16-005326
Willie James vs.
State Board Of Administration
Status: Closed
Recommended Order on Wednesday, December 21, 2016.
Recommended Order on Wednesday, December 21, 2016.
1STATE OF FLORIDA
4DIVISION OF ADMINISTRATIVE HEARINGS
8WILLIE JAMES,
10Petitioner ,
11vs. Case No . 1 6 - 5326
19STATE BOARD OF ADMINISTRATION,
23Respondent ,
24and
25ORANGE COUNTY,
27Intervenor.
28_______________________________/
29RECOMMENDED ORDER
31D. R. Alexander, A dministrative L aw J udge of the Division
43of Administrative Hearings (DOAH) , conducted a hearing in this
52case in Tallahassee, Florida , on November 14, 2016 .
61APPEARANCES
62For Petitioner : Jerry Girley, Esquir e
69The Girley Law Firm, P.A.
74125 East Marks Street
78Orlando, Florida 32803 - 3816
83For Respondent : Brian A. Newman, Esquire
90Brandice D. Dickson, Esquire
94Pennington, P.A.
96Post Office Box 10095
100Tallahassee, Flo rida 32302 - 2095
106For Intervenor: Sarah P. L. Reiner, Esquire
113GrayRobinson, P.A.
115301 East Pine Street , Suite 1400
121Orlando, Florida 32801 - 2741
126STATEMENT OF THE ISSUE
130The issue is whether Petitioner took an in - service
140distribution from his Investment Plan retirement account , and if
149so, must either repay the distribution in full or ter minate
160employment with all FRS - participating employers, including his
169current employer, Orange County (County) , for at least six
178calendar months .
181PRELIMINARY STATEMENT
183On August 1, 2016, the State Board of Administration (SBA)
193informed Petitioner by lett er that a r outine audit revealed he
205had received an "in - service " distribution from his FRS
215Investment Plan account while still employed by the County .
225The letter stated that such a distribution is prohibited by
235section 121.591, Florida Statutes, and Inte rnal Revenue Service
244regulations , and unless Petitioner or the County repa id
253$474,932.62 to his Investment Account by September 30, 2016, he
264must terminate employment with the County for at least six
274calendar months . Petitioner timely requested a hearing, and the
284matter was referred b y the SBA to DOAH to be set for hearing.
298The County was later authorized to intervene in this proceeding.
308By agreement of the parties, t h is case was heard on a
321consolidated record with Case No. 16 - 5327, which involved a
332simi lar case with another County employee. However, separate
341recommended orders are being entered.
346At the final hearing , Petitioner testified on his own
355behalf. The SBA presented the testimony of one witness.
364SBA Exhibit 1 was accepted in evidence. T he County presented
375the testimony of one witness. Joint Exhibits 1 - 8 were accepted
387in evidence. The undersigned also granted the SBA's request to
397take official recognition of the case of Colford v. Department
407of Transportation , Pub. Emp. Rel. Comm., Case No. CS - 2011 - 0278
420(Recommended Order April 21, 2011, Final Order May 9, 2011) .
431A one - volume Transcript of the hearing was prepared. The
442parties timely filed p roposed r ecommended o rders (PROs), w hich
454hav e been considered in the preparation of this Recommen ded
465Order.
466FINDINGS OF FACT
4691. The FRS is comprised of the Pension Plan , which is a
481defined benefit plan , and the Investment Plan , which is a
491defined contribution plan. The Division of Retirement
498administers the Pension Plan, while the SBA administers th e
508Investment Plan. S ection 121.4501(13) charges the SBA with
517administering the Investment Plan in compliance with the
525Internal Revenue Code in order to re tain its q ualified status .
5382. Until March 4 , 2014, Petitioner was a member of the
549FRS Pension Plan by virtue of his employment as a Lieutenant
560with the Orange County Fire Rescue D epartment . The County
571participates in the FRS.
5753 . Effective March 1, 2014, Petitioner used his one - time
587Second Election to switch from the FRS Pension Plan to the FRS
599Investm ent Plan. He switched plans in order to have ready
610access to his FRS retirement funds should he be terminated from
621employment by the County.
6254 . On March 4, 2014, Petitioner was terminated from his
636employment for allegedly violating County rules and regul ations.
6455 . On March 10, 2014, Petitioner filed a formal grievance
656seeking reinstatement and all benefits. The decision to
664terminat e his employment was later upheld.
6716 . After the grievance was denied, but before he took a
683distribution, Petitioner obtaine d legal representation and
690initiated a lawsuit against the County on the basis that he was
702terminated b ecause of his race and gender.
7107 . Without a job or income, o n September 4 , 8, and 9,
7242015, Petitioner withdrew distributions totaling $474,932.62
731from his Investment Plan account.
7368 . Before taking a n Investment Plan distribution, a member
747is required to answer several questions , either on - line or by
759telephone, to verify that he is eligible to take a distribution.
770Petitioner elected to apply on - line. One question asks if the
782member is "pending reemployment," a term that means , among other
792things, the member is seeking reinstatement through a pending
801action against his employer at the time of the distribution. If
812a member answers yes, he is ineligibl e to take a distribution.
824Even though he had a pending discrimination lawsuit against his
834employer, which could lead to reinstatement if he prevailed ,
843Petitioner answered no. Had he answered the question correctly,
852Petitioner w ould not have been allowed to take a distribution.
8639 . The SBA does not check in real time the veracity of a
877member's answers to the questions asked during the distribution
886request process. Petitioner was advised by written information,
894however, that the SBA might undertake a lat er review of his
906distribution and seek repayment if it was determined to be
916invalid.
91710 . During the distribution process, members have access
926to Ernst & Young planners on the MyFRS Financial Guidance Line
937to answer any questions they have concerning the distribution.
946Although he was aware of th i s educational resource, Petitioner
957chose not to call a planner.
96311 . On May 24, 2016, Petitioner and his former employer
974entered into a Settlement Agreement and Mutual General Release
983(Settlement Agreement) to re solve the discrimination lawsuit .
992Without admitting liability, the County agreed , among other
1000things, for Petitioner to be reinstated to his former position
1010with all seniority, benefits, and accrued back pay effective
1019June 6, 2016 . He also had service cr edit re stored for the
1033period March 2014 through June 2016. The Settlement Agreement
1042further provided that a letter of reprimand would replace the
1052termination notice. Petitioner was represented by an attorney
1060during the settlement negotiations. The SBA w as not a party to
1072the agreement.
107412 . Following the execution of the Settlement Agreement,
1083but before payment of the settlement funds, the County was
1093advised by the SBA that because Mr. James was being reinstated
1104and the termination set aside, an in - servic e distribution had
1116occurred in September 2015 , and Mr. James would be required to
1127either pay back the distribution in full or terminate employment
1137with the County for at least six months. The County was also
1149advised that a change to the language in the Se ttlement
1160Agreement confirming that Mr. James had in fact been separated
1170from employment with the County for a period of six months would
1182resolve the in - service distribution issue and make it
1192unnecessary to rep ay the distribution or be separated from
1202employ ment with the County. This information was orally
1211conveyed to Petitioner's counsel.
12151 3 . Despite this warning, Petitioner declined to modify
1225the Settlement Agreement. T he County reconfirmed this
1233information in a letter dated June 14, 2016, to Petitione r 's
1245attorney . It read in pertinent part as follows:
1254[ T ] his will confirm that you advised you met
1265with Mr. James and counseled him on the
1273potential implications of his acceptance of
1279the enclosed payments under the Agre e ment
1287(a copy of which was previously provided for
1295your records), including the requirement
1300that he repay to the Florida Retirement
1307System (FRS) all sums that he previously
1314received as disbursements from the FRS , and
1321his responsibility for all penalties and tax
1328consequences, if any, related t o the
1335Agreement payments and FRS disbursements.
1340This will also confirm that although Orange
1347County offered to enter into an alternate
1354agreement form with Mr. James (for the same
1362consideration) that would be acceptable to
1368FRS and not require repayment of F RS
1376disbursements, Mr. James elected to remain
1382bound by the terms of the current Agreement
1390and you advised Mr. James will make any FRS -
1400related payments necessary.
1403As we previously discussed, in the event
1410Mr. James does not repay sums due and owing
1419the FRS , Orange County will not repay such
1427sums on his behalf. Further, in the event
1435of Mr. James ' non - repayment of funds to the
1446FRS, we understand from Orange County that
1453it may be compelled by FRS to separate
1461Mr. James from his employment pursuant to
1468applic able statutory laws, rules and
1474regulations. In light of the serious
1480consequences to Mr. James of non - repayment
1488of the FRS funds, in an abundance of
1496caution, Orange County once again advises
1502that if an alternate form of settlement
1509agreement that does not r equire repayment to
1517FRS is preferred by Mr. James , Orange County
1525stands ready to execute such an agreement in
1533the form previously provided for your
1539consideration.
1540Jt. Ex. 8, p p . 00 01 - 000 2. This was fair warning to Petitioner
1557that there were serious conse quences if he chose to ignore the
1569SBA's concerns .
15721 4 . On June 15, 2016, Petitioner's counsel replied b y
1584letter that the settlement checks which accompanied the County's
1593June 14 letter were cas hed, Mr. James would not repay funds to
1606the FRS , and Mr. James intended to return to work with the
1618County . Id. at pp. 0 003 - 0 004. As of the date of the hearing,
1635Petitioner had not repaid the distribution, and pending the
1644outcome of this hearing, he has continued to work as a County
1656employee pursuant to the Settlemen t Agreement.
16631 5 . Based upon an audit by t he Division of Retirement
1676a fter Petitioner was reinstated, which showed that Petitioner
1685had received a distribution , he was currently receiving FRS
1694contributions from his employer , and he h ad no County
1704termination date, the SBA determined the distribution was
1712invalid .
171416. On August 1, 2016, Petitioner was notified by the SBA
1725that his September 201 5 distributions were considered "in -
1735service" distributions based on reinstatement to his FRS - covered
1745position and ser vice credit given for the period from March 2014
1757through June 2016 . He was offered the option of returning the
1769distributions to his account by September 30, 2016, or being
1779terminated by his employer , with leave to be reemployed by an
1790FRS - participating emp loyer after six months. Petitioner
1799declined this option and filed an appeal.
1806CONCLUSIONS OF LAW
18091 7 . Petitioner has the burden of proving by a
1820preponderance of the evidence that he is e ntitled to the relief
1832requested in his Petition. See , e.g. , Fla. De p't of Trans p . v .
1847J.W.C. Co., Inc. , 396 So. 2d 778, 788 (Fla. 1st DCA 1981).
18591 8 . The I nvestment P lan must be administered so as to
1873comply with the Internal Revenue Code. See § 121.4501(13)(a),
1882Fla. Stat. Benefit payments from the FRS that are not vali d
1894jeopardize the qualified status of the plan.
190119. Section 121.591(1)(a)3. and 4. governs when payments
1909of benefits under the Investment Plan may be made. It reads as
1921follows:
19223. The member must be terminated from all
1930employment with all [FRS] employe rs, as
1937provided in s. 121.021(39).
19414. Benefit payments may not be made until
1949the member has been terminated for 3
1956calendar months.
1958See also Blaesseer v. State Bd. of Admin. , 134 So. 3d 1013, 1014
1971(Fla. 1st DCA 2012)( "an employee must terminate all FRS - c overed
1984employment in order to receive a benefit " under the Investment
1994Plan ).
19962 0 . If an Investment Plan member takes a distribution in
2008contravention of section 121.591(1) (a) 3. and 4., t he member has
2020taken an "invalid distribution" and must either return the
2029distribution or terminate employment for at least six months .
2039Florida Administrative Code Rule 19 - 11.003(9) implements the
2048statute and requires that the member or former member "repay the
2059entire invalid distribution within 90 days of the member's
2068rece ipt of a final notification from the SBA, or in lieu of
2081repayment, the member must terminate employment from all
2089participating employers." Otherwise, the qualified status of
2096the Investment Plan would be in jeopardy.
21032 1 . In sum, s ection 121.591(1)(a)5. ma kes clear that under
2116the facts of this case Petitioner must: (1) repay or terminate
2127employment; and (2) if he fails to repay, he is subject to
2139section 121.122, which prohibits him from further participation
2147in the FRS. In this case, the SBA is doing prec isely what the
2161law requires. The County agrees with this analysis.
21692 2 . A lthough Petitioner argues otherwise, t he Colford
2180case, officially recognized, is strikingly similar to the
2188circumstances here and supports the position of the SBA. O n
2199January 7, 201 0, Colford , a DOT employee, was terminated from
2210employment for allegedly violating DOT rules and regulations.
2218Colford elected to grieve her dismissal pursuant to her union
2228contract. While the grievance was pending, d ue to financial
2238difficulties, Colford elected to withdraw all of her funds from
2248the Investment Plan. Like Mr. James, she neglected to advise
2258FRS about the pending grievance . On May 3, 2010 , she received
2270her distribution . A week later, her Step 3 grievance was
2281sustained, and DOT was ordered to reinstate her with back pay.
2292She was reinstated effective July 6, 2010. After a routine
2302audit , the SBA determined that the distribution was invalid and
2312offered her the option of repaying the distribution and becoming
"2322unretired," or terminating employ ment with DOT for at least six
2333months. Because she declined to repay the distribution, the SBA
2343(and DOT) concluded termination of her employment was required
2352by chapter 121. This determination was affirmed in both the
2362recommended and final orders. A sim ilar result is required
2372here.
237323. The SBA contends that under section 121.091(9)(d)2.,
2381if Petitioner fails to repay the distribution and the County
2391does not terminate his employment, the County is jointly and
2401severally liable for repayment of the distribu tion. That
2410section provides that if a n FRS retiree is employed within six
2422calendar months of his termination date, the employee and
2431employer are "jointly and severally liable for reimbursement of
2440any benefits paid to the retirement trust fund from which t he
2452benefits were paid." The County asserts the statute does not
2462apply under the circumstances presented here. A resolution of
2471that issue is unnecessary, as the County represents in its PRO
2482that if Petitioner fails to repay the distribution, it will seek
2493to avoid liability by "any lawful means," including terminating
2502Mr. James' employment.
25052 4 . Finally, in reaching the above conclusion s , the
2516undersigned has considered the arguments raised by Petitioner.
2524In the Amended Pre - H earing Stipulation, he conten ds the
2536Settlement Agreement is "ambiguous" because it does not
2544explicitly state that he would be treated as never having been
2555t erminated. By operation of the terms of the agreement,
2565however, the termination notice was specifically replaced by a
2574letter of reprimand . This meant he no longer had a termination
2586date , and therefore he was no t eligible for a distribution.
2597Pet itioner also contends he was not an employee when he received
2609the distributions in September 2015. Again, by virtue of the
2619terms of the a greement, he became "unretired" and subject to the
2631Investment Plan distribution rules. In his PRO, Mr. James
2640further argues that the Settlement Agreement does not address in
2650detail the ramifications of taking an in - service distribution of
2661his retirement f unds. While this may be true, before the
2672settlement checks were cashed, these details were explicitly
2680outlined in the County's letter dated June 14, 2016.
2689RECOMMENDATION
2690Based on the foregoing Findings of Fact and Conclusions of
2700Law, it is
2703RECOMMENDED tha t the State Board of Administration enter a
2713final order dismissing the Petition for Hearing and de termining
2723that unless Petitioner repays the distribution to FRS within
273230 days from the date of the final order , he must be declared a
2746retiree and ineligib le for future participation in the FRS ; any
2757retirement contributions received from Petitioner or the County
2765after his first distribution on September 4, 201 5 , must be
2776returned ; service credit awarded for the period from March 2014
2786through June 2016 must be vacated ; and Petitioner must be
2796immediately terminated from employment for at least six calendar
2805months.
2806DONE AND ENTERED this 21st day of December, 201 6 , in
2817Tallahassee, Leon County, Florida.
2821S
2822D. R. ALEXANDER
2825Administr ative Law Judge
2829Division of Administrative Hearings
2833The DeSoto Building
28361230 Apalachee Parkway
2839Tallahassee, Florida 32399 - 3060
2844(850) 488 - 9675
2848Fax Filing (850) 921 - 6847
2854www.doah.state.fl.us
2855Filed with the Clerk of the
2861Division of Administrative Hearings
2865t his 21st day of December, 2016.
2872COPIES FURNISHED :
2875Jerry Girley , Esquire
2878The Girley Law Firm, P.A.
2883125 East Marks Street
2887Orlando, Florida 32803 - 3816
2892(eServed)
2893Brian A. Newman, Esquire
2897Pennington, P.A.
2899Post Office Box 10095
2903Tallahassee, Florida 32302 - 2095
2908(eServed)
2909Sarah P.L. Reiner, Esquire
2913GrayRobinson, P.A.
2915301 East Pine Street, Suite 1400
2921Orlando, Florida 32801 - 2741
2926(eServed)
2927Ash Williams, Executive Director
2931and Chief Investment Officer
2935State Board of Administration
29391801 Hermitage Boulevard, Suite 100
2944Post Office Box 13300
2948Tallahassee, Florida 32317 - 3300
2953NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
2959All parties have the right to submit written exceptions within
29691 5 days of the date of this Recommended Order. Any exceptions to
2982this Recommended Orde r should be filed with the agency that will
2994render a final order in this matter.
- Date
- Proceedings
- PDF:
- Date: 03/15/2017
- Proceedings: Intervenor's Response in Oppostion to Petitioner's Exceptions to the Recommended Order filed.
- PDF:
- Date: 03/15/2017
- Proceedings: Petitioner's Exceptions to the Division's Recommended Order filed.
- PDF:
- Date: 12/21/2016
- Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
- PDF:
- Date: 12/12/2016
- Proceedings: Corrected Petitioner Willie James (Proposed) Recommended Order filed.
- Date: 11/14/2016
- Proceedings: CASE STATUS: Hearing Held.
- PDF:
- Date: 11/02/2016
- Proceedings: Intervenor's Cross Notice of Taking Deposition of Willie James filed.
Case Information
- Judge:
- D. R. ALEXANDER
- Date Filed:
- 09/16/2016
- Date Assignment:
- 09/19/2016
- Last Docket Entry:
- 03/15/2017
- Location:
- Tallahassee, Florida
- District:
- Northern
- Agency:
- ADOPTED IN TOTO
Counsels
-
Brandice Davidson Dickson, Esquire
Pennington, Moore, Wilkinson,
2nd Floor
215 South Monroe Street
Tallahassee, FL 32301
(850) 222-3533 -
Jerry Girley, Esquire
The Girley Law Firm
125 East Marks Street
Orlando, FL 32803
(407) 540-9866 -
Brian A Newman, Esquire
Pennington, P.A.
215 South Monroe Street, Second Floor
Tallahassee, FL 32302
(850) 222-3533 -
Sarah P. Reiner, Esquire
GrayRobinson, P.A.
Suite 1400
301 East Pine Street
Orlando, FL 32801
(407) 843-8880 -
Brandice Davidson Dickson, Esquire
Address of Record -
Jerry Girley, Esquire
Address of Record -
Brian A Newman, Esquire
Address of Record -
Sarah P. Reiner, Esquire
Address of Record -
Brian A. Newman, Esquire
Address of Record