BLANCA MARTINEZ, Plaintiff-Petitioner, v. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION OF NEW MEXICO, and PUBLIC EMPLOYEES RETIREMENT BOARD, Defendants-Respondents.
Docket No. 31,310
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
July 17, 2012
2012-NMCA-096
BUSTAMANTE, Judge.
Certiorari Granted, September 14, 2012, No. 33,759
APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
Raymond Z. Ortiz, District Judge
The Pickett
Mark L. Pickett
Las Cruces, NM
for Petitioner
Charles Rennick, LLC
Charles Rennick
Santa Fe, NM
for Respondents
OPINION
BUSTAMANTE, Judge.
{1} Blanca Martinez appeals from a district court decision upholding the Public Employees Retirement Board’s conclusion that (1) she had no absolute entitlement to survivor benefits under her deceased husband’s retirement plan with the Public Employees Retirement Association, and (2) she had not substantially complied with the statutory requirement to apply for survivor benefits within one year of her husband’s death. We hold that Mrs. Martinez did not have an interest in her husband’s retirement benefits after his death other than a statutorily created property interest in survivor benefits. We also hold that the time limit and documentation requirements in
I. BACKGROUND
A. Factual Background
{2} Blanca Martinez’s husband, Marco Martinez, died of a sudden heart attack on March 8, 2007. He was 47 years old. At the time of his death, he had worked for the New Mexico Department of Corrections for seven years. Mr. Martinez was enrolled in the Public Employees Retirement Association (PERA) and contributed to his PERA account throughout his employment with the State of New Mexico. Mrs. Martinez was his designated beneficiary for both survivor benefits and refund of contributions.
{3} On May 30, 2007, Mrs. Martinez sent a letter to PERA notifying them of her husband’s death. She enclosed a copy of the death certificate and mentioned “the PERA survivor pension referenced on page 23 of the PERA member handbook.” Her letter requested that PERA send her “any paperwork [she] need[ed] to complete to receive this survivor pension.” The letter prompted PERA to conduct an audit of Mr. Martinez’s file to determine what, if any, benefits were due to his beneficiaries. On June 5, 2007, PERA sent Mrs. Martinez a letter stating that “PERA [was] conducting an audit on Mr. Marco Martinez’[s] retirement file to determine the amount of monthly retirement benefits that are payable to [her].” On June 27, 2007, PERA sent Mrs. Martinez another letter. In this letter, PERA requested that Mrs. Martinez complete and return the enclosed “Application for Survivor Retirement Annuity.” There was no mention of a deadline for submission of this form and/or supporting documents. Although the letter states that a copy of the relevant section of the Public Employees Retirement Act, see
{4} Mrs. Martinez completed the application for survivor annuity on August 3, 2007, but testified that she did not send it to PERA because she was busy with other matters related to her husband’s estate and uncertain about how to complete it since there was an ongoing investigation into the cause of her husband’s death. She testified that she “might have known about [the one year deadline for application for benefits],” but she had “other things . . . to do” related to her husband’s death. On May 12, 2009, two years and two months after Mr. Martinez’s death, PERA notified Mrs. Martinez by mail that she had failed to submit the application for survivor annuity within one year of her husband’s death and, therefore, she was “no longer eligible for a survivor benefit.” On November 12, 2009, Mrs. Martinez, through counsel, submitted the application for survivor annuity and requested that PERA accept it in light of the circumstances of her case. PERA denied this request by letter on November 17, 2009, stating, “we are unable to allow you to receive survivor benefits” because “you did not comply with the statutory one[-]year requirement.”
B. Procedural Background
{5} Mrs. Martinez appealed PERA’s decision pursuant to 2.80.1500 NMAC (10/15/1997) (amended 9/30/10). After a hearing, the hearing officer concluded that Mrs. Martinez did not have a “statutory right or entitlement” to the survivor pension, that an application that satisfied the requirements of
{6} Mrs. Martinez appealed the PERA Board’s decision to the district court. The district court found that Mr. Martinez’s benefits had vested in him, but not in Mrs. Martinez, “thereby according her no right or entitlement to said retirement benefits.” The court found that the one-year period for filing for survivor benefits in
II. DISCUSSION
{7} Mrs. Martinez raises two issues on appeal: (1) whether
A. Mrs. Martinez Did Not Substantially Comply with Section 10-11-14.5(A)
1. Standard of Review
{8} Generally, this Court applies the same standard of review as the district court and reviews an administrative order to determine whether the order is “arbitrary, capricious, or an abuse of discretion; not supported by substantial evidence in the record; or, otherwise not in accordance with law.” Rio Grande Chapter of the Sierra Club v. N.M. Mining Comm‘n, 2003-NMSC-005, ¶ 17, 133 N.M. 97, 61 P.3d 806; see
2. Analysis
{9} Mrs. Martinez contends that her claim for survivor benefits should not be barred because she substantially complied with the statute’s requirements by sending a letter and the certificate of death within three months of her husband’s death.
A survivor pension may be paid to certain persons related to or designated by a member who dies before normal or disability retirement if a written application for the pension, in the form prescribed by the association, is filed with the association by the potential survivor beneficiary or beneficiaries within one year of the death of the member.
(Emphasis added). Mrs. Martinez argues that (1) the purpose of
{10} PERA counters that the “purpose of the requirements is to ensure accuracy, to identify potential minor beneficiaries, and to deter fraud by virtue of requiring official documents and sworn statements,” as well as to “ensure the actuarial viability of the trust fund.” PERA argues that the statute’s one-year requirement is mandatory because it is “consistent with the actuarial nature of the trust fund.” The one-year requirement also prevents PERA from having to manage and plan for applications for survivor benefits that are submitted “5, 10, 15[,] even 20 years” after the death of a member.
{11} The parties do not dispute that Mrs. Martinez did not comply strictly with Subsection A. Stennis v. City of Santa Fe (Stennis II), 2010-NMCA-108, ¶ 9, 149 N.M. 92, 244 P.3d 787 (“Strict compliance means that the statutory provision at issue must be followed precisely.“). Instead, Mrs. Martinez argues that her actions were sufficient to substantially comply with the requirements. When a party claims substantial compliance, “a court should determine
a. Purpose of PERA and Section 10-11-14.5(A)
{12} PERA was established in 1947, see Pierce v. State, 1996-NMSC-001, ¶ 32, 121 N.M. 212, 910 P.2d 288, by the Act. Regulation of PERA is codified in the New Mexico Administrative Code at 2.80.100 to -2300 NMAC (11/19/81, as amended through 9/30/10). PERA was established to collect, hold in trust, and invest monies contributed by employees and employers to pay “future retirement benefits to . . . PERA members.” Gonzales v. Pub. Emps. Ret. Bd., 114 N.M. 420, 422, 839 P.2d 630, 632 (Ct. App. 1992). The PERA Board is charged “to preserve, protect, and administer the trust to meet its current and future obligations and provide quality services to Association members.” PERA, http://www.pera.state.nm.us. As trustee of PERA funds, the PERA Board “has a fiduciary responsibility to invest these funds solely in the interest of the members, retirees, and beneficiaries and exclusively to provide benefits to the members, retirees, and beneficiaries and to pay reasonable administrative costs.” 2.80.300.30(A)(2) NMAC; see
{13} Mrs. Martinez makes two distinct arguments with respect to Subsection A. First, she argues that the one-year time limit serves no discernable purpose and, therefore, strict compliance with that requirement does not further the intent of the statute. Second, she argues that the contents of her letter of May 30, 2007, were sufficient to meet the purposes of the statute. We address each of these points in turn.
b. Time Limit
{14} Our Supreme Court has addressed time limits applying to the administration of PERA funds in State ex rel. Pub. Emps. Ret. Ass’n v. Longacre, 2002-NMSC-033, ¶¶ 20-23, 133 N.M. 20, 59 P.3d 500. The Court discussed the reasons why PERA may not recover overpayments to retirees and beneficiaries past a certain date:
a statute of limitations or repose providing that the state may not recover overpaid retirement benefits after the expiration of a certain time period serves the purpose of facilitating effective financial planning by retirees who are often forced to make, for example, critical healthcare decisions based upon the availability of fixed and often limited resources.
Id. ¶ 20 n.8. In Longacre, the purpose of the bar on PERA claims against retirees and beneficiaries was to “reduce the potential hardship to retirement pension beneficiaries from having to return overpayments that
{15} In this case, the language in Subsection A barring claims for survivor’s benefits after one year from the death of the member serves PERA’s fiduciary purpose. The deadline promotes resolution and closure of claims for benefits within a manageable period and allows PERA to administer its funds effectively and profitably. It prevents PERA from having to hold some funds in abeyance in anticipation of a claim, and allows PERA to invest and manage the funds, consistent with its mission, for the benefit of all retirees and beneficiaries. It permits PERA to determine the beneficiaries, the amount of their annuity, and the number of years they will be paid, as well as to plan for reservation and/or investment of funds for those payments in a timely manner. See
c. Documentary Requirements
{16} The specific documentary requirements of an application for benefits aid PERA in preventing fraud.
{17} As trustees of the funds contributed by its members and the state and municipal agencies it serves, the PERA board has a fiduciary duty to be vigilant against fraud. In addition to imposing this duty on the PERA Board, the Legislature, by requiring compliance with “the form prescribed by the association,” entrusted the PERA Board to determine how best to carry out that duty.
{18} Mrs. Martinez contends that the fact that PERA initiated an audit of her husband’s contributions, contacted his employer to verify his final salary, and calculated the amount of the monthly survivor benefits indicates that PERA had enough information to pay her benefits and, therefore, she substantially complied with the deadline. We are not persuaded. In In re Estate of Mayfield, 108 N.M. 246, 248, 771 P.2d 179, 181 (1989), the claimant argued that the fact that the “[respondent sought] discovery and request[ed]
{19} Furthermore, PERA’s action to investigate whether Mr. Martinez was vested and to calculate Mrs. Martinez’s potential benefits indicates only that PERA knew how much they may have to pay in survivor benefits. Under the statute, however, PERA is not obligated to begin payments until all the required documents are received and the beneficiaries are verified. See
{20} Finally, Mrs. Martinez asks that we compare the current version of Subsection A to the 1993 version and conclude that, because pre-amendment applicants were not subject to a deadline but post-amendment applicants are, the only purpose of the deadline is to deny benefits to those otherwise entitled. As discussed, however, the application requirements in the Act are related to its overall purpose. The fact that applicants before and after the amendments were subject to different requirements does not indicate that the 1997 amendments were unrelated to the purpose and intent of the statute.
{21} Mrs. Martinez neither strictly nor substantially complied with
B. The Act’s One-Year and Documentation Requirements do not Violate a Fundamental Personal Property Right Because they are Rationally Related to a Legitimate Government Purpose
{22} Mrs. Martinez argues that vested retirement benefits are property in which an individual’s rights are protected and that Mr. Martinez had earned a vested property interest in his retirement benefits that passed to his wife on his death. She maintains that the one-year time limit on application for those benefits deprives her of property rights without substantive due process as required under the New Mexico and United States Constitutions. Mrs. Martinez argues that we should review the statute’s requirements for applications using a strict scrutiny test because the interest at stake is a fundamental property interest.
{23} PERA counters that Mrs. Martinez did not obtain property rights equivalent to her husband’s on his death because survivor benefits are payable only upon compliance with the retirement plan’s requirements, including those in Subsection A. PERA contends that Mrs. Martinez failed to preserve her argument that Subsection A unconstitutionally deprives her of a property right. In the event that the Court finds the issue was preserved, PERA also argues that, even if Mrs. Martinez did have a property interest in the survivor benefits, Subsection A’s requirements are subject only to rational basis review, and under that test, the requirements are not unconstitutional.
1. Mrs. Martinez’s Arguments were Preserved
{24} “To preserve an issue for review on appeal, it must appear that appellant
{25} At the administrative hearing, Mrs. Martinez questioned PERA’s witness about the reasons for the time limit and raised the due process arguments regarding her property rights in closing argument. The hearing officer concluded that the statute does not “create a statutory right or entitlement for a named survivor beneficiary to always receive a survivor pension from PERA upon the death of a vested PERA member.” The hearing officer did not address the constitutional issue of whether Mrs. Martinez had been deprived of a right to substantive due process. See Montez v. J & B Radiator, Inc., 108 N.M. 752, 754, 779 P.2d 129, 131 (Ct. App. 1989) (“Raising [a constitutional] issue before the hearing officer was not required in order to preserve it because he had no authority to decide the issue.“). Mrs. Martinez again raised the issue of whether her husband’s vested property rights passed to her on his death in her exceptions to the hearing officer’s recommended conclusions of law. The PERA Board accepted the hearing officer’s conclusions.
{26} Finally, Mrs. Martinez raised the issue of her property rights in the survivor benefits and Subsection A’s impact on those rights in the appeal hearing before the First Judicial District Court. The district court judge found that (1) “the vesting rights law . . . applies to the employee spouse, not the beneficiary spouse;” (2) the statute “did not create a right or entitlement” in Mrs. Martinez, and (3) “there was no disregard of Mrs. Martinez’[s] [due process] rights in the circumstances here.” These issues were preserved for appeal.
2. Standard of Review
{27} The parties propose the same standard of review and cite to Lantz v. Santa Fe Extraterritorial Zoning Authority, 2004-NMCA-090, ¶ 5, 136 N.M. 74, 94 P.3d 817, which states “we will not disturb a final agency decision unless it was fraudulent, arbitrary, or capricious; not supported by substantial evidence; or otherwise not in accordance with law.” Constitutional questions like those before us are questions of law and are reviewed de novo. See Los Chavez Cmty. Ass’n v. Valencia Cnty., 2012-NMCA-044, ¶ 12, 227 P.3d 475.
3. Analysis
{28} Mrs. Martinez asks that we find that the one-year requirement in Subsection A deprives her of a property right unconstitutionally because PERA has not shown that it serves a compelling government interest. The first step in our inquiry is to determine whether Mrs. Martinez had an interest in PERA retirement benefits and, if so, the nature of the interest.
a. Interest as a Matter of Law
{29} In Pierce, 1996-NMSC-001, ¶ 43, the New Mexico Supreme Court analyzed the Act and held that the statute creates vested property rights. The Court stated:
[W]e find that the express language of the [PERA] statute[] initially creates an expectancy, or property interest, in receiving benefits. [It] require[s] a minimum of five years of earned service credits before an employee is eligible to receive benefits. The only other condition of eligibility is reaching a specified age. Therefore, based on an absolute right to receive some form of benefits after earning five years of service credits, we may infer that the statute[] create[s] vested property rights, but that these rights do not mature until the final statutory condition is met.
Id. (emphasis added). The “final statutory condition” is attainment of retirement age or
Upon meeting the minimum service requirements of an applicable retirement plan created by law for employees of the state or any of its political subdivisions or institutions, a member of a plan shall acquire a vested property right with due process protections under the applicable provisions of the New Mexico and United States [C]onstitutions.
{30} Mrs. Martinez maintains that her husband’s “absolute” interest in pension benefits passed to her on his death as a matter of law. In response, PERA cites Ruggles v. Ruggles to support its argument that “the benefits themselves do not vest in the survivor.” See Ruggles v. Ruggles, 116 N.M. 52, 860 P.2d 182 (1993). To the extent that Mrs. Martinez attempts to distinguish Ruggles on grounds that it is a divorce case not focused on survivor benefits, we are not persuaded. Ruggles makes clear that “[b]efore actual retirement, the right to receive an income stream from the pension plan is also subject to the contingency that the employee’s interest will become vested, then the contingency that it will mature, and all along the contingency that the employee will not die.” Id. at 65, 860 P.2d at 195. We agree with PERA that Ruggles and Schweitzer, to which Ruggles refers, appear to dictate that, when a member dies before his pension benefits mature and unless a statute provides otherwise, the surviving spouse has an interest only in the actual contributions made by the member to the pension plan, not in the benefits. Ruggles, 116 N.M. at 60, 860 P.2d at 190; Schweitzer, 103 N.M. at 615, 711 P.2d at 892.
{31} To the extent Mrs. Martinez relies on Pierce and Section 22 of Article XX of the New Mexico Constitution, those sources discuss vesting of rights in the contributing member, not in the member’s beneficiaries, and are, therefore, unavailing. See Pierce, 1996-NMSC-001, ¶ 37 (“[The] provision granted employees . . . a vested right in membership.” (emphasis added)); id. ¶ 42 (“[PERA] grant[s] employees a substantive right to receive retirement benefits upon meeting certain requirements.” (emphasis added));
b. Interest Created by Statute
{32} The terms of the statute creating a property right also govern how and when the right will mature. See Pierce, 1996-NMSC-001, ¶ 44. Here, Mr. Martinez’s right to retirement benefits vested when he completed five years of service and would have matured when he turned sixty-five. See
{33} Similarly, Mrs. Martinez’s right to a survivor pension was created by the Act and she became eligible for it only when her husband died. See, e.g.,
{34} Mrs. Martinez urges us to find that the language in
{35} Although she cites to Pierce in support of her contention that Subsection K gives her an “absolute right to receive some form of retirement benefits,” Pierce does not so hold. Rather, the Pierce court, while calling a vested right an “absolute right,” also recognized that the “absolute right to receive benefits” was created by the PERA statute and “vests upon fulfilling the minimum of five years of service credits” and “matures when the employee attains the age specified in the plan.” 1996-NMSC-001, ¶ 31; Copeland, 91 N.M. at 412, 575 P.2d at 102. The Court thus recognized that the “absolute right” could be accessed only by compliance with the Act. The Act states that, except as provided for survivor beneficiaries, “[a]ll payments stop upon the death of the retired member.”
{36} Mrs. Martinez had a property interest in survivor’s benefits for which she became eligible on her husband’s death and which she could have accessed by submitting a complete application, with accompanying documents, within the one-year period set by the statute. Since she did not meet these conditions, her right to the survivor benefits terminated. We turn now to whether the requirements for application deprived her of her right to survivor’s benefits without substantive due process, i.e., for no rational reason. See N.M. Indus. Energy Consumers v. N.M. Pub. Serv. Comm’n, 104 N.M. 565, 567, 725 P.2d 244, 246 (1986) (“Having identified the property interest, we must determine what process is due it.“).
c. Substantive Due Process
{37} The Fourteenth Amendment to the United States Constitution and Article II, Section 18 of the New Mexico Constitution require “due process of law” when a state deprives “any person of life, liberty, or property.”
{38} Mrs. Martinez urges us to assess the constitutionality of the Act’s application requirements using a strict scrutiny analysis on grounds that her interest in survivor benefits is a fundamental property right. She depends on a statement in Marrujo to the effect that “[s]trict scrutiny applies when the violated interest is a fundamental . . . right [such as] fairness in the deprivation of life, liberty, or property.” 118 N.M. at 757, 887 P.2d at 751 (emphasis added). Mrs. Martinez’s reliance on Marrujo is misplaced. In that case, the Court addressed whether the Tort Claims Act’s requirement that claims
{39} The rational basis test applies here. Like in Marrujo, where the time limit did not preclude a substantive right, the requirements in Subsection A do not preclude a survivor beneficiary from exercising a substantive right to receive benefits. See Pierce, 1996-NMSC-001, ¶ 42 (stating that the Act grants “employees a substantive right to receive benefits upon meeting certain requirements“). Rather, they specify the prerequisites for maturity of the benefits and the circumstances under which a beneficiary may receive them. See Longacre, 2002-NMSC-033, ¶ 24 (finding a time limit constitutional because it does not prohibit recovery of overpayments, but merely restrains the period in which to do so). In addition, the U.S. Supreme Court has applied rational basis scrutiny to similar cases involving pension benefit legislation. See, e.g., Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 725 (1984) (applying rational basis test to retroactive application of legislation requiring employers withdrawing from a plan to pay the plan their proportionate share of vested benefits); Gavin Reinke, Note, When a Promise Isn’t a Promise: Public Employers’ Ability to Alter Pension Plans of Retired Employees, 64 Vand. L. Rev. 1673, 1687 (2011). In R.A. Gray & Co., the Court stated:
It is by now well established that legislative Acts [sic] adjusting the burdens and benefits of economic life come to the Court with a presumption of constitutionality, and that the burden is on one complaining of a due process violation to establish that the legislature has acted in an arbitrary and irrational way.
467 U.S. at 729 (internal quotation marks and citation omitted).
{40} Finally, the time limit in Subsection A functions like a statute of repose because it cuts off claims after a specific statutorily defined date. See Cummings, 1996-NMSC-035, ¶ 50. As stated in Marrujo, statutes of repose are analyzed using a rational basis test. See 118 N.M. at 759, 887 P.2d at 753; Cummings, 1996-NMSC-035, ¶¶ 20-21, (“New Mexico courts have repeatedly analyzed . . . statutes of repose under the rational-basis test.“).
{41} Under a rational basis test, Mrs. Martinez must show that the one-year deadline and requirement for specific documents are not related to any legitimate governmental purpose. Marrujo, 118 N.M. at 758, 887 P.2d at 752. Any reasonable justification will suffice to find these requirements constitutional. Cummings, 1996-NMSC-035, ¶ 21. Mrs. Martinez questioned PERA’s manager of the Death and Disability Unit in the administrative hearing about the purpose of the one-year deadline. She maintains that, because the witness could not articulate a specific reason for this deadline, there must not be a reason. This inquiry alone, however, is not enough to demonstrate that there is no legitimate purpose for either the one-year period or the application requirements. The New Mexico Legislature, not PERA staff, instituted the one-year time frame and gave the PERA Board the power to require an application and accompanying documents. Therefore, the fact that the PERA staff member did not know why the Legislature instituted
{42} Mrs. Martinez also asserts that the requirements in Subsection A are an unconstitutional taking of her property without just compensation under
III. CONCLUSION
{43} We hold that Mrs. Martinez did not substantially comply with the requirements of
{44} We affirm.
{45} IT IS SO ORDERED.
MICHAEL D. BUSTAMANTE, Judge
WE CONCUR:
CELIA FOY CASTILLO, Chief Judge
J. MILES HANISEE, Judge
Topic Index for Martinez v. PERA of New Mexico, No. 31,310
ADMINISTRATIVE LAW AND PROCEDURE
Administrative Appeal
Arbitrary and Capricious Actions
Due Process
Judicial Review
Legislative Intent
Standard of Review
Timeliness
APPEAL AND ERROR
Preservation of Issues for Appeal
Standard of Review
CONSTITUTIONAL LAW
Due Process
EMPLOYMENT LAW
Health, Pension, and Retirement Benefits
GOVERNMENT
Public Employee
STATUTES
Interpretation
Legislative Intent