E. Yale (Account of F. Yale) v. SERS

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Eleanor Yale (Account of Frank Yale), :
Petitioner :
: No. 178 C.D. 2016
v. :
: Submitted: June 17, 2016
State Employees’ Retirement System :
(SERS), :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE DAN PELLEGRINI, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE McCULLOUGH FILED: January 18, 2017
Eleanor Yale (Petitioner) petitions for review of the January 15, 2016
order of the State Employees’ Retirement Board (Board) adopting the opinion and
recommendation of the hearing examiner to deny Petitioner’s request to be paid
additional benefits as the surviving spouse of Frank Yale (Decedent).
The underlying facts of this case are not in dispute and were stipulated to
by the parties before the Board. Petitioner and Decedent were married on August 19,
1961. Decedent was employed by the Pennsylvania State Police, from which he
retired on January 5, 1991, with 32.7840 years of service credit. Prior to his
retirement, Decedent elected to receive his monthly annuity payment under Option 1
of the State Employees’ Retirement Code (Retirement Code), 71 Pa.C.S. §§5101-
5956. The terms of Option 1 are as follows:
Option 1. — A life annuity to the member with a
guaranteed total payment equal to the present value of the
maximum single life annuity on the effective date of
retirement with the provision that, if, at his death, he has
received less than such present value, the unpaid balance
shall be payable to his beneficiary.
71 Pa.C.S. §5705(a)(1). At the time of his retirement, Decedent voluntarily
designated Petitioner as his beneficiary to receive any amount payable under Option
1 at the time of his death. In fact, Decedent voluntarily retained Petitioner as his
designated beneficiary throughout his retirement. The State Employees’ Retirement
System (SERS) disbursed annuity payments to Decedent from the date of his
retirement to the date of his death, June 4, 2013, with the monthly annuity payments
to Decedent totaling $372,625.48 more than the initial present value of Decedent’s
retirement account. Thus, Decedent’s retirement account was exhausted by the time
he died and no death benefit was payable to Petitioner. (Reproduced Record (R.R.) at
61-63.)
Additionally, the parties stipulated that the Retirement Code does not
provide for automatic survivor payments to a deceased member’s spouse and that a
member’s rights under the Retirement Code are personal to the member and, in the
absence of a court order to the contrary, a member’s spouse has no legal interest in
the member’s retirement benefit. (R.R. at 62, 64.) The parties also stipulated that
SERS is a governmental retirement plan for government employees and, therefore,
“ERISA and the Retirement Equity Act of 1984 do not apply to SERS.” 1 (R.R. at
64.) Further, the parties stipulated that a member of SERS may select any retirement
1
ERISA refers to the Employee Retirement Income Security Act of 1974, 29 U.S.C.
§§1001-1461. The Retirement Equity Act of 1984 is codified at 29 U.S.C. §1056(d).
2
benefit option for which they are eligible at the time of retirement without any sign-
off by the member’s spouse or any other party. (R.R. at 62.)
Following notification of Decedent’s death, SERS informed Petitioner
that she would receive a check in the amount of $506.13, representing a prorated
portion of Decedent’s annuity payment for the month of his death, as final settlement
of Decedent’s retirement account. By letter dated October 23, 2013, Petitioner,
through counsel, demanded that SERS recalculate the amount payable to her. SERS,
however, rejected this demand and Petitioner appealed to SERS’s Appeals
Committee. On February 14, 2014, SERS’s Appeals Committee denied Petitioner’s
appeal. Petitioner then appealed to the Board, raising issues that the failure to obtain
a signoff constituted sexual discrimination and was violative of the provisions of
ERISA. Petitioner also alleged that she maintained an equitable lien against
Decedent’s pension pursuant to the Divorce Code, 23 Pa.C.S. §§3101-3904. (R.R. at
86-94.)
The Board appointed a hearing officer to preside over the matter, who
conducted a hearing on June 30, 2015. SERS presented the testimony of Dana
Shettel, an administrative officer for the Board. Shettel prepared a chronology of
events relating to Petitioner’s claim, consistent with the parties’ stipulation, and
recited the same before the hearing officer. SERS next presented the testimony of
David Tarsi, Director of the Board’s Bureau of Member Services. Tarsi identified a
copy of Decedent’s original application for retirement allowance, executed on
December 12, 1990, wherein Decedent chose Option 1. Tarsi compared Option 1 to a
checking account, with an established value that is reduced each time a check is sent,
but the difference being that the checks will continue even after the balance reaches
zero until a member’s death. Once the balance is exhausted, Tarsi explained that no
3
death benefit will be paid. Tarsi also identified a nomination of beneficiary form
executed by Decedent that same day naming Petitioner as his beneficiary. Tarsi
noted that a 2006 Personal Statement of Retirement Benefits advised Decedent that
his initial present value had been exhausted but that he would continue to receive
annuity payments for his lifetime consistent with his choice of an Option 1
retirement. Tarsi stated that these statements are provided annually and each one
after 2006 reflected this same information. (R.R. at 102-124.)
On cross-examination, Tarsi conceded that Petitioner did not sign off
with respect to Decedent’s selection of an Option 1 retirement. However, Tarsi
explained that Decedent could have chosen Option 2 or Option 3, through which the
member would receive a reduced annuity and, upon the member’s death, his named
survivor would receive either that same amount, or half of that amount, respectively,
for the remainder of his/her life. On re-direct examination, Tarsi noted that, at the
time of his retirement, Decedent elected to withdraw all of his contributions and
interest and that he received the same in a single, lump-sum payment. Tarsi stated
that after a member receives his contributions and interest, the remaining monies
represent the Commonwealth’s share of the pension. In re-cross examination, Tarsi
testified that, by statute, the Commonwealth’s share must be paid out monthly over
the member’s lifetime. Finally, Tarsi reiterated that Petitioner had no interaction with
Decedent’s choice of options. (R.R. at 125-133.)
Finally, SERS presented the testimony of Debra Murphy, Director of
SERS’s Benefit Determination Division. Murphy identified a copy of a letter from
SERS to Decedent dated February 12, 1991, explaining Decedent’s choice of an
Option 1 retirement, establishing a present value to his retirement account of
$579,065.66, and providing that if he should die before this amount is exhausted, any
4
balance would be paid to his beneficiaries. Murphy also identified SERS’s final
settlement letter, addressed to Petitioner because she was Decedent’s named
beneficiary. Additionally, Murphy identified an audit review of Decedent’s account
describing the present value of his account established at the time of his retirement
and the amounts paid to him over the years, which revealed that he received
$372,625.48 in excess of that present value. (R.R. at 135-142.)
On cross-examination, Murphy acknowledged that Decedent withdrew
all of his contributions at the time of his retirement without any signoff from
Petitioner. Further, Murphy conceded that the remaining funds, representing the
Commonwealth’s contributions, were paid to Decedent monthly without any signoff
from Petitioner. Finally, when asked where these rules originate, Murphy responded
the Retirement Code. (R.R. at 143-144.)
By opinion dated September 18, 2015, the hearing officer
recommended that Petitioner’s appeal be denied. (R.R. at 6-22.) The hearing officer
concluded that Petitioner failed to sustain her burden of proving that she is entitled to
retirement benefits from Decedent’s SERS account under the Retirement Code.
(R.R. at 14.) The hearing officer described Decedent’s choice of an Option 1
retirement as final and binding, consistent with section 5907(j) of the Retirement
Code, 71 Pa.C.S. §5907(j) (prohibiting an annuitant from changing a benefit plan),
and section 249.7(d) of the Board’s regulations, 4 Pa. Code §249.7(d) (describing
election of option as an “irrevocable choice”). Id. The hearing officer noted that the
Retirement Code contains no provision requiring a member’s spouse to consent to the
member’s election of a benefit option. Id.
Additionally, the hearing officer noted that Petitioner does not maintain
an equitable lien on Decedent’s retirement benefits and is not entitled to retirement
5
benefits under ERISA. Id. The hearing officer also concluded that the “[r]ights
provided to SERS members under the Retirement Code are so personal that no person
may exercise those rights on the member’s behalf,” citing Teti v. State Employees’
Retirement Board, 981 A.2d 399, 404 (Pa. Cmwlth. 2009), and that the Retirement
Code does not provide for automatic survivor payments to a deceased member’s
spouse. (R.R. at 14.) Further, the hearing officer concluded that Petitioner was not
entitled to benefits as a result of Decedent’s election of an Option 1 retirement and
the exhaustion of the present value of his retirement account. (R.R. at 14-15.)
In his discussion, the hearing officer specifically rejected Petitioner’s
claims of sexual discrimination and entitlement to benefits under ERISA or the
Divorce Code. (R.R. at 15, 18-21.) Regarding Petitioner’s claim of sexual
discrimination, the hearing officer relied on his conclusions set forth above and
noted, citing Weaver v. Harpster, 975 A.2d 555, 572 (Pa. 2009), that our Supreme
Court has refused to invoke the Equal Rights Amendment to invalidate a statute, such
as the Retirement Code in the present case, that makes no distinctions based on
gender. (R.R. at 18.) Regarding ERISA, the hearing officer noted that by its very
terms, ERISA does not apply to a governmental employee benefit plan, 29 U.S.C.
§1003(b)(1). (R.R. at 19.) Regarding the Divorce Code, the hearing officer noted
that we rejected an identical argument in Teti on the basis that, like the Petitioner and
Decedent here, the claimant and her late husband were still married at the time of his
death. (R.R. at 20.)
Petitioner thereafter filed exceptions to the hearing officer’s opinion
and recommendation, alleging, inter alia, that Decedent’s election of an Option 1
retirement was not final and binding, that Decedent’s pension was marital property
under the Divorce Code, and that SERS was required to obtain consent or a written
6
signoff as is the standard under ERISA. (R.R. at 194-95.) SERS also filed a
technical exception seeking to strike the hearing officer’s partial quotation of section
5705(a) of the Retirement Code, 71 Pa.C.S. §5705(a), in Finding of Fact No. 9, as the
quoted language relates to a “special vestee” and does not apply to Decedent. (R.R.
at 191-192.) By opinion and order dated January 15, 2016, the Board granted
SERS’s technical exception, denied Petitioner’s exceptions, and adopted the opinion
and recommendation of the hearing officer to deny Petitioner’s request to be paid
additional benefits as the surviving spouse of Decedent. (R.R. at 200-04.) Petitioner
subsequently filed a petition for review with this Court. (R.R. at 207-08.)
On appeal,2 Petitioner argues that the Board erred in denying her
request to be paid additional benefits as the surviving spouse of Decedent, reiterating
her contentions that the present statutory system, i.e., not requiring a signoff,
constitutes sexual discrimination prohibited by the United States and Pennsylvania
Constitutions, and was violative of the provisions of ERISA and the Divorce Code.
We disagree.
As aptly found by the hearing officer, at the time of his retirement,
Decedent chose to withdraw his member contributions and interest and receive the
same in the form of a single, lump-sum payment. Decedent also elected to receive
his monthly annuity payments under Option 1 of the Retirement Code, 71 Pa.C.S.
§5705(a)(1). As noted above, under this option, a death benefit is only payable to a
2
Our review of a state agency determination is limited to determining whether the necessary
findings of fact were supported by the record, whether constitutional rights were violated, or
whether errors of law were made. Welsh v. State Employees’ Retirement Board, 808 A.2d 261, 264
n.5 (Pa. Cmwlth. 2002). Moreover, an administrative agency’s interpretation of the statute it is
charged with enforcing is entitled to great deference and, unless plainly erroneous, will be affirmed
on appeal. Rinaldi v. Board of Vehicle Manufacturers, Dealers & Salespersons, 843 A.2d 418, 420
n.4 (Pa. Cmwlth. 2004).
7
beneficiary if the member had received less than the present value of his retirement
account. However, when Decedent passed on June 4, 2013, it is undisputed that he
had exhausted his account and had actually received $372,625.48 more than the
present value established at the time of his retirement. Hence, while Decedent named
Petitioner his beneficiary, there were simply no monies remaining in Decedent’s
account to pay Petitioner a death benefit.
Also, there is no question that SERS benefits are personal to the
member, that members enjoy only those rights created by the Retirement Code and
no person can exercise those rights on the member’s behalf, and that a member may
choose any benefit option available at the time of retirement. Teti, 981 A.2d at 404;
see also Cosgrove v. State Employees’ Retirement Board, 665 A.2d 870, 874 (Pa.
Cmwlth. 1995). Additionally, section 5907(j) of the Retirement Code and section
249.7(d) of the Board’s regulations effectively prohibit a member from changing a
benefit plan, except in limited circumstances not applicable here. Indeed, section
5907(j) provides that:
A member who is eligible and elects to receive a reduced
annuity under Option 1, 2, 3, or 4, shall nominate a
beneficiary or a survivor annuitant, as the case may be, by
written designation filed with the board at the time of his
retirement. A member who has elected Option 1 may
change his designated beneficiary at any time. A member
having designated a survivor annuitant at the time of
retirement shall not be permitted to nominate a new
survivor annuitant unless such survivor annuitant
predeceases him or unless the member is awarded a divorce
or becomes married subsequent to the election of the
option. In such cases, the annuitant shall have the right to
reelect an option and to nominate a beneficiary or a new
survivor annuitant and to have his annuity recomputed to be
actuarially equivalent as of the date of recomputation to the
annuity in effect immediately prior to the recomputation. In
8
no other case shall a benefit plan be changed by an
annuitant.
71 Pa.C.S. §5907(j) (emphasis added). Similarly, section 249.7(d) of the Board’s
regulations provides, in pertinent part, that:
A member who terminates State service, who is eligible to
elect to withdraw his total accumulated deductions, or vest
his retirement rights, or receive an immediate annuity, shall,
by exercising the election, be deemed to have made an
irrevocable choice which may not be changed unless the
change was made prior to the effective date of termination
of service. . .An election to receive any of the three benefits
made after the effective date of termination of service shall
be deemed to be irrevocable and no change may be
permitted, except to elect early retirement from vesting.
4 Pa. Code §249.7(d) (emphasis added).
Further, while a member may name anyone as a beneficiary or survivor
annuitant and may change beneficiaries at any time and as often as he/she desires
under section 5907(j) of the Retirement Code, this Court has previously held that the
General Assembly has created no right in the spouse of a member to a SERS death
benefit. Hoffman v. Pennsylvania State Employees Retirement Board, 743 A.2d
1014, 1017 (Pa. Cmwlth. 2000).
Nevertheless, Petitioner advances three separate arguments as to why
the Board erred in denying her request to be paid additional benefits as the surviving
spouse of Decedent. First, Petitioner alleges that SERS’s failure to obtain her signoff
on Decedent’s retirement election constituted sexual discrimination in violation of the
United States Constitution and Article 1, section 28 of the Pennsylvania
Constitution.3 However, Petitioner does not attempt to explain how SERS sexually
3
Article 1, section 28 of the Pennsylvania Constitution, referred to as the Commonwealth’s
Equal Rights Amendment, provides that “[e]quality of rights under the law shall not be denied or
abridged in the Commonwealth of Pennsylvania because of the sex of the individual.” PA. CONST.
(Footnote continued on next page…)
9
discriminated against her or how the Equal Rights Amendment would provide her
relief. Additionally, as the hearing officer correctly observed, the benefit options
provisions of the Retirement Code “are not predicated upon traditional or
stereotypical roles of men or women. Instead, the Retirement Code in its written
form and application applies equally to members of both genders, and to their
respective spouses.” (R.R. at 19.) Indeed, our Pennsylvania Supreme Court has
declined “to invalidate a statute that makes no distinctions based on gender.” Weaver
975 A.2d at 572. Moreover, in Teti, we specifically held that “the Retirement Code
does not require a member’s spouse to consent to the member’s election of a benefit
option.” Id., 981 A.2d at 404-05. Thus, the fact that Petitioner is not entitled to any
survivor benefits is not a consequence of her gender and we find no merit to her
sexual discrimination argument.
Next, Petitioner argues that SERS’s failure to obtain her signoff on
Decedent’s retirement election violated ERISA. However, in Teti, we specifically
recognized that ERISA “does not apply to government plans, including the SERS
plan.” Id., 981 A.2d at 405 n.8. In fact, Petitioner acknowledged this inapplicability
(continued…)
art. I, §28. Our General Assembly has essentially codified the Equal Rights Amendment, by stating
that:
General rule. — In recognition of the adoption of section 28 of
Article I of the Constitution of Pennsylvania, it is hereby declared to
be the intent of the General Assembly that where in any statute
heretofore enacted there is a designation restricted to a single sex, the
designation shall be deemed to refer to both sexes unless the
designation does not operate to deny or abridge equality of rights
under the law of this Commonwealth because of the sex of the
individual.
1 Pa.C.S. §2301(a).
10
in both the stipulation filed with the Board, R.R. at 64, and in her brief to this Court,
Brief of Petition at 7-8.
Finally, Petitioner argues that SERS’s failure to obtain her signoff on
Decedent’s retirement election is violative of the Divorce Code. In other words,
Petitioner claims that the spousal pension provisions of the Divorce Code provide her
with an equitable interest in Decedent’s pension. However, this contention directly
contradicts this Court’s decision in Teti, wherein we rejected the claimant’s argument
that her deceased husband’s SERS pension was a marital asset under the Divorce
Code, stressing that the claimant and the deceased remained married at the time of his
death. Id., 981 A.2d at 405.
Because Petitioner has failed to establish any sexual discrimination on
the part of SERS or any entitlement to Decedent’s retirement benefits under ERISA
or the Divorce Code, the Board did not err in denying Petitioner’s request to be paid
additional benefits as the surviving spouse of Decedent.
Accordingly, the order of the Board is affirmed.
________________________________
PATRICIA A. McCULLOUGH, Judge
11
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Eleanor Yale (Account of Frank Yale), :
Petitioner :
: No. 178 C.D. 2016
v. :
:
State Employees’ Retirement System :
(SERS), :
Respondent :
ORDER
AND NOW, this 18th day of January, 2017, the order of the State
Employees’ Retirement Board, dated January 15, 2016, is hereby affirmed.
________________________________
PATRICIA A. McCULLOUGH, Judge