03-000324 City Of Crystal River vs. Department Of Management Services, Division Of Retirement Status: Closed Recommended Order on Thursday, July 10, 2003.

Summary: Petitioner showed that employee, who was not a member of Florida Retirement System, filed form opting out of retirement system plan available to City Senior Management. No obligation to contribute where Respondent excluded himself per Agency rule.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CITY OF CRYSTAL RIVER, )

)

Petitioner, )

)

vs. ) Case No. 03 - 0324

)

DEPARTMENT OF MANAGEMENT, )

SERVICES, DIVISION OF )

RETIREMENT, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice this cause came on for formal proceeding

before P. Michael Ruff, duly - designated Administrative Law Judge

of the Division of Administrative Hearings on April 24, 2003, in

Crystal River, Florida. The appearances we re as follows:

APPEARANCES

For Petitioner: David La Croix, Esquire

123 North Main Street

Brooksville, Florida 34601 - 2520

For Respondent Thomas E. Wright, Esquire

Department of Management Services

4050 Esplanade Way, S uite 260

Tallahassee, Florida 32399 - 0950

STATEMENT OF THE ISSUE

The issue to be resolved in this proceeding concerns

whether the Petitioner, the City of Crystal River, is required

to report Myrl David Sallee as a member of th e Senior Management

Services Class (SMSC) of the Florida Retirement System (FRS) for

the period from June 7, 1999, through July 2000, and remit the

required contributions for that period.

PRELIMINARY STATEMENT

The Petitioner City is a member employer of t he Florida

Retirement System (FRS). The Petitioner hired Myrle David

Sallee as City Manager in June of 1999. The City's hiring

contract with Mr. Sallee provided "City shall contribute an

amount equal to 24 percent of salary to agreed upon retirement

plan in lieu of city retirement." Because Mr. Sallee had

enrolled in an alternative retirement plan with the city,

operated and managed by the International City Manager's

Association (ICMA), the Petitioner City did not report Mr.

Sallee's hiring nor his wage s to the Respondent agency until

July 2000. The City Manager, Mr. Sallee had never filed a form

FRS - M10, required for enrollment in the FRS. Mr. Sallee was

purportedly unaware of any obligation to participate in the FRS

until June 7, 2000. On that date he completed and filed a form

SMS - 3, with the Division, which is an election to withdraw or

not participate in the FRS because he chose to continue to

participate in his employer - provided annuity program instead.

The Division there upon informed Crystal R iver that Mr. Sallee

would be removed from the FRS effective August 1, 2000, and that

contributions were due for all employment previous to that date.

The City requested a reconsideration of that decision, which was

denied, and this formal proceeding ther eafter ensued.

The cause came on for hearing as noticed. The Petitioner

offered the testimony of Linda Stillson, Assistant Finance

Director for the City of Crystal River and one exhibit, which

was admitted into evidence. The Respondent presented the

tes timony of Kathy Smith, Benefits Administrator, Division of

Retirement, and offered eight exhibits which were admitted into

evidence. Official recognition was taken of Chapter 121,

Florida Statues, and specifically, Section 121.021(10), (22),

(34) (42) and (52); Section 121.051; Section 121.055; Section

121.061; and Section 121.071, Florida Statutes, (2001).

Official recognition was also taken of Rules 60S - 1.0057 and 60S -

3.011, Florida Administrative Code.

Upon conclusion of the proceeding, the parties e lected to

stipulate to an extended briefing schedule and to submit

Proposed Recommended Orders. Those Proposed Recommended Orders

have been considered in the rendition of this Recommended Order.

FINDINGS OF FACT

1. The Petitioner, the City of Crystal R iver (City) is a

Florida municipal corporation which has elected to participate

in the Florida Retirement System (FRS). The Respondent is an

agency of the State of Florida charged with administering the

Florida Retirement System and enforcing the statues and rules

which pertain thereto.

2. On June 7, 1999, the City hired Myrle David Sallee as

its City Manager, pursuant to a written contract which required

Mr. Sallee to begin his employment on that date. The City's

contract with Me. Sallee provided, "Cit y shall contribute an

amount equal to 24 percent of salary to agreed upon retirement

plan in lieu of city retirement." The term "city retirement"

refers to the FRS, of which the city normally was a

participating member.

3. Upon commencement of his emplo yment, Mr. Sallee elected

to have his city retirement contributions paid into a retirement

plan operated and managed by the International City Manager's

Association (ICMA) and the city agreed. From the date of his

employment with the city until his employ ment terminated on

June 6, 2001, the city made the required 24 percent

contributions for Mr. Sallee to the ICMA plan.

4. Mr. Sallee's position as city manager was one which is

required to participate in the FRS Senior Management Service

Class pursuant to Section 121.055(1)(b)1, Florida Statutes, and

Rule 60S - 1.0057(1)(c)2, Florida Administrative Code. Persons in

such a position may, however, elect to withdraw from the FRS

altogether, pursuant to Section 121.055(1)(b)2, Florida

Statutes. There is no r ule that corresponds to such an

unconditional withdrawal; however, Rule 69S - 1.0057(2)(c),

Florida Administrative Code, provides that some person eligible

to participate in the Senior Management Service Class of the

FRS, including city managers, may elect t o participate in a

lifetime annuity program provided by their employer, in lieu of

being a member of the FRS Senior Management Service Class.

5. Local government employees participating in the FRS

Senior Management Service Class are obligated by Rule 60S -

1.0057(3)(b)1, Florida Administrative Code, to complete and file

with the division a form SMS - 3 and a form FRS - M10.

6. Pursuant to Rule 60S - 1.0057(3)(b)2, Florida

Administrative Code, the election to withdraw from the FRS

altogether and participate in a n employer - provided lifetime

annuity program is also made by filing a form SMS - 3. According

to Rule 60S - 1.0057(2)(c)1, such an election is effective the

first day of the month following the month in which the form

SMS - 3 is received by the Division.

7. M r. Sallee was unaware of his obligation to participate

in the FRS until July 7, 2000, at which time he completed and

filed with the Division a form SMS - 3. In his form SMS - 3, Mr.

Sallee elected to withdraw from the FRS and participate in an

employer - provid ed annuity program instead.

8. Mr. Sallee never did file with the Division a from FRS -

M10.

9. The City made a required FRS contribution for Mr.

Sallee for July of 2000, but no other. On November 20, 2000,

the Division notified the City, by letter, tha t FRS

contributions were due for Mr. Sallee from the date of his

employment, June 7, 1999, until the effective date of his

election to withdraw from the FRS, August 1, 2000. By various

telephone calls and letters, the City informed the Division of

its pos ition and requested relief from making the contributions

payments that the Division claimed were due. On September 30,

2002, the Division notified the City, by letter, that it had not

changed its position and that the letter of that date

constituted final agency action, to the effect that the Division

was maintaining its claim that the City owed the contribution

payments at issue.

10. Rule 60S - 1.002(2), Florida Administrative Code,

provides that the Division "shall deny membership" in the FRS to

any empl oyee who does not comply with statutory requirements for

membership or requirements for membership set forth in Chapter

60S, Florida Administrative Code. In addition to Rule 60S -

1.0057(3)(b)1, Florida Administrative Code, Rule 60S - 1.002(2),

Florida Admini strative Code also requires an employee to file a

form FRS - M10 with the Division for enrollment into the FRS. The

Division has admitted that the City does not have to make FRS

contributions for employees who are not me member of the FRS.

11. Within a we ek after Sallee was hired by the City, the

City's Finance Director and Assistant Finance Director resigned

their positions. According to witness Linda Stilson, during the

thirteen months from when Sallee was hired on June 7, 1999,

until July 7, 2000, the date he completed and filed with the

Division a form SMS - 3 (electing not to be a participant in the

FRS) the City hired and lost another finance director; hired

another finance director who left in October of 2000; hired and

lost another assistant finance director; and hired Ms. Stilson

as assistant finance director on May 25, 2000. It was Ms.

Stilson who discovered that Mr. Sallee had not been enrolled in

the FRS.

12. Although the Division put on testimony that the City

had been sent notices of the gene ral requirements for enrollment

in the FRS, there was no testimony that the City had actually

received such notices prior to Mr. Sallee's hiring. Rule 60S -

3.011(2) provides for the assessment of delinquent fees for FRS

contributions which have not been ti mely made; however, Florida

Administrative Code Rule 60S - 3.011(4) allows the Division to

waive delinquent fees because of exceptional circumstances

beyond an employer's control.

CONCLUSIONS OF LAW

13. The Division of Administrative Hearings has

jurisdicti on of the subject matter of and the parties to this

proceeding. Sections 120.569 and 120.57, Florida Statutes.

14. Because of his non - compliance with Rule 60S -

1.0057(3)(b)1, Florida Administrative Code, by his failure to

file with the Division a form SM S - 3 until July 7, 2000, the FRS

should have denied Mr. Sallee membership in the FRS until at

least July 7, 2000, in accordance with Rule 60S - 1.002(2),

Florida Administrative Code. Indeed he never filed a form FRS -

M10 necessary for initiating enrollment in to the FRS.

15. Since Mr. Sallee should never have been considered by

the Division to have been a member of the FRS, according to its

own rules, until at least June 7, 2000, when Mr. Sallee first

complied with the rule requiring filing of a from SMS - 3

re garding enrollment in the FRS, no FRS contribution should have

been required for Mr. Sallee until at least July 7, 2000.

16. Because of non - compliance with Rule 60S - 1.0057(3)(b)1

and 60S - 1.002(2), Florida Administrative Code, through his

failure to file with the Division a form FRS - M10 for enrollment

into the FRS, the FRS should have denied Mr. Sallee membership

in the FRS even after July 7, 2000, in accordance with Florida

Administrative Code, Rule 60S - 1.002(2), until such time as he

complied with the en rollment requirements. In fact, he was

never enrolled in the FRS at all.

17. Since Mr. Sallee should have never been considered by

the Division to be a member of the FRS, according to its own

rules, no FRS contribution for Mr. Sallee should have been

re quired from the City at all. In fact, the Division should not

have accepted the one - month contribution made by the City

because Mr. Sallee had not complied with the Division rules and

the Division was required to "deny membership" in the FRS to him

pursua nt to Rule 60S - 1.002(2). Indeed, inasmuch as the City's

contract of hiring with Mr. Sallee provided that the City would

contribute to the agreed - upon ICMA retirement plan "in lieu of

city retirement" (i.e. FRS), if the Division required Mr. Sallee

to join the FRS and the City to make contribution therefor it

might be construed by a court of competent jurisdiction to have

engaged in a constitutionally prohibited impairment of the

obligation of the City and Mr. Sallee's contract.

18. Assuming arguendo that if contributions for Mr. Sallee

could be legally required from the City, the turmoil in the

City's finance department and the frequent change of finance

directors and assistant finance directors could, within the

Division's discretion, be construed to be an exceptional

circumstance suffiently beyond the City's control (especially

since the employee in question would never exert a burden on the

FRS anyway) for the Division to waive any delinquent fees under

Rule 60S - 3.011(4), Florida Administrative Code.

RE COMMENDED ORDER

Having considered the foregoing Findings of Fact,

Conclusions of Law, the evidence of record, the candor and

demeanor of the witnesses, and the pleadings and arguments of

parties, it is, therefore,

RECOMMENDED that a final order be entered by the Division

of Retirement making no assessment of FRS contributions or

delinquency penalties against the City of Crystal River on

behalf of employee Mr. Sallee, and that the Division return to

the City the single contribution made for July 2000.

DONE AND ENTERED this 10th day of July, 2003, in

Tallahassee, Leon County, Florida.

S

___________________________________

P. MICHAEL RUFF

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Par kway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with Clerk of the

Division of Administrative Hearings

this 10th day of July, 2003.

COPIES FURNISHED :

David La Croix, Esq.

123 N. Main Street

Brooksville, Florida 34601 - 2520

Thomas E. Wright, Esq.

Department of Management Services

4540 Esplanade Way, Suite 260

Tallahassee, Florida 32399 - 0950

Erin Sjostrom, Director

Cedars Executive Center

Building C

2639 North Monroe Street

Tallahassee, Florida 32399 - 1580

Monesia Taylor Brown

Acting General Counsel

4050 Esplanade Way

Tallahassee, Florida 32399 - 1560

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written excep tions 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.