State Employees’ Retirement Code; Administrative Law

Estate of L. Wilson v. State Emps. Ret. Bd., 177 A.3d 1020 (Pa. Cmwlth. 2017), allocatur granted Jul. 16, 2018, appeal docket 21 WAP 2018

The Supreme Court granted allocatur to consider whether Commonwealth Court abused its discretion and applied the wrong scope and standard of review when ruling on an appeal from an adjudication of the State Employees’ Retirement Board where the Board was interpreting its own regulations. Commonwealth Court held that a decedent’s retirement option change application must be considered filed when mailed.

Decedent Wilson became a State Employees’ Retirement System (SERS) member in 1977 through his employment with the Department of Public Welfare. Upon Wilson’s retirement in 1997, he elected to receive an Option 2 annuity which meant that if he predeceased his designated survivor annuitant (his wife Christene), she would receive the same monthly benefit Wilson received when he was alive. If, however, Christene predeceased Wilson, his retirement benefit would cease upon his death unless he changed his survivor annuitant designation.

A SERS member who wishes to change survivor benefits must file an Application for Option Change form. Wilson’s wife Christene predeceased him on November 27, 2011. SERS by letter to Wilson explained his options given that his designated survivor annuitant died. SERS also explained that any option change would be effective on the date SERS receives the completed SERS Application.

Wilson completed a SERS Application on June 1, 2012 designating his oldest daughter as the new principal beneficiary and he also acknowledged on the Application that he understood his option change would be effective on the date SERS received his Application. Wilson died on June 9, 2012 and SERS received his Application four days later on June 13, 2012.

SERS was not notified immediately of Wilson’s death so it took the steps to effectuate Wilson’s retirement option change. On July 10, SERS was notified of Wilson’s June 9 death and then advised Wilson’s Estate that Wilson’s original option 2 plan would be honored because that was the option still in effect at the time of his death. Because Wilson’s original designated annuitant had predeceased him, SERS advised that at the time of Wilson’s death there were no monies remaining to be paid and SERS stopped the annuity payments.

Wilson’s Estate asked SERS to reconsider and SERS’ Benefit Determination Division Director concluded the prior determination was correct. The Estate then went through the SERS appeal process which resulted in the SERS’ Appeals Committee, a SERS hearing officer, and ultimately the SERS Board denying the Estate’s request to honor the option change Wilson requested in his Application.

The Estate appealed to Commonwealth Court arguing that because Wilson’s Application and Beneficiary Nomination were executed and mailed before his death, his retirement option changes should be honored by SERS. The court agreed.

Commonwealth Court determined that the Hearing Officer’s reliance on Hess v. Pub. Sch. Emps. Ret. Bd., 460 A.2d 1231 (Pa. Cmwlth. 1983) was misplaced because Wilson’s case was distinguishable from Hess in several aspects. In Hess, the decedent made oral representations that he wished to change his beneficiary, but never completed or filed an Application with the Public School Employes’ Retirement Board.

SERS Board also relied upon Section 31.11 of the General Rules of Administrative Practice and Procedure (GRAPP) and Harasty v. Pub. Sch. Emps. Ret. Bd., 945 A.2d 783 (Pa. Cmwlth. 2008). Section 31.11 provides that “[t]he date of receipt at the office of the agency and not the date of deposit in the mails is determinative” for submitting pleadings and other documents to state agencies. However, again, the court determined Harasty to be distinguishable from Wilson’s case because in Harasty there was a statutory deadline for the member to elect an option and GRAPP applied. The Harasty court rejected the SERS member’s argument that because he mailed a written notice before the statutory deadline, his notice should be considered timely. Here in contrast there was no statutory deadline.

Commonwealth Court determined that Wilson had no ability to anticipate his death and, thus, ensure that SERS received his Application before the date of his death, so it is “untenable to conclude that Wilson’s documents were untimely because SERS did not receive them before he died.” Slip Op. at 6. The court further cited SERS’ letter to Wilson that advised him that his “option change will be effective the date SERS receives your completed [SERS Application] and required attachments.” Slip Op. at 7. The court also noted that according to 71 Pa. C.S. § 5102 (Retirement Code), the definition of “beneficiary” includes “the person or persons last designated in writing to the [B]oard by a member.” Slip Op. at 8. The SERS Board acknowledged that it received Wilson’s last written designation listing his daughter as his principal beneficiary. The court held that Wilson’s option change was effective upon SERS receipt and, thus, that the Board erred by not honoring it.

Then Judge Cosgrove wrote separately to highlight the problems that may arise when an administrative agency will not effectuate a person’s petitions or applications until receipt of such documents. In large bureaucratic institutions, it would be difficult to determine when receipt occurred. Judge Cosgrove wrote that where receipt remains administratively required, problems can be avoided by adopting the common law “mailbox rule” which would make such documents effective on mailing.

The Supreme Court granted allocatur on the following issues as phrased by the Board:

(1) Did the Commonwealth Court abuse its discretion and depart from accepted judicial practice in holding that the Decedent’s retirement option change application must be considered filed when mailed?

(2) Did Commonwealth Court apply the wrong scope and standard of review to the Retirement Board’s adjudication by not affording the appropriate deference to the Retirement Board’s interpretation of the State Employees’ Retirement Code, 71 Pa.C.S. §§ 5101-5958, (“Retirement Code”) and duty [sic] adopted regulation for determining a document’s filing date, and by making unsupported evidentiary presumptions, regarding the actual mailing of the documents at issue in this case?

For more information, contact Kevin McKeon or Dennis Whitaker