Fiola v. State, Dept. of Treasury, Div. of Pensions

• Decision Date: 09 April 1984
• Citation: 193 N.J.Super. 340,474 A.2d 23
• Parties: Nicholas FIOLA, Jr., Petitioner-Appellant, v. STATE of New Jersey, DEPARTMENT OF the TREASURY, DIVISION OF PENSIONS, Police and Firemen's Retirement System, Respondent-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 340

193 N.J.Super. 340

474 A.2d 23

Nicholas FIOLA, Jr., Petitioner-Appellant, v. STATE of New Jersey, DEPARTMENT OF the TREASURY, DIVISION OF PENSIONS, Police and Firemen's Retirement System Respondent-Respondent.

Superior Court of New Jersey Appellate Division.

Argued March 20, 1984.

Decided April 9, 1984.

Samuel J. Halpern, Paterson, for petitioner-appellant.

Robert K. Walsh, Deputy Atty. Gen., for respondent-respondent (Irwin I. Kimmelman, Atty. Gen., of New Jersey, attorney; James J. Ciancia, Asst. Atty. Gen., of counsel; Robert K. Walsh, on the brief).

Before BOTTER, PRESSLER and O'BRIEN.

The opinion of the court was delivered by

PRESSLER, J.A.D.

This is an appeal from a final determination of the Board of Trustees of the Police and Firemen's Retirement System (PFRS), which administers N.J.S.A. 43:16A-11.1, et seq. (Police and Firemen's Retirement System of New Jersey). The issue presented involves N.J.S.A. 43:16A-11.2, which accords the option of a deferred retirement allowance to those members terminating their employment after ten years of creditable service prior to reaching the age of 55, provided the termination was not the result of "removal for cause on charges of misconduct or delinquency." PFRS, rejecting the contrary recommendation of the administrative law judge, interpreted this provision as resulting in a forfeiture of the deferred retirement allowance option if the election is not made within two years after termination of actual service. It accordingly rejected the application for a deferred retirement allowance made by petitioner Nicholas Fiola, Jr., more than seven years after his separation from service but prior to his reaching age 55. Fiola appeals. We reverse.

The facts are essentially uncontroverted, and PFRS concedes that but for the timeliness issue Fiola would be entitled to a deferred retirement allowance. Fiola was first employed as a firefighter by the Township of Millburn in January 1955 and was enrolled as a PFRS member in February 1955. He resigned effective July 1974, his last contribution to PFRS being made in that month. He was then 46 years old and would reach the age of 55 in June 1983. Fiola's resignation was motivated by his alcoholism problems which had resulted in disciplinary proceedings being brought against him. The record indicates that he opted to resign rather than to face the disciplinary charges in order to avoid a discharge for cause and thereby to protect his right to a deferred retirement allowance. Correspondence between his then attorney and PFRS made clear that if he voluntarily resigned and the disciplinary proceedings were consequently dismissed, his pension rights would not be jeopardized. PFRS does not take a contrary position now.

The record also discloses that in March 1976 PFRS sent Fiola a document entitled "Member's Expiration Notice" advising that his account would expire on July 1, 1976. The notice also advised that "If you have resigned and do not plan to return to service before the date of expiration, you are eligible to apply for the withdrawal of your aggregate contributions." A withdrawal application was in fact enclosed. Also contained in the notice was this advisory:

CAREFULLY REVIEW THE REVERSE SIDE OF THIS FORM. IF YOU CAN QUALIFY FOR A RETIREMENT BENEFIT, NOTIFY US IMMEDIATELY THAT YOU WISH TO APPLY FOR A SPECIFIC RETIREMENT BENEFIT, SINCE YOUR FAILURE TO NOTIFY OUR OFFICE WILL JEOPARDIZE YOUR ELIGIBILITY FOR BENEFITS.

The reverse side of the notice form contained a list of various retirement possibilities, including service retirement for those who had already reached 55 years of age, special retirement for those who had not reached age 55 but who had 25 years or more of creditable service, deferred retirement for those who had the requisite number of years of service and who had not yet reached the age of 55, and disability retirement for those who were totally and permanently disabled from the continued performance of duties. There was also a statement of insurance benefits advising that no such benefits would be payable to a member applying for a deferred retirement allowance who died before reaching the age of 55 nor to a member under 55 who had withdrawn his aggregate contributions. No application form was, however, included with the notice other than that pertaining to withdrawal of contributions.

Fiola did not respond to this notice, testifying at the hearing before the administrative law judge that he had no recollection of having received it. Nor did he subsequently make application for withdrawal of his contributions. Nor did PFRS tender his contributions to him. In September 1981 he first began to pursue the matter of his deferred retirement allowance and in January 1982 made formal request for an application. The denial of that request resulted in his appeal to PFRS, which referred the matter to an administrative law judge. The administrative law judge was of the view that since Fiola had not withdrawn his contributions prior to reaching age 55 he was still entitled to elect a deferred retirement allowance. PFRS disagreed, and this appeal followed.

The statutory provision in question, N.J.S.A. 43:16A-11.2, not heretofore construed in a reported decision, provides in pertinent part as follows:

Should a member, after having established 10 years of creditable service, be separated voluntarily or involuntarily from the service, before reaching age 55, and not by removal for cause on charges of midconduct or delinquency, such person may elect to receive the payments provided for in section 11 of P.L.1944, c. 255 1 [ N.J.S.A. 43:16A-11] or section 16 of P.L.1964, c. 241,2 [ N.J.S.A. 43:16A-11.1] or a deferred retirement allowance, beginning on the first day of the month following his attainment of age 55 and the filing of an application therefor, which shall consist of:

(1) An annuity which shall be the actuarial equivalent of his aggregate contributions at the time of his severance from the service and

(2) A pension in the amount which, when added to the member's annuity, will provide a total retirement allowance of 2% of his average final compensation multiplied by the number of years of his creditable service up to 30 plus 1% of his average final compensation multiplied by the number of years of creditable service over 30, provided that such inactive member may elect to receive payments provided under section 11 of P.L.1944, c. 255 or section 16 of P.L.1964, c. 241 if he had qualified under that section at the time of leaving service, except that in order to avail himself of the option, he must exercise such option at least 30 days before the effective date of his retirement. If such inactive member shall die before attaining age 55, his aggregate contributions shall be paid in accordance with section 11 of P.L.1944, c. 255 and, in addition if such inactive member shall die after attaining age 55 but before filing an application for retirement benefits pursuant to this section or section 16 of P.L.1964, c. 241 and has not withdrawn his aggregate contributions, or in the event of death after retirement, an amount equal to one-half of the compensation upon which contributions by the member to the annuity savings fund were based in the last year of creditable service shall be paid to such member's beneficiary.

The statutory plan is in our view plain. A member leaving service who is not removed for cause, who has ten years of creditable service, and who has not yet attained the age of 55 is accorded three options. The first option is to receive from PFRS the full amount of his aggregate contributions pursuant to N.J.S.A. 43:16A-11. That option is, in fact, available to anyone leaving service for any reason without a retirement allowance. The second option is the election of a special retirement pursuant to N.J.S.A. 43:16A-11.1. That option is available only to those having served 25 years of creditable service. The third option is the deferred retirement allowance with its two components of an annuity and a pension. It is clear that of the three options it is only the deferred retirement allowance whose benefits are not immediately available to the member. If that is the election he makes, he receives no benefits at all until age 55.

The delay in receipt of benefits which characterizes the deferred retirement allowance available pursuant to N.J.S.A. 43:16A-11.2 is a singular feature of that retirement plan. Not only do the other options of that section provide for immediate receipt of benefits but so also do all other available types of pension benefits, including ordinary age and service retirement pursuant to N.J.S.A. 43:16A-5, accidental disability retirement pursuant to N.J.S.A. 43:16A-7, and ordinary disability retirement pursuant to N.J.S.A. 43:16A-8. It is therefore only in the case of a deferred retirement allowance that there is characteristically a substantial hiatus between the actual separation from service and the commencement of benefit payments.

The statute itself does not specify a time period following separation from service within which an election among the available options must be made. PFRS imposed a two-year time period on the election of a deferred retirement allowance relying on N.J.S.A. 43:16A-3(3), which provides that

Should any member withdraw his aggregate contributions, or become a beneficiary or die, or if more than two years have elapsed from the date of his last contribution to the system, he shall thereupon cease to be a member.

It is the view of PFRS that once membership ceases pursuant to that section then, irrespective of whether the member had withdrawn his aggregate contributions, he has lost the necessary membership status required to make any election at all. PFRS consequently takes the position that the former member is then entitled only to the return of his aggregate contributions whenever he should choose to apply for them pursuant to ...