# Susan Seago v. Board of Trustees, Teachers' Pension and Annuity Fund

> Supreme Court of New Jersey · May 22, 2024

URL: https://www.frixlaw.com/law-library/cases/10454706

## Case

- **Court:** Supreme Court of New Jersey
- **Decided:** May 22, 2024
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10454706

## Opinion text

SYLLABUS

This syllabus is not part of the Court’s opinion. It has been prepared by the Office
of the Clerk for the convenience of the reader. It has been neither reviewed nor
approved by the Court and may not summarize all portions of the opinion.

Susan Seago v. Board of Trustees, Teachers’ Pension and Annuity Fund
(A-9-23) (087786)

Argued January 29, 2024 -- Decided May 22, 2024

FASCIALE, J., writing for a unanimous Court.

The Court considers whether, under the circumstances presented, the Board of
Trustees of the Teachers’ Pension and Annuity Fund (TPAF Board) acted arbitrarily,
capriciously, or unreasonably when it denied petitioner Susan Seago’s application
for an interfund transfer from her expired Public Employees’ Retirement System
(PERS) account to her active Teachers’ Pension and Annuity Fund (TPAF) account.

The Edison Township Board of Education (Edison BOE) hired Seago as a
paraprofessional in 2004, and she became a member of PERS that same year. At the
beginning of the 2017-2018 school year, Seago resigned from her position as a
paraprofessional and became employed as a teacher by the Edison BOE. By that
time, her PERS account had reached “Tier 1” membership status and had vested.

On July 6, 2017, Seago filled out an “Application for Interfund Transfer” to
transfer her PERS credits and contributions to her new TPAF account. According to
the printed instructions on the application, Seago and the Edison BOE were required
to complete different portions of the application. Seago completed and signed her
section and sent the application to the Edison BOE. Although the Edison BOE
enrolled Seago as a TPAF member in September 2017, it did not complete its portion
of Seago’s interfund transfer application at that time.

In early March 2019, the Department of the Treasury, Division of Pensions
and Benefits (Division) notified Seago that she had not contributed to her PERS
account since June 30, 2017. Seago spoke with representatives of the Edison BOE’s
human resources department, who assured her that all she needed to do to effectuate
her interfund transfer request was to complete “the top portion” of the application, as
she had already done. On June 30, 2019, Seago’s membership in PERS ceased
pursuant to N.J.S.A. 43:15A-7(e). At that time, and unbeknownst to Seago, the
Edison BOE had still not completed its portion of Seago’s interfund transfer
application.

1
On August 31, 2020, the Edison BOE realized that it failed to send Seago’s
interfund transfer application to the Division on time. The Edison BOE attempted to
rectify the situation by completing its portion of the application and submitting it to
the Division that same day. Along with the application, the Edison BOE sent a letter
admitting its mistake. The Division informed Seago and the Edison BOE that,
despite the Edison BOE’s conceded error, Seago’s application for interfund transfer
could not be processed because her PERS account had expired.

The Edison BOE challenged the denial of Seago’s interfund transfer
application. The TPAF Board again denied the interfund transfer request, and the
Appellate Division affirmed. The Court granted certification. 255 N.J. 411 (2023).

HELD: The TPAF Board acted arbitrarily, capriciously, and unreasonably when it
denied Seago’s interfund transfer application. Under the unique facts of this case,
equity requires that the TPAF Board grant Seago’s interfund transfer application.
Seago’s reasonable and good-faith attempts to ensure that her interfund transfer
application was timely filed, coupled with the absence of apparent harm to the
pension fund, necessitate this outcome.

1. PERS and TPAF are two distinct retirement systems operated by the State.
Membership in PERS “shall cease if [the member] shall discontinue [their] service
for more than two consecutive years.” N.J.S.A. 43:15A-7(e) (emphasis added).
PERS contributions and credits may, however, be transferred to a different State-
operated retirement system, including TPAF, which expressly requires that
membership in the former system has not expired or been withdrawn. N.J.A.C.
17:3-7.1(b). To effectuate such a transfer, as relevant here, “[a] member . . . must
file an ‘Application for Interfund Transfer,’” N.J.A.C. 17:3-7.1(b)(1), “no more than
two years from the date of the last contribution in the PERS,” N.J.A.C. 17:3-
7.1(b)(5)(ii). Regarding interfund transfers, the Division’s Teachers’ Pension and
Annuity Fund (TPAF) Member Guidebook states in part that “an Application for
Interfund Transfer should be submitted by your employer to the [Division].”
Notably, the ability to transfer service credit and contributions from one retirement
system to another may directly impact a member’s retirement benefits, including by
maintaining tier status. (pp. 13-16)

2. Generally, equitable principles are rarely applied against governmental entities.
Under the appropriate circumstances, however, equitable estoppel may apply unless
its application would prejudice essential governmental functions. As the TPAF
Board has conceded in this appeal, it has “the authority to apply equitable principles
to provide a remedy when justice so demands, provided the power is used rarely and
sparingly, and does no harm to the overall pension scheme.” See Sellers v. Bd. of
Trs., PFRS, 399 N.J. Super. 51, 62 (App. Div. 2008). This is particularly true where
providing an equitable remedy would require the TPAF Board only to relax its own
2
regulation, not a statute duly enacted by the Legislature. Courts consider several
factors, as outlined by the Appellate Division in Sellers, when determining whether
to apply equitable principles in the “interests of justice” to circumstances presented
by a member of a retirement system: “whether the government failed to ‘turn square
corners’”; whether the pension member “acted in good faith and reasonably”; the
harm a member will suffer; the harm to the pension scheme; and any other relevant
factors in the interest of fairness. See id. at 62-63. The Court explains the
considerations that underly those factors. (pp. 17-21)

3. Here, it is evident that the TPAF Board did not “turn square corners” when
considering Seago’s interfund transfer application in light of the reasons provided
for the delayed submission. The TPAF Board did not reasonably and adequately
consider the Edison BOE’s admitted responsibility and how the Guidebook,
application, and regulations led to the late filing of Seago’s interfund transfer
application, through no fault of Seago’s. In addition, Seago acted in good faith and
took reasonable steps to attempt to ensure that her interfund transfer application was
filed. Seago completed her portion of the application timely and reasonably
believed, based on reassurances by her employer coupled with the instructions in the
Guidebook and on the application itself, that it was the Edison BOE’s responsibility
to complete and submit her application. Moreover, Seago would suffer significant
harm from the denial of her interfund transfer application: she will be unable to
transfer her PERS “Tier 1” membership status, which means she will have to wait 5
additional years to retire and will ultimately receive a lower monthly pension
allowance. The record is devoid of evidence that the fund would face significant
harm if Seago’s application is treated as timely. Cases like Seago’s only occur two
to three times per year, and the Court’s holding here is a narrow one that applies
specifically to Seago’s unique circumstances. (pp. 21-25)

4. The Court stresses that it does not hold that it is the employer’s responsibility to
file an interfund transfer application on a member’s behalf, or that a member will be
entitled to an interfund transfer in every case in which a former employer fails to
timely complete an interfund transfer application on the member’s behalf. Rather,
under the specific circumstances of this case, the Court concludes that as a matter of
equity the TPAF Board must grant Seago’s interfund transfer application as if it were
timely filed. (p. 25)

REVERSED.

CHIEF JUSTICE RABNER and JUSTICES PATTERSON, SOLOMON,
PIERRE-LOUIS, WAINER APTER, and NORIEGA join in JUSTICE
FASCIALE’s opinion.

3
SUPREME COURT OF NEW JERSEY
A-9 September Term 2023
087786

Susan Seago,

Petitioner-Appellant,

v.

Board of Trustees, Teachers’
Pension and Annuity Fund,

Respondent-Respondent.

On certification to the Superior Court,
Appellate Division.

Argued Decided
January 29, 2024 May 22, 2024

Kathleen Naprstek Cerisano argued the cause for
appellant (Zazzali, Fagella, Nowak, Kleinbaum &
Friedman, attorneys; Kathleen Naprstek Cerisano, of
counsel and on the brief, and Amory Blank, on the brief).

Joseph A. Palumbo, Deputy Attorney General, argued the
cause for respondent (Matthew J. Platkin, Attorney
General, attorney; Donna Arons, Assistant Attorney
General, of counsel, and Robert E. Kelly, Deputy
Attorney General, on the brief).

JUSTICE FASCIALE delivered the opinion of the Court.

1
In this appeal from a final administrative determination, we must decide

whether under the circumstances presented, the Board of Trustees of the

Teachers’ Pension and Annuity Fund (TPAF Board) acted arbitrarily,

capriciously, or unreasonably when it denied petitioner Susan Seago’s

application for an interfund transfer from her expired Public Employees’

Retirement System (PERS) account to her active Teachers’ Pension and

Annuity Fund (TPAF) account.

Pursuant to N.J.A.C. 17:3-7.1(b), a TPAF member seeking to effectuate

an interfund transfer from a former PERS account must file an “Application

for Interfund Transfer” before the member’s PERS account expires, which

occurs two years from the date of the member’s last contribution.

Seago was a paraprofessional and PERS member for almost thirteen

years until she became employed as a teacher, at which time she was enrolled

in TPAF. Seago’s last contribution to her PERS account was on June 30,

2017. Although she completed her portion of the interfund transfer application

on July 6, 2017 -- well before the expiration of her PERS account -- her

employer admittedly “overlooked” her application and failed to timely

complete and file it. Despite assuring Seago that her only responsibility to

successfully effectuate an interfund transfer was to complete the “top portion”

of the interfund transfer application -- which she did -- Seago’s employer did

2
not realize it failed to submit Seago’s application until after Seago’s PERS

account had expired. Consequently, the TPAF Board denied Seago’s interfund

transfer application as out of time. She appealed, and the Appellate Division

upheld the TPAF Board’s determination.

We hold that the TPAF Board acted arbitrarily, capriciously, and

unreasonably when it denied Seago’s interfund transfer application. Under the

unique facts of this case, we conclude that equity requires that the TPAF Board

grant Seago’s interfund transfer application. Seago’s reasonable and good-

faith attempts to ensure that her interfund transfer application was timely filed,

coupled with the absence of apparent harm to the pension fund, necessitate this

outcome. We therefore reverse the Appellate Division’s judgment and direct

the TPAF Board to grant Seago’s interfund transfer application as if it were

timely filed.

I.

A.

We derive the following facts from the parties’ submissions and

information provided to us at oral argument because Seago was denied a

hearing in the Office of Administrative Law (OAL). Importantly, the TPAF

Board has maintained that it does not dispute and has assumed the truth of

Seago’s allegations.

3
The Edison Township Board of Education (Edison BOE) hired Seago as

a paraprofessional in 2004. As a result of this public employment, Seago

became a member of PERS that same year. Seago continued her role as a

paraprofessional and contributed to her PERS account until 2017. At the

beginning of the 2017-2018 school year, Seago resigned from her position as a

paraprofessional and became employed as a teacher by the Edison BOE. Even

though Seago’s employer did not change, the change in position required that

Seago become a member of TPAF and that her pension contributions be made

to TPAF. Thus, Seago’s last contribution to her PERS account was on June

30, 2017. By that time, her PERS account had acquired 152 months of credit

and had reached “Tier 1” membership status. 1 Moreover, Seago had a total of

$20,086.49 in pension contributions, and her account had vested. 2

1
“Tier” membership status is not specifically addressed in the PERS or TPAF
statutory scheme. Rather, as identified by the TPAF Board, it is language used
by the Department of the Treasury, Division of Pensions and Benefits
(Division), for ease of reference and exists in both the PERS and TPAF
member guidebooks provided by the Division. However, a member’s “tier”
status is based on provisions in both the PERS and TPAF statutory schemes
which establish rules for retirement tethered to a member’s date of enrollment.
See, e.g., N.J.S.A. 43:15A-47 to -48 (examples of statutory provisions
supporting the “tier” designations under PERS); N.J.S.A. 18A:66-43 to -44
(examples of statutory provisions supporting the “tier” designations under
TPAF).
2
Pursuant to N.J.S.A. 43:15A-38, a PERS member’s account vests after the
member has completed ten years of service. If a PERS account is vested, the
member may be eligible for deferred retirement.
4
On July 6, 2017, Seago filled out an “Application for Interfund

Transfer” to transfer her PERS credits and contributions to her new TPAF

account. According to the printed instructions on the application, Seago and

the Edison BOE were required to complete different portions of the

application. Seago completed and signed her section of the application, “the

top portion,” and subsequently sent the application to the Edison BOE.

Although the Edison BOE enrolled Seago as a TPAF member in September

2017, it did not complete its portion of Seago’s interfund transfer application -

- the portion to be completed by the member’s “former” employer -- at that

time.

In early March 2019, the Department of the Treasury, Division of

Pensions and Benefits (Division) notified Seago by letter that she had not

contributed to her PERS account since June 30, 2017. That letter did not

explicitly state that Seago’s PERS account was set to expire in June 2019, two

years after her last contribution. It did, however, provide the date of her last

contribution, stated that she was still a PERS member, and explained that she

was eligible to apply for retirement benefits. Seago did not respond to the

letter. Instead, Seago spoke with representatives of the Edison BOE’s human

resources department who assured her that all she needed to do to effectuate

her interfund transfer request was to complete “the top portion” of the

5
application, as she had already done. At oral argument, Seago’s counsel

detailed how the Edison BOE informed Seago that it did in fact timely file her

interfund transfer application, despite the fact that it had not done so. Counsel

for the TPAF Board did not challenge that assertion.

On June 30, 2019, Seago’s membership in PERS ceased pursuant to

N.J.S.A. 43:15A-7(e). At that time, and unbeknownst to Seago, the Edison

BOE had still not completed its portion of Seago’s interfund transfer

application. Consequently, Seago’s opportunity to apply for an interfund

transfer lapsed under N.J.A.C. 17:3-7.1(b), which provides that a TPAF

member is only eligible to transfer membership if the former membership “has

not expired.”

Thereafter, on September 17, 2019, the Division notified Seago of her

options for the pension contributions she made to her PERS account: apply for

withdrawal of a lump sum of her contributions; apply for a rollover of

contributions to an Individual Retirement Account or an employer’s retirement

plan; or apply for the monthly retirement allowance.

On August 31, 2020, the Edison BOE realized that it failed to send

Seago’s interfund transfer application to the Division on time because,

according to the Edison BOE, it “missed out/overlooked” Seago’s application.

The Edison BOE attempted to rectify the situation by completing the “former

6
employing agency” portion of the application and submitting it to the Division

that same day in August 2020 -- over three years after Seago completed her

section of the application and over a year after Seago’s PERS account expired.

Along with Seago’s application, the Edison BOE sent the Division a

letter admitting its mistake. That August 2020 letter, authored by the Edison

BOE’s payroll supervisor and business administrator, stated that

[Seago] had filled out an Interfund Transfer form on
July 6th, 2017. I see that her form was missed
out/overlooked by Payroll Dept. and not sent to NJ
Pensions.

Please accept this as a letter of request for Interfund
Transfer from PERS to TPAF. This oversight was not
[Seago’s] fault. Can we please restore her enrollment
date and process this form for her[?]

The Division received Seago’s application for interfund transfer from

the Edison BOE on September 10, 2020. Later that month, the Division

informed Seago and the Edison BOE that, despite the Edison BOE’s conceded

error, Seago’s application for interfund transfer could not be processed

because her PERS account expired on June 30, 2019.

B.

In October 2020, the Edison BOE challenged the Division’s denial of

Seago’s interfund transfer application in a letter, reiterating that the delay was

due to the Edison BOE’s own mistake. The Edison BOE explained:
7
We are fully aware of the expiration of [Seago’s] PERS
credit; however, we as the employer had not submitted
her interfund transfer form in 2017 when she filled out
her portion of the form.

. . . . We [are] not sure which of [the Edison BOE’s
employees] was responsible for the completion of
interfund transfer applications; however, one of them
never submitted Ms. Seago’s application. When our
current Payroll Supervisor . . . discovered the error, she
immediately completed the form and submitted it.
Unfortunately, it was after Ms. Seago’s PERS 2-year
grace period expired.

....

We are also aware of the fact that Ms. Seago had
received several notices that her PERS grace period was
about to expire; but she claims that she was told by our
Human Resources Department, that when she became a
teacher, she didn’t have to do anything to transfer her
time, except to fill out the top portion of the interfund
transfer form. We do not doubt that she was told this,
because at the time, this was all she needed to do.

Following a TPAF Board meeting in December 2020, the TPAF Board

affirmed the Division’s determination and denied Seago’s interfund transfer

request, concluding initially that it “ha[d] no authority to grant Ms. Seago’s

request in accordance with N.J.S.A. 43:15A-7(e) and N.J.A.C. 17:3-7.1.”

Seago appealed the TPAF Board’s denial and requested a hearing in the OAL.

The TPAF Board summarily denied the request for a hearing because,

according to the TPAF Board, there were “no factual issues to be adduced.”
8
In its final administrative determination, the TPAF Board again denied

Seago’s interfund transfer request, reasoning that “the statutes and relevant

case law governing TPAF,” including N.J.S.A. 43:15A-7(e) and N.J.A.C. 17:3-

7.1, “do not permit the Board to grant” such a request. The TPAF Board

emphasized that interfund transfers are not mandatory, but rather are optional

at the member’s request. Thus, the TPAF Board concluded that “if an

employee chooses to exercise the option, the responsibility to timely file the

required application lies with the member, not the employer.”

C.

Seago appealed the TPAF Board’s final administrative determination to

the Appellate Division. The Appellate Division affirmed the decision,

maintaining that N.J.A.C. 17:3-7.1(b)(5)(ii) provides that it is the member’s

responsibility to fill out and file the interfund transfer application within two

years from the date of the last contribution. The appellate court rejected

Seago’s argument that the TPAF Member Guidebook says otherwise,

reasoning that the “TPAF Member Guidebook does not supersede the language

of an unambiguous statute” and that Seago was therefore the one responsible

for filing and submitting her application, not the Edison BOE. Moreover, the

Appellate Division declined to find that applying N.J.A.C. 17:3-7.1(b)’s two-

year limitation to Seago’s circumstances was inequitable.

9
We granted Seago’s petition for certification. 255 N.J. 411 (2023).

II.

Seago asks us to reverse the Appellate Division’s judgment and argues

that the TPAF Board acted arbitrarily, capriciously, and unreasonably when it

denied her interfund transfer application. She emphasizes that the relevant

pension statutes are to be construed liberally and that this Court should not

employ an “overly stringent interpretation” of those statutes, especially

considering her “significant public service.” Seago further argues that she

acted with “diligence and good faith,” and reasonably relied on her employer’s

representations concerning the status of her interfund transfer application.

Seago cites to the TPAF Member Guidebook, which places the burden on the

employer to submit interfund transfer applications. Lastly, Seago contends

that this Court should weigh the financial implications of her being unable to

transfer her credits and losing her “Tier 1” membership status against the

prejudice to the pension fund, which, according to Seago, is minimal compared

to the financial impact on her.

The TPAF Board argues that this Court should defer to its reasonable

determination concerning Seago’s application. It contends that a liberal

construction of the relevant pension statutes “does not enlarge the rights

provided by statute” and that the Legislature provided “clear directives” that

10
apply to Seago’s circumstances, making her ineligible to complete an interfund

transfer of her PERS contributions and service credit.

The TPAF Board further argues that Seago did not act with reasonable

diligence and that “[i]t was her own failure to ensure that her application for

interfund transfer was filed” that resulted in her ineligibility to transfer her

account now. In support, the TPAF Board emphasizes that the Division sent

Seago notices informing her that she still had an active PERS account and that

Seago should have contacted the Division directly to obtain more information

upon receiving those notices. Because she failed to do so, the TPAF Board

argues that this Court should reject Seago’s equitable arguments. At oral

argument, the TPAF Board conceded that it did in fact have the authority to

grant Seago equitable relief but maintained that Seago’s circumstances did not

warrant such relief.

III.

A.

“Judicial review of [an] agency determination[] is limited.” Allstars

Auto Grp., Inc. v. Motor Vehicle Comm’n, 234 N.J. 150, 157 (2018). An

agency’s final “decision will be sustained unless there is a clear showing that it

is arbitrary, capricious, or unreasonable, or that it lacks fair support in the

record.” Ibid. (quoting Russo v. Bd. of Trs., PFRS, 206 N.J. 14, 27 (2011)).

11
But, in cases involving statutory interpretation or pure legal issues, “a

reviewing court is ‘in no way bound by [an] agency’s interpretation of’” that

statute or legal issue. Id. at 158 (alteration in original) (quoting DYFS v. T.B.,

207 N.J. 294, 302 (2011)).

B.

Pension statutes for public employees, like PERS and TPAF, “serve a

public purpose” and are designed to encourage individuals “to enter and

remain in public employment, and to render faithful and efficient service while

so employed.” Geller v. Dep’t of Treasury, 53 N.J. 591, 597 (1969). And

because pension statutes are “remedial in character,” ibid., they are to “be

liberally construed and administered in favor of the persons intended to be

benefited thereby,” Minsavage v. Bd. of Trs., TPAF, 240 N.J. 103, 107 (2019)

(quoting Steinmann v. Dep’t of Treasury, 116 N.J. 564, 572 (1989)). We are

therefore hesitant to allow “[f]orfeiture of earned pension rights” -- “a drastic

penalty” -- “unless that penalty has been clearly mandated by the Legislature.”

Bueno v. Bd. of Trs., TPAF, 422 N.J. Super. 227, 242 (App. Div. 2011)

(alteration in original) (quoting Fiola v. Dep’t of Treasury, 193 N.J. Super.

340, 347-48 (App. Div. 1984)).

12
IV.

PERS and TPAF are two distinct retirement systems operated by the

State. N.J.S.A. 43:15A-1 to -161 govern PERS. PERS provides a pension

fund for the payment of retirement benefits to public employees who are not

members of any other retirement system supported by the State. N.J.S.A

43:15A-7. In contrast, N.J.S.A. 18A:66-1 to -93 govern TPAF, which provides

retirement benefits specifically to teachers. N.J.S.A. 18A:66-4; see also

N.J.S.A. 18A:66-2(p) (defining “teacher” for the purposes of TPAF). Thus,

despite being public employees, teachers are members of TPAF and not PERS.

See N.J.S.A. 18A:66-4; N.J.S.A 43:15A-7. Paraprofessionals who accept

“employment in the service of the State” are members of PERS and not TPAF.

See N.J.S.A. 43:15A-7.

Membership in PERS “shall cease if [the member] shall discontinue

[their] service for more than two consecutive years.” N.J.S.A. 43:15A-7(e)

(emphasis added). PERS contributions and credits may, however, be

transferred to a different State-operated retirement system. PERS members

may transfer their service credit and contributions from their PERS account to

TPAF upon enrollment in TPAF, pursuant to N.J.S.A. 18A:66-15.1(c):

A member who is a member of [PERS] . . . at the time
of enrollment in [TPAF] and who within three years of
the date of that enrollment ceases to be an active
contributing member of [PERS] may transfer all service
13
credit in [PERS] to [TPAF] upon application and
transfer of the member’s contributions from [PERS] to
[TPAF].

[(emphasis added).]

However, an interfund transfer does not occur automatically.

Administrative regulations provide guidance to TPAF members regarding how

to successfully complete an interfund transfer. See N.J.A.C. 17:3-1 to -7

(regulations governing TPAF). According to N.J.A.C. 17:3-7.1(b), a TPAF

member is generally “eligible to transfer membership from another State-

administered defined benefit retirement system, provided the membership has

not expired or has not been withdrawn and provided that all service eligible for

participation has ceased.” (emphasis added). To effectuate such a transfer,

which includes transferring service credit and contributions, “[a] member . . .

must file an ‘Application for Interfund Transfer.’” N.J.A.C. 17:3-7.1(b)(1)

(emphases added). And the “Application for Interfund Transfer” from PERS

to TPAF must occur “no more than two years from the date of the last

contribution in the PERS, or the member’s PERS account has not expired due

to the provisions of N.J.S.A. 43:15A-8.” N.J.A.C. 17:3-7.1(b)(5)(ii).

The Division has also made available to TPAF members a TPAF

“Member Guidebook” designed to provide “a summary description of the

benefits of the plan” and to “outline[] the rules and regulations governing the

14
plan.” N.J. Div. of Pension & Benefits, Teachers’ Pension and Annuity Fund

(TPAF) Member Guidebook 4 (July 2021). The Guidebook’s foreword

includes a caveat that “if there is a conflict with statutes governing the plan or

regulations implementing the statutes, the statutes and regulations will take

precedence” over the Guidebook. Ibid. Regarding interfund transfers, the

Guidebook states:

If you are eligible and interested in transferring your
membership account, an online Enrollment Application
for the new retirement system and an Application for
Interfund Transfer should be submitted by your
employer to the [Division]. Applications must be
received within [thirty] days of the date you meet the
eligibility requirements of the new retirement system.

[Id. at 11 (emphasis added). 3]

Notably, the ability to transfer service credit and contributions from one

retirement system to another may directly impact a member’s retirement

benefits. For instance, and pertinent to this appeal, N.J.S.A. 43:15A-47(a)

3
Seago specifically relies on this section of the Guidebook in support of her
arguments. However, the Appellate Division determined that this section of
the Guidebook did not apply to Seago’s circumstances because it governs
transfers from TPAF to PERS, not PERS to TPAF. Although this section of
the Guidebook generally covers transfers from TPAF to other State-
administered retirement systems, including PERS, the Guidebook specifically
notes within the first paragraph of that same section that interfund transfers
can be made from TPAF to different State-administered retirement systems
and “vice versa.” TPAF Member Guidebook at 11.
15
provides that a PERS member who joined prior to November 2008 may retire

and receive benefits at age 60. The Division designates members who fall

within this category as having “Tier 1” or “Tier 2” membership status. In

contrast, “Tier 5” membership status encompasses individuals who became

PERS members after June 28, 2011 -- those individuals are only eligible to

receive retirement benefits at age 65. N.J.S.A. 43:15A-47(c). Further, PERS

members who have “Tier 5” membership status are entitled to a lower monthly

pension allowance as compared to “Tier 1” members. See N.J.S.A. 43:15A-

48.

TPAF mirrors those provisions and “tier” statuses. See N.J.S.A.

18A:66-43, -44; see also TPAF Member Guidebook at 25. And importantly,

when a member successfully completes an interfund transfer, the member may

retain their “tier” status from the former retirement system to the new

retirement system. See N.J.A.C. 17:3-7.1(b)(4) (“The member’s service

credits and enrollment date established in the former system shall be

transferred into the new membership account.” (emphasis added)).

V.

A.

To determine whether the TPAF Board acted arbitrarily, capriciously, or

unreasonably when it denied Seago’s request for an interfund transfer, we view

16
the unique facts of this case from the lens of equity. Generally, equitable

principles are rarely applied against governmental entities. See Middletown

Twp. Policemen’s Benevolent Ass’n Loc. No. 124 v. Township of

Middletown, 162 N.J. 361, 367 (2000) (“Equitable estoppel is ‘rarely invoked

against a governmental entity.’” (quoting Wood v. Borough of Wildwood

Crest, 319 N.J. Super. 650, 656 (App. Div. 1999))). However, as to the

principle of equitable estoppel, we have held that it “may be invoked” against

a governmental entity “where interests of justice, morality and common

fairness clearly dictate that course.” Ibid. (quoting Gruber v. Mayor & Twp.

Comm. of Raritan, 39 N.J. 1, 13 (1962)).

Thus, under “the appropriate circumstances,” equitable estoppel may

apply unless its application “would ‘prejudice essential governmental

functions.’” Ibid. (quoting Wood, 319 N.J. Super. at 656); see also Skulski v.

Nolan, 68 N.J. 179, 198 (1975) (“[E]quitable considerations are relevant in

evaluating the propriety of conduct taken after substantial reliance by those

whose interests are affected by subsequent actions . . . [in order] ‘to avoid

wrong or injury ensuing from reasonable reliance upon such conduct.’”

(citation omitted) (quoting Summer Cottagers’ Ass’n v. Cape May, 19 N.J.

493, 504 (1955))).

17
B.

In considering Seago’s circumstances and the applicability of equitable

principles, we find that Sellers v. Board of Trustees, PFRS, 399 N.J. Super. 51

(App. Div. 2008), provides well-reasoned guidance.

In Sellers, the plaintiff appealed a final determination by the Board of

Trustees of the New Jersey Police and Firemen’s Retirement System (PFRS)

denying his PFRS enrollment on the ground that he had exceeded the statutory

maximum age for enrollment, which consequently rendered him unable to

pursue employment as a firefighter. 399 N.J. Super. at 52-53, 55. In deciding

to leave his former employment to pursue a firefighter position, both the

plaintiff and the township employer that had offered him the position operated

under the mistaken belief that the plaintiff’s age would be “adjusted” to reflect

his time as a police officer and years of military service under applicable

statutory law, such that he would satisfy the qualifying firefighter age

requirements. Id. at 53-54. The plaintiff argued that equitable principles

should be applied to his circumstances because both he and the township

employer reasonably believed his age would be statutorily adjusted, which

consequently would have allowed the plaintiff to enroll in PFRS. Id. at 55.

The Appellate Division agreed with the plaintiff’s position and held that the

18
PFRS Board should have considered equitable principles in the plaintiff’s case.

Id. at 62-63.

We hold that the equitable principles outlined in Sellers apply to the

circumstances presented in this appeal. As the TPAF Board has conceded in

this appeal, it has “the authority to apply equitable principles to provide a

remedy when justice so demands, provided the power is used rarely and

sparingly, and does no harm to the overall pension scheme.” Id. at 62. This is

particularly true where providing an equitable remedy would require the TPAF

Board only to relax its own regulation, not a statute duly enacted by the

Legislature. See, e.g., Minsavage, 240 N.J. at 106, 108-09 (holding that “a

retirement application, whether approved or not, may be reopened and

modified upon a showing of good cause, reasonable grounds, and reasonable

diligence,” despite relevant regulations to the contrary (citing N.J.A.C. 17:3-

6.1(f)(5) and N.J.A.C. 17:3-6.3(a))).

We consider several factors, as outlined by the Appellate Division in

Sellers, when determining whether to apply equitable principles in the

“interests of justice” to circumstances presented by a member of a retirement

system: “whether the government failed to ‘turn square corners’”; whether the

pension member “acted in good faith and reasonably”; the harm a member will

19
suffer; the harm to the pension scheme; and any other relevant factors in the

interest of fairness. See id. at 62-63.

First, when considering whether the government failed to “turn square

corners,” this Court has emphasized how “governmental officials act solely in

the public interest” and that the government’s “primary obligation is to

comport itself with compunction and integrity.” F.M.C. Stores Co. v. Borough

of Morris Plains, 100 N.J. 418, 426-27 (1985).

Next, it is important to consider whether the member acted in good faith,

“exercised reasonable diligence,” and seeks relief “for good cause upon

reasonable grounds.” Minsavage, 240 N.J. at 110. In Minsavage, we

determined that the petitioner, a beneficiary of her deceased husband’s

retirement benefits, could modify the retirement selection that her husband

previously made, provided “good cause, reasonable grounds, and reasonable

diligence are shown.” Id. at 105, 107. Thus, we remanded to provide the

petitioner with an opportunity to make such a showing. Id. at 105.

We also consider the harm to the member, specifically the “degree of

harm” to the member if relevant statutes or regulations are to be “strictly

enforced,” and the harm to the pension fund. Sellers, 399 N.J. Super. at 62.

As we emphasized above, pension statutes should be “administered in favor of

the persons intended to be benefited,” Minsavage, 240 N.J. at 107 (quoting

20
Steinmann, 116 N.J. at 572), but “‘[a] potential adverse impact on the financial

integrity’ of the pension fund . . . may counsel against too broad an application

of a pension statute in favor of a petitioner,” Francois v. Bd. of Trs., PERS,

415 N.J. Super. 335, 349 (App. Div. 2010) (quoting Chaleff v. Bd. of Trs.,

TPAF, 188 N.J. Super. 194, 197 (App. Div. 1983)).

For example, in Smith v. Department of Treasury, the Appellate

Division rejected the plaintiff’s interpretation of a PERS-related statute, in part

because that interpretation would have expanded “the class of persons eligible

for . . . significantly greater” pension benefits and would therefore have placed

“a greater strain on the financial integrity of the fund . . . and its future

availability for those persons who are truly eligible for such benefits.” 390

N.J. Super. 209, 215 (App. Div. 2007). Thus, “the fiscal integrity of the

pension funds” is another consideration when determining whether a member

should be granted equitable relief. Francois, 415 N.J. Super. at 349 (quoting

DiMaria v. Bd. of Trs., PERS, 225 N.J. Super. 341, 354 (App. Div. 1988)).

VI.

Considering those equitable principles and the specific circumstances of

this appeal, we hold that the TPAF Board acted arbitrarily, capriciously, and

unreasonably when it denied Seago’s interfund transfer application. As a

21
result, we direct the TPAF Board to accept Seago’s interfund transfer

application as if it were timely filed.

It is evident that the TPAF Board did not “turn square corners” when

considering Seago’s interfund transfer application in light of the reasons

provided for the delayed submission. Although the TPAF Board continues to

claim that it was Seago’s responsibility under N.J.A.C. 17:3-7.1(b)(1) to

submit the interfund transfer application, the TPAF Member Guidebook -- a

Guidebook created to help TPAF members understand the retirement system

and made available on the Division’s official website -- offers contradictory

guidance. As the Guidebook indicates, for those “eligible and interested in

transferring [a] membership account, an online Enrollment Application for the

new retirement system and an Application for Interfund Transfer should be

submitted by your employer to the [Division].” TPAF Member Guidebook at

11 (emphasis added).

Notwithstanding the Guidebook’s initial disclaimer -- that statutes and

regulations take precedence over the Guidebook -- it was unreasonable for the

TPAF Board, under Seago’s particular circumstances, not to recognize the

hardship that this contradiction caused Seago. See Steinmann, 116 N.J. at 576-

78 (holding that the plaintiff demonstrated good cause to change her retirement

selection because it was the TPAF “Board’s regulation, combined with its

22
failure to provide [the plaintiff] with information material to her decision, that

prevented [the plaintiff] from selecting” a more favorable retirement option).

Moreover, the interfund transfer application that Seago filled out

explicitly provided that the application must be completed by the member and

the member’s former employer and must be submitted with the new enrollment

application for the retirement system into which the member is transferring.

Notably, it is the employer’s “statutory responsibility” to enroll employees in

TPAF and other State-operated retirement systems. See N.J.A.C. 17:1-3.1;

N.J.A.C. 17:3-2.8. Considering its “primary obligation . . . to comport itself

with compunction and integrity,” F.M.C. Stores Co., 100 N.J. at 427, the

TPAF Board did not reasonably and adequately consider the Edison BOE’s

admitted responsibility and how the Guidebook, application, and regulations

led to the late filing of Seago’s interfund transfer application, through no fault

of Seago’s.

In addition, Seago acted in good faith and took reasonable steps to

attempt to ensure that her interfund transfer application was filed. Seago

completed her portion of the application on July 6, 2017 -- approximately two

years prior to the expiration of her PERS account. And when Seago received

information from the Division regarding her PERS account, she turned to her

employer who assured her that her only responsibility was to complete her

23
portion of the application. Seago’s employer admitted to the TPAF Board

numerous times that Seago’s late application was due to the Edison BOE’s own

failure, not Seago’s. Based on those reassurances by her employer, coupled

with the instructions in the Guidebook and on the application itself, Seago

reasonably believed that it was the Edison BOE’s responsibility to complete

and submit her application. Thus, we conclude Seago acted in good faith, with

reasonable due diligence, and took reasonable steps to attempt to ensure that

her interfund transfer application was filed.

Moreover, Seago will suffer significant harm if we uphold the TPAF

Board’s denial of her interfund transfer application: she will be unable to

transfer her PERS “Tier 1” membership status, thereby relegating her to “Tier

5” membership status in TPAF. See N.J.A.C. 17:3-7.1(b)(4). And

consequently, if Seago remains in “Tier 5” membership status in TPAF, to

receive her full TPAF retirement benefits, Seago must wait until she reaches

the age of 65 rather than age 60, and she will ultimately receive a lower

monthly pension allowance. See N.J.S.A. 18A:66-43 to -44.

The record is devoid of evidence that the fund would face significant

harm if Seago’s application is treated as timely. As the TPAF Board admitted

at oral argument, cases like Seago’s only occur two to three times per year.

Importantly, our holding is a narrow one that applies specifically to Seago’s

24
unique circumstances; thus, it will not “place a greater strain on the financial

integrity of the fund.” Cf. Smith, 390 N.J. Super. at 215.

We therefore conclude that, based on the record before us, the harm to

the pension system in granting Seago’s application does not appear to be

significant as compared to the harm Seago will face if we allow the TPAF

Board’s decision to stand. Considering Seago’s circumstances and the

applicable equitable principles, it is apparent that the TPAF Board acted

unreasonably and that Seago’s interfund transfer application must be granted.

To be clear, we do not hold that it is in fact the employer’s responsibility

to file an interfund transfer application on a member’s behalf. Additionally,

we do not hold that a member will be entitled to an interfund transfer in every

case in which a former employer fails to complete an interfund transfer

application on the member’s behalf within the time limitations provided in the

regulations. Rather, under the specific circumstances presented in this case,

we conclude that as a matter of equity the TPAF Board must grant Seago’s

interfund transfer application as if it were timely filed.

VII.

Having concluded that the TPAF Board acted arbitrarily, capriciously,

and unreasonably under the circumstances presented, we reverse the judgment

of the Appellate Division and instruct the TPAF Board to grant Seago’s

25
application for an interfund transfer as if her application had initially been

timely filed.

CHIEF JUSTICE RABNER and JUSTICES PATTERSON, SOLOMON,
PIERRE-LOUIS, WAINER APTER, and NORIEGA join in JUSTICE FASCIALE’s
opinion.

26

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10454706. Public record. Not legal advice.