16-005326 Willie James vs. State Board Of Administration
 Status: Closed
Recommended Order on Wednesday, December 21, 2016.


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Summary: By taking an in-service distribution of retirement funds, Petitioner was required to repay the distribution or terminate employment for six months.

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.

Select the PDF icon to view the document.
PDF
Date
Proceedings
PDF:
Date: 03/15/2017
Proceedings: Agency Final Order filed.
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: 03/13/2017
Proceedings: Agency Final Order
PDF:
Date: 12/21/2016
Proceedings: Recommended Order
PDF:
Date: 12/21/2016
Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
PDF:
Date: 12/21/2016
Proceedings: Recommended Order (hearing held November 14, 2016). CASE CLOSED.
PDF:
Date: 12/15/2016
Proceedings: Intervenor's Proposed Recommended Order filed.
PDF:
Date: 12/15/2016
Proceedings: Respondent's Proposed Recommended Order filed.
PDF:
Date: 12/12/2016
Proceedings: Corrected Petitioner Willie James (Proposed) Recommended Order filed.
PDF:
Date: 12/12/2016
Proceedings: Petitioner Willie James (Proposed) Recommended Order filed.
Date: 11/14/2016
Proceedings: CASE STATUS: Hearing Held.
PDF:
Date: 11/10/2016
Proceedings: Respondent's Motion for Official Recognition filed.
PDF:
Date: 11/10/2016
Proceedings: Amended Pre-hearing Stipulation filed.
PDF:
Date: 11/10/2016
Proceedings: Pre-hearing Stipulation filed.
PDF:
Date: 11/02/2016
Proceedings: Intervenor's Cross Notice of Taking Deposition of Willie James filed.
PDF:
Date: 10/27/2016
Proceedings: Notice of Taking Deposition Duces Tecum filed.
PDF:
Date: 09/28/2016
Proceedings: Order of Pre-hearing Instructions.
PDF:
Date: 09/28/2016
Proceedings: Notice of Hearing (hearing set for November 14, 2016; 9:00 a.m.; Tallahassee, FL).
PDF:
Date: 09/26/2016
Proceedings: (Joint) Response to Initial Order filed.
PDF:
Date: 09/23/2016
Proceedings: Order Granting Motion to Intervene.
PDF:
Date: 09/22/2016
Proceedings: Orange County, Florida's Motion to Intervene filed.
PDF:
Date: 09/22/2016
Proceedings: Notice of Appearance (Brandice Dickson) filed.
PDF:
Date: 09/22/2016
Proceedings: Notice of Appearance (Brandice Dickson) filed.
PDF:
Date: 09/19/2016
Proceedings: Initial Order.
PDF:
Date: 09/16/2016
Proceedings: Agency action letter filed.
PDF:
Date: 09/15/2016
Proceedings: Petition for Hearing filed.
PDF:
Date: 09/15/2016
Proceedings: Referral Letter 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

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