16-001947 Kelly A. Cummings vs. State Board Of Administration Status: Closed Recommended Order on Thursday, September 29, 2016.

Summary: FRS participant may not rescind second election made in month in which she earned service credit by use of sick and annual leave because second election during such month was authorized by statute.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

KELLY A . CUMMINGS ,

Petitioner,

vs. Case No. 1 6 - 1947

STATE BOARD OF ADMINISTRATION ,

Respondent.

_______________________________/

RECOMMENDED ORDER

On July 1 9 , 2016 , Robert E. Meale, Administrative Law Judge

of the Division of Administrative Hearings (DOAH), conducted the

final hearing by videoconference in Jacksonville and

Tallahassee, Florida.

APPEARANCES

For Petitioner: T. A. Delegal, III, Esquire

James C. Poindexter, Esquire

Delegal Law Offices, P.A.

424 East Monroe Street

Jacksonville, Florida 32202

For Respondent : Brian A. Newman, Esquire

Pennington, P.A.

21 5 South Monroe Street, Second Floor

Tallahassee, Florida 32302

STATEMENT OF THE ISSUE

The issue is whether Petitioner is entitled to rescind a

"second election" to invest in the Florida Retirement System

(FRS) Investment Plan on the ground that , when filed, the second

election failed to comply with the requirements of

sections 121.4501(4)(g) and 121.021(17)(b), Florida Statutes

(2012).

PRELIMINARY STATEMENT

By letter dated March 4, 2016, Respondent de nied

Petitioner's request to transfer to the FRS Pension Plan. The

letter states that Petitioner effectively elected to participate

in the FRS Pension Plan when first eligible , on March 1, 2005;

was allowed only one subsequent election; and made her secon d

election to transfer to the FRS Investment Plan on November 29,

2012.

By petition served on March 30, 2016, Petitioner requested

a hearing. Respondent initially treated the request a s a demand

for an informal hearing, but, by Order Transferring Case e ntered

on April 8, 2016, transmitted the case to DOAH for a formal

hearing.

At the hearing, each party called one witness. Petitioner

offered into evidence four exhibits : Petitioner Exhibits 1

through 4. Respondent offered into evidence 26 exhibits:

Re spondent Exhibits 1 through 26. All exhibits were admitted.

The court reporter filed the transcript on August 5 , 2016,

and each party filed a propose d recommended order on August 26 ,

2016.

FINDINGS OF FACT

1. On August 9, 2004, Petitioner first became eligible to

participate in the FRS. At the time, she was employed by Monroe

County in its building department. On February 21, 2005,

Petitioner timely elected to participate in the FRS Pension

Plan, which is a d efined benefit plan, rather than the FRS

Investment P lan, which is a defined contribution plan.

2. Petitioner participated in the FRS Pension Plan until

the events described in this paragraph. Her last day of work

was in June 2012 , although she did not formally terminate her

employment until December 6, 2012 . At the time, Petitioner was

experiencing health problems that Petitioner worried would

prevent her from continuing to perform the duties of her job

with Monroe County. In July 2012, Petitioner ca lled the FRS

financial guidance line and discussed transferring to the FRS

Investment Plan, so she could withdraw funds to live on during a

period of extended unemployment for health reasons.

3. Even though Petitioner did not work after June, from

Novem ber 1 through 6, she received pay for 13.25 hours of unused

sick leave and 5 hours of unused annual leave. For the

remainder of the month, Petitioner was on leave without pay .

4. On November 29, Petitioner called the FRS financial

guidance line to disc uss again transferring to the FRS

Investment Plan. An FRS representative warned her that, to make

an election, she would have to be "employed with the FRS service

credit" to make a second election.

5. On the same day, Petitioner filed a second election

with Respondent to transfer from the FRS Pension Plan to the FRS

Investment Plan. In a form mailed on December 3, 2012,

Respondent acknowledged receipt of Petitioner's second election ,

effective December 1, 2012. There is some dispute as to whether

Resp ondent adequately advised Petitioner of any grace period to

rescind her second election, but she did not attempt to do so

until over three years had elapsed, as noted below.

6. On April 5, 2013, Petitioner called the FRS financial

guidance line and aske d about withdrawing some of the funds in

her FRS Investment Plan. She was informed that, if she did so,

she could not defer compensation to this account on regaining

FRS - covered employment.

7. In September or October 2015, Petitioner obtained

FRS - covered employment at the library of the City of Islamorada.

On November 1, 2015, Petitioner called the FRS financial

guidance line and asked about rescinding her second election.

An FRS representative told her that she would have to sub mit a

request for "intervention . " On February 10, 2016, Petitioner

filed a request for intervention, stating that no one had warned

her that, if she withdrew any funds from the defined

contribution account, she could not again defer compensation to

this account. By lette r dated March 4, 2016, Respondent denied

the request solely on the ground that Petitioner had earned

service credit for the month of November 2012 when she filed her

second election, so, since she had not yet terminated

employment, her second election was lawful .

CONCLUSIONS OF LAW

8 . DOAH has jurisdiction of the sub ject matter.

§§ 120.569 and 120.57(1), Fla. Stat. (2012 ).

9 . Petitioner bears the burden of proving the material

allegations by a preponderance of the evidence. § 120.57(1)(j);

Dep't of Transp. v. J.W.C., Inc. , 396 So. 2d 778 (Fla. 1st DCA

1981).

10 . Pension statutes must be liberally construed in favor

of the "intended recipients . " Scott v. Williams , 107 So. 3d

379, 384 - 85 (Fla. 2013). As Respondent notes in its proposed

recommended order, this case presents an interesting wrinkle

because Petitioner contends that Respondent improperly allowed

her to make her second election -- meaning that, if she prevails,

Petitioner would force a change in Respondent's administration

of FRS second el ections so as to restrict the freedom of choice

that participants presently enjoy. Fortunately, this case does

not present so close a question of law that this rule of

statutory construction is dispositive.

11. Section 121.4501(4)(g) provides:

T he empl oyee shall have one opportunity . .

. to choose to move from the pension plan

to the investment plan or from the

investment plan to the pension plan.

Eligible employees may elect to move between

plans only if they are earning service

credit in an employe r - employee relationship

consistent with s. 121.021(17)(b), excluding

leaves of absence without pay.

12. Section 121 .021(17 ) (b) 4. provides that monthly service

credit is awarded "for each month salary is paid for service

performed." By this provision, the legislature chose as the

unit of measurement for the determination of whether an employee

is earning a service credit a month. The legislature was free

to choose any unit of measurement -- although the shorter the

unit, the greater th e administrative burden. The point is that

the month is the unit of measurement for service credits, so an

employee's right to make a second election is dependent on her

earning service credit during the month in which the election is

filed.

13. An emplo yee performs service when her only activity

during a month is taking sick or annual leave . T his

relationship was arguably clearer when a monthly service credit

was linked to the payment of a minimum compensation amou nt,

section 121.021(17)(b)2. and 3., b u t if "service performed" were

to exclude all forms of compensated leave, an employee taking

paid leave of more than one month's duration would suffer a

break in service.

14. A s Respondent states in its proposed recommended

order, an employee may make a second election only while she is

an active participant in the FRS, so the election must be filed

prior to the date of formal termination of employment. In the

present case, Petitioner's formal date of termination was in

December, so the date of terminati on is irrelevant .

15 . Petitioner relies on Florida Administrative Code

Rule 19 - 11.007, which provides:

A member may make a valid 2nd election only

if the 2nd election is made and processed by

the Plan Choice Administrator while the

member is actively emp loyed and earning

salary and service credit in an employer -

employee relationship consistent with the

requirements of Section 121.021(17)(b), F.S.

Members on an unpaid leave of absence,

terminated members, or employees of an

educational institution on summe r break

cannot use their 2nd election until they

return to covered FRS employment. In

general terms, this means that the 2nd

election must be made and processed while

the member is actively working and being

paid for that work. It is the

responsibility of the member to assure that

the 2nd election is received by the Plan

Choice Administrator no later than 4:00 p.m.

(Eastern Time) on the last business day the

member is earning salary and service credit.

(emphasis supplied) .

16 . This rule misses several opportunities to restate that

the FRS unit of measurement for service credits is the month,

not the day. "While" in the first and third sentences of the

rule means "during the month that." The second sentence would

be clearer if "during entire months of " replaced "on"

immediately before "summer break." And "of the month" should

follow "day" in the fourth sentence. Further confusing matters ,

t he reference to "actively working , " rather than "actively

employed," in the highlighted sentence may suggest tha t an

employee may not earn credit by the use of paid leave, although

the following sentence properly rephrases this requirement as

"earning salary." This rule must be interpreted in light of the

clear statutory provisions discussed above. Any interpretat ion

of such language is going to be strained, but Responden t's

interpretation is preferable to Petitioner's -- without regard to

the principle requiring deference, during judicial review, of an

agency's interpretation of its rules. If ever they did,

casuall y drafted rules no longer stand in the way of the

efficient administrative adjudication of disputes based on the

clear language of governing statutes. § 120.57(1)(e)1.

17 . Based on the foregoing, it is unnecessary to address

Respondent's alternative clai ms of waiver and a failure to

satisfy the prerequisites for rescission.

RECOMMENDATION

It is

RECOMMENDED that Respondent enter a final order dismissing

Petitioner's request for hearing on Respondent's denial of her

request for intervention to allow her to transfer from the FRS

Investment Plan to the FRS Pension Plan .

DONE AND ENTERED this 29 th day of September , 2016 , in

Tallahassee, Leon County, Florida.

S

____________________________________

Robert E. Meale

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 29 th day of September , 2016 .

COPIES FURNISHED:

T. A. Delegal, III, Esquire

James C. Poindexter, Esquire

Delegal Law Offices, P.A.

424 East Monroe Street

Jacksonville, Florida 32202

(eServed)

Brian A. Newman, Esquire

Pennington, P.A.

215 South Monroe Street, Second Floor

Tallahassee, Florida 32302

(eServed)

Ash Williams, Exec utive Director

and Chief Investment Officer

State Board of Administration

1801 Hermitage Bou levard, Suite 100

Post Office Box 13300

Tallahassee, Florida 32317 - 3300

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.