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November 30, 2010

Withdrawing from membership in a New York State public retirement system

Withdrawing from membership in a New York State public retirement system
Richardson v NYC Employees’ Retirement System, NYS Supreme Court, Justice Gammerman, [Not selected for publication in the Official Reports]

A member of a public retirement system may lose his or her eligibility for significant benefits if he or she decides to withdraw his or her contributions upon leaving public employment. The Richardson decision illustrates this.

Richardson, a New York City corrections officer, joined the New York City Employees’ Retirement System [NYCERS] in 1987. When he resigned from his position on September 29, 1997, Richardson submitted a form to NYCERS asking for a refund of all of the money he contributed to the System. In late November 1997, the System sent him a check for the full amount of his employee contributions -- approximately $19,000.

However, Richardson had also submitted an application for a disability pension to the Medical Division of NYCERS on October 14, 1997. He was found disabled by both the NYCERS Medical Board and an outside health provider after medical examinations. The Medical Division staff was unaware that Richardson had applied for, and received, his membership contributions.

On February 9, 1998, the Medical Division wrote to Richardson indicating that the Medical Board had approved his application and the NYCERS Board of Trustees would consider it. A few days later NYCERS again wrote to Richardson advising him that its February 9, 1998 letter was sent by mistake as he was in fact no longer eligible for disability retirement benefits because in September 1997 he elected to withdraw his employee contributions. Accordingly, said the System, he ceased to be a member of NYCERS and thus was ineligible for disability retirement benefits.

Richardson sued, contending that he was entitled to a disability pension since the Medical Board approved his initial application. He claimed that NYCERS’ determination rejecting his application for disability retirement was arbitrary, capricious and unlawful under both the United States and New York constitutions. He also claimed that had he been notified that the withdrawal of his contributions would disqualify him for disability retirement, he would have returned the money and remained a member of NYCERS.

As to Richardson’s argument concerning the rejection of his application for disability retirement, Justice Gammerman said that Section 517 of the Retirement and Social Security Law specifically provides that: “[u]pon withdrawal of contributions by a member ... membership in the public retirement system involved shall cease.” Justice Gammerman concluded that Richardson’s withdrawal of his contributions terminated his membership with NYCERS and his eligibility for disability benefits.

Justice Gammerman also rejected Richardson’s contention that the System should have warned him of the fact that he would become ineligible for benefits if he withdrew his contributions. He said that:

“there is no affirmative duty for NYCERS administrative staff to inform about the specifics of pension provisions beyond providing written material ... [members are] thus charged with constructive knowledge [of the pension materials]” and that “not inquiring about the status of one’s pension rights is unreasonable.”

The court held that NYCERS’ decision was reasonable and that its refusal to consider Richardson’s application for disability retirement benefits was neither arbitrary nor capricious. It then dismissed Richardson’s petition.

If a member of the New York State Employees’ Retirement [ERS] system leaves government service and does not withdraw his or her employee contributions, he or she continues to be a member of ERS. His or her ERS membership, however, will cease after five years have elapsed since he or she last left government service, or he or she dies or retires, whichever event first occurs [Section 40.f, Retirement and Social Security Law].

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John J. Murphy, the NYCERS' Executive Director from 1990 to 2005, e-mailed NYPPL stating that “I assume this member did not have 10 years of credited service. If he did, the refund was given contrary to law. The fact that he was granted a tentative disability, however, leads to the possibility that he may have had 10 years of service. Unless he was disabled due to an accident on the job, he would have had to have been credited with ten years of service to have been granted a disability. The crucial fact is how much service was he credited with when he resigned on Sept 27, 1997. Mr. Murphy further asked: “Did this plaintiff have 10 years of service in Sept, 1997? This supersedes the court decision. NYCERS must correct any error if they find them. If the refund was given after 10 years of credited service, it was invalid and therefore, the disability benefit is in force retroactively to 1997. [Mr. Murphy posts a blog focusing on the New York City Employees’ Retirement System at http://nycers-info-murphy.blogspot.com/ ]

NYPPL comments: Assuming, but not conceding, that Richardson did not have 10 years of member service at the time he withdrew his employee contributions, the Richardson decision demonstrates that in the event a member of a public retirement system withdraws his or her "employee contributions" upon resignation or termination, which he or she may elect to do if otherwise permitted, his or her membership in a New York public retirement system* ceases for the purposes of subsequently claiming eligibility for any benefit otherwise available to a member.

In contrast, were such an individual not to withdraw such employee contributions and he or she is later appointed to a position whereby he or she is required [or may elect] to become a member of a public retirement system of this State within the permitted period of time for "rejoining the System," his or her membership, and member service credit, could determined based on his or her membership as of the date of his or her separation. This suggests that absent compelling circumstances, the individual might be better served if he or she were to consider leaving the “employee contributions” with the System.

* The Optional Retirement Plans, available to certain employees of SUNY, CUNY, the statutory colleges at Cornell and Alfred Universities, the community colleges and the New York State Department of Education, are not public retirement systems of this State within the meaning of Article V, §7 of the State Constitution.
NYPPL

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