The opinion
NOT FOR PUBLICATION WITHOUT THE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-3151-18T3
ELLEN SCHWARTZ,
Plaintiff-Appellant,
v.
DEPARTMENT OF TREASURY,
DIVISION OF PENSIONS AND
BENEFITS,
Defendant-Respondent.
________________________________
Submitted April 20, 2020 – Decided July 16, 2020
Before Judges Rothstadt and Moynihan.
On appeal from the Board of Trustees, Teachers'
Pension and Annuity Fund, Department of the
Treasury, TPAF No. 1-10-158521.
Caruso Smith Picini PC, attorneys for appellant
(Timothy Richard. Smith, of counsel; Sara B. Liebman,
on the briefs).
Gurbir S. Grewal, Attorney General, attorney for
respondent (Melissa H. Raksa, Assistant Attorney
General, of counsel; Austin J. Edwards, Deputy
Attorney General, on the brief).
PER CURIAM
Plaintiff Ellen Schwartz appeals from the Board of Trustees, (Board)
Teachers' Pension and Annuity Fund's (TPAF) February 11, 2019 final
administrative determination requiring plaintiff to repay $32,431.56 in pension
benefits. The Board required the repayment after it determined her retirement
from the Elizabeth Board of Education (EBOE) did not qualify as a "bona fide
severance from employment" since she returned to work for the EBOE within
180 days of her retirement, in contravention of N.J.A.C. 17:1-17.14(a)(2)(iv).
On appeal, plaintiff argues that the matter should have been transferred to
the Office of Administrative Law (OAL) for a hearing because there were factual
disputes that needed to be resolved. She also contends that she should not be
forced to repay the benefits because she returned to work as a substitute teacher
through a placement by a third-party employer, Source4Teachers (S4T).
Moreover, even if she did violate the regulation prohibiting returning to work,
it was unintentional. We affirm because plaintiff failed to establish that a factual
dispute existed or that the Board's decision was arbitrary, capricious, or
unreasonable.
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2
The material facts are undisputed. The EBOE employed plaintiff as a
teacher until May 9, 2014, when it informed plaintiff that her employment would
be terminated, effective June 30, 2014, due to a reduction in force. On May 31,
2015, plaintiff filed for retirement and at its regular July 2, 2015 meeting, the
Board approved plaintiff's retirement, effective June 1, 2015. In its letter
notifying plaintiff that her retirement was approved, the Board cautioned
plaintiff that if she was to return to public employment following her retirement,
she needed to notify the Board's Office of Client Services "immediately."
On April 2, 2015, plaintiff began working as a substitute teacher for S4T,
which assigned her to work for the EBOE starting on October 6, 2015 through
June 21, 2016. Thereafter, the EBOE directly reemployed plaintiff as a full -
time teacher for the term beginning in September 2016. Plaintiff notified the
Division of Pensions and Benefits (Division) about her reemployment in a
October 1, 2016 letter that also requested that her retirement be stopped, and
advised that she understood she was required to repay the distributed retirement
benefits she received for September and October 2016.
Upon receipt of plaintiff's letter, the Division's external auditor unit
(EAU) began a review to determine whether plaintiff's post-retirement
employment complied with "all applicable pension laws." On October 6, 2016,
A-3151-18T3
3
a member of the EAU contacted plaintiff by telephone to investigate plaintiff's
claims and verify her post-retirement employment status. During a phone call
with the EAU, plaintiff confirmed that she worked for EBOE through S4T after
her retirement. According to plaintiff, S4T told her that employment with S4T
would not adversely affect any pre-existing relationships.
The Division had no records indicating plaintiff ever contacted it to
ascertain whether employment with the EBOE, through S4T, would compromise
plaintiff's retirement benefits.
Following a verification from the EBOE of her employment status,
plaintiff was advised that she would be re-enrolled in the TPAF, her retirement
benefits would be suspended, and defendant would initiate a recovery of all
overpaid retirement benefits. Following a further review of the documents
submitted by the EBOE, the EAU wrote to plaintiff on May 14, 2018 to advise
her in detail of the Division's determination that her June 1, 2015 retirement did
not constitute a bona fide severance from employment, given that she returned
to work for the EBOE within 180 days of retirement.
The letter recounted: when plaintiff retired, when her employment was set
to be terminated by the EBOE, her earned wage totals from S4T, and various
regulations that she was required to meet upon retiring before stating:
A-3151-18T3
4
Based on information provided by your employer,
EBOE, the Division has determined that your TPAF
retirement effective June 1, 2015 was not bona fide and
that you remained an active member of TPAF since you
did not separate from employment with the [EBOE] as
required by the provisions of N.J.A.C. 17:1-17.14. The
Division found that you did not have a bona fide
severance from employment because you returned to
the same employer (EBOE) that you retired from
through a third[-]party employer (S4T) within 180 days
of your retirement date of June 1, 2015. As a non[-
]bona fide retiree, you were not entitled to the
retirement benefits you have received since your
retirement of June 1, 2015.
Plaintiff appealed the Division's determination to the Board. On August
15, 2018, the Board sent plaintiff another detailed letter explaining that it found
plaintiff violated N.J.A.C. 17:1-17.14 by returning to work for the EBOE within
180 days of her June 1, 2015 retirement. The Board found that plaintiff's
retirement was not bona fide, "essentially for the reasons outlined b y the
Division's May 14, 2018, letter." As a non-bona fide retiree, the Board
determined plaintiff "was not entitled to the retirement benefits she received
since her retirement of June 1, 2015."
The Board concluded that plaintiff was required to repay "all retirement
benefits received" from the TPAF from July 1, 2015 to March 1, 2017, totaling
A-3151-18T3
5
$32,431.56.1 Of that total amount, the Board found that plaintiff was not
contesting the repayment of pension checks she received from October 1, 2016
to March 1, 2017, totaling $9266.16, which she received after she returned to
full-time employment with the EBOE as a teacher beginning September 1, 2016.
Thereafter, plaintiff requested a hearing as to the Board's determination.
The Board denied the request on January 17, 2019, "essentially for the reasons
set forth in the Board's denial letter dated August 15, 2018." On February 11,
2019, the Board issued its "Final Administrative Determination," setting forth
its findings of fact that essentially described the noted history of plaintiff's
employment, retirement, and re-employment by the EBOE, indirectly through
S4T and then directly in September 2016. The Board described the issue as
"whether [plaintiff] observed a 'bona fide severance from employment' because
she returned to the EBOE within 180 days of her retirement in violation of
N.J.A.C. 17:1-17.14(a)(2)(iv)." In concluding that plaintiff violated N.J.A.C.
17:1-17.14, the Board stated that "[i]n order for [plaintiff's] retirement to be
bona fide, it would require that her employment be severed for a minimum
1
Defendant did not suspend plaintiff's retirement benefits until after March 1,
2017.
A-3151-18T3
6
period of 180 days subsequent to her June 1, 2015 retirement, not the June 30,
2014 date." This appeal followed.
"Our review of administrative agency action is limited." Russo v. Bd. of
Trs., Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011). In our review, we
presume the validity of the "administrative agency's exercise of its statutorily
delegated responsibilities." Lavezzi v. State, 219 N.J. 163, 171 (2014). For
those reasons, we will "not disturb an administrative agency's determinations or
findings unless there is a clear showing that (1) the agency did not follow the
law; (2) the decision was arbitrary, capricious, or unreasonable; or (3) the
decision was not supported by substantial evidence." In re Application of
Virtua-West Jersey Hosp. Voorhees for a Certificate of Need, 194 N.J. 413, 422
(2008). "The burden of demonstrating that the agency's action was arbitrary,
capricious or unreasonable rests upon the [party] challenging the administrative
action." In re Arenas, 385 N.J. Super. 440, 443-44 (App. Div. 2006).
"[T]he test is not whether [we] would come to the same conclusion if the
original determination was [ours] to make, but rather whether the factfinder
could reasonably so conclude upon the proofs." Brady v. Bd. of Review, 152
N.J. 197, 210 (1997) (quoting Charatan v. Bd. of Review, 200 N.J. Super. 74,
79 (App. Div. 1985)). "Where . . . the determination is founded upon sufficient
A-3151-18T3
7
credible evidence seen from the totality of the record and on that record findings
have been made and conclusions reached involving agency expertise, the agency
decision should be sustained." Gerba v. Bd. of Trs., Pub. Emps.' Ret. Sys., 83
N.J. 174, 189 (1980), overruled on other grounds by Maynard v. Bd. of Trs.,
Teachers' Pension & Annuity Fund, 113 N.J. 169 (1988). However, we review
de novo an agency's interpretation of a statute or case law. Russo, 206 N.J. at
27.
We turn first to plaintiff's contention that a factual dispute required the
referral of the matter to the OAL. Specifically, plaintiff argues that in following
the Division's "unsupported determination that [plaintiff's] employment with
[S4T] constituted employment with the EBOE," the Board "erroneously ignored
the clear factual dispute; that is [plaintiff] maintains that she was employed by
a private employer and not by the EBOE." According to plaintiff, since "the
Board failed to engage in any factual analysis, there [was] no basis for its finding
that [plaintiff's] retirement was not bona fide." We disagree as we conclude the
matter presented only a legal issue under what were undisputed facts.
Turning to plaintiff's contention that the Board's legal conclusion was
incorrect because she was an employee of S4T rather than the EBOE when she
returned to work, we disagree and find from our de novo review that the Board's
A-3151-18T3
8
legal determination was correct. In reaching that conclusion, we are mindful of
the public policies that must guide our review. First, "[a]s a form of legislation
aimed at remedying a social problem, pension statutes 'should be liberally
construed and administered in favor of the persons intended to be benefited. '"
Francois v. Bd. of Trs., Pub. Emps.' Ret. Sys., 415 N.J. Super. 335, 351 (App.
Div. 2010) (quoting Klumb v. Bd. of Educ. of Manalapan–Englishtown Reg'l
High Sch. Dist., 199 N.J. 14, 34 (2009)). However, second, "pension[] statutes
are to be construed so as to preserve the fiscal integrity of the pension funds. "
DiMaria v. Bd. of Trs., Pub. Emps.' Ret. Sys., 225 N.J. Super. 341, 354 (App.
Div. 1988).
With those guiding principles in mind we turn to the Board's legal
conclusion. The Board, relying exclusively on N.J.A.C. 17:1-17.14(a)(2)(iv),
found that plaintiff did not have a bona fide severance from employment after
she returned to employment with the EBOE within 180 days of her retirement,
and was therefore required to repay the retirement benefits that the TPAF paid
to her from July 1, 2015 to March 1, 2017. We agree.
Under the Teachers' Pension and Annuity Fund Law, N.J.S.A. 18A:66-1 to
-93, when a former member of the TPAF, who has received a retirement
allowance "for any cause other than disability, becomes employed again in a
A-3151-18T3
9
position which makes him eligible to be a member of the retirement system, his
retirement allowance . . . shall be canceled until he again retires." N.J.S.A.
18A:66-53.2(a). Under N.J.A.C. 17:1-17.14(c), defined benefit plans 2 are
required to pay retirement benefits to a member "only when there is a bona fide
severance from employment" unless the member is of normal retirement age
under the plan and the plan provides for distribution of benefits without a bona
fide severance from employment.
"Bona fide severance from employment" means a
complete termination of the employee's employment
relationship with the employer for a period of at least
180 days. The following does not constitute a complete
termination of the employee's relationship with the
employer:
i. Employment or reemployment in a part-time
position;
ii. Employment or reemployment in a position that is
not covered by the Defined Benefit Plan;
iii. A change in title;
iv. Employment or reemployment as a contract
employee, a leased employee, or an independent
contractor; or
v. Termination of employment with a pre-arranged
agreement for reemployment.
2
The TPAF is one of seven defined benefit plans. N.J.A.C. 17:1-17.14(a)(1).
A-3151-18T3
10
Federal Internal Revenue Service factors 3 shall be used
as guidance in determining whether an employment
relationship exists. A mandatory retirement shall be
treated as a bona fide severance from employment.
[N.J.A.C. 17:1-17.14(a)(2) (emphasis added).]
According to N.J.A.C. 17:1-17.14(e),
if an employee who has applied and commenced a
retirement benefit is reemployed by the same
employer . . . within fewer than 180 days after the
specified date of termination, the Division may, but is
not required to, do the following:
1. Require the employee and employer to again certify
that there was no prearranged agreement for the
reemployment; and
2. Investigate the circumstances of the reemployment
to determine if there was, in fact a bona fide severance
from employment.
If, after investigation, the Division finds there was no bona fide severance from
employment, the Division "may revoke the retirement of the member and require
3
Those factors are used as guidance in determining whether "an employment
relationship exists," N.J.A.C. 17:1-17.14(a)(2), and were "designed to determine
whether a person was an independent contractor or an employee." Francois, 415
N.J. Super. at 351. Contrary to plaintiff's contention on appeal, the federal
factors were not triggered because there was no dispute that she worked for the
EBOE as a contract employee or an independent contractor.
A-3151-18T3
11
the repayment of benefits in order to protect the qualified status of the defined
benefit plans." N.J.A.C. 17:1-17.14(f).
Here, the Board correctly found that plaintiff's retirement did not qualify
as a bona fide severance from employment under the applicable regulations.
Plaintiff's status an employee of S4T rather than the EBOE, is inconsequential.
N.J.A.C. 17:1-17.14(a)(2) states that "[e]mployment or reemployment as a
contract employee, a leased employee, or an independent contractor" "does not
constitute a complete termination of the employee's relationship with the
employer." (Emphasis added). It is undisputed that within 180 days after her
retirement, plaintiff began working, through S4T, as a contract or leased
employee, for the EBOE as a substitute teacher.
The Board's decision was not arbitrary, capricious, or unreasonable in
light of the clear language of the regulations and the facts surrounding plaintiff's
re-employment. To hold otherwise would create a simple method for retirees
from a school system to continue their work while not of retirement age while
simultaneously collecting their pension and a salary, which would be contrary
to the polices governing public pensions. See Francois, 415 N.J. Super. at 350
("An inappropriate allowance of benefits tends 'to place a greater strain on the
financial integrity of the fund in question and its future availability for those
A-3151-18T3
12
persons who are truly eligible for such benefits.'" (quoting Smith v. State, 309
N.J. Super. 209, 215 (App. Div. 2007))).
Plaintiff's final argument addresses the Board's requirement for
repayment. She contends that even if she violated N.J.A.C. 17:1-
17.14(a)(2)(iv), any violation was unintentional and therefore she should not be
responsible for reimbursement of the full amount of the pension benefits she
received. Specifically, plaintiff contends that she should be required to repay
$9179.71, calculated by summing her "gross pay" from October 2015 to July 16
when she worked for the EBOE through S4T.
When determining the amount of the retirement allowance to be repaid,
factors pertinent to the equities in the case should be considered. They include
whether the retiree reasonably relied on representations in selecting a course of
action; the diligence of the agency action in uncovering improper payment of
retirement allowances; evidence of manipulation by the retiree and his or
employer; and the proportionality of an order requiring repayment where non -
compliance is attributable to a mistake rather than manipulation of the pension
system. See, e.g., Skulski v. Nolan, 68 N.J. 179, 196 (1975); Vliet v. Bd. of
Trs., Pub. Emps.' Ret. Sys., 156 N.J. Super. 83, 90 (App. Div. 1978); Indursky
v. Bd. of Trs., Pub. Emps.' Ret. Sys., 137 N.J. Super. 335, 343 (App. Div. 1975).
A-3151-18T3
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However, reasonable reliance does not include relying upon outside advice when
making post-retirement decisions, as the retiree's former employer may offer
"more specific advice" on the effects of post-retirement employment on that
retiree's pension as compared to an outsider. Vliet, 156 N.J. Super. at 89-90.
The Board determined that plaintiff owed $32,431.56 since plaintiff
received her first retirement benefits check on July 1, 2015 and her final check
on March 1, 2017. Plaintiff acknowledged, and has not contested, that she is
required to repay $9266.16, which represents the total of six pension checks she
received from October 1, 2016 to March 1, 2017 after she returned to full -time
employment with the EBOE. Also, it is undisputed that plaintiff did not
manipulate the TPAF in any way and the Division conducted an immediate
investigation upon notification of plaintiff's true employment status.
In considering the equities, we find no error in the Board's decision that it
was unreasonable for plaintiff to rely on representations from S4T that her
pension would not be adversely affected by being placed with the EBOE. As
evidenced by her contact with the Board after her full-time direct re-
employment, she was aware that her pension could be impacted by her post-
retirement employment. And, she was also evidently concerned about that
impact when she obtained advice from S4T about working through it for the
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EBOE, yet she provided no explanation for why she did not contact the Division
to determine exactly what the impact of her placement would be, as instructed
in the letter approving her retirement.
Balancing these equities, the Board was correct in determining that
plaintiff was required to repay the full $32,431.56. Although her non -
compliance with the regulations was seemingly unintentional, there is no reason
why plaintiff should realize a windfall at the TPAF's expense based on her own
actions. Under the circumstances, we have no cause to disturb the Board's
decision.
Affirmed.
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