclined to
select her daughter as her survivor beneficiary, but claims a human resource
director told her it was in her best interest to select her spouse. Petitioner asserts
she was not aware at the time she selected Rick as the beneficiary that the
selection was irreversible. The Board approved petitioner's retirement
1
We use Rick's first name because he shares a surname with petitioner. We
intend no disrespect.
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application at its meeting on February 18, 2015, and named Rick as her survivor
beneficiary.2
Petitioner filed for divorce on May 22, 2018. During the divorce
proceedings, the parties attended mediation, where Rick agreed to waive any
right to petitioner's pension and survivor benefits in exchange for her reciprocal
waiver of any right to his 401K account. The parties ultimately settled the case
2
"At the time of retirement, a member shall receive benefits in a retirement
allowance payable throughout life, or the member may, on retirement, elect to
receive the actuarial equivalent of the member's retirement allowance, in a lesser
retirement allowance payable throughout life[.]" N.J.S.A. 43:15A-50. A PERS
member may choose one of nine options to receive retirement benefits. N.J.S.A.
43:15A-50; N.J.A.C. 17:2-6.1(d). The two retirement benefit options pertinent
in this matter are:
1. Maximum Option [which] provides the largest
allowance for the member but does not include a
pension benefit paid to a beneficiary upon the member's
death.
....
9. Option D [which] provides, upon the member's
death, a lifetime monthly retirement allowance equal to
[twenty-five] percent of the member's monthly
retirement allowance to a beneficiary. If the member's
beneficiary predeceases the member, the member's
retirement allowance shall increase to the Maximum
Option.
[N.J.A.C. 17:2-6.1(d)(1), (9).]
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on December 17, 2018, and entered into a marital settlement agreement (MSA),
which memorialized Rick's waiver of any right to petitioner's PERS pension
benefits. The final judgment of divorce was entered on December 24, 2018,
which incorporated the MSA.
Petitioner originally filed an application with the Division of Pensions in
May 2019 to change her pension survivor designation, and to implement the
terms of the MSA and judgment of divorce. The Division of Pensions denied
that application, and petitioner then appealed to the Board. On appeal to the
Board, she again referenced the MSA, but also indicated Rick was abusive
during the course of the marriage and had addiction issues. Petitioner further
indicated she had been diagnosed with Stage 4 lung cancer. Accordingly, she
submitted it would not be fair for Rick to be a beneficiary of her pension. On
September 3, 2019, the Board denied petitioner's application as untimely
pursuant to N.J.A.C. 17:2-6.3, and because the MSA did not clearly reflect any
agreement with respect to Rick's waiver of the survivor benefit.
Petitioner resubmitted her application on October 22, 2019, along with an
October 11, 2019 consent order, which specifically indicated that Rick waived
and relinquished all rights to petitioner's pension survivor benefits. On July 21,
2020, the Board again denied petitioner's application, finding it was time-barred
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pursuant to N.J.A.C. 17:2-6.3. Petitioner retained counsel and filed a motion
for reconsideration, arguing the Board was obligated to exercise its equitable
authority in light of the competent evidence and that petitioner demonstrated
good cause to depart from strict adherence to the time limitations set forth in
N.J.A.C. 17:2-6.3.
On March 18, 2021, the Board denied the motion for reconsideration. In
addition to noting petitioner's application was untimely pursuant to N.J.A.C.
17:2-6.3, the Board determined a private agreement between two parties cannot
waive the rules and regulations governing PERS. The Board further "declined
to exercise its equitable authority under the facts of this case" because petitioner
selected her beneficiary while she was still married and was notified several
times of the limited time period in which she could amend her application.
Moreover, she had collected her pension benefit for over four years before
attempting to make this change.
Thereafter, petitioner filed this appeal.
II.
Petitioner argues the following before us:
POINT I
THE PERS BOARD'S FINAL ADMINISTRATIVE
DECISION WAS ARBITRARY, CAPRICIOUS, AND
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UNREASONABLE BECAUSE THE BOARD FAILED
TO CONSIDER THE INDIVIDUAL EQUITIES OF
APPELLANT'S APPLICATION TO DETERMINE
WHETHER THERE EXISTED GOOD CAUSE TO
REOPEN APPELLANT'S RETIREMENT
APPLICATION AND PERMIT A CHANGE TO HER
BENEFICIARY DESIGNATION.
POINT II
THE PERS BOARD'S FINAL ADMINISTRATIVE
DECISION MUST BE REVERSED AS A MATTER
OF LAW, AS PETITIONER ACTUALLY
ESTABLISHED GOOD CAUSE TO REOPEN HER
RETIREMENT APPLICATION AND SHOWED
THAT PERMITTING THE REQUESTED CHANGE
WOULD ONLY SERVE THE ESSENTIAL ENDS OF
JUSTICE AND PUBLIC POLICY.
A. Reversing the Board's Final
Determination Would Serve the Policy of
the Law.
B. Reversing the Board's Final
Determination Would Serve the Ends of
Essential Justice.
Petitioner primarily relies on In re Van Orden for the proposition that the
Board has the inherent power upon a showing of good cause to reopen its
proceedings to approve a change in beneficiary designation when necessary to
serve the ends of essential justice and the policy of the law. 383 N.J. Super.
410, 419 (App. Div. 2006). She also relies on Minsavage ex rel. Minsavage v.
Board of Trustees, Teachers' Pension Authority and Annuity Fund, 240 N.J. 103,
A-2398-20
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109 (2019), and Steinmann v. State, Department of Treasury, Division of
Pensions, Teachers' Pension & Annuity Fund, 116 N.J. 564 (1989), in support
of her arguments. In short, petitioner contends the Board was required to
consider the individual equities of petitioner's application and depart from the
blind application of its regulations, given the good cause the petitioner
demonstrated. Petitioner further indicates it would be unjust to allow Rick to
retain a portion of her pension benefits after his clear waiver.
The Board counters that it properly denied petitioner's request to change
her freely chosen, irrevocable retirement option given she filed her application
more than four years after her retirement became due and payable. The Board
notes the Division of Pensions and Benefits provided petitioner with a quotation
letter on February 12, 2015, which set forth the amounts that would be payable
to petitioner and her beneficiary under all the available options. Moreover, the
Division advised petitioner, "[o]nce you retire, you cannot change your payment
method option." The quotation further states, "[i]f you choose payment method
options A, B, C, D, 2, 3, or 4, under no circumstances can you change your
beneficiary selection once you retire, even if your beneficiary dies before you."
Moreover, when the Board approved petitioner's retirement on February 18, it
advised her she would have thirty days after the effective date of her retirement
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or the date of the Board's approval, whichever is later, to "make any changes to
[her] retirement." The thirty-day time period expired on March 20, 2015.
The Board argues that while it has the inherent authority to reopen
administrative matters upon a showing of good cause, reasonable grounds, and
reasonable diligence pursuant to Minsavage, 240 N.J. at 108-09, it determined
here petitioner had made no such showing and declined to reopen her
application. The Board submits that notwithstanding the serious allegations
against Rick, the Board is in no position to accept or reject those claims or
change a beneficiary on this basis. Moreover, the parties' agreement in the MSA
does not transform an irrevocable designation into a revocable one. Stated
differently, petitioner's divorce—four years after she made her pension
selection—does not abrogate the statutory and regulatory irrevocability of her
initial designation.
III.
Our role in reviewing the decision of an administrative agency is limited. In
re Stallworth, 208 N.J. 182, 194 (2011) (citing Henry v. Rahway State Prison, 81
N.J. 571, 579 (1980)). We accord a strong presumption of reasonableness to an
agency's exercise of its statutorily delegated responsibility, City of Newark v.
National Resource Council in Department of Environmental Protection, 82 N.J. 530,
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539 (1980), and defer to its fact-finding. Utley v. Bd. of Rev., Dep't of Lab., 194
N.J. 534, 551 (2008). We will not upset the determination of an administrative
agency absent a showing that it was arbitrary, capricious, or unreasonable; that it
lacked fair support in the evidence; or that it violated legislative policies. Lavezzi
v. State, 219 N.J. 163, 171 (2014); Campbell v. Dep't of Civ. Serv., 39 N.J. 556, 562
(1963).
On questions of law, our review is de novo. In re N.J. Dep't of Env't Prot.
Conditional Highlands Applicability Determination, Program Int. No. 435434,
433 N.J. Super. 223, 235 (App. Div. 2013) (citing Russo v. Bd. of Trs., Police &
Firemen's Ret. Sys., 206 N.J. 14, 27 (2011)). We are "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. in Div. of Consumer Affairs of Dep't of
Law & Pub. Safety, 64 N.J. 85, 93 (1973).
A.
The cases relied upon by petitioner are distinguishable from the facts in
this matter. In Van Orden, the plaintiff filed his application for retirement on
April 10, 2003, seeking a retirement allowance based on an anticipated
retirement from service as of July 1, 2003. 383 N.J. Super. at 413. Significantly,
however, at the time he applied for retirement, he was engaged in matrimonial
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litigation. Ibid. In his initial application, he selected a payment option that
would provide him with the maximum benefits during his life, but no payments
to his wife in the event of his death. Id. at 413-14. The plaintiff's wife filed a
motion in the Family Part arguing the plaintiff improperly changed his pension
designation, and the Family Part judge agreed. Ibid. The court ordered the
plaintiff to file an amended application and to name his wife as a beneficiary.
Id. at 415. The plaintiff complied with the court order and filed the amended
application on August 1, 2003—within thirty days of PERS approving his initial
application. Ibid.The final judgment of divorce was entered on February 3, 2004, wherein
the plaintiff's wife relinquished all interest in the plaintiff's pension. Ibid. The
plaintiff sought to revive his original pension benefit selection on February 10,
2004, which would have provided him with the maximum benefit along with no
death benefit being provided to his beneficiary. Ibid. The Board denied the
plaintiff's application because he did not request the change within the requisite
time period pursuant to N.J.A.C. 17:2-6.3. Id. at 416. We reversed and noted
the Board was mistaken when it concluded it was powerless to consider
appellant's unique circumstances to determine whether there was good cause to
reopen or modify the plaintiff's pension option. Id. at 418. Moreover, because
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the Board did not consider the equities presented by appellant's unique
circumstances, we determined the Board erred as a matter of law. Id. at 419.
We noted the petitioner in Van Orden presented a compelling argument
for reopening the proceedings because he was ordered by a judge to change his
pension selection during the course of the divorce proceeding. Id. at 421.
"[Petitioner] dutifully followed the court's command and made the change,
protecting his wife's potential interest." Ibid. When the plaintiff's wife later
relinquished her interest, the plaintiff was unable to undo the "court -mandated
selection" to reinstate his original pension choice.
The facts before us here are far afield from Van Orden. PERS provided
petitioner documents that informed her the selection of the pension option was
permanent. Moreover, while petitioner's health status and divorce subsequent
to her pension selection are unfortunate, they are not the type of compelling or
unique circumstances that we contemplated in Van Orden. The petitioner in Van
Orden was forced by the court to change his pension selection from his original
choice. Petitioner here was not compelled in any manner to change her pension
selection, and when she did attempt to do so, it was four years after she received
her pension. Accordingly, we find no merit in petitioner's reliance on that case.
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Similarly, petitioner's reliance on Steinmann and Minsavage is unavailing.
Steinmann involved a teacher who applied for retirement benefits after twenty-
five years of service. 116 N.J. at 566. She fell while teaching a class and
suffered injuries, which prompted her to apply for retirement. Ibid.Accordingly, Steinmann was eligible for early or deferred retirement based on
her twenty-five years of service. Id. at 568. In addition, she could have applied
for accidental-disability benefits, and if rejected, she could have qualified for
ordinary-disability benefits. Ibid. Her options were further complicated by the
fact that a workers' compensation award reduced accidental- and ordinary-
disability benefits and, therefore, the calculation had to await an adjudication of
the workers' compensation claim. Ibid. Importantly, the Court determined the
Board did not inform Steinmann that ordinary-disability benefits would be
subject to an offset by a workers' compensation award or that she could convert
to early retirement and thereby avoid any offset. Id. at 570. The Court therefore
reversed the Board's decision denying Steinmann's conversion request. Id. at
578. The Court determined Steinmann could not have made an informed choice
about her retirement until she knew the amount of her workers' compensation
award. Id. at 575. Specifically, the Court noted, "it was the Board's regulation,
combined with its failure to provide . . . Steinmann with information material to
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her decision, that prevented the petitioner from selecting her retirement option
with adequate knowledge of the relevant facts." Id. at 576.
The facts in Steinmann are distinguishable from petitioner's case. The
plaintiff in Steinmann had a pending workers' compensation claim at the time
she applied for her pension and the Board did not tell her this impacted her
selection. Here, petitioner did not receive inaccurate information from the
Board and only sought to change her pension options because of life
circumstances occurring long after her pension selection.
In Minsavage, the Supreme Court addressed whether a widow could
modify the retirement application of her recently deceased husband, even though
his application was never approved because he selected a retirement option for
which he was ultimately ineligible. 240 N.J. at 105. David Minsavage died of
cancer after he accumulated twenty-four years and nine months of teaching
service—just short of the twenty-five years required for an early retirement.
Ibid. Because he did not qualify for his retirement selection, the Board
determined his wife was only entitled to reimbursement of his pension
contributions and a group life insurance benefit. Id. at 106. The Court noted
while the husband did not live long enough to qualify for early retirement, his
family would have been entitled to greater benefits had he selected and qualified
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for ordinary disability on his retirement application. Ibid. The Court indicated
the Board acted unreasonably by denying the wife's request to modify the
retirement and that she should have been given an opportunity to at least present
evidence to prove she exercised reasonable diligence to modify her husband's
pension selection. Id. at 110. The Court concluded that such proof must include
evidence that her husband qualified for ordinary disability retirement, and that,
but for his incapacity, he would have changed his retirement selection to
ordinary disability. Ibid.
Minsavage turned on the potential incapacity of the husband and its
impact on his ability to correct his pension retirement selection. That is very
different from petitioner's claims in this case, where there is no suggestion she
chose the incorrect pension option at the time she applied. Rather, she is seeking
to change her pension options because of her post-retirement divorce and
unfortunate illness, both of which occurred long after she selected her pension.
B.
Generally, a "member shall have the right to withdraw, cancel, or change
an application for retirement at any time before the member's retirement
allowance becomes due and payable . . . by sending a written request signed by
the member." N.J.A.C. 17:2-6.3(a). "A member's retirement allowance shall
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not become due and payable until 30 days after the date the Board approved the
application for retirement . . . ." N.J.A.C. 17:2-6.2. As noted above, however,
our courts have recognized the Board may honor a petitioner's request to reopen
a retirement selection upon a showing of "good cause, reasonable grounds, and
reasonable diligence[.]" Steinmann, 116 N.J. at. 573.
The Board's power to reopen proceedings is not at issue in this case.
Rather, it is whether petitioner's circumstances were sufficient to establish good
cause to reopen the pension selection. In our view, petitioner has not established
good cause. The cases discussed above in which our courts have directed the
Board to allow a petitioner to change their pension option involve unusual
circumstances involving the initial pension selection, and petitioner's claims do
not implicate the same principles articulated in those cases so as to establish
good cause. The "unique and individual circumstances" contemplated by these
cases that required the Board to reopen a pension option selection involved
issues surrounding the pension selection process itself. However, they did not
include personal circumstances or hardships, no matter how unfortunate, that
occur years after the pension selection and that have nothing to do with the
original selection of the pension option. That is, the distinguishing factor in
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these cases is that they all involved issues encountered by the petitioners at or
around the time of their initial pension selection, unlike petitioner here.
We noted in Van Orden the circumstances there were "unique and,
therefore, unlikely to frequently reoccur." 383 N.J. Super. at 422 n.7.
Petitioner's divorce and illness after several years of collecting her pension is
not a unique situation that is unlikely to reoccur.3 We are mindful of the Board's
"need to preserve the actuarial integrity of the pension system and that such need
underlies the prohibition against changing payment options after [a pension]
becomes due and payable." Ibid. The Board's decision here was consistent with
that goal and was not arbitrary, capricious, or unreasonable under the
circumstances.
Affirmed.
3
We hasten to add that our decision should not be interpreted as barring
petitioner from seeking relief in the Family Part consistent with Rick's waiver
of petitioner's survivor benefit, including establishing a constructive trust to
benefit petitioner's daughter should petitioner predecease Rick.
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