ALJDEC decisions subject to certification as final

18F-010-ARB · Arizona State Retirement System · 2019-06-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 10, 2018 and May 6, 2019 (no evidence was taken on this date) APPEARANCES: Susan E. Baker on her own behalf; Jothi Beljan, Esq (October 10, 2018) and Mark Fuller, Esq. (May 6, 2019) for Respondent ADMINISTRATIVE LAW JUDGE: Thomas Shedden FINDINGS OF FACT 1. On July 16, 2018, the Arizona State Retirement System (“ASRS”) issued a Notice of Hearing setting the above-captioned matter for hearing on August 21, 2018 at the Office of Administrative Hearings in Phoenix, Arizona. 2. The issue for hearing is Appellant Susan E. Baker’s appeal of ASRS’s denial of her request to change her retirement benefit from a fifteen-year term-certain annuity to a joint-and-survivor 100% annuity. ASRS denied Ms. Baker’s request because it determined that it does not have statutory authority to make the annuity change she requested. 3. The matter was continued and the hearing was convened on October 10, 2018, but not finished. The matter was scheduled to be convened for further hearing on December 18, 2018, but at ASRS’s request it was continued and rescheduled to be reconvened on February 7, 2019. Due to her own health issues and that of her husband’s, Ms. Baker request that the matter be delayed until after May 2, 2019. The matter was then scheduled for May 6, 2019. Mr. Baker had continued health issues and although the matter was convened on May 6th, no evidence was taken. The matter was then reset for May 20, 2019, but before that date Ms. Baker filed a notice withdrawing her appeal based on continued health problems. 4. In response to Ms. Baker’s withdrawal, ASRS requested what in essence would be a default ruling. The Administrative Law Judge deferred ruling on ASRS’s request, and informed the parties that unless there was an objection, he would issue an Administrative Law Judge Decision based on the record as it existed when Ms. Baker withdrew. No objection being received the matter was concluded effective on June 6, 2019, and this Decision is based on the existing record. 5. In 2012, Ms. Baker was a long-term disability member of ASRS. As pertinent to this matter, long-term disability members are discontinued from that program when they become eligible for a normal retirement. This date is referred to as the maximum or “max” pay date. 6. In Ms. Baker’s case, she became eligible for a normal retirement when she reached 80 points, which is calculated by adding her age to her number of years of service. 7. On April 16, 2012, ASRS performed an audit of Ms. Baker’s account, which it typically does about six months before the member’s estimated max pay date. On April 16, 2012, ASRS determined that Ms. Baker’s max pay date was September 2, 2012. This was a change from ASRS’s prior estimate that Ms. Baker’s max pay date was November 19, 2012. 8. Through a letter dated April 17, 2012, ASRS informed Ms. Baker that it had recalculated her first normal retirement date (i.e., her max pay date), and that the date was now estimated to be September 2, 2012. ARSR’s letter requested that Ms. Baker telephone ASRS as soon as possible to make an appointment to meet with a Benefit Advisor who would help her in completing the required paperwork to transition to retirement. 9. At the hearing, Ms. Baker acknowledged that she received ASRS’s letter of April 17, 2012, but she did not open it until several years later. As such, Ms. Baker did not learn of her newly estimated max pay date until on or about September 4, 2012. 10. Members may choice from seven annuity options when they retire, which are a straight life annuity, three different joint and survivor annuities, and three different term-certain options. With the letter of April 17th, ASRS system included a description of each annuity option and a statement showing Ms. Baker’s estimated retirement benefits under all seven annuity options based on the proposed retirement date of September 2, 2012. 11. Filing an application is necessary before a member may begin to collect her retirement benefits. Because Ms. Baker was no longer receiving LTD benefits as of September 2nd, and she could not receive retirement benefits until her application was submitted, she and Mr. Baker were anxious to act quickly.[1] 12. On September 4, 2012, Ms. Baker met with ASRS and discussed her options. She did not sign her application that date, but returned to ASRS on September 5, 2012, when she submitted to ASRS her application for retirement benefits. September 5, 2012 is Ms. Baker’s date of retirement. 13. In the application’s Section 3, Election of Retirement Benefits, are listed the seven annuities that a member can choose from. In Ms. Baker’s application, there is a handwritten “X” in the box for “Life Annuity – 15 Year Certain.” There are initials in that Section, but it is not clear if they are Ms. Baker’s. 14. Through Section 5 of her application, Ms. Baker designated her husband James Lynn Baker as her primary beneficiary and Erik J. Baker and Nicholas P. Baker as her secondary beneficiaries. Ms. Baker initialed all three choices. 15. Ms. Baker signed her application on September 5, 2012. By signing the application, Ms. Baker certified that she had complied with the state law requiring her to notify her spouse of the annuity option she had chosen. 16. Through a letter dated September 12, 2012, ASRS informed Ms. Baker that her application was being processed and that she might receive three estimated payments before the processing was final. 17. Through a letter dated October 31, 2012, ASRS informed Ms. Baker that her application had been processed and that its records showed that she had chosen the 15-Year Term-Certain annuity option. The letter provided additional information about her account and the monthly benefit that she would receive. 18. On February 11, 2013, at Mr. Baker’s request, ASRS faxed to the Bakers a copy of its letter of October 31, 2012. 19. In August 2015, Ms. Baker requested an appointment with ASRS regarding her annuity option. That appointment was rescheduled several times, with Ms. Baker eventually telling ASRS that she would contact it at some time in the future to set up an appointment. 20. Through a letter dated December 29, 2017, Ms. Baker filed what she styled as an Appeal to Correct ASRS Distribution. 21. In her appeal, Ms. Baker wrote to the effect that she was caught off-guard in September 2012 when she learned that her LTD benefits would end on September 2, 2012; she asserted that considering her medical condition in 2012, it would have made no sense to choose the term-certain option, but rather to benefit her husband, the Joint and Survivor option was the best choice; that she had only learned of this error recently as Mr. Baker began to prepare for his retirement; and she requested that her benefit option be changed to a Joint and Survivor option. 22. Through a letter dated January 24, 2018, ASRS informed Ms. Baker that her appeal was being denied because ASRS did not have the authority to make the change she was requesting. ASRS found that when read together Ariz. Rev. Stat. sections 38-760(A) and (B) (2), and 38-764(H) show that this is the case. ASRS explained that based on these statutes, Ms. Baker had until thirty days after her retirement date to make any change to her annuity choice, which she had failed to do.[2] 23. In her appeal of December 29, 2017, which Mr. Baker also signed, Ms. Baker noted that her retirement date was before the changes to the spousal consent law that added a requirement that a member’s spouse must “sign-off” on the member’s retirement selections. 24. In its letter of January 24, 2018, ASRS explained that the amendment to Ariz. Rev. Stat. section 38-776 (the law related spousal consent) that Ms. Baker referenced in her appeal was not effective until July 1, 2013, which was after her date of retirement and so was not applicable to her matter. ASRS also noted that when Ms. Baker signed her application, she certified that she had provided Mr. Baker with notice of her annuity choice, which is what the law required at that time. 25. On May 7, 2018, ASRS received from Ms. Baker an Appeal to Correct ASRS Annuity Distribution in which she asserted that Kim, the ASRS employee who assisted Ms. Baker on September 5, 2012, had selected the wrong option (i.e., that Kim did not select the option Ms. Baker had requested). In support of that assertion, Ms. Baker stated that her initials were not in Section 3 of the application. And Ms. Baker asserted that the legislation to protect spousal rights was signed before her retirement date. 26. Through a letter dated May 18, 2018, ASRS informed Ms. Baker it was upholding its original denial because it had no authority to grant her request. It also informed her that Kim was an experienced employee, that Ms. Baker had been informed through the letter of October 31, 2012 that she had selected the 15-year term-certain annuity option, that the spousal consent law was not in effect on her date of retirement, and that she had acknowledged that she had notified Mr. Baker of her annuity choice as required by the law in existence at that time. 27. ASRS employees are not permitted to mark for a member the annuity choice the member is making. They are permitted to walk a member through her application and to advise her on the options available, but they are not permitted to make actual marks on the application form. CONCLUSIONS OF LAW 1. Ms. Baker bears the burden of proof and the standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119. 2. A preponderance of the evidence is: The 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. Black’s Law Dictionary 1373 (10th ed. 2014).

3. The primary goal when construing statutes is to fulfill the intent of the legislature. Backus v. State of Arizona, 220 Ariz. 101, 203 P.3d 499 (2009). 4. An agency’s authority is limited to that which is found in its enabling legislation. Arizona State Board of Regents v. Arizona State Personnel Board, 195 Ariz. 173, 985 P.2d 1032 (1999). 5. The tribunal may not expand or extend a statute to include that which is not within its provisions. State ex rel. Morrison v. Anway, 87 Ariz. 206, 349 P.2d 774 (1960). 6. When the legislature changes a statute, the tribunal must give effect to those changes, which are presumed to be intended to change the law. Finch v. State Department Of Public Welfare, 80 Ariz. 226, 295 P.2d 846 (1956)(citation omitted). 7. The preponderance of the evidence shows that ASRS provided Ms. Baker with about four and one-half months’ notice that her estimated max pay date had been recalculated to be September 2, 2012, but she failed to open her mail. Consequently, if Ms. Baker suffered any disadvantage from that change, it was occasioned by her failure to read ASRS’s notification letter, not by ASRS. 8. Ms. Baker signed her application that shows she chose a 15-year term-certain annuity. Ms. Baker has not proven that ASRS made any errors in processing her application or that someone other than her selected the term-certain option. 9. Ariz. Rev. Stat. section 38-760(B)(2) addresses term-certain annuities. That statute provides only limited options to change such a choice, none of which are applicable here, and it provides no authority for ASRS or Ms. Baker to change her choice to a joint and survivor annuity as Ms. Baker now requests. Ms. Baker identifies no other legal authority that would authorize such a change. Consequently, ASRS may not now make the change Ms. Baker is requesting. See Arizona State Board of Regents v. Arizona State Personnel Board; State ex rel. Morrison v. Anway. 10. When Ms. Baker signed her application, she certified that she had complied with the existing law requiring her to inform her husband of her choice. At that time, the Ariz. Rev. Stat. section 38-776 did not require Ms. Baker to obtain Mr. Baker’s written consent for her annuity choice. Consequently, Ms. Baker has not shown that ASRS erred in processing her application without a waiver from Mr. Baker. See Finch v. State Department Of Public Welfare. 11. Ms. Baker has not shown by a preponderance of the evidence that ASRS erred when it denied her request to change her retirement benefits, nor has she shown that ASRS has the legal authority to make such a change for her. 12. Consequently, Ms. Baker’s appeal should be dismissed. ORDER IT IS ORDERED that Susan E. Baker’s appeal is dismissed. 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 is five days after the date of that certification.

Done this day, June 26, 2019.

/s/ Thomas Shedden Thomas Shedden Administrative Law Judge

Transmitted electronically to:

Paul Matson, Director Arizona State Retirement System ----------------------- [1] A member whose retirement date is delayed through no fault of her own may be able to receive benefits retroactively. [2] To make such a change, Ms. Baker would have had to cancel her retirement and then reapply.

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826