96-003761 Bobbie Jones Scott vs. Division Of Retirement Status: Closed Recommended Order on Wednesday, July 30, 1997.

Summary: Evidence did not establish estoppel on pension calculation where representation by State was only mistatement of law.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BOBBIE JONES SCOTT, )

)

Petitioner, )

)

vs. ) Case No. 96-3761

)

DEPARTMENT OF MANAGEMENT SERVICES, )

DIVISION OF RETIREMENT, )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

This matter came on for hearing before Diane Cleavinger, a

duly-designated Administrative Law Judge of the Division of

Administrative Hearings, on March 27, 1997, in Fort Walton Beach,

Florida.

APPEARANCES

For Petitioner: M. Christopher Bryant, Esquire

Oertel, Hoffman, Fernandez and Cole, P.A.

Post Office Box 6507

Tallahassee, Florida 32314-6507

For Respondent: Robert B. But ton, Esquire

Division of Retirement

Cedars Executive Center, Building C

2639 North Monroe Street

Tallahassee, Florida 32303

STATEMENT OF THE ISSUE

Whether Petitioner is entitled to disability retirement

benefits calculated as if she had reached the age of 65,

irrespective of her true age.

PRELIMINARY STATEMENT

Respondent, Division of Retirement, notified Petitioner,

Bobbie Jones Scott, of its denial of her claim to increased

retirement benefits under the Teachers Retirement System (TRS).

Petitioner challenged the Division's denial and filed a Petition

for Formal Hearing. The Petition was forwarded to the Division

of Administrative Hearings.

At the hearing, Petitioner testified in her own behalf and

offered the testimony of Virginia Bowles, a benefit specialist

with the Okaloosa County School System; Mark Sadler, head of

Disability Determination Section in the Division of Retirement;

and the deposition testimony of Brenda Woodard, a benefits

specialist in Mr. Sadler’s section. Additionally, Petitioner

offered eight exhibits into evidence. The Respondent presented

the testimony of June Ferguson, a retirement administrator in the

Division of Retirement Benefits Calculations Section and offered

one exhibit into evidence.

After the hearing, Petitioner and Respondent submitted

Proposed Recommended Orders on May 21, 1997, and May 15, 1997,

respectively.

FINDINGS OF FACT

1. From April 1969 until March 1996, Petition er,

Bobbie Jones Scott, was employed as a school teacher by the

Okaloosa County School Board. She served 27 years as an

elementary school teacher, teaching at the same Okaloosa County

elementary school for her entire tenure. Prior to commencing her

teaching career, Petitioner served as a library aide in Okaloosa

County for the full 9-month term of that position in the

1967-1968 school year.

2. Petitioner is a member of the TRS. The TRS was closed

to new members on December 1, 1970. Since closure, teachers have

been enrolled in the Florida Retirement System (FRS). At some

point, Petitioner purchased retirement credits in TRS for the

school year during which Petitioner served as a library aide.

3. Early retirees under both TRS and FRS, retiring without

disability, have their retirement benefits actuarially reduced by

five percent per year or five-twelfths percent per month for each

year or fraction of year that the retiree is under the age of 62.

See, Section 121.021(30), Florida Statutes and Rule 6S-7.003,

Florida Administrative Code.

4. Petitioner first inquired about retirement in 1993, when

her husband, also a teacher, retired. She requested and obtained

from the Division an estimate of early retirement benefits. In

1993, the early retirement penalty reduced Petitioner's

retirement benefit to 67.9 percent of her normal retirement

benefit. The reduction was so great that Petitioner elected to

keep teaching.

5. On October 16, 1994, Petitioner severely injured her arm

when she slipped on a freshly waxed floor at the elementary

school. Several surgical procedures were required over the next

two years as a result of this accident. Despite extensive

physical therapy, Petitioner did not regain full range of motion

and full use of her dominant right arm. Petitioner could not

raise her arm above shoulder level and could not raise it high

enough to write on a blackboard. The injury clearly interfered

significantly with Petitioner's ability to teach.

6. In December 1994, because of he r injury, Petitioner

requested an estimate of retirement benefits. Again, the early

retirement penalty reduced the retirement benefit to 77.9 percent

of normal benefits. The reduction was so great that Petitioner

could not afford to retire.

7. Approximately three months after her accident on

January 17, 1995, the Petitioner returned to teaching. Her

physical therapy and surgical treatment continued.

8. In June 1995, while recuperating from the third

operation on her arm, Petitioner called the Division of

Retirement to request information on disability retirement. She

specifically told the person she spoke with that she was a member

of TRS. Petitioner was sent an application form and instructions

for retirement under FRS instead of an application and

instructions for TRS.

9. At that time, the Petitioner did not submit the

application because a decision on the application would not be

reached before the start of the 1995-1996 school year.

Petitioner wished to avoid commencing the school year, only to

leave teaching several weeks into the school year, necessitating

finding and hiring a replacement teacher and disrupting the

students’ course of studies.

10. In November 1995, Petitioner was diagnosed with

diabetes. Teaching was becoming detrimental to Petitioner's

health. At the urging of her physician she elected to pursue

disability retirement. The Petitioner reviewed a booklet sent to

her by Respondent entitled "Florida Retirement System Disability

Benefits." The Petitioner relied on the statement on page 27 of

the booklet which states, "Disability benefits are not reduced

for early retirement." Based on that statement Petitioner

applied for disability retirement and submitted the disability

retirement application which she had received earlier along with

the requisite supporting documentation on January 10, 1996.

11. Neither the FRS disability retirement application form

nor the FRS Disability Retirement Handbook informed Petitioner

that there would be an early retirement penalty for disability

retirees. However, the FRS literature also indicates that

employees who are members of other retirement systems may be

governed by different rules and should look to those other

retirement systems.

12. Unfortunately, Petitioner had been given the wrong

information by the Division of Retirement even though she had

specified she was a member of TRS.

13. On February 9, 1996, after receiving Petitioner's

application, the Division of Retirement sent a letter to

Petitioner advising her that the incorrect disability retirement

application form had been used. A TRS Disability Retirement

Application form was enclosed with the letter. Only the title of

the application was changed. In essence, the TRS application was

the same as the FRS application. No booklet or pamphlet

explaining the TRS system was provided.

14. On February 14, 1996, immediately upon her receipt of

the February 9, letter and the TRS Disability Retirement

Application form, Petitioner telephoned the Division of

Retirement and spoke with Mark Sadler, a retirement administrator

in the disability determination section within the Division of

Retirement. The Petitioner explained that she had used the

disability retirement forms provided to her by the Division. She

inquired as to whether an additional 30 days would be needed to

process her application. She also indicated that the reason she

was still working and had not retired previously is that she

could not afford to be assessed the early retirement penalty.

15. Mr. Sadler informed the Petitioner that she would need

to submit the correct TRS Disability Retirement application.

However, Mr. Sadler agreed to accept the physician’s report of

disability already submitted with the FRS form and to expedite

her request for disability retirement since the medical

information which Petitioner had submitted met the TRS

requirements for disability documentation.

16. On or about March 7, 1996, Petitioner received

notification from the Division of Retirement that her application

for disability retirement had been approved. The next day,

Petitioner met with Virginia Bowles, a benefits specialist with

the Okaloosa County School Board, to obtain an estimate of her

retirement benefits under Plan E of the TRS system. Mrs. Bowles

prepared an estimate of Petitioner’s benefits. The estimate did

not show any reduction of benefits for early retirement.

17. The form Ms. Bowles prepared was clearly labeled

"estimate" and provided, inter alia , that Petitioner would

receive a calculation of her retirement benefits from the

Division of Retirement in approximately three weeks.

18. While in Mrs. Bowles’ office, Petitioner insisted on

confirmation from the Division of Retirement that an early

retirement penalty would not be imposed on her benefits. In the

Petitioner’s presence, Mrs. Bowles called the Division of

Retirement to verify that there was no early retirement penalty

for disability retirees. Mrs. Bowles was assured that there was

no such penalty. Mrs. Bowles immediately relayed that

information to Petitioner.

19. Based on this representation, Petitioner immediately

resigned her position on March 8, to be effective March 13,

1996. 1 Had Petitioner known there would be a reduction in her

disability retirement benefits and had she not received incorrect

information from both the Division of Retirement and the Okaloosa

County School Board, she would have found some way to continue

working to avoid the early retirement penalty even though

continued employment would have been detrimental to her health. 2

20. At the time of her retirement, Petitioner had attained

the age of 58 years and 4 months, 44 months short of the normal

retirement of age 62. The estimate prepared by Ms. Bowles

reflected that Petitioner's monthly retirement benefit would fall

between $1,458.20 and $1,512.41.

21. At the time of her resignation, Petitioner was earning

over $39,000 per year as an experienced teacher.

22. Once Petitioner resigned her position, she could not

immediately return to work. Board policy required her to wait

one year before re-employment and then she could be rehired at a

starting teacher’s salary of about $21,000.

23. A couple of weeks after resigning her position,

Petitioner received a calculation of her retirement benefits from

the Division of Retirement. The benefits were significantly

lower than the estimate of benefits prepared by Mrs. Bowles.

24. Retirement benefits under Plan E are calculated by,

first, determining an "average final compensation," or AFC, for

an employee by averaging the 10 highest years of salary in the

employee’s last 15 years of employment. The employee’s

compensation percentage, or "comp percent," is then determined by

assigning a 2 percent value for every year of creditable service.

The AFC is then multiplied by the comp percent to arrive at a

retirement benefits figure.

25. In Petitioner’s case, the Division calculated AFC as

$32,601.10. The Division, based on 27.9 years of service,

arrived at a comp percent of .558, resulting in a normal

retirement allowance of $18,191.41 per year or $1,515.95 per

month. 3

26. However, because Ms. Scott fell into the early

retirement category under TRS her benefits were reduced.

27. In calculating Petitioner’s disability benefits, the

Division of Retirement reduced the otherwise normal retirement

benefit calculation by 18.33 percent to 81.667 percent of her

normal benefit. The reduction resulted in a monthly retirement

benefit of $1,238.03. The reduction is the result of a five-

twelfths of one percent reduction for each month that Petitioner

was short of age 62 and is the correct benefit calculation under

TRS. See Rule 6S-7.003, Florida Administrative Code.

CONCLUSIONS OF LAW

28. The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to this

proceeding. Section 120.57(1), Florida Statutes.

29. Petitioner retired under Plan E of TRS.

30. Sections 238.07(2)(e), 1., 2., Florida Statutes, govern

retirement benefits under TRS and states in part:

(2) The provisions for the retirement of a

member are as follows:

* * *

(e) To retire:

1. At normal retirement age which shall be

age 60 for those persons whose membership

date, or last renewal thereof, occurred prior

to July 1, 1963, and age 62 for those persons

whose membership date, or last renewal

thereof, occurred on or after July 1, 1963;

or

2. Prior to normal retirement age but at or

subsequent to age 55, provided that upon such

date the member has completed 10 years of

creditable service, which shall be the early

retirement age; or

* * *

31. Sections 238.07(7), (a), (b), (c), Florida Statutes

states in part:

Upon service retirement under plan E, a

member shall receive a service retirement

allowance which shall be determined as

follows:

(a) At normal retirement age: Two percent

of his or her average final compensation

multiplied by the number of years of

creditable service.

(b) At early retirement age: Two percent of

his or her average final compensation

multiplied by the number of years of

creditable service and adjusted for actuarial

equivalents based on completed months by

which early retirement precedes normal

retirement as provided in paragraph (2)(e).

(c) At delayed retirement age: Two percent

of his or her average final compensation

multiplied by the number of years of

creditable service.

32. Sections 238.07(11)(a) and (e), Florida Statutes,

states in part:

* * *

(11) Upon retirement on account of

disability, a member shall be paid his or her

service retirement allowance if he or she is

eligible for a service retirement allowance;

otherwise, the member shall receive a

retirement allowance which shall consist of:

(a) An annuity which shall be the actuarial

equivalent of his or her accumulated

contributions at the time of retirement; and

* * *

(e) If the member is making contributions

for retirement under plan E, he or she shall

receive a retirement allowance which shall

consist of 100 percent of the retirement

allowance to which he or she would be

entitled if his or her date of disability

retirement were his or her otherwise normal

retirement date; provided, however that the

retirement allowance payable upon disability

retirement shall not be less than 25 percent

of average final compensation nor, if

disability retirement occurs prior to the

date on which the member is first eligible

for service retirement, shall it be greater

than the service retirement allowance to

which the member would be entitled if he or

she continued in active service to such date

at the same rate of compensation effective on

the date of disability retirement.

33. Section 238.07(11), Florida Statutes, provides, among

other things, that upon retirement on account of disability a TRS

member shall be paid his or her service retirement allowance if

the member is eligible for service retirement. Petitioner, as a

Plan E participant, was eligible for one of the service

retirement categories as defined in Subsection 238.07(2)(e),

Florida Statutes.

34. Petitioner was past the age of 55, but not yet 62 and

had completed at least ten years of service. Petitioner was,

therefore, entitled to retire under the early retirement service

category of Subsection 238.07(2)(e)2, Florida Statutes.

Petitioner was not entitled to retire under the normal service

retirement category because she did not meet the age requirements

for such retirement. Subsection 238.07(2)(e)1, Florida Statutes.

35. Section 238.07, Florida Statutes, establishes the

methodology for calculating retirement benefits or service

allowances once the service retirement category is determined.

Normal retirement benefits under Plan E are calculated by, first,

determining an "average final compensation," or AFC, for an

employee by averaging the ten highest years of salary in the

employee’s last fifteen years of employment. The employee’s

compensation percentage, or "comp percent," is then determined by

assigning a two percent value for every year of creditable

service. The AFC is then multiplied by the comp percent to

arrive at a retirement benefits figure. Early retirement

benefits are actuarially reduced.

36. In Petitioner’s case, the Division calculated her AFC

as $32,601.10. The Division, based on 27.9 years of service,

arrived at a comp percent of .558, resulting in a normal

retirement allowance of $18,191.41 per year or $1,515.95 per

month. 3

37. However, because Ms. Scott fell into the early

retirement service category her benefits were reduced pursuant to

the formula set forth in 238.07(7)(b), Florida Statutes.

38. Under Section 2 38.07(2)(e)1., Florida Statutes, normal

retirement age is 62. In this case, Petitioner retired at age

58, 44 months prior to her normal retirement age. Therefore,

under Section 238.07(7)(b), Florida Statutes, Petitioner's

retirement benefit should be actuarially adjusted by .28333 to

.81667 of her normal retirement benefit. The reduction resulted

in a monthly retirement benefit of $1,238.03. The Division’s

methodology and calculations were legally correct in Petitioner’s

case. Section 238.07(11), Florida Statutes.

39. In the instant case, the Division made a representation

to Petitioner and to a person calling on the behalf of the

Petitioner that there would be no reduction in disability

retirement benefits for early retirement. In reliance on that

representation, Petitioner resigned her position as a teacher in

the Okaloosa County school system. Petitioner’s change in

position is not reversible and is detrimental because any attempt

to return to employment once resigning the position would be at a

significantly reduced salary.

40. The elements of equitable estoppel against the State

are (1) a representation as to a material fact that is contrary

to a later-asserted position; (2) reliance on that

representation; and (3) a change in position detrimental to the

party claiming estoppel, caused by the representation and

reliance thereon. Kuge v. State, Department of Administration,

Division of Retirement , 449 So. 2d 389, 391 (Fla. 3d DCA 1984).

41. In Salz v. Department of Administration, Division of

Retirement , 432 So. 2d 1376 (Fla. 3d DCA 1983), Mrs. Salz, a

teacher in the Dade County school system, inquired of the

Division of Retirement as to her ability to purchase eight years’

out-of-state service was not creditable because the school in

which she taught was a private school.

42. Following an administrative hearing on the matter, a

hearing officer determined that the Division was estopped from

denying Mrs. Salz’s retirement credit for the eight-year period.

The Division’s final order reversed the hearing officer, and

Mrs. Salz appealed. The Third District Court of Appeal reversed,

noting that the Division’s mistaken belief that the Missouri

school in which she taught was a public school was a mistake of

fact, not of law, which may have prevented application of

estoppel. Estoppel applied.

43. Similarly, in Kuge v. Department of Administration,

Division of Retirement , supra , an employee of the Department of

Health and Rehabilitative Services was told by the Division of

Retirement that she would be eligible for retirement benefits

based on two prior periods of employment in state government.

Before resigning from the state during her second period of state

employment to accept a position with the federal government,

Mrs. Kuge had been informed that she had to continue to work

through a certain date to achieve the necessary ten years of

creditable retirement service to be eligible for state retirement

benefits.

44. After working the specified length of time, and

resigning her state position, the Division of Retirement informed

Ms. Kuge that she was not eligible for retirement benefits as she

had only 9.33 years of creditable State retirement service,

instead of ten years necessary to vest in the state retirement

system. Following an informal administrative proceeding in which

Ms. Kuge challenged the determination that she was ineligible for

retirement benefits, the Division of Retirement entered a final

order finding her ineligible.

45. On appeal, the Third DCA reversed, noting that the

Division was estopped from denying benefits. The State had made

a statement of fact as to the length of time which Ms. Kuge had

to serve in order to qualify for benefits. Ms. Kuge’s

detrimental reliance on this statement formed the basis for

estoppel.

46. The Third District also specifically rejected the

Division’s argument that there was no detrimental reliance as

Ms. Kuge "could always return to state employment and serve out

an additional eight months, thereby becoming eligible for state

retirement benefits." Kuge , 449 So. 2d at 392. As noted by the

Third DCA, "this argument ignores the real world as the

employment market does not ordinarily permit such cavalier

changes in job placement." Id . As in Petitioner’s case, a

return to employment to earn additional years of service, or

termination of benefits until the age of 62 is reached, during

which time Petitioner would receive no income, is not a

reasonable alternative.

47. In Austin v. Division of Retirement , 350 So. 2d 102

(Fla. 1st DCA 1977), the court held that a mis-statement of law

contained in a pamphlet issued by the Division did not bind the

Division of Retirement with respect to certain death benefits.

In short, the court said that administrative officers of the

state cannot estop the state through mistaken statements of the

law. Likewise, as provided in Division of Retirement v. Flowers ,

356 So. 2d 14 (Fla. 1st DCA 1978), although an incorrect estimate

had been mistakenly furnished by the Division’s Benefit

Calculation Section in response to a member’s inquiries about his

prospective retirement benefits, the incorrect estimate did not

warrant estoppel, and the Division was not required to pay

retirement benefits in accordance with the incorrect estimate.

48. In the instant case, an affirmative mis-representation

was made to Petitioner by both the Division of Retirement and

Okaloosa County School District that no early retirement penalty

was imposed on disability retirees. Petitioner relied on that

statement. However, the representation can only be characterized

as a mis-statement of the law and not a mis-statement of fact.

Therefore, Petitioner is not entitled to an increase in her

retirement benefit.

RECOMMENDATION

Based upon the findings of fact and conclusions of law, it

is,

RECOMMENDED:

That the Division of Retirement calculated Petitioner’s

benefits correctly and is not estopped from reducing Petitioner’s

benefits based on her status as a disability retiree.

DONE AND ENTERED this 30th day of July , 1997, in

Tallahassee, Leon County, Florida.

___________________________________

DIANE CLEAVINGER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 30th day of July , 1997.

ENDNOTES

1 / Technically, Petitioner's retirement for TRS purposes would

not begin until the first of the next month following her

termination date with the Okaloosa County School System.

2 / Petitioner's disability was not challenged in this

proceeding.

3 / Mrs. Bowles' annual benefit calculation was $17.498 due to an

erroneous comp percent of .538, which assumed only 26.9 years of

service.

COPIES FURNISHED:

M. Christopher Bryant, Esquire

Oertel, Hoffman, Fernandez and Cole, P.A.

Post Office Box 6507

Tallahassee, Florida 32314-6507

Robert B. Button, Esquire

Division of Retirement

2639 North Monroe Street

Tallahassee, Florida 32399-1560

A. J. McMullian, III, Director

Division of Retirement

Cedars Executive Center, Building C

2639 North Monroe Street

Tallahassee, Florida 32399-1560

William H. Linder, Secretary

Department of Management Services

4050 Esplanade Way

Tallahassee, Florida 32399-0950

Paul A. Rowell, Esquire

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.