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January 31, 2011

State Comptroller DiNapoli proposes legislation providing for the forfeiture of pension benefits of members guilty of “Abuse of Public Trust”

State Comptroller DiNapoli proposes legislation providing for the forfeiture of pension benefits of members guilty of “Abuse of Public Trust”
Source: Office of the State Comptroller

State Comptroller Thomas P. DiNapoli has proposed the introduction of legislation providing for the forfeiture of pension benefits* if certain members of the System are found guilty of committing a felony related to the performance of their official duties.

DiNapoli’s bill also imposes a penalty up to twice the amount a public official benefited from the commission of a crime committed in the course of his or her performace [or presumably, an ommission] of his or her public duty.

DiNapoli, noting State Constitution’s prohibitions against any diminishment of retirement benefits for current public officials and public servants, indicated that the pension forfeiture provisions in the proposed bill would apply only to indiviuals becoming members of the Retirement System after the measure's effective date.

The proposed bill is posted on the Internet at:
http://osc.state.ny.us/press/releases/jan11/forfeiture.pdf.

As to the issue of a public officer or employee forfeiting retirement benefits under certain conditions, in Castro v Safir, 291 A.D.2d 212** the basic issue concerned the fallout of New York City police officer Antonio Castro's dismissal prior to the effective date of his retirement. If he was so lawfully dismissed, any pension benefits to which he would otherwise be entitled would be forfeited pursuant to Section 13-173.1 of the New York City Administrative Code.***

Section 13-173.1 requires an employee to "be in service" on the effective date of his or her retirement or vesting of retirement benefits. If the employee is not "in service" on that date, he or she forfeits his or her retirement benefits.

Castro was terminated from his position following a "second arrest." As a result he became ineligible for the ordinary disability retirement benefits for which he had applied. He sued, contending that the Department had terminated him in bad faith in order to frustrate his eligibility for pension benefits as the New York City Employees' Retirement System's Medical Board had previously found Castro eligible for ordinary disability retirement.

According to the decision, Castro was terminated after he had applied for ordinary disability retirement but before he was actually retired for disability.

The Appellate Division ruled that Castro had forfeited his pension benefits as he was discharged before he retired on ordinary disability, i.e., he was not in service on the effective date of his retirement.

This conclusion by the Appellate Division appears to parallel the Court of Appeals holding in its Waldeck and Barbaro rulings wherein the Court of Appeals said that Section 13-173.1 provides that an employee's disciplinary termination prior to effective date of his or her voluntary resignation results in a forfeiture of his or her eligibility for pension benefits. [Waldeck v NYC Employees' Retirement System, 81 N.Y.2d 804, decided with Barbaro v NYC Employees' Retirement System.]

Waldeck and Barbaro challenged the forfeiture of their respective retirement benefits on the ground that they had not been advised of the effective dates of their respective discharges from employment after being found guilty of disciplinary charges filed against them.

Both Waldeck and Barbaro had been terminated prior to their intended dates of voluntary resignation. Did this mean that they could not vest their retirement benefits and thus those benefits would, in effect, be forfeited? In a word -- yes!

The Court of Appeals said that Section 13-173.1 of the Administrative Code contains no requirement that employees receive notice of their discharge from employment, nor does any other statutory authority, and thus the fact that neither Waldeck nor Barbaro were aware that they had been terminated prior to the effective date of their respective resignations "has no relevance to the effective date of termination from employment under Section 13-173.1."

According to the decision, there is no legislative requirement for notice affecting the effective date of discharge for purposes of determining whether a pension has vested within the meaning of Section 13-173.1 of the Code.

* If enacted into law, this presumably could result in the forfeiture of the pension portion of the individual's retirement allowance but that portion of the individual's retirement allowance attributed to his or her "employee contributions" would be refunded.

** See, also, Cipolla v. Kelly 26 A.D.3d 171, wherein the court held that “The fact that [the individual] was about to retire, or that [the individual] ultimately settled the criminal charges by pleading to a violation, does not demonstrate [the individual’s] termination was in bad faith.”

*** As a police officer, Castro was a "public officer." He was also a public employee, as although not all public employees are public officers, all public officers are public employees.

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New York Public Personnel Law Blog Editor Harvey Randall served as Principal Attorney, New York State Department of Civil Service; Director of Personnel, SUNY Central Administration; Director of Research, Governor’s Office of Employee Relations; and Staff Judge Advocate General, New York Guard. Consistent with the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations, the material posted to this blog is presented with the understanding that neither the publisher nor NYPPL and, or, its staff and contributors are providing legal advice to the reader and in the event legal or other expert assistance is needed, the reader is urged to seek such advice from a knowledgeable professional.
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