ALJDEC decisions subject to certification as final

18F-005-ARB · Arizona State Retirement System · 2018-08-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Kenneth Zimmerman,

Appellant,

Arizona State Retirement System,

Respondent.

No. 18F-005-ARB

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: June 25, 2018 at 9:00 AM.

APPEARANCES: Lesli Sorensen, Esq. appeared on behalf of Kenneth Zimmerman (“Appellant”), with Appellant, Charles Burris, and Valerie Burkett as witnesses. Assistant Attorney General Jothi Beljan, Esq. appeared on behalf of the Arizona State Retirement System (“ASRS” or “Respondent”), with Jenna Golab as a witness. Debbie Wilks served as the official Court Reporter for the proceedings.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Order to the Board of ASRS.

FINDINGS OF FACT

Background and Procedure

ASRS is a public pension plan for workers employed by various government entities within and for the State of Arizona. The state agency administers retirement benefits, among other benefits, to qualified government employees. ASRS is governed by a Board that acts as fiduciary of the ASRS trust fund with powers and duties as outlined in Ariz. Rev. Stat. §§ 38-713 and 38-714.

ASRS offers several optional programs regarding retirement benefits, one of which is codified in Ariz. Rev. Stat. § 38-743 entitled “public service credit.” Public service credit allows actively contributing ASRS members to purchase credited service in the ASRS from their previous employment with other government agencies, including the federal government, state governments, and other in-state government agencies.

Appellant began his career as a probation officer in Indiana where he worked in the field from about 1986 through 1999. In 2004, Appellant relocated to Arizona. Appellant’s interest in working as a government employee was due, in part, to the State offering medical insurance, life insurance, and employee retirement benefits. He began working as a probation officer for Maricopa County on June 07, 2004. Appellant became an ASRS member at that time.

On or about July 13, 2004, Appellant elected to purchase the service credit from his Indiana government employment, which totaled 13.5 years. The total cost to purchase his years of credited service was $57,375.99. Appellant elected to pay for the service purchase with a direct payment of $40,532.27, which purchased 9.54 years of credited service. Appellant purchased the remaining 3.96 years of credited service, at a cost totaling $16,843.72, utilizing an irrevocable payroll deduction authorization (“PDA”). ASRS processed a bi-weekly payroll deduction of $64.98, the minimum permissible deduction amount to not exceed the maximum time period of twenty (20) years per Ariz. Admin. Code R2-8-513(E)(2), which included eight percent (8%) interest. Appellant’s twenty year PDA included a principal amount of $16,843.72 and $16,945.88 in interest, totaling $33,789.60.

On or about June 30, 2005, Appellant signed an ASRS authorization deduction form, number 59967, whereby he also initialed each of the following notices printed on the authorization:

This Payroll Deduction Authorization (PDA) is binding and irrevocable.

This agreement shall remain in effect until (a) the authorized payroll deductions are completed, or (b) my employment is terminated, whichever occurs first.

The cost to purchase this service includes an 8% per annum interest charge on the unpaid balance.

In 2006, Ariz. Rev. Stat. § 38-902 was amended to authorize the Administrative Office of the Courts to enter into a joinder agreement with the Public Safety Personnel Retirement System Fund Manager for probation, surveillance, and juvenile detention officer positions. In 2007, another joinder agreement was executed for court probation, surveillance, and juvenile detention officers to participate in the Arizona Corrections Officer Retirement Plan (“CORP”).

In May of 2007, Appellant completed a CORP membership form to voluntarily transfer from ASRS to CORP, along with the balance of his remaining ASRS service purchase PDA. Appellant’s request was processed by CORP in October of 2007.

After Appellant transferred from ASRS to CORP, his government employment continued and his employer continued making ASRS service purchase payment withholdings from Appellant’s bi-weekly salary as required by the irrevocable payroll deduction agreement.

On September 22, 2017, Appellant retired from government employment. Appellant’s retirement automatically terminated his service purchase PDA. By this date Appellant had paid $7,079.48 in principal payments and $13,584.16 in interest payments to ASRS, for 1.66 service credit years.

Soon thereafter Appellant applied for retirement benefits from ASRS. ASRS notified Appellant that he was not a member and could not collect benefits. ASRS presented Appellant with two options: to either transfer the amount he paid for service purchase (e.g., $15,370.34, of which $12,459.08 was calculated as principal and $2,911.26 was calculated as interest) to his current retirement system (e.g., CORP), or elect to have the amount he paid for service purchase returned to him (e.g., $13,225.22, of which $12,459.08 was calculated as principal and $766.14 was calculated as accrued interest).

Appellant disagreed with the options ASRS offered for a number of reasons. Because ASRS had sent Appellant monthly statements from 2007 through 2011 that projected estimates of his monthly retirement benefit at age sixty-five, Appellant believe he was entitled to the estimated funds in spite of, or because of, their error. Appellant further believed that he relied on the estimates, to his detriment, because he did not engage in other financial planning opportunities in favor of relying on a monthly pension benefit from ASRS. Appellant additionally disagreed with the options ASRS presented because from 2011 through 2017 ASRS created an online account for Appellant which he used to track his estimated retirement benefit and plan for his retirement. Again, Appellant believed that he was entitled to the estimated funds in spite of, or because of, this additional error. Lastly, Appellant disagreed because he did not want to roll over the funds into his CORP account, desiring instead to be refunded monies that included principal, interest, and accrued interest.

After an unsuccessful Settlement Conference, Appellant requested a State Fair Hearing on February 13, 2018, regarding the determination issued by ASRS’ Director.

On February 26, 2018, ASRS referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. The Notice of Hearing originally set the above-captioned matter for hearing at 8:00 a.m. on April 12, 2018. The Director’s determination, which served as the basis for Appellant’s appeal, noted that Appellant had the following options: (a) to transfer the amount he paid for ASRS service credit totaling $7,079.48 under an ASRS irrevocable payroll deduction authorization to the CORP, or (b) have ASRS return the $7,079.48 payment amount to him.

On May 22, 2018, ASRS issued an Amended Notice of Hearing that modified the appealable agency action as follows: Appellant had the option to either (a) to transfer his monies at ASRS to CORP totaling $15,370.34 (of which $12,459.08 was calculated as principal and $2,911.26 was calculated as interest), or (b) have ASRS return $13,225.22 to him (of which $12,459.08 was calculated as principal and $766.14 was calculated as interest).

Appellant requested a continuance on March 23, 2018, and the matter was reset and heard on June 25, 2018. The Amended Notice of Hearing identified the issue for hearing as whether grounds exist to justify ASRS’ appealable agency action and its application of Ariz. Rev. Stat. §§ 38-747, 38-750, 38-921, and 38-922, as detailed above.

Hearing Evidence

Appellant testified on his own behalf, called Charles Burris and Valerie Burkett as witnesses, and submitted nineteen exhibits. ASRS called Jenna Golab as a witness and submitted thirty-eight exhibits. Both parties also submitted written closing arguments.

Appellant’s testimony

Appellant testified that when he learned that he could purchase service credits based on his government employment in Indiana, that he did so by paying for a $40,532.27 upfront, and then signed an irrevocable PDA for the remainder. Per Appellant’s understanding, there would be 520 payroll deductions for $64.98, plus 8% interest, totaling $33,789.60.

Appellant testified that he chose to move his retirement assets to CORP on May 22, 2007, because the plan had a higher multiplier and he could retire earlier at twenty years of service.

Appellant testified that from 2007 through 2011, ASRS mailed him benefit statements that noted his pension would be approximately $289.61 per month upon retirement, until it was increased to $806.00 in online statements generated in 2012, and further increased to $848.91 through 2017.

Appellant testified that he filled out a retirement application on July 14, 2017, and submitted it that same day. He estimated his expected retirement date to be September 25, 2017.

Appellant testified that he was notified by ASRS in September of 2017 that he was not eligible for retirement benefits. Per Appellant, in the weeks that followed he exchanged several emails with representatives from CORP and ASRS regarding his retirement eligibility and benefits.

Appellant testified that at no time prior to the submission of his retirement application did ASRS inform him that he was ineligible for a pension benefit, was not an ASRS member, or should not have access to an online ASRS account.

Appellant testified that on or about November 13, 2017, he appealed the ASRS determination that he was ineligible for retirement benefits. ASRS subsequently issued a letter upholding its denial to Appellant on November 24, 2017.

After Appellant requested a State Fair Hearing, ASRS issued a Notice of Hearing on February 26, 2018, that said Appellant had been offered a $7,079.48 refund/transfer.

Appellant testified that he received a letter from ASRS dated March 08, 2018, that encouraged him to retire because he was eligible.

On May 26, 2018, ASRS issued an Amended Notice of Hearing that said Appellant had been offered a $15,370.34 refund/transfer. Appellant testified that he refused the offer.

Appellant testified that he had detrimentally relied on ASRS’ monthly pension statements because he used them, in large part, to plan his retirement date and that he lost out on additional monies by retiring when he did.

Appellant further testified that he prayed for the Tribunal to issue: (a) an Order estopping ASRS from denying him pension payments and requiring the agency to remit an $848.91 monthly pension, (b) an alternative Order requiring ASRS to provide him with a $289.61 monthly pension, or (c) an Order requiring ASRS to refund his service purchase including principal, interest, and accrued interest. Appellant also requested an award of attorney’s fees should he prevail in this matter.

Mr. Burris’ testimony

Mr. Burris testified that he is employed by ASRS as a member balancing account supervisor.

Per Mr. Burris, when an ASRS member has an active PDA and completes a transfer out, the member must continue making the payments to ASRS with their new employer. But because their transfer out cancels the member’s ASRS membership, ASRS’ only option when the member terminates employment is to refund their contributions.

Mr. Burris further testified that telephonic ASRS customer service agents utilize job aids to assist members who call in looking for assistance with their retirement accounts. A job aid is easily accessible summarized information regarding a member’s account. Job aids are stored on ASRS’ servers. Per Mr. Burris, the job aids on ASRS’ servers, which appeared in several members’ online portals including Appellant’s, did not display correct member service information for members who transferred out of the plan. Mr. Burris specifically recounted that for affected members, when they transferred out and returned to a contributory status or continued to make payments, the service portion field of their job aid did not zero out at the time of the transfer, which gave the appearance that their time was still available.

Mr. Burris testified that ASRS was aware that transferred out member information was displaying incorrectly because on or about December 22, 2014, there had been an outstanding information technology repair request submitted regarding the issue. Mr. Burris opined that the job aid was incomplete because it did not include verbiage to indicate that the service balance could be transferred to CORP when the member terminated employment.

To the best of Mr. Burris’ recollection, the issue was still an occurring problem in August of 2017.

Ms. Burkett’s testimony

Ms. Burkett testified that she is employed by ASRS as a program manager in the Technology Services Division (“TSD”). Ms. Burkett was hired to work on an information technology project that ran from 2002 through 2007. The project was to upgrade ASRS’ paper-based system to a digital one. From 2009 through 2014, Ms. Burkett worked on a member-based self-service project. Since 2014, Ms. Burkett has worked on system migration.

Ms. Burkett testified that she recalled Mr. Burris requesting assistance from TSD sometime in December of 2014, regarding member service credits and transfer outs. Per her recollection, TSD did not respond to Mr. Burris’s request for help until February 02, 2015, when TSD asked Mr. Burris to resubmit his request. Mr. Burris resubmitted his request on April 16, 2015. Ms. Burkett testified that on November 15, 2015, Mr. Burris’ issue was noted as “partially fixed”. Ms. Burkett testified that on February 19, 2016, an update regarding Mr. Burris’ issue was requested, but was taken to senior management for approval. Ms. Burkett testified that on February 22, 2016, additional work was undertaken on Mr. Burris’ request. Per Ms. Burkett, an entry was made on February 24, 2016, but no further work was done to resolve or address the underlying issues Mr. Burris’ originally noted in his service request, even though the issue was reviewed and considered quarterly by ASRS through March of 2018.

Ms. Golab’s testimony

Ms. Golab is employed by ASRS as a member advocate. Ms. Golab’s role is to assist in researching complex escalated issues. She previously worked as a benefit technician, benefit advisor, and appeals analyst before being promoted to her current role.

Ms. Golab testified that in order for public employees to participate in ASRS, they have to work for an eligible employer and in an eligible position for at least twenty hours per week for at least twenty weeks a year.

Ms. Golab testified that retirement benefits are calculated, pursuant to Ariz. Rev. Stat. § 38-711, by multiplying the following components together to equate a monthly annuity benefit: a member’s credited years of service, a graded multiplier based on the total years of a member’s service, and the member’s average monthly salary. Retired members are offered monthly payment options but may also opt for a one-time lump sum payment.

Ms. Golab testified that Ariz. Rev. Stat. § 38-743 allows a member to buy past public service and add it to their ASRS total years of credited service, which is known as a service purchase. Members may buy their time outright or enter into a PDA agreement so that they may make biweekly payments directly from their paycheck under Ariz. Rev. Stat. § 38-747.

Ms. Golab testified that interest is charged on PDA agreements, in part, because there is an associated cost of interest to keep the fund whole because ASRS is not getting the member’s cost for the total years of service in an upfront payment.

Ms. Golab testified that while both principal and interest are paid in a service purchase, when a member elects a PDA, payments are applied to the interest first and then to the principal. Thus, members do not receive credit to their retirement accounts for service credit payments that are made to interest. Therefore, principal payments are applied to the service credit and the interest is applied to the plan.

Ms. Golab testified that in Appellant’s case, he had 1.45 years of payroll deduction authorization credited service on his account.

Ms. Golab testified that transfers between plans are governed by Ariz. Rev. Stat. §§ 38-921 and 38-922 and occur when a member leaves one public employer for another public employer in a different pension plan and chooses to transfer their time from their prior retirement plan to their new one.

Ms. Golab testified that when a member transfers their contributions to a new plan, their rights under ASRS are immediately extinguished. However, if the member has an existing PDA, those payments must continue as the contract is irrevocable.

Per Ms. Golab, Appellant enrolled as an ASRS member through his employment with the Maricopa County Adult Probation Department, effective June 07, 2004.

On July 30, 2004, Appellant submitted a service purchase request and supporting affidavits to ASRS. Upon approval Appellant purchased a portion of his service outright and signed an irrevocable PDA for the remainder.

In May of 2007, Appellant submitted a CORP membership form, to transfer from ASRS to CORP, along with his remaining ASRS service purchase PDA. It was processed by CORP in October of 2007. Although Appellant was still being charged 8% interest on the principal payments of his service purchase PDA, only the principal was transferred to CORP.

Ms. Golab testified that ASRS’ systems were not advanced enough in 2007 to acknowledge Appellant’s pension transfer to CORP because he had a PDA at the time, so it did not recognize that Appellant only had a service purchase with ASRS and had terminated. This inability is the reason why the system sent member statements to over 400,000 former members, including Appellant, as though they were current members. However, the member statements did indicate $0.00 in 0.00 years of contributions deposited.

Ms. Golab further testified that the mailed pension estimates Appellant received contained the following disclaimer at the top of the first page, “Below are estimates of when you will be eligible to retire, as well as your estimated monthly pension benefit on those dates. Estimates are based upon data the ASRS currently has on file for you, combined with various projections and assumptions. All of the data listed here is unaudited and should not be considered an income commitment.”

Ms. Golab testified that ASRS systems also erroneously permitted Appellant to create an online account. Moreover, Appellant was erroneously permitted to enroll in an educational seminar regarding retirement, whereby he received a projected estimate of 11.13 years of credited service and an average monthly pension of $848.91.

Ms. Golab testified that ASRS maintains an event log for all members. The log notes the date, time, and type of contact of every ASRS member has with their account in the retirement system, by the member and ASRS, even if the member is inactive, deceased, or if a member has elected to refund their account and terminate their relationship by transferring out of ASRS and going to a different retirement system.

Appellant was a part of a large group of similarly aged individuals who received letters in error from ASRS, as a result of a technological glitch, dated March 13, 2017, encouraging retirement.

Ms. Golab characterized both Appellant and the ASRS customer service call center agents he engaged with regarding his retirement account as victims of an information technology “glitch,” as neither was aware that the information available to them regarding Appellant’s account was incorrect.

Per Ms. Golab, it was not until ASRS received Appellant’s retirement application that it realized something was amiss with Appellant’s account, along with seventy-six other ineligible members. After several hours of manmade repairs to the system, ASRS determined that Appellant was ineligible and denied his application.

Appellant appealed on November 13, 2017, and the Deputy Director responded on November 24, 2017, affirming ASRS’ denial.

CONCLUSIONS OF LAW

Pursuant to Ariz. Rev. Stat. § 38-714 the ASRS Board has jurisdiction over the subject matter in this appeal.

Appellant bears the burden of proof in this matter, which is a preponderance of the evidence. Ariz. Rev. Stat. § 41-1092.07(G); Ariz. Admin. Code R2-19-119(A). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Further, a preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

Chapter 5, Articles 2 and 7, of the Arizona Revised Statutes Title 38 codify rules and regulations regarding ASRS and transfers to another retirement system or plan, respectively.

Ariz. Rev. Stat. § 38-755(A) requires ASRS to “make information concerning a member’s account accessible to the member in written or electronic form. This information shall include the member’s current account balance, contact information, beneficiary election, estimated retirement date and estimated benefit amount.” ASRS is required to correct errors in member records per Ariz. Rev. Stat. § 38-765 because ASRS is a trust fund for all members. See Ariz. Rev. Stat. § 38-712.

Ariz. Rev. Stat. § 38-747(A) states that a member who purchases credited service pursuant to §§ 38-738, 38-742, 38-743, 38-744, 38-745 or 38-922 shall either:

1) Make payments directly to ASRS as provided in subsection H of this section, [or]

2) Elect to have the member’s employer make payments as provided in subsection B of this section.

Ariz. Rev. Stat. § 38-747(B) states that a member may elect to have the member’s employer make payments for all or any portion of the amounts payable for the member’s purchase of credited service pursuant to the sections prescribed in subsection A of this section through a salary reduction program in accordance with the following:

1) The amounts paid pursuant to a salary reduction program are in lieu of contributions by the electing member. The electing member’s salary or other compensation shall be reduced by the amount paid by the employer pursuant to this subsection.

2) The member shall make an election at any time on or after the date the member elects to purchase credited service and before the member’s termination of employment. The election shall specify the number of payroll periods that deductions will be made from the member’s compensation and the dollar amount of deductions for each payroll period during the specified number of payroll periods. After an election is made, the election is binding on and irrevocable for the member and the member’s employer during the member’s remaining period of current employment.

Ariz. Rev. Stat. § 38-747(H) states that to the extent that a payment under this subsection does not alter, amend, or revoke any one or more currently effective irrevocable elections made by the member pursuant to subsection B or D of this section, the Board may accept employer contributions made pursuant to Ariz. Rev. Stat. § 38-771 or member contributions for the payment for credited service purchases pursuant to Ariz. Rev. Stat. §§ 38-738, 38-742, 38-743, 38-744, 38-745 or 38-922 or contributions made pursuant to Ariz. Rev. Stat. § 38-771.01, subsection F, paragraph 4, in whole or in part, by any one or a combination of the following methods:

1) In lump sum payments.

2) Subject to the limitations prescribed in §§ 401(a)(31) and 402(c) of the internal revenue code and subsection J of this section, accepting a direct transfer of any eligible rollover distribution from one or more:

(a) Retirement programs that are qualified under § 401(a) or 403(a) of the internal revenue code.

(b) Annuity contracts described in § 403(b) of the internal revenue code.

(c) Eligible deferred compensation plans described in § 457(b) of the internal revenue code that are maintained by a state, a political subdivision of a state or any agency or instrumentality of a state or a political subdivision of a state.

3) Accepting from a member a direct transfer from an individual retirement account or individual retirement annuity described in § 408(a) or 408(b) of the internal revenue code of an amount that would otherwise be eligible to be rolled over to ASRS under the provisions of § 408(d)(3)(A)(ii) of the internal revenue code if the amount had been received by the member and would have otherwise been includible in the member’s gross income but for the direct transfer.

4) Providing by rule that the contributions may be made in installment payments over a period of time.

Ariz. Admin. Code R2-8-513(A) states that an eligible member may purchase service credit by an Irrevocable PDA.

Ariz. Rev. Stat. §§ 38-921 and 38-922 permit eligible members of one state public retirement system in Arizona to transfer to another state retirement system.

Ariz. Rev. Stat. § 38-740(A) states, in pertinent part, that a member whose membership commenced before July 01, 2011, and who leaves employment other than by retirement or death may elect to receive a return of the contributions as follows:

2) If a member has five or more years of credited service, the member shall receive the member’s contributions and an amount equal to a percentage of the employer contributions paid on behalf of the member. This amount excludes payments made by an employer pursuant to § 38-738, subsection B, paragraph 3, unless the member has made the payment required by § 38-738, subsection B, paragraph 1. The percentage of employer contributions paid on behalf of the member shall be as follows:

(a) 5.0 to 5.9 years of credited service, twenty-five per cent.

(b) 6.0 to 6.9 years of credited service, forty per cent.

(d) 8.0 to 8.9 years of credited service, seventy per cent.

(e) 9.0 to 9.9 years of credited service, eighty-five per cent.

(f) 10.0 or more years of credited service, one hundred per cent.

3) Interest on the returned contributions as determined by the board.

Ariz. Rev. Stat. § 38-750(D) states that if an employee is given an election to transfer to another defined benefit retirement system or plan of this state or to remain with the employee’s current retirement system, on termination of employment the employee shall elect to have ASRS:

1) Promptly transfer to the subsequent defined benefit retirement system or plan the amount paid by the employee for the purchase of credited service plus interest as determined by ASRS. If an unfunded liability is created, subsection B of this section applies. If the employee fails to elect to have the assets transferred within thirty days after termination of employment, the employee is deemed to have made an election as prescribed in paragraph 2.

2) On written request by the employee, promptly return to the employee the amount paid by the employee for the purchase of credited service plus interest as determined by ASRS. If no application is received by ASRS within sixty days after termination of employment, ASRS shall issue the payment directly to the employee.

Ariz. Rev. Stat. § 38-922(E) states, in pertinent part, that on completion of a transfer provided for in this article, the member’s rights in the retirement system or plan from which the member is transferring are extinguished.

Senate Bill 1407 was enacted in June of 2008. The Arizona House of Representatives Bill Summary for Senate Bill 1407 states, in pertinent part, “[A]t termination and at the employee’s election either ASRS will transfer all assets and service credit to the other retirement system . . . or ASRS will refund the assets to the employee.”

“In applying a statute . . . its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.” “[A] statute should be explained in conjunction with other statutes to the end that they may be harmonious and consistent; . . . if statutes relate to the same subject and are thus in pari materia, they should be construed together with other related statutes as though they constituted one law.” Statutes are not interpreted in a vacuum and legal relationships mandated by one statute cannot be ignored in interpreting another. An agency may not disregard clear statutory directives or legislative intent. When statutes conflict, a special statute will prevail over a general statute.

Because retirement benefit and pension plans are adopted in a beneficial spirit and “not as business ventures or money-making syndicates, but rather to provide for the security of faithful servants [and] to improve their morale and to give them peace of mind in their dedication to public service,” statutes creating such plans are generally construed “with a view of promoting the object for which they were adopted.”

“Equity is reluctant to permit a wrong to be suffered without a remedy. It seeks to do justice and is not bound by strict common law rules or the absence of precedents. It looks to the substance rather than the form. It will not sanction an unconscionable result merely because it may have been brought about by means which simulate legality. And once rightfully possessed of a case it will not relinquish it short of doing complete justice.”

An Administrative Law Judge must apply equitable principles in making her recommendation to the Board in an effort to avoid an unconscionable or unjust result.

Here, Appellant argues that he is entitled as a matter of law to a monthly pension benefit from ASRS totaling either $848.91 or $289.61, or alternatively that ASRS should be required to a return all of his service purchase including principal, interest, and accrued interest.

Respondent argues that because the agency has deference to interpret the applicable statutes concerning this matter, that any disagreement regarding their interpretation due to perceived vagueness must be resolved in a light most favorable to the agency. Thus, Respondent opines that Appellant is entitled to no more relief than it is willing to offer.

Based on the relevant and credible evidence in the record the Tribunal holds that Appellant has failed to sustain his burden of proof regarding both of his monthly pension arguments. However, Appellant has sustained his burden of proof regarding the refund of his service purchase, including principal, interest, and accrued interest.

The lackadaisical conduct of ASRS in this matter, over a span of several years, is noted by the Tribunal. ASRS should not have provided Appellant with monthly retirement account statements or granted him access to an online ASRS retirement account. That being said, the Tribunal cannot compel ASRS to provide Appellant with a benefit that he knew, or should have known, he was not entitled to. Appellant’s transfer out of ASRS to CORP immediately terminated his relationship with ASRS. Appellant’s signature on the transfer documentation evinces his knowledge as to such. “[E]stoppel may apply against the state only when the public interest will not be unduly damaged and when its application will not substantially and adversely affect the exercise of government powers.” If ASRS was required to pay Appellant monies he was not entitled to receive, other members would be unfairly and inequitably impacted. This is true even in the face of ASRS’ improper conduct beyond the course of a decade.

For estoppel to be appropriately levied against a state agency, the agency’s communication giving rise to the estoppel must be formal, usually in writing, and made by “a person authorized to act in the area under consideration.” “In general, the state may not be estopped due to the casual acts, advice, or instructions issued by nonsupervisory employees.” Here, automated technology created and disseminated misinformation to Appellant, which was repeated to Appellant by non-supervisory employees on occasion. No formal documentation was ever sent to Appellant, nor was he ever provided misinformation in a formal capacity by a supervisor with ASRS.

Appellant’s detrimental reliance argument does not sway the Tribunal in his favor either because it does not hold weight. Appellant testified that he planned his retirement date based on the pension he believed he would receive from ASRS, and that he planned a fixed monthly budget based on those funds as well. However, Appellant did not provide specifics regarding his anticipated spending based upon receiving either a monthly pension from ASRS of $289.61, $806.00, or $848.91. Nor did Appellant show any evidence that would tend to suggest he was actually harmed by ASRS as a result of his alleged detrimental reliance. Most importantly, however, the evidence suggests that Appellant knew, or should have known, he was not eligible for an ASRS pension after transferring to CORP, which outweighs his arguments to the contrary.

Appellant presented the Tribunal with no law that would require ASRS to provide him with a pension, in any amount, as a result of its conduct. Although Appellant’s ethos arguments regarding detrimental reliance and estoppel are appealing, neither sufficiently lays legal foundation for this Tribunal to compel ASRS to provide Appellant with a monthly retirement pension.

However, Appellant’s final prayer for relief, a refund of his service purchase, including principal with interest and accrued interest, has more than just merit. As to this issue, Appellant has sustained his burden of proof by a preponderance of the evidence.

Ariz. Rev. Stat. § 38-750(D)(2) governs the return of Appellant’s remaining ASRS service purchase PDA. Further, legislative intent and equitable considerations must also be taken into account. Notably, Senate Bill 1407 specifically requires that an employee be refunded all assets in their ASRS account upon termination.

The evidence is clear regarding this issue – Appellant dutifully made monthly payments pursuant to an irrevocable agreement. Those payments, which occurred from July 13, 2004, to September 22, 2017, were applied to both the principal and interest of his service purchase. Appellant’s payments earned interest and accrued interest. These facts are not in dispute.

Here, the parties agree that Appellant is entitled to refunds of $12,459.08 in principal and $766.14 in accrued interest. The only material issue at dispute is whether Appellant is entitled to a return of $2,911.26 in interest earned on his payroll deduction authorization payments, as a matter of law. This Tribunal holds that he is. ASRS’ determination that Appellant was not entitled to a return of said interest was erroneous.

Ariz. Rev. Stat. § 38-750(D)(2) is clear: upon termination of employment an employee who elected to transfer to another defined benefit retirement system or plan in this state may compel ASRS, on written request, to have the agency promptly return monies the employee paid for their purchase of credited service, plus interest as determined by ASRS.

Moreover, Senate Bill 1407 notes that at a terminated employee’s election either ASRS will transfer all assets and service credit to the other retirement system or ASRS will refund the assets to the employee.

Not only does the greater weight of the evidence encourage this Tribunal to resolve this particular issue in Appellant’s favor, this result is also the most just. ASRS presented no evidence to establish that the interest earned on Appellant’s PDA payments was debt, credit, liability, or something beyond ASRS’ interpretations of relevant authority. Thus, Appellant has sustained his burden of proof regarding this issue by a preponderance of the evidence.

Therefore, the Administrative Law Judge concludes that the most equitable outcome permitted by law, given this case’s factual particulars, is to grant Appellant’s request to refund his service credit purchase including interest and accrued interest.

RECOMMENDED ORDER

Based on the foregoing findings of facts and conclusions of law,

IT IS RECOMMENDED that Appellant’s appeal in this matter should be granted in part and denied in part. Appellant’s request to compel ASRS to issue him a monthly pension should be denied. Appellant’s request to compel ASRS to refund his service purchase including principal, interest, and accrued interest, totaling $16,136.48, should be granted.

IT IS FURTHER RECOMMENDED that the underlying determination issued by the Director of ASRS be overruled and reversed.

IT IS FURTHER RECOMMENDED that Appellant’s request for an award of attorney fees be denied. Ariz. Rev. Stat. §§ 12-341 and 12-341.01, under which Appellant prayed for relief, applies only to civil matters and are inapplicable in administrative hearings such as this.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five (5) days from the date of that certification.

Done this day, August 30, 2018.

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Paul Matson, Director

Arizona State Retirement System