ELIZABETH R. STEINMANN, APPELLANT, v. STATE OF NEW JERSEY, DEPARTMENT OF THE TREASURY, DIVISION OF PENSIONS, TEACHERS’ PENSION AND ANNUITY FUND, RESPONDENT.
Supreme Court of New Jersey
August 7, 1989
Argued February 14, 1989
116 N.J. 564
The opinion of the Court was delivered by
STEIN, Justice.
Although the underlying chronology and regulatory context of this case are somewhat complex, the critical issue is simple: whether appellant has shown good cause to change her disability pension to a more favorable pension benefit based on service rather than disability.
Mrs. Steinmann was entitled to an early retirement pension of $752.93 per month based on over twenty-five years of service as a teacher. Because she sustained a job-related injury in 1981, she was eligible to apply, alternatively, for a disability retirement benefit. She was not adequately informed by the Board of Trustees of the Teachers’ Pension and Annuity Fund (Board or TPAF), however, of the possibility that her disability pension benefit, reduced by her ultimate workers’ compensation award, could be less than her early-retirement pension. When she eventually learned that her net disability pension would be $193 per month less than her service pension, she requested permission to change her pension selection. This request was denied for the reason that “once a retirement has become effective no change * * * is possible.”
On review, an administrative law judge determined that Mrs. Steinmann had shown the requisite “good cause” and “reasonable diligence” to reopen her pension designation. The ALJ found that Mrs. Steinmann had been treated unfairly by the Board and had received inadequate and incomplete information about the effect of a workers’ compensation award on her various retirement options. The Board subsequently rejected the ALJ‘s recommendation, finding that Mrs. Steinmann pos
The Appellate Division affirmed, finding “substantial credible evidence” on the record to support the Board‘s conclusions. 235 N.J.Super. 356. Judge O‘Brien dissented, agreeing with the ALJ that Mrs. Steinmann should be permitted to convert from ordinary disability to early retirement, and disagreeing with the majority that the Board‘s findings were supported by substantial credible evidence. We reverse.
I.
Elizabeth R. Steinmann was a schoolteacher for more than twenty-five years in the Newark and Wayne school systems. On April 3, 1981, she fell while teaching a class and suffered injuries that led to her retirement. She had accumulated over twenty-five years of creditable service in the Teachers’ Pension and Annuity Fund when she filed an application for accidental-disability retirement on January 31, 1983.
Appellant‘s claim may be understood only in the context of the retirement options then available to her. On the one hand, public employees may select retirement plans based solely on age and service. “Service” retirement is available to any employee at age sixty regardless of years in service. It is determined by dividing years of service by age and multiplying that number by a retiree‘s “final average salary” for the last three years of her employment.1 “Early retirement” is available to employees who have established twenty-five years or more of creditable service before age sixty.2 “Deferred retire
Distinct from these retirement plans based on age and service is a system that compensates disabled employees. Disabled retirees receive a certain percentage of their final average salary payable as long as they remain disabled. “Ordinary disability” retirement is available to retirees under sixty years of age with ten or more years of credited service who are considered “totally and permanently disabled.”4 “Accidental disability” retirement, by comparison, is available to retirees under sixty-five years old who are considered “totally and permanently disabled” as a direct result of a “traumatic event” that occurred in the course of the performance of regular employment duties.5 Those who qualify for accidental disability receive benefits equal to two-thirds of the salary received on the date of the accident.
Since 1971 public employees receiving workers’ compensation benefits are also entitled to receive retirement benefits.6 However, workers’ compensation awards result in a reduction of the
Thus, when Mrs. Steinmann realized in January 1983 that she was permanently disabled, she had certain available options. Without regard to her job-related disability, Mrs. Steinmann was eligible for early or deferred retirement based on her twenty-five years of service as a teacher. Alternatively, she could have applied, as she did, for accidental-disability benefits; if rejected, she could qualify for ordinary-disability benefits. However, as noted above, accidental- or ordinary-disability benefits are reduced by a workers’ compensation award, and thus calculation of a disability-retiree‘s ultimate award must await adjudication of the workers’ compensation claim.
In order for Mrs. Steinmann to have made an informed choice concerning her retirement benefits in January 1983, the following information would have been material: the amount of age and service-related benefits to which she was entitled; the amount of accidental- or ordinary-disability benefits to which she was entitled; which, if any, of the above are offset by a workers’ compensation award; the amount of the compensation
When Mrs. Steinmann filed her application for accidental disability in 1983, she referred to a booklet entitled Teachers’ Retirement in New Jersey, published by the Division of Pensions, which reflected conditions in effect on July 1, 1973. This booklet states that one should
understand that if he is receiving periodic benefits under Workmen‘s Compensation, the actuarial equivalent of such benefits remaining to be paid will reduce the pension portion of his allowance.8
The booklet that she consulted—the only booklet then available—made no distinction between age/service benefits and disability benefits. Nor did the booklet contain any explanation about how the reduction for workers’ compensation was to be calculated.
Subsequent to oral argument, the Court requested counsel for the Board to inform it concerning the method of calculating the workers’ compensation award offset. Counsel has provided to the Court a copy of a form entitled “Workmen‘s Compensation Actuarial Reduction Worksheet,” which it describes as the worksheet “employed to calculate the amount of reduction necessitated by a workers’ compensation award.” Letter from Deputy Attorney General Connel, Mar. 3, 1989. (The worksheet is reproduced as Appendix A to this opinion.) The worksheet does not appear in the booklets on Teachers Retirement published by the Division of Pensions, nor is the method of calculation described in any regulations adopted by the Board. The calculation contemplated by the worksheet requires use of
In January 1983, when Mrs. Steinmann first filed her application for accidental disability benefits, the Board was aware that she had been receiving workers’ compensation benefits, and was awaiting disposition of a pending petition for further benefits. Presumably, the Board could have ascertained from her application that she was also eligible for early retirement benefits. In December 1983, the Board denied appellant‘s accidental-disability application; simultaneously, it granted Mrs. Steinmann ordinary-disability benefits based on her permanent and total disabilities. The Board also informed Mrs. Steinmann of the right to amend her retirement option, but only if she acted within thirty days. She was not specifically informed either that ordinary disability benefits would be subject to an offset by a workers’ compensation award or that she could convert to early retirement and thereby avoid any offset.
In February 1984, the Board informed appellant of her exact monthly allowance under the maximum ordinary-disability option, and informed her for the first time that ordinary-disability retirement could be subject to reduction by a workers’ compensation award:
Please note that if you are receiving any periodic Worker‘s Compensation payments after the effective date of your retirement, your retirement allowance could be subject to a reduction. You must advise this office if and when you receive any Worker‘s Compensation Benefits.9
On July 10, 1984, Mrs. Steinmann‘s workers’ compensation claim was adjudicated. She was awarded 38-½ weeks of temporary disability and 225 weeks of permanent disability at the rate of $846.00. By letter dated July 20, 1984, she advised the Board of this award, but received no response.
In January 1985, Mrs. Steinmann wrote the Board to confirm her understanding about offset. She stated, “It is my understanding that my ordinary disability pension is not subject to any offset. If I am not correct in this matter please change my pension to years in service [early retirement] * * *.”
In September 1985, the Division of Pensions advised Mrs. Steinmann that her monthly ordinary-disability benefit would be reduced commencing November 1, 1985, from $908.57 to $559.88, as a result of an offset reflecting the workers’ compensation award. For the first time since she applied for retirement benefits, Mrs. Steinmann realized that she would be entitled to $193 per month more under an earned early-retirement benefit than she would receive from her ordinary-disability benefit offset by her workers’ compensation award. Accordingly, in November 1985, Mrs. Steinmann asked the Board to convert her benefits from ordinary disability to early retirement. In January 1986, the Board denied her request because “once a retirement has become effective no change * * * is possible.”
Appellant sought review of the Board‘s ruling. An ALJ determined that Mrs. Steinmann had established the requisite “good cause” and “reasonable diligence” to reopen her pension. See Duvin v. State, 76 N.J. 203, 207 (1978). The ALJ found that Mrs. Steinmann had been treated unfairly by the Board because she never had been adequately informed about her retirement options. Appellant testified before the ALJ that if adequately informed, she would have chosen early retirement
The Board rejected the ALJ‘s recommendations and denied petitioner‘s conversion request. The Board concluded that appellant knew about the effect of a workers’ compensation award at or about the time she accepted ordinary-disability retirement. It also determined that it had no obligation at that time to inform her of the early retirement plan option.
The Appellate Division majority affirmed the Board‘s ruling. Petitioner appeals as of right on the basis of the dissent below.
II.
This Court has acknowledged the importance of construing the extensive statutory and regulatory scheme relating to pensions fairly, with due regard to the significant interests of public employees:
Pensions for public employees serve a public purpose. A primary objective in establishing them is to induce able persons to enter and remain in public employment, and to render faithful and efficient service while so employed. They are in the nature of compensation for services previously rendered and act as an inducement to continued and faithful service. Being remedial in character, statutes creating pensions should be liberally construed and administered in favor of the persons intended to be benefited thereby. [Geller v. Department of the Treasury, 53 N.J. 591, 597-98 (1969) (citation omitted) (emphasis added).]
Estate of Hagel v. Board of Trustees, 226 N.J.Super. 182, 186 (App.Div.1988); see also Fiola v. Department of the Treasury, 193 N.J.Super. 340, 347 (App.Div.1984) (“It is virtually axiomatic that statutory pension provisions are to be liberally construed in favor of public employees and that pensions represent not merely the gratuity of a benevolent governmental employer but rather that they constitute deferred compensation earned by
It is well established that the Board may honor a pensioner‘s request to reopen her retirement selection after it is due and payable if a showing of good cause, reasonable grounds, and reasonable diligence has been made. Duvin v. State, 76 N.J. 203, 207; see Geller v. Department of the Treasury, supra, 53 N.J. 591; Fiola v. Department of the Treasury, supra, 193 N.J.Super. 340; Smith v. Consolidated Police & Firemen‘s Pension Fund Comm‘n, 149 N.J.Super. 229 (App.Div.), certif. denied, 75 N.J. 8 (1977).
Although Geller and Fiola do not explicitly enunciate the “good cause” standards established in Duvin, they support the principle that a pensioner may alter her retirement plan if she demonstrates adequate grounds. In Geller, supra, 53 N.J. 591, a teacher who overstayed her maternity leave by four months sought to receive full credit for prior teaching service. She wrote the Board a letter authorizing it to make appropriate increased deductions from her pay. The Board never complied nor did it satisfactorily explain its failure to do so. This Court held that “[i]n light of the Board‘s expertise in such matters and Mrs. Geller‘s inexperience, * * * if the Board was not clear as to her authorization it should have said so and sought clarification.” Id. at 600. We ordered that she be restored to the position in which she would have been had the deductions been made as authorized. Ibid.
In Fiola, supra, 193 N.J.Super. 340, a retired fireman filed for deferred retirement benefits after the deadline. The Board
III.
In deciding that Mrs. Steinmann had not shown “good cause” sufficient to permit her to change her retirement designation, the Appellate Division majority focused solely on whether the record supported the Board‘s conclusion that when petitioner applied for disability benefits, she knew that an ordinary-disability pension was subject to reduction by a workers’ compensation award. That focus too narrowly circumscribes the “good cause” standard we adopted in Duvin, supra, 76 N.J. 203, particularly in the context of the Legislature‘s intention to provide public retirees with a variety of options in selecting a retirement-benefit plan.
It is highly unlikely that the Legislature would offer public employees the option of selecting among various service retirement benefits and disability benefits without intending that a retiree be able to make an informed choice about which benefit
As the record in this case so clearly demonstrates, appellant could not make an informed choice about her retirement options until she knew the amount of her workers’ compensation award and until the Board‘s actuary calculated the amount of the offset, even if she knew there would be such an offset. It is obvious that Mrs. Steinmann would not have elected to receive an ordinary-disability benefit if she knew that her early retirement-benefit would be substantially greater. However, she was compelled by the Board‘s regulations to make a binding election among her retirement options before she could determine which option was in her best interest. See
Although this appeal does not directly concern the validity of the Board‘s regulations, it is well-settled that “[a]dministrative regulations * * * cannot alter the terms of a legislative enactment or frustrate the policy embodied in the statute.” New Jersey Chamber of Commerce v. New Jersey Election Law Enforcement Comm‘n, 82 N.J. 57, 82 (1980). In the face of the Legislature‘s clearly-expressed intention to afford a wide range of retirement options to public employees, including those eligible for workers’ compensation benefits, the Board‘s procedures, as applied to employees situated similarly to Mrs. Steinmann, would appear to disserve the legislative purpose.
We find that the facts in this record demonstrate “good cause” to permit Mrs. Steinmann to change her pension designation, irrespective of her knowledge concerning the workers’ compensation offset.10 The “good cause” derives from the fact that when Mrs. Steinmann applied for a disability pension, she was unable to make an informed choice among her retirement options. The parameters of the “good cause” standard we adopted in Duvin, supra, 76 N.J. 203, should be sufficiently flexible to accommodate the legislative purpose of affording
Thus, we do not hold as a matter of law that the Board must allow all retirees faced with Mrs. Steinmann‘s options to change their election after the workers’ compensation award is final. However, at oral argument we were informed by the Board‘s counsel that the number of retirement applications that pose this problem is quite limited. That would suggest that the Board should seriously evaluate whether, consistent with its overall responsibility for administration of the teachers’ pension and annuity fund,
The judgment of the Appellate Division is reversed and the matter remanded to the Board for further proceedings consistent with this opinion.
APPENDIX “A”
WORKMENS’ COMPENSATION ACTUARIAL REDUCTION WORKSHEET
| Name | PERS TPAF # | Date |
| Retirement date | Normal monthly allowance: | |
| Type | 1. Pension $ | |
| Option | 2. Annuity $ | |
| 3. Total $ | ||
Workmens’ compensation award: (Effective ________)
4. $ ________ per weeks for ________ weeks ........ $ ________
5. Less amount paid prior to retirement date:
$ ________ X ________ weeks ........ $ ________
6. Balance of award remaining on date of retirement ........ $ ________
7. Actuarial) $ ________ ÷ ________ $ ________ Annual reduction.
Reduction) (Line 6) (SLA factor)
$ ________ Monthly
8. If pensioner is receiving a lifetime award from the 2nd Injury Fund, the reduction is 100% of weekly award on Line 4 ........ $ ________
Adjusted monthly allowance: Monthly — (× 4).. $ ________
9. Pension $ ________ — Monthly red. $ ________ $ ________
(Line 1) (Line 7 or 8)
10. Annuity — (Line 2)........ $ ________
11. Reduced monthly allowance ........ $ ________
Summary:
12. Reduce retirement allowance to $ ________ monthly, effective ________, check dated ________
13. Overpayment of pension from date of ret. to date of adj. ........ ________ months.
14. Original pens. $ ________ — Reduced pens. $ ________ $ ________
Mo. Red. (Line 1) (Line 9)
15. Monthly red. $ ________ X mos. on ret. ........ $ ________
Overpayment (Line 14) (Line 13)
16. Secondary adjustment if pensioner cannot reimburse retirement system by lump sum. Additional actuarial reduction is permitted.
Overpayment $ ________ ÷ ________ $ ________ Annual reduction.
(Line 15) (SLA factor)
$ ________ Monthly.
Calculated by ________ Date ________
We would affirm substantially for the reasons expressed in the majority opinion filed in the Appellate Division, reported at 235 N.J.Super. 356 (1988).
For reversal—Chief Justice, WILENTZ and Justices CLIFFORD, HANDLER and STEIN—4.
For Affirmance—Justices POLLOCK, O‘HERN and GARIBALDI—3.
Notes
An application for retirement benefits may be approved by the board of trustees while the member, applying for such benefits, is in receipt of periodic benefits under the workmen‘s compensation law. In this event the actuarial equivalent of such periodic benefits remaining to be paid shall be computed and will serve to reduce the pension portion of the retirement allowance payable to the retirant * * *.
See also