The consequences of withdrawing from membership in a retirement system

The consequences of withdrawing from membership in a retirement system
2014 NY Slip Op 03907, Appellate Division, Third Department

An applicant [Applicant] for disability retirement benefits was employed as a highway laborer and suffered an injury in the course of his employment. Unable to return to duty, he was terminated from his employment. About a month later he submitted a withdrawal from membership application to the New York State and Local Retirement System,“apparently upon the advice of the Town's comptroller who informed him that such withdrawal would have no affect on his ability to receive retirement benefits.”

Applicant slubsequently applied for disability retirement benefits. The New York State Employees’ Retirement System , however, denied his application on the basis that he was not a member of the Retirement System on the filing date. After exhausting his administrative remedies, Applicant commenced a CPLR Article 78 proceeding challenging the System’s decision.

The Appellate Division affirmed the System’s determination, explaining that an applicant for such disability retirement benefits must be a member of the Retirement System at the time of his or her application is filed in order to be eligible to receive disability retirement benefits. As Applicant had withdrawn from the System prior to the date he applied for disability benefits, he entitled to, and received, only the funds he had contributed to the System.*

The court rejected Applicant’s argument that the Retirement System should be estopped from denying his application for a disability retirement allowance based upon his allegation that he was instructed by Town personnel that his withdrawal would not affect his right to receive disability benefits. The Appellate Division said that “it has been established that municipal employees are not agents of the Retirement System,” citing Bruni v Regan, 133 AD2d 921, leave to appeal denied 71 NY2d 806.

The Appellate Division further noted that “estoppel may not be invoked against the State generally,” and "erroneous advice by a government employee does not constitute the type of unusual circumstance contemplated by the exception" in advancing such an estoppel argument.

Confirming the Retirement System’s decision, the court said that the Comptroller is vested with the "exclusive authority to determine entitlement to retirement benefits and the duty to correct errors and cannot be estopped  ‘to create rights to retirement benefits to which there is no entitlement.'"

* An individual who withdraws his or her membership, in contrast to vesting his or her benefits or retiring from service if so eligible, in effect forfeits the employer’s contributions. The same it true with respect to participants in the Optional Retirement Program available to certain employees of the State University, the City University, the Community Colleges the Statutory Contract Colleges at Cornell and Alfred Universities and the State Department of Education.
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