Recognizing out-of-state same-sex marriages for purposes of public employee health insurance coverage and other benefits ruled lawful

Godfrey v Spano, 2009 NY Slip Op 08474, Decided on November 19, 2009, Court of Appeals [Decided with Lewis v New York State Department of Civil Service]

Plaintiffs in this action are taxpayers challenging directives recognizing out-of-state same-sex marriages for purposes of public employee health insurance coverage and other benefits.* The Court of Appeals held that that plaintiffs' actions were properly dismissed by the courts below.

Many residents of New York State in a same-gender relationship have traveled to Massachusetts, Connecticut, Iowa and Vermont, jurisdictions permitting same-gender marriage, for the purpose of marrying.

In response to this development, several state and county officials issued general directives relating to the recognition of those out-of-state same-sex marriages.

This appeal involved challenges to the lawfulness of two such directives: a Policy Memorandum, Employee Benefits Division Policy Memorandum issued by the Commissioner of the New York State Department of Civil Service, which became effective May 1, 2007* and an Executive Order issued by the County Executive of the County of Westchester, Westchester County Executive Order No. 3 of 2006.**

However, the Court of Appeals commented with respect to the action brought by Godfrey that it did adopt the Second Department's rationale for affirmance of the Supreme Court’s ruling, i.e., the Executive Order did not purport to change the law, because it included language directing recognition of same-sex couples "to the maximum extent allowed by law."

The high court said that it found such language ambiguous, and it said it “would not encourage executive officials to try to insulate their orders from judicial review by this means.” Instead the Court of Appeals sustained the result “because the Godfrey plaintiffs have failed to allege an unlawful expenditure of taxpayer funds, they have not stated a cognizable claim under General Municipal Law §51.”

As to the Lewis plaintiffs, the Court of Appeals noted that the only surviving causes of action were based on State Finance Law §123-b and the separation of powers doctrine.

As to Finance Law § 123-b, the court said although a taxpayer may bring suit under this statute to prevent the unlawful expenditure of state funds "whether or not such person is or may be affected or specially aggrieved" (State Finance Law §123-b [1]), there must be some specific threat of an imminent expenditure. In this instance the Court of Appeals ruled that “The State Finance Law claim of the Lewis plaintiffs fails to state a cause of action for the same reason that the General Municipal Law § 51 claim of the Godfrey plaintiffs fails.

Addressing the Lewis plaintiffs' action based on the separation of powers doctrine, essentially the complaint alleges that the Department of Civil Service acted "inconsistently with the Legislature's pronouncements on spousal benefits" and was thus in violation of Civil Service Law §164. In the words of the Court of Appeals: “The statute itself refutes plaintiffs' claim.”

Civil Service Law §161(1) provides that the President of the Civil Service Commission is "authorized and directed to establish a health insurance plan for state officers and employees and their dependents and officers" and provides that every state employee "shall be entitled to have his spouse and dependent children, as defined by the regulations of the president, included in the coverage upon agreeing to pay his contribution, if any, to the cost of such coverage for such dependents" (emphasis in the original).

Accordingly, said the court, the statute thus expressly gives the President of the Civil Service Commission the authority to define "spouse."

Moreover, said the court, the statute does not restrict the President's provision of health insurance to spouses and dependent children. The language is of entitlement, not restriction.

The Court of Appeals concluded by stating that "in each case the order of the Appellate Division should be affirmed with costs."

* The decision notes that “The Memorandum explained that the State had provided eligibility for employee benefits, including New York State Health Insurance Program benefits, to the domestic partners of State employees, including same-sex partners, since the mid-1990s. The coverage, while mandatory for the State, as an employer, itself, providing such coverage was discretionary for Participating Agencies (PAs) and Participating Employers (PEs).”

** The New York State Employees’ Retirement System recognized “same-sex marriages” for retirement benefit purposes if the union was performed in a jurisdiction where performing a same-sex marriage was lawful. It successfully defended a lawsuit challenging that policy [Godfrey v DiNapoli, 22 Misc.3d 249]. In the Godfrey case the jurisdiction was Canada.

The decision is posted on the Internet at:
http://www.courts.state.ny.us/reporter/3dseries/2009/2009_08474.htm

Determining final average salary for retirement purposes - lump sum payments

Wallon v NYS Teachers' Retirement System, 294 AD2d 644

An employee's final average salary [FAS] is a critical element in determining the individual's retirement allowance. In the Wallon case the issue before the court concerned whether or not certain "lump sum payments" should have been included in determining the retiree's FAS.

When Thomas Wallon retired from his position as an elementary school principal with the Avon School District, the School District included its lump sum payments of $21,500 to Wallon's tax-sheltered annuity and $14,793.43 in lieu of health insurance in reporting his compensation to the New York State Teachers' Retirement System [TRS]. Both lump sum payments were made in accordance with the terms of a collective bargaining agreement between the District and Wallon's collective bargaining unit representative.

Initially TRS included these lump sum payments in determining Wallon's FAS for the purpose of calculating his retirement allowance. Later TRS decided that neither lump sum payment constituted "compensation" for the purpose of determining his FAS within the meaning of Education Law Section 501(11).

TRS also determined that the inclusion of these amounts in calculating Wallon's retirement allowance resulted in a $9,031.63 overpayment of retirement benefits. This, said TRS, required it to deduct $1,000 from Wallon's monthly benefits until this overpayment was recouped.

Wallon sued, seeking a court order annulling TRS's determinations. Supreme Court ruled that while the lump sum payment for Wallon's tax deferred annuity may not be included in determining his FAS, Avon's "payments in lieu of health insurance was properly included in determining [Wallon's] FAS."

Wallon and TRS both appealed this ruling.

The Appellate Division affirmed the lower court's decision, holding that it had previously ruled that "payments made near the end of an applicant's career of benefits which he [or she] accumulated throughout the course of his [or her] working life will not be included in the ultimate determination of his [or her] retirement income," citing Martone v New York State Teachers' Retirement Sys., 105 AD2d 511.

According to the decision, the record did not demonstrate that "the payments to [Wallon's] annuity were for services performed during the time period covered by the … collective bargaining agreement."

Turning to the question of including the amount of the lump sum payment in lieu of health insurance in determining Wallon's FAS, the court noted that although TRS had included such payments in the FAS of another Avon retiree, Richard Letvin, it disallowed similar payments in Wallon's case. It appears that TRS's decision was based on its finding that Letvin, in retirement, was covered by his spouse's health insurance while Wallon used his lump sum payment to purchase health insurance.

The Appellate Division agreed with Supreme Court's conclusion that Wallon and Letvin "were similarly situated and had to be similarly treated by [TRS] to avoid being arbitrary and capricious."

Finally, the court sustained the recoupment any overpayments made by TRS to Wallon, commenting that TRS did not abuse its discretion by demanding such repayment over a nine-month period since Wallon was on notice for at least 13 months that substantial portions of his FAS were being disputed and that he might be required to repay any overpayments.

The Appellate Division observed that once Wallon had initiated his lawsuit, TRS suspended the monthly deduction pending resolution of the litigation, thus giving Wallon an additional 15-month grace period before resumption of the now reduced deductions. Accordingly, the court ruled that TRS's recoupment schedule of repayment over a nine-month period was neither arbitrary nor capricious.

Determining final average salary for retirement purposes - lump sum payments

Determining final average salary for retirement purposes - lump sum payments
Wallon v NYS Teachers' Retirement System, 294 AD2d 644

An employee's final average salary [FAS] is a critical element in determining the individual's retirement allowance. In the Wallon case the issue before the court concerned whether or not certain "lump sum payments" should have been included in determining the retiree's FAS.

When Thomas Wallon retired from his position as an elementary school principal with the Avon School District, the School District included its lump sum payments of $21,500 to Wallon's tax-sheltered annuity and $14,793.43 in lieu of health insurance in reporting his compensation to the New York State Teachers' Retirement System [TRS]. Both lump sum payments were made in accordance with the terms of a collective bargaining agreement between the District and Wallon's collective bargaining unit representative.

Initially TRS included these lump sum payments in determining Wallon's FAS for the purpose of calculating his retirement allowance. Later TRS decided that neither lump sum payment constituted "compensation" for the purpose of determining his FAS within the meaning of Education Law Section 501(11).

TRS also determined that the inclusion of these amounts in calculating Wallon's retirement allowance resulted in a $9,031.63 overpayment of retirement benefits. This, said TRS, required it to deduct $1,000 from Wallon's monthly benefits until this overpayment was recouped.

Wallon sued, seeking a court order annulling TRS's determinations. Supreme Court ruled that while the lump sum payment for Wallon's tax deferred annuity may not be included in determining his FAS, Avon's "payments in lieu of health insurance was properly included in determining [Wallon's] FAS."

Wallon and TRS both appealed this ruling.

The Appellate Division affirmed the lower court's decision, holding that it had previously ruled that "payments made near the end of an applicant's career of benefits which he [or she] accumulated throughout the course of his [or her] working life will not be included in the ultimate determination of his [or her] retirement income," citing Martone v New York State Teachers' Retirement Sys., 105 AD2d 511.

According to the decision, the record did not demonstrate that "the payments to [Wallon's] annuity were for services performed during the time period covered by the … collective bargaining agreement."

Turning to the question of including the amount of the lump sum payment in lieu of health insurance in determining Wallon's FAS, the court noted that although TRS had included such payments in the FAS of another Avon retiree, Richard Letvin, it disallowed similar payments in Wallon's case. It appears that TRS's decision was based on its finding that Letvin, in retirement, was covered by his spouse's health insurance while Wallon used his lump sum payment to purchase health insurance.

The Appellate Division agreed with Supreme Court's conclusion that Wallon and Letvin "were similarly situated and had to be similarly treated by [TRS] to avoid being arbitrary and capricious."

Finally, the court sustained the recoupment any overpayments made by TRS to Wallon, commenting that TRS did not abuse its discretion by demanding such repayment over a nine-month period since Wallon was on notice for at least 13 months that substantial portions of his FAS were being disputed and that he might be required to repay any overpayments.

The Appellate Division observed that once Wallon had initiated his lawsuit, TRS suspended the monthly deduction pending resolution of the litigation, thus giving Wallon an additional 15-month grace period before resumption of the now reduced deductions. Accordingly, the court ruled that TRS's recoupment schedule of repayment over a nine-month period was neither arbitrary nor capricious.