An application for retroactive membership in a retirement system must be supported by substantial evidence

A public retirement system's denial of an application for retroactive membership in the System must be supported by substantial evidence

Sears v DiNapoli, 2018 NY Slip Op 08610, Appellate Division, Third Department

§803.a of the Retirement and Social Security Law [RSSL] addresses processing applications for retroactive membership in a public retirement system of New York State and provides, in pertinent part, that "A public retirement system shall have the authority to grant relief from a failure to file an application for membership in that system in connection with service rendered prior to April first, nineteen hundred ninety-three in accordance with the provisions of this [§803]."

Patricia Sears, a permanent employee of the Department of Taxation and Finance from November 1977 until her retirement in July 2015 was enrolled in ERS as a Tier 3 member. Prior thereto her permanent appointment in 1977, Sears had been employed by Tax and Finance as a seasonal employment on two occasions, initially from March 4, 1976 to June 30, 1976 and then again from January 6, 1977 until September 16, 1977. Prior to the commencement of her second temporary period of employment with Tax and Finance Sears signed a waiver dated December 28, 1976 acknowledging her right to join the Retirement System and elected not to do so.*

After RSSL §803 was enacted in 1993, Sears sought, but was denied, retroactive Tier 2 membership in ERS. Shortly before Sears retired in July 2015, she again sought to have her ERS membership in Tier 3 changed to a Tier 2 membership. Although ERS again denied Sears' request for Tier 2 membership, Sears challenged the decision via an administrative hearing and the Hearing Officer recommended Sears' application for retroactive Tier 2 membership be granted. The Comptroller rejected the Hearing Officer's recommendation and Sears filed an Article 78 petition challenging the Comptroller's determination.

The Appellate Division said the ERS conceded, and its review of the record confirms, that the underlying determination denying Sears' application to Tier 2 membership in ERS was not supported by substantial evidence. In words of the court, "As the Hearing Officer aptly observed, the waiver signed by [Sears] in December 1976 cannot be applied retroactively to encompass [Sears'] initial period of seasonal employment from March 1976 to June 1976, and Sears testified without contradiction that she was neither offered an opportunity to join nor declined membership in the Retirement System at that time."

The court explained that there was no information in Sears' personnel file regarding her membership options or opportunities when she was first hired in 1976, nor were there any current employees who could attest to the membership notification procedures that were in place when Sears was initially employed by Tax and Finance. Further, said the court, the documentary proof offered at the hearing was insufficient to establish, among other things, that Sears participated in a procedure that a reasonable person would recognize as an opportunity to join or decline membership in the Retirement System.

Accordingly, the Appellate Division annulled the Comptroller's determination, granted Sears application for retroactive Tier 2 status in ERS and remitted the matter to ERS "further proceedings not inconsistent with this Court's decision."

In contrast, in Schuyler v New York State and Local Employees' Retirement System, 158 AD3d 909, the Appellate Division ruled that a "lack of documentation, coupled with information suggesting that petitioner's services were performed as an independent contractor rather than a state employee, supports the Comptroller's denial of petitioner's request for additional service credit." 

* Frequently employees, other than employees in the Labor Class, eligible for membership in ERS but not required to become a member, declined becoming a member in order to avoid being required to make employee contributions to ERS and participating in Social Security [Federal Insurance Contributions Act (FICA)]. Employees in the Labor Class were required to participate in Social Security regardless of their membership in ERS.

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2018/2018_08610.htm

Historical Note: Eligibility to participate in Social Security was made available to public employees of the State of New York pursuant to an agreement between the State and the Social Security Administration as authorized by §1 of Chapter 619 of the Laws of 1953. Members of a public retirement system in service prior to the effective date of the agreement decline to participate in Social Security. As to such individuals wishing to participate in Social Security, the employee could elect to either (a) pay the employee contributions for Social Security in addition to paying the required employee contributions for his or her membership in the retirement system or (b) elect to apply his or her required employee contributions for participation in the retirement system towards paying for his or her required employee contributions for his or her participation in Social Security.