00-001935 Frederick Stief vs. Department Of Management Services, Division Of Retirement Status: Closed Recommended Order on Tuesday, October 31, 2000.

Summary: Employee required to pay interest to Florida Retirement System on contribution for upgrade of retirement class.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FREDERICK STIEF, )

)

Petitioner, )

)

vs. ) Case No. 00-1935

)

DEPARTMENT OF MANAGEMENT SERVICES, )

DIVISION OF RETIREMENT, )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was held in this case

on September 27, 2000, by video teleconference between

Tallahassee and Miami, Florida, before Claude B. Arrington, a

duly-designated Administrative Law Judge of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Donald D. Slesnick, II, Esquire

Slesnick and Casey

10680 Northwest 25th Street, Suite 202

Miami, Florida 33172-2108

For Respondent: Thomas E. Wright, Esquire

Division of Retirement

Cedars Executive Center, Building C

2639 North Monroe Street

Tallahassee, Florida 32399-1560

STATEMENT OF THE ISSUE

Whether Petitioner is entitled to a refund of interest he

paid in 1999 on the employee contribution that became due when

he opted to change his retirement classification from the

regular class to the special risk class for the period September

1974, through September 30, 1975.

PRELIMINARY STATEMENT

Petitioner was hired as a Police Technician by what is now

known as the Miami- Dade Police Department in September 1974. At

the time of his hire, Petitioner was enrolled in the Florida

Retirement System (FRS) in the regular class. At the times

pertinent to this proceeding up to October 1, 1975, the FRS was

a contributory system, which required both the employee and the

employer to make contributions towards the employee's

retirement. Since October 1, 1975, the FRS has been a non-

contributory system, which means the employer makes all

contributions on behalf of each employee.

On February 17, 1979, the State Retirement Commission

entered a Final Order that determined that Petitioner was

eligible for the special risk retirement class. Subsequently,

the Director of the Division of Retirement determined that

Petitioner's special risk class should be effective retroactive

to June 1, 1977, the date Petitioner applied for that

classification. The date of retroactivity was based on rules

then in effect.

In 1998, Petitioner requested that his retirement account

be audited as part of his retirement planning. As a result of

that audit, the Division of Retirement determined that because

of changes in its rules, Petitioner was now entitled to claim

the special risk class retroactive to September 9, 1974, when he

was first hired as a police technician. On January 28, 1999,

the Division of Retirement mailed Petitioner an estimate, which

reflected that Petitioner owed the FRS the sum of $2,201.69. In

response to Petitioner's request for an explanation as to why he

owed this sum, the Division of Retirement advised him that he

owed the sum of $503.12 for the previously unpaid employee

contribution for the period September 9, 1974, through

September 30, 1975, and that, in ad dition, he owed interest on

that unpaid contribution in the amount of $1,698.57.

Petitioner thereafter paid the employee contribution in the

amount of $503.12 and he also paid, under protest, the claimed

interest. Petitioner thereafter challenged Respondent's

determination that he owed interest on the unpaid contribution,

the matter was referred to the Division of Administrative

Hearings, and this proceeding followed.

At the final hearing, Petitioner testified on his own

behalf and presented the additional testimony of Donald Allen,

Deputy Director of the Miami- Dade County Employee Relations

Department. Petitioner offered 11 sequentially numbered

exhibits, 10 of which were admitted into evidence. Petitioner's

Exhibit 4 was rejected.

Respondent presented the testimony of Larry Hunnicutt,

Benefits Administrator of Respondent's Bureau of Retirement

Calculations, and David Ragsdale, Benefits Administrator of

Respondent's Bureau of Enrollment and Contributions. Respondent

offered 2 exhibits (marked as Respondent's Exhibits 2 and 3)

each of which was accepted into evidence.

No transcript of the proceedings was filed. Each party

filed a Proposed Recommended Order, which has been duly

considered by the undersigned in the preparation of this

Recommended Order.

FINDINGS OF FACT

1. Petitioner was employed by the Metropolitan Dade County

Police Department (now Miami- Dade Police Department) on

September 9, 1974, as a Police Technician. He has held that

employment since that date of hire.

2. Petitioner was enrolled in the FRS when he was first

employed. His employer reported him as a member of the regular

class for retirement purposes.

3. During the period September 9, 1974, and September 30,

1975, the FRS was a contributory system, which required both the

employee and the employer to make contributions towards the

employee's retirement. Since October 1, 1975, the FRS has been

a non-contributory system, which means the employer makes all

contributions on behalf of each employee.

4. In addition to the regular class for retirement

purposes there are other retirement classes, including the

special risk class, which requires higher contributions than the

regular class, but provides enhanced benefits.

5. In June 1977, Petitioner applied to Respondent for

membership in the special risk class. The Director of the

Division of Retirement denied this requested change.

6. Petitioner thereafter requested a hearing before the

State Retirement Commission. Following a hearing on

December 20, 1978, the State Retirement Commissi on entered a

Final Order on February 17, 1979, that reversed the decision

denying Petitioner's eligibility in the special risk class.

7. Pursuant to rules in effect when the State Retirement

Commission entered its ruling, the Director of the Division of

Retirement determined in 1979 that Petitioner was entitled to

the special risk class retroactive to June 1, 1977. 1/

8. In 1982, the Division of Retirement changed its rules

to permit employees to claim special risk membership retroactive

to the date of employment in any position that qualified for

special risk class. 2/

9. As part of his retirement planning Petitioner asked the

Division of Retirement in 1998 to audit his retirement account

to provide an estimate as to his retirement benefits. In

response to that request, the Division of Retirement reviewed

Petitioner's retirement status. On January 26, 1999, the

Division of Retirement determined that because of changes in its

rules, Petitioner was now entitled to claim membership in the

special risk class retroactive to September 9, 1974.

10. On January 28, 1999, the Division of Retirement mailed

an estimate of his retirement benefits and options to

Petitioner. One of the options contained an estimate that

assumed Petitioner would elect to claim membership in the

special risk class retroactive to his date of hire. The

estimate for that option reflected that Petitioner would owe the

FRS the sum of $2,201.69 if he claimed special risk class

retroactive to September 9, 1974. In response to Petitioner's

request for an explanation as to why he would owe that sum, the

Division of Retirement advised him on May 18, 1999, that he

would owe the sum of $503.12 for the previously unpaid employee

contribution for the period September 9, 1974, through

September 30, 1975, and that, in addition, he would owe interest

on that unpaid contribution in the amount of $1,698.57. 3/

11. Petitioner thereafter paid the employee contribution

in the amount of $503.12 and he also paid, under protest, the

interest that is at issue in this proceeding. 4/

12. Petitioner was not aware until 1999 that he could

claim membership in the special risk class for the period at

issue in this proceeding.

CONCLUSIONS OF LAW

13. The Division of Administrative Hearings has

jurisdiction of the parties to and the subject of this

proceeding. Section 120.57(1), Florida Statutes.

14. Chapter 121, Florida Statutes, pertains to the Florida

Retirement System. Section 121.081, Florida Statutes, provides

certain conditions under which past service or prior service may

be claimed and credited for retirement purposes. Included as a

condition of receiving credit, are the requirements that the

appropriate contribution for the past service be paid and, in

addition, that interest be paid on that contribution. The

payment of interest is important to maintain the actuarial

integrity of the FRS. Pursuant to the provisions of

Section 121.081, Florida Statutes, the Division of Retirement

has adopted Rule 60S-3.0035, Florida Administrative Code,

pertaining to the interest rate on payments for creditable

service which provides as follows:

The interest rate which shall be charged the

member on payments due the Division for the

purchase of creditable service shall, unless

otherwise specified, be compounded annually

each June 30 from the appropriate date as

provided in these rules, at 4% through

June 30, 1975, and at 6.5% from July 1, 1975

through the date of payment.

15. Respondent has established in this proceeding that

interest was appropriately assessed on Petitioner's contribution

for his upgraded retirement classification for the period

September 9, 1974, to September 30, 1975.

16. Petitioner's argument that it is fundamentally unfair

to charge interest on the contribution dating back to 1974-75

because he did not know he was eligible to claim membership in

the special class retroactive to his date of hire until 1999 is

rejected. Petitioner was not required to upgrade his retirement

status for the period in question - he elected to do so.

Petitioner's situation is no different than any other employee

who opts to purchase prior service for a period that the FRS was

a contributory system. As provided by rule and statute, such an

employee is required to pay the contribution plus interest.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that Petitioner enter a final order

dismissing this proceeding.

DONE AND ENTERED this 31st day of October, 2000, in

Tallahassee, Leon County, Florida.

___________________________________

CLAUDE B. ARRINGTON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalache e Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 31st day of October, 2000.

ENDNOTES

1/ The determination that Petitioner was entitled to special

risk class is not at issue in this proceeding. That

determination was based on Rule 22B1-1.04(7)(b)1, Florida

Administrative Code, which provided as follows:

Upon approval of the certification for

special risk class membership, membership in

the special risk class shall be retroactive

to the first day of employment or the first

day of the pay period following a change in

employers or positions, if the certification

was received by the Division of Retirement

within 90 days following the employment or

change. If the certification is not

received within a 90 day period, special

risk membership, if approved, shall be

effective the first day of the pay period

following the day certification was received

by the Division of Retirement.

2/ Effective October 13, 1982, Rule 22B-1.05, Florida

Administrative Code, allowed members to claim special risk

membership retroactive to the date of employment in the special

risk position.

3/ Petitioner did not owe for any contribution between

October 1, 1975, and May 31, 1979, because the FRS was a non-

contributory system during that period. Miami- Dade County has

paid the contribution plus interest for that period of time.

That payment is not at issue in this proceeding.

4/ In addition to the contribution required of Petitioner for

this period, Miami- Dade County paid its share of the

contribution for the period in question, plus interest.

COPIES FURNISHED:

Donald D. Slesnick, II, Esquire

Slesnick and Casey

10680 Northwest 25th Street, Suite 202

Miami, Florida 33172-2108

Thomas E. Wright, Esquire

Division of Retirement

Cedars Executive Center, Building C

2639 North Monroe Street

Tallahassee, Florida 32399-1560

Ron Poppell, Interim Director

Division of Retirement

Cedars Executive Center, Building C

2639 North Monroe Street

Tallahassee, Florida 32399-1560

Bruce Hoffmann, General Counsel

Department of Management Services

4050 Esplanade Way

Tallahassee, Florida 32399-0950

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.