The opinion
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Estate of Lynn D. Wilson :
by Donna Killinger, Executrix, :
Petitioner :
:
v. :
:
State Employees’ Retirement Board, : No. 1253 C.D. 2016
Respondent : Argued: November 15, 2017
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ROBERT SIMPSON, Judge
HONORABLE P. KEVIN BROBSON, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE JOSEPH M. COSGROVE, Judge
OPINION BY
JUDGE COVEY FILED: December 20, 2017
Estate of Lynn D. Wilson (Wilson) by Donna Killinger (Claimant),
Executrix (Estate) petitions this Court for review of the Pennsylvania State
Employees’ Retirement Board’s (Board) June 28, 2016 order affirming the
Pennsylvania State Employees’ Retirement System’s (SERS) denial of the Estate’s
request to effectuate Wilson’s option change and pay his death benefit. The Estate
presents two issues for this Court’s review: (1) whether the Board erred, abused its
discretion or capriciously and arbitrarily determined that Wilson’s beneficiary
designation was not accepted because SERS did not receive Wilson’s beneficiary
change until after Wilson’s death; and (2) whether Wilson’s retirement should vest in
the Estate if the Board does not accept Wilson’s beneficiary change. After review,
we reverse.
The facts as found by the Board are undisputed. Wilson became a SERS
member on September 21, 1977, by virtue of his employment with the Department of
Public Welfare. Wilson retired effective March 1, 1997, after electing to receive an
Option 2 annuity and naming Christene Wilson, his wife, as his survivor annuitant.
Electing an Option 2 annuity meant that if Wilson predeceased his designated
survivor annuitant, she would receive the same monthly benefit Wilson received
while he was alive. In addition, because an Option 2 annuity was elected, if Wilson’s
designated survivor annuitant predeceased him, Wilson’s retirement benefit would
cease upon his death, unless he changed his survivor annuitant designation.
A SERS member whose designated survivor annuitant predeceases him
may change his survivor benefits by filing an Application for Option Change form
(SERS Application) with SERS. Wilson’s wife and designated survivor annuitant,
Christene Wilson, predeceased Wilson on November 27, 2011. By letter dated May
22, 2012, to Wilson, SERS explained that, because his designated survivor annuitant
had died, Wilson could re-elect his retirement option and select one of several other
options, including an option that would allow him to designate a different survivor
annuitant. SERS’ May 22, 2012 letter stated that any option change would be
effective on the date SERS receives the completed SERS Application and required
attachments.
Wilson completed a SERS Application, which he signed and dated June
1, 2012. Wilson also completed a Retired Member Beneficiary Nomination form
(Beneficiary Nomination), naming Diana L. Johns (Johns), his oldest daughter, as
100% principal beneficiary, and Claimant, his youngest daughter, as 100% contingent
beneficiary. Wilson checked the “yes” box next to the statement that he understood
that his option change election would be effective on the date SERS received his
SERS Application. Wilson died on June 9, 2012. SERS received Wilson’s
2
completed SERS Application, together with the completed Beneficiary Nomination,
on June 13, 2012.
When SERS received Wilson’s completed SERS Application and
Beneficiary Nomination it had not yet received notice of Wilson’s death, and took the
necessary administrative steps to change Wilson’s option in accordance with the
documents. On June 26, 2012, SERS sent Wilson a letter stating that his retirement
account had been recalculated in order to change his retirement option from Option 2
to Option 1 as requested. On July 10, 2012, SERS received notification of Wilson’s
June 9, 2012 death from Johns. By November 29, 2012 and January 18, 2013 letters
to the Estate, SERS advised that it would not honor Wilson’s option change because
SERS received Wilson’s SERS Application and Beneficiary Nomination after the
date of his death and therefore determined that Wilson’s death benefit was based on
his original option selection, which meant that, since Wilson’s designated survivor
annuitant, his wife, had predeceased him, there were no monies remaining to be paid,
and SERS stopped the annuity.
By May 13, 2013 letter, the Estate’s Counsel asked SERS to reconsider
its decision and allow the Estate to file an appeal. By November 6, 2013 letter,
SERS’ Benefit Determination Division Director Debra G. Murphy responded that
SERS had reviewed Wilson’s file again, concluded that SERS’ prior determination
was correct, and explained the Estate’s appeal rights. On November 23, 2013, the
Estate appealed from SERS’ determination. SERS’ Appeals Committee (Appeals
Committee) denied the Estate’s request to change Wilson’s retirement option in
accordance with Wilson’s SERS Application and Beneficiary Nomination. Claimant
appealed from the Appeals Committee’s determination and a hearing was held on
February 25, 2015 before a Hearing Officer. On August 13, 2015, the Hearing
Officer issued an Opinion and Recommendation that Claimant’s request be denied.
Claimant filed timely exceptions with the Board. On June 28, 2016, the Board
3
accepted and adopted the Hearing Officer’s Opinion and Recommendation, as
modified1 and denied Claimant’s appeal. Claimant appealed to this Court.2
Essentially, Claimant argues that because Wilson’s SERS Application
and Beneficiary Nomination were executed and mailed before Wilson’s death, his
retirement should have been changed from Option 2 to Option 1 and Johns should be
designated his 100% principal beneficiary and Claimant, his 100% contingent
beneficiary. We agree.
At the outset, as the Board acknowledged, the Hearing Officer began her
discussion by referring to Wilson’s wife as a beneficiary,3 rather than a survivor
1
Pursuant to Section 35.211 of General Rules of Administrative Practice and Procedure, 1
Pa. Code § 35.211, either party may file exceptions within 30 days. SERS filed exceptions raising
issues with statements contained in the body of the Hearing Officer’s Opinion and
Recommendation. First, SERS asserted that the identity of SERS’ counsel who filed the Answer in
this matter is misstated on page one of the Opinion and Recommendation. The Board sustained this
exception. SERS next took exception with the Hearing Officer’s discussion on page ten of her
Opinion and Recommendation where she misstated the distinction between a survivor annuitant and
a beneficiary, as those terms are defined by the State Employees’ Retirement Code (Retirement
Code), 71 Pa.C.S. §§ 5101-5958. Because survivor annuitants and beneficiaries are two separate
and distinct classes of people under the Retirement Code, the Board sustained this exception as
well. Wilson’s spouse was his designated survivor annuitant, as the Option 2 selection that he made
at retirement did not provide for the naming of a beneficiary to receive a lump sum death benefit,
but rather a survivor annuitant who would receive a lifetime annuity if living at his death.
2
Our scope of review is limited to determining whether constitutional
rights were violated, whether the adjudication is not in accordance
with the law, whether local agency procedures have been violated, or
whether ‘any findings of fact made by the agency and necessary to
support its adjudication are not supported by substantial evidence.’
Sandusky v. Pa. State Emps.’ Ret. Bd., 127 A.3d 34, 47 n.17 (Pa. Cmwlth. 2015) (quoting Drennan
v. City of Phila., Bd. of Pensions & Ret., 525 A.2d 1265, 1266 (Pa. Cmwlth. 1987)).
3
The Retirement Code defines a “beneficiary” as follows:
In the case of the system, the person or persons last designated in
writing to the [B]oard by a member to receive his accumulated
deductions or a lump sum benefit upon the death of such member. In
the case of the plan, the person or persons last designated in writing to
the [B]oard by the participant to receive the participant’s vested
4
annuitant. The State Employees’ Retirement Code (Retirement Code) defines a
“survivor annuitant” as “[t]he person or persons last designated by a member under a
joint and survivor annuity option to receive an annuity upon the death of such
member.” 71 Pa.C.S. § 5102. The Hearing Officer expounded:
A duly[-]executed retirement beneficiary nomination form
cannot be superseded even by a signed nomination of
beneficiaries form if that latter form has not been filed with
the Board. Hess v. [] Pub. Sch. [Emps.’] Ret[.] Bd., 460
A.2d 1231, 1232 (Pa. Cmwlth. 1983). Therefore, Claimant
has not sustained her burden of proof in this matter.
Hearing Officer Op. and Rec. at 10-11. Importantly, the Hearing Officer’s reliance
upon Hess is misplaced as that case is clearly distinguishable from the instant matter.
In Hess, the decedent made oral representations that he desired to change his
“beneficiary,” but in fact never completed a Beneficiary Nomination, much less filed
one with the Public School Employes’ Retirement Board. Here, Wilson completed
and executed his SERS Application and Beneficiary Nomination, and SERS received
both.
Notwithstanding, the Board insists that it is not bound by Wilson’s
SERS Application and Beneficiary Nomination because SERS did not receive them
before Wilson’s death. The Board relies upon Section 31.11 of the General Rules of
Administrative Practice and Procedure (GRAPP),4 and Harasty v. Public School
Employees’ Retirement Board, 945 A.2d 783 (Pa. Cmwlth. 2008), to support its
conclusion.
The Harasty Court rejected a SERS member’s (claimant) argument that
because he mailed a written notice before the statutory deadline, his notice should be
accumulated total defined contributions or a lump sum benefit upon
the death of the participant.
71 Pa.C.S. § 5102.
4
1 Pa. Code §§ 31.1 - 35.251.
5
considered timely. Specifically, Section 8305.1(b) of the Public School Employees’
Retirement Code, the statute referenced in the Harasty case, requires: “The member
must elect to become a Class T-D member by filing a written notice with the [Public
School Employes’ Retirement B]oard on or before December 31, 2001, or before
the termination of school service or State service as applicable, whichever first
occurs.” 24 Pa.C.S. § 8305.1(b) (emphasis added). Section 31.11 of GRAPP
provides:
Pleadings, submittals or other documents required or
permitted to be filed under this part, the regulations of the
agency or any other provision of law shall be received for
filing at the office of the agency within the time limits, if
any, for the filing. The date of receipt at the office of the
agency and not the date of deposit in the mails is
determinative.
1 Pa. Code § 31.11 (emphasis added). Because there was a statutory deadline and
GRAPP applied, the Harasty Court properly rejected the claimant’s argument that the
mailbox rule applied.5
However, there is no statutory deadline in this case. Rather, without
supporting legal authority, the Board determined that Wilson’s June 9, 2012 death
date was the applicable deadline and, based on GRAPP, Wilson missed that deadline.
To the contrary, since Wilson’s death date could not possibly be known in advance,
Wilson had absolutely no ability to guarantee SERS received his SERS Application
and Beneficiary Nomination before then. Hence, it is untenable to conclude that
Wilson’s documents were untimely because SERS did not receive them before he
died. The dispositive issue, as evidenced by SERS’ May 22, 2012 letter, is not
5
“The mailbox rule creates a rebuttable presumption that an item which is properly mailed
will be received; the presumption cannot be nullified by only an assertion that the item was not
received.” C.E. v. Dep’t of Pub. Welfare, 97 A.3d 828, 832 (Pa. Cmwlth. 2014).
6
whether SERS received the forms before Wilson’s death, but rather, whether Wilson
completed and filed the forms. SERS’ May 22, 20126 letter to Wilson stated:
When you retired, you selected Option 2, which provides a
monthly annuity for your designated survivor upon your
death. Because your designated survivor has died, you are
permitted to re-elect your retirement option and select one
of the following: Maximum Single Life, Option 1, Option 2,
Option 3 or a Special Option 4. If you select an option that
provides a survivor annuity, you may designate a different
survivor.
SERS prepared the enclosed option change estimate at your
request. The enclosed benefit estimates are based on your
gender and current age. The estimate calculations for
Option 2 and Option 3 also are based on the age and gender
of the person you identified.
Also enclosed are [a SERS Application] and [Beneficiary
Nomination]. To select a new option you must complete
the enclosed [SERS Application].
If you select Option 1, you must also complete the
[Beneficiary Nomination] with the names of your death
beneficiaries. If you do not select Option 1, do not
complete the [Beneficiary Nomination].
Reproduced Record (R.R.) at 85a-86a (emphasis added). The letter concluded:
Electing a new option is likely to reduce the amount of
your monthly annuity payment. The option change will
be effective the date SERS receives your completed
[SERS Application] and required attachments; however,
it will take up to sixty days for SERS to process the change.
(Special Option 4 selections also must be deemed to be
actuarially sound and may take longer to process). After
your new monthly annuity payment is calculated, SERS
will provide you with a bill for the amount you were
overpaid.
6
Wilson’s spouse died on November 27, 2011. SERS did not issue its letter until six
months later.
7
Should you have any questions or need assistance
completing the appropriate forms, please feel free to contact
me at number listed in the letterhead.
R.R. at 86a (emphasis added).
There is no dispute that Wilson completed a SERS Application and
Beneficiary Nomination, and filed the same with SERS. If Wilson had not died, his
option change and possible reduction in benefits would have been effective when
SERS received his forms. The date of SERS’ receipt is irrelevant in relation to
Wilson’s option change and new beneficiaries, particularly when there are no
promulgated rules or regulations requiring that the SERS Application and Beneficiary
Nomination be filed before a member’s death. Moreover, the definition of
“beneficiary” includes “the person or persons last designated in writing to the [B]oard
by a member . . . .” 71 Pa.C.S. § 5102. Here, SERS confirmed it received Wilson’s
last written designation of Johns as 100% principal beneficiary, and Claimant as
100% contingent beneficiary. Finally, none of the Board’s cited cases hold that
GRAPP is applicable herein and requires a different conclusion. See Harasty,
(statutory deadline triggered GRAPP); Rosenstein v. Pub. Sch. Emps.’ Ret. Sys., 685
A.2d 624 (Pa. Cmwlth. 1996) (claimant was never designated as a substitute survivor
annuitant or beneficiary); Luckhardt v. State Emps. Ret. Bd., 459 A.2d 1347, 1348 n.4
(Pa. Cmwlth. 1983) (“formal proceedings before the Board are governed by
[GRAPP]”).
Based on the circumstances herein that SERS received Wilson’s last
designated beneficiaries notice, Wilson’s option change was effective upon SERS
receipt and, thus, the Board erred by failing to honor Wilson’s option change and pay
the designated beneficiaries his death benefit.7
7
Given the disposition of the first issue, the second issue is moot.
8
For all of the above reasons, the Board’s order is reversed.
___________________________
ANNE E. COVEY, Judge
9
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Estate of Lynn D. Wilson :
by Donna Killinger, Executrix, :
Petitioner :
:
v. :
:
State Employees’ Retirement Board, : No. 1253 C.D. 2016
Respondent :
ORDER
AND NOW, this 20th day of December, 2017, the Pennsylvania State
Employees’ Retirement Board’s June 28, 2016 order is reversed.
___________________________
ANNE E. COVEY, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Estate of Lynn D. Wilson :
by Donna Killinger, Executrix, :
Petitioner :
:
v. :
:
State Employees’ Retirement Board, : No. 1253 C.D. 2016
Respondent : Argued: November 15, 2017
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ROBERT SIMPSON, Judge
HONORABLE P. KEVIN BROBSON, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE JOSEPH M. COSGROVE, Judge
CONCURRING OPINION
BY JUDGE COSGROVE FILED: December 20, 2017
I join the exceptionally well-written Majority opinion in its entirety. I
write separately to emphasize the danger posed by administrative directives which
require an agency to have actually received a particular item before giving that item
effect.
In this case, without regulatory, statutory, or case law support, the State
Employees’ Retirement System (SERS) argued that Lynn D. Wilson’s (Mr. Wilson)
change of retirement option should be rejected because, although Mr. Wilson
properly executed and actually mailed the change form, it was not received by SERS
prior to his death. Discounting this argument, the Majority correctly notes that
nothing impeded the change request from taking effect prior to actual receipt by
SERS. Mr. Wilson did all he could to have his wishes carried out by completing the
necessary form and dropping it in the mail. Others in his and similar situations, i.e.,
where an individual seeks a benefit or service to which he or she is allowed, follow
that same process countless times each week. But how, when, where (or if) the
designated recipient agency actually “receives” the item is another question. In the
entangled bureaucratic webs which encircle state agencies it may be difficult, with
any level of certainty, to determine what exactly constitutes “receipt” and whether
something which must be received by a certain date was actually “received” on time,
if at all.
In the present case, despite SERS’ best effort, the Majority recognized
that Mr. Wilson’s wishes did not need a receipt by SERS for them to be effective.
Had the Majority said otherwise, however, and in the face of specific requirements
in other administrative areas, see, e.g., 1 Pa.Code § 31.11, a separate and even
constitutional due process problem may have arisen. In those areas where receipt
remains administratively required, this potential problem can be avoided through an
understanding of the present Majority’s logic, as well as recognition and
administrative adoption of “[t]he venerable common law ‘mailbox rule.’”
Commonwealth v. Thomas, 814 A.2d 754, 758 (Pa. Super. 2002). This would avoid
the problem SERS tried to create here, a problem which potentially lurks elsewhere
in our administrative machinery.
___________________________
JOSEPH M. COSGROVE, Judge
JMC-2