ALJDEC decisions subject to certification as final

20F-009-ARB · Arizona State Retirement System · 2020-08-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Chad Gosnell

Appellant,

Arizona State Retirement System,

Respondent.

No. 20F-009-ARB

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: August 4, 2020; the record was held open until August 18, 2020 for the receipt of the transcript

APPEARANCES: Appellant Chad Gosnell appeared on his own behalf. Assistant Attorney General Cassie Adams represented Respondent Arizona State Retirement System. Ryan Guerra appeared as a witness for the Arizona State Retirement System. Ursala Pappas, Court Reporter, was present

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

FINDINGS OF FACT

This hearing was noticed due to the Arizona State Retirement System (“ASRS”) Director’s determination that ASRS has paid Appellant Chad Gosnell (“Appellant”) all benefits to which he is lawfully entitled, and Appellant has appealed such determination.

Appellant first became an ASRS member on November 1, 2008, when he became an employee of Glendale Union High School. See Exhibit 1.

On May 26, 2011, Appellant ceased his employment with Glendale Union High School and was no longer employed by an ASRS employer. See Exhibit 3.

In August 2011, Appellant filed with ASRS an Application for Withdrawal of Contributions and Termination of Membership (“2011 Application”). Id. On August 31, 2011, Appellant received a payout of $2,882.12 which included both his and his employer’s contributions. Id. Such actions constituted a withdrawal of his membership in ASRS and resulted in forfeiture of all other ASRS benefits as noted on page 2 of the 2011 Application, “I understand I am forfeiting all future retirement rights and privileges of membership with the ASRS.” Id.

In October 2011, Appellant became employed by Deer Valley Unified School District, another ASRS employer. See Exhibit 1.

In October and November 2019, Appellant contacted ASRS to obtain an estimate of his return of contributions. ASRS customer service representatives erroneously advised Appellant during several phone calls that he would receive the gross amount of $25,976.00. See Exhibit 5.

In November 2019, Appellant filed an Application for Withdrawal of Contributions and Termination of Membership. See Exhibit 4.

On November 7, 2019, ASRS issued a letter to Appellant advising in pertinent part, “Please be aware that withdrawal of contributions from the ASRS will automatically terminate your membership with the ASRS and all rights to current and future benefits your membership may hold. . . .” Id.

In December 2019, ASRS disbursed to Appellant his ASRS contributions in the amount of $16,778.00, not the $25,976.00 he was expecting based upon the misinformation he had received. Id.

Appellant thereafter requested that ASRS pay him the full $25,976.00, as he was erroneously advised he would receive.

ASRS denied Appellant’s request due to not having the authority to pay a member more that the amount to which the member is entitled, citing to A.R.S. § 38-765 which requires ASRS to correct any errors if the error would result in any member receiving from ASRS more or less than the amount to which a member is truly entitled. The denial letter dated March 4, 2020, indicates in pertinent part:

ASRS is bound by statute to return your contributions according to your membership date. When you elected to refund your account in August 2011, you forfeited your membership and the benefits associated with that membership date. When you returned to a contributing status on October 7, 2011, after forfeiting your membership, you effectively became a new member. As a result, October 7, 2011 became your new membership date with all rights and benefits afforded to that date going forward. A.R.S. § 38-738(B) indicates that since your new membership date is after July 1, 2011, you are now only eligible to receive your employee contributions plus board approved interest in the event of a refund. Therefore, the refund amount you received of $16,778 is the correct amount you are entitled to receive. The ASRS is not permitted to pay any benefits greater than those you are entitled, according to statute.

See Exhibit 6.

By letter dated April 13, 2020, ASRS expressed admiration for Appellant’s career of service and sympathized with Appellant’s health condition. ASRS further apologized for the misinformation provided to Appellant by its customer service representatives. See Exhibit 8. ASRS indicated that it had further considered and reviewed Appellant’s appeal, however, it upheld its original decision due to the fact that ASRS did not have the authority to pay Appellant benefits to which he was not entitled. The letter referred Appellant to A.R.S. §§ 38-740 and 38-765.

Appellant appealed ASRS’s denial of his request to pay him $25,976.00.

This matter was referred to the Office of Administrative Hearings, an independent state agency. A hearing was held on August 4, 2020, at 1:00 p.m.

At hearing, Ryan Guerra, ASRS Member Advocate, testified that the misinformation was provided to Appellant as a result of an audit error. Mr. Guerra explained that the system was not updated to reflect Appellant’s forfeiture in 2011 and subsequent new membership date in October 2011. Mr. Guerra further explained that because of a statutory change in July 2011, Appellant was not eligible for an employer match because his new hire date was not until October 2011. Mr. Guerra referenced A.R.S. § 38-740. The erroneous information provided to Appellant included the amount of an employer match, for which he was not eligible, but for which it appeared he was because the system had not been updated to reflect his previous forfeiture. ASRS was apologetic to Appellant for its mistake in providing him erroneous information.

Mr. Guerra testified that there is no statutory authority to pay Appellant more than what he is entitled to receive and that ASRS is statutorily required to correct any accounting and reporting errors. Mr. Guerra cited to A.R.S. § 38-765.

Appellant testified that his withdrawal of his funds in August of 2011 was his only option in order to prevent homelessness. Appellant was fortunate to obtain employment with another school district 39 days after the loss of his previous employment due to budget cuts. In February 2019, Appellant was diagnosed with an autoimmune disorder. As a result of that diagnosis, Appellant was compelled to resign from his employment. Appellant testified that he contacted ASRS on October 25, November 7, and November 19, 2019, to inquire about the amount of funds he would receive if he withdrew from ASRS and forfeited his benefits. On all three occasions, he was advised that he would receive $25,976.00. Appellant asserted that he was not aware of the change in the law that took place. Appellant requested that the Administrative Law Judge take into consideration the information contained in his appeal letter and attachments thereto outlining his service and contributions to the community. Id. Appellant requested a “recommendation for special dispensation” or in the alternative, a “compromised negotiated portion” of the $9,000.00 he feels he is owed from the general fund.

CONCLUSIONS OF LAW

Appellant 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.

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).

The primary goal when construing statutes is to fulfill the intent of the legislature. Backus v. State of Ariz., 220 Ariz. 101, 203 P.3d 499 (2009).

An agency’s authority is limited to that which is found in its enabling legislation. Ariz. State Bd. of Regents v. Ariz. State Pers. Bd., 195 Ariz. 173, 985 P.2d 1032 (1999).

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).

A.R.S. § 38-740 governs a member’s return of contributions, the statute applicable to Appellant’s request. That statute provides in pertinent part:

A. A member whose membership commenced before July 1, 2011 and who leaves employment other than by retirement or death may elect to receive a return of the contributions as follows:

1. If the member has less than five years of credited service, the member shall receive all of the member's contributions.

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 section 38-738, subsection B, paragraph 3, unless the member has made the payment required by section 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.

B. A member whose membership commenced on or after July 1, 2011 and who leaves employment other than by retirement or death may elect to receive a return of all of the member's contributions with interest as determined by the board.

. . . .

D. Withdrawal of contributions with interest constitutes a withdrawal from membership in ASRS and results in a forfeiture of all other benefits under ASRS.

A.R.S. § 38-765 provides as follows:

If any change or error in the records results in any member or beneficiary receiving from ASRS more or less than the member or beneficiary would have been entitled to receive if the records had been correct, ASRS shall correct the error and as far as practicable shall adjust the payments in a manner so that the actuarial equivalent of the benefit to which the member or beneficiary was correctly entitled is paid. ASRS shall correct any change or error and shall pay the appropriate monies to a member or beneficiary or shall recover monies from the member or beneficiary if the member or beneficiary is overpaid. ASRS shall recover monies by reducing any benefit otherwise payable by ASRS or the LTD program established by article 2.1 of this chapter to an active, inactive, person with a disability or retired member, survivor, contingent annuitant, beneficiary or alternate payee.

While the Administrative Law Judge is sympathetic to Appellant’s debilitating health condition and the fact that ASRS provided erroneous information to Appellant, the fact remains that ASRS is required to abide by the statutes by which it is governed. In this case, because Appellant withdrew his contributions and terminated his ASRS membership in August of 2011, he forfeited his membership and all benefits associated therewith up to that point in time. Appellant became a new member upon his employment in October of 2011. Appellant’s new member status dictates that the provisions of A.R.S. § 38-740(B) apply to Appellant’s current withdrawal and termination. Because Appellant’s new membership began after July 1, 2011, he is only entitled to receive his contributions with interest, not his employer’s contributions. Moreover, A.R.S. § 38-765 precludes ASRS from paying benefits to which a member is not eligible.

Therefore, the preponderance of the evidence shows that ASRS paid Appellant the correct amount upon his Withdrawal of Contributions and Termination of Membership in 2019.

The Administrative Law Judge concludes that in the absence of controlling authority to the contrary, Appellant failed to establish by a preponderance of the evidence that ASRS improperly denied Appellant’s appeal.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that the ASRS Board affirm its denial of Appellant’s appeal.

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 days from the date of that certification.

-54864001

001

-137160-45720000Done this day, August 27, 2020.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted electronically to:

Paul Matson, Director

Arizona State Retirement System

-54864001

001

-137160-45720000