Saccone v. Bd. of Trs. of the Police

• Decision Date: 11 September 2014
• Citation: 98 A.3d 1158,219 N.J. 369
• Parties: Thomas SACCONE, Plaintiff–Appellant, v. BOARD OF TRUSTEES OF the POLICE AND FIREMEN'S RETIREMENT SYSTEM, Defendant–Respondent.
• Court: New Jersey Supreme Court

219 N.J. 369

98 A.3d 1158

Thomas SACCONE, Plaintiff–Appellant,

v.BOARD OF TRUSTEES OF the POLICE AND FIREMEN'S RETIREMENT SYSTEM, Defendant–Respondent.

Supreme Court of New Jersey.

Argued Feb. 4, 2014.

Decided Sept. 11, 2014.

Donald D. Vanarelli argued the cause for appellant (Law Office of Donald D. Vanarelli, attorney; Mr. Vanarelli and Whitney W. Bremer, Westfield, on the brief).

Melissa H. Raksa, Assistant Attorney General, argued the cause for respondent (John J. Hoffman, Acting Attorney General of New Jersey, attorney; Jeremy M. Vaida and Diane J. Weeden, Deputies Attorney General, on the letter briefs).

Ron M. Landsman, a member of the Maryland bar, argued the cause for amicus curiae Special Needs Alliance, Inc. (Schenck, Price, Smith & King, attorneys; Shirley B. Whitenack, Florham Park, of counsel; Mr. Landsman, and Ms. Whitenack, on the brief).

Daniel J. Jurkovic argued the cause for amici curiae National Academy of Elder Law Attorneys, New Jersey Chapter and Guardianship Association of New Jersey, Inc. (Mr. Jurkovic and Robert F. Brogan, Point Pleasant, on the brief).

John W. Callinan, Wall Township, argued the cause for amicus curiae National Academy of Elder Law Attorneys, Inc.

Justice LaVECCHIA delivered the opinion of the Court.

In this appeal, we review whether the disabled son of a retired member of the Police and Firemen's Retirement System (PFRS) may have his survivors' benefits paid into a first-party special needs trust (SNT) created for him under 42 U.S.C.A. § 1396p(d)(4)(A). We hold that he may and reverse the contrary administrative action by the PFRS Board of Trustees (Board).

The Board's strict view of how to implement the word “child” in the survivors' benefits statute when dealing with the circumstances of a Supplemental Security Income (SSI) eligible disabled child of a PFRS retiree would have forced this class of beneficiary into an untenable situation. The Board's determination required a disabled child of a PFRS retiree to have to choose between abandoning the survivors' benefit earned by his father and forgoing public assistance programs for his medical needs. That choice is harsh and unwarranted. No legitimate public policy is advanced by the Board's interpretation. Both the federal government's SSI and related medical assistance programs and New Jersey's SNT statutes permit the use of self-settled (d)(4)(A) SNTs. We reject as arbitrary, capricious, and unreasonable the Board's interpretive determination that foists on disabled children of PFRS retirees, such as the child involved here, what is essentially a forfeiture of survivors' benefits.

I.

Thomas Saccone (Saccone) is a retired Newark firefighter and a member of the Police and Firemen's Retirement System. As a retired PFRS member, Saccone receives a pension and other benefits in recompense for his service. See generally N.J.S.A. 43:16A–1 to –68. In addition, Saccone's wife and son are entitled to receive pension death benefits, or “survivors' benefits,” if Saccone predeceases them. See N.J.S.A. 43:16A–12.1(a). Following his death, those benefits are awarded directly to Saccone's wife and son; they do not pass through Saccone's estate.

Saccone's son, Anthony, suffers from a severe mental disability and currently receives public assistance in the form of SSI and other programs. However, those forms of public assistance are available only to individuals with incomes below a specified amount.¹ Fearing that Anthony's statutorily directed share of the survivors' benefits would place him over the SSI income cap and thereby disqualify him from receiving public assistance, Saccone wanted to ensure that the PFRS survivors' benefits for Anthony would be paid to the “Anthony J. Saccone Supplemental Benefits Trust.” Because assets held within a supplemental benefits trust are not counted as income for the purpose of many public assistance programs, Saccone believed that designating a supplemental benefits or special needs trust ² as the beneficiary in Anthony's stead would allow Anthony to receive Saccone's death benefits without jeopardizing Anthony's eligibility for public assistance.

On August 18, 2008, Saccone's attorney wrote to the Division of Pension and Benefits (Division) seeking reassignment of the survivors' benefits from Anthony as an individual to an SNT in Anthony's name. The letter explained that, “[d]ue to Anthony's disability and the benefits he receives as a disabled person, he cannot receive any additional assets outright. Therefore, it is necessary for Mr. Saccone to change the beneficiary designation on his pension fund....” The Division denied Saccone's request in a letter dated September 4, 2008. In its letter, the Division stated that, under the plain language of N.J.S.A. 43:16A–12.1(a), Saccone could not change the beneficiary of his death benefits. Further, the Division stated that it would not “be a party to an effort to enable [Anthony] to continue to be eligible for public assistance by not reporting the benefit he receives as a beneficiary as taxable income.” Saccone's request that the Division reconsider its decision also was denied.

Saccone filed an administrative appeal with the Board, seeking to overturn the Division's decision. The Board initially refused to entertain Saccone's request because Saccone was still alive, and, therefore, it believed that any decision relating to the assignment of Saccone's survivors' benefits would be an advisory opinion. The Appellate Division affirmed that decision. We granted Saccone's petition for certification and summarily reversed and remanded the case to the Board for a decision on the merits. Saccone v. Bd. of Trs., Police & Firemen's Ret. Sys., 212 N.J. 564, 564–65, 58 A.3d 732 (2011).

On remand, the Board rejected Saccone's claim on the merits, finding that the PFRS statutory framework did not permit Saccone to designate a trust as the beneficiary of his survivors' benefits. Based on its review of the text of N.J.S.A. 43:16A–12.1(a), the Board concluded that PFRS survivors' benefits vest “automatically” in the decedent's spouse and children upon the death of the PFRS member. Cf. N.J.A.C. 17:4–3.4(a) (noting that eligible survivors are “entitled to benefits on the first day of the month following the member's death”). As a result, the Board determined that Saccone was unable to assign a trust in his son's name as a beneficiary. As additional support, the Board pointed to N.J.A.C. 17:4–3.5(b), which states that “[a] retiree cannot designate a primary or a contingent beneficiary for the receipt of the retiree's accumulated pension contributions in the event of the retiree's death.” The Board also contrasted the language of the survivors' benefits statute with that of the PFRS group life insurance statute, N.J.S.A. 43:16A–59. Unlike the survivors' benefits statute, the group insurance statute specifically provides that a retiree may designate any individual as a beneficiary, not just a spouse or child. See N.J.S.A. 43:16A–59 (“Benefits under such group [insurance] policy ... shall be paid ... to such person ... as the member shall have nominated ....”); see also N.J.A.C. 17:1–5.4(a). Accordingly, the Board determined that the Legislature intended to restrict the potential beneficiaries of a PFRS member's death benefits to a member's spouse and children.

On appeal, the Appellate Division affirmed the Board's administrative determination in an unpublished decision. The panel examined the relevant legislative history and compared the language of the current survivors' benefits statute, N.J.S.A. 43:16A–12.1, with that of its predecessor, N.J.S.A. 43:16A–12. The panel noted that, as initially enacted, N.J.S.A. 43:16A–12 allowed a PFRS member to designate any individual to receive that member's pension death benefits; however, when the Legislature enacted N.J.S.A. 43:16A–12.1 in 1967, it repealed the ability of a PFRS member to choose the beneficiary of his or her survivors' benefits. Instead, those benefits now must go to the deceased PFRS member's spouse and children. In light of that change, the Appellate Division concluded that the Legislature had purposefully eliminated a PFRS member's ability to assign a trust as a beneficiary under N.J.S.A. 43:16A–12.1.

The panel also determined that its decision did not conflict with New Jersey's public policy favoring the establishment of SNTs. The panel compared the three types of SNTs authorized under the federal Medicaid statute, 42 U.S.C.A. § 1396p(d)(4)(A)-(C), with the two types of SNTs authorized in the New Jersey SNT statute, N.J.S.A. 3B:11–37. Noting that the Legislature had not adopted the type of SNT authorized by 42 U.S.C.A. § 1396p(d)(4)(B), which enables a third party to establish an SNT on behalf of a disabled person if the SNT is composed entirely of pension or Social Security benefits due to that disabled person, the panel concluded that such trusts were impermissible in New Jersey. The panel further concluded that New Jersey's SNT statute does not allow a person to fund an SNT with benefits belonging to someone else. Accordingly, the Appellate Division held that, under N.J.S.A. 3B:11–37, Saccone could not fund an SNT with Anthony's share of survivors' benefits because those benefits belong to Anthony, not to Saccone.

Finally, the panel stated that Saccone had not demonstrated the inability of other estate planning approaches to protect Anthony's eligibility for public assistance benefits.Accordingly, the panel concluded that the Board's determination was not arbitrary, unreasonable, or capricious and affirmed its decision.

We granted certification. 213 N.J. 387, 63 A.3d 227 (2013). We also granted amicus curiae status to the Special Needs Alliance, the National Academy of Elder Law Attorneys, and the Guardianship Association of New Jersey.

II.

A.

Saccone maintains that the Board adopted, and the Appellate Division affirmed, a cramped interpretation of the PFRS survivors' benefits statute that...