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Recapturing retirement benefit overpayments

Recapturing retirement benefit overpayments
Matter of Marin v Teachers' Retirement Sys. of the City of New York, 2009 NY Slip Op 51600(U), Decided on July 14, 2009, Supreme Court, New York County, Judge Alice Schlesinger [This decision will not be included in the Official Reports.]

Some 12 years after the effective date of her retirement, the Teacher's Retirement System of the City of New York [TRS] determined that it had overpaid Esther Marin, a retired Supervisor of Special Education, retirement benefits and advised her that it would recoup overpayments totaling $300,184.75. The System offered Marin the following alternatives:

1. Marin could repay the full amount in one lump sum;

2. Marin could do nothing, in which case TRS would automatically initiate a cost-recovery plan by reducing her monthly amount by 25%;* or

3. Marin could appeal the System?s determination.

Marin appealed the System?s decision, seeking [1] to limit the recoupment to the amount paid to her during last three years of her retirement and [2] to reduce the monthly reduction to 10%, arguing that she did not know, nor could she have reasonably been expected to know, that she had been receiving an excess pension amount and that the proposed cost-recovery plan would lead to financial hardship.

The System denied her appeal and she then initiated an Article 78 action in an effort to have the System?s decision annulled, contending that its decision arbitrary and capricious.

The court dismissed her petition, commenting that ?it cannot be said that the TRS decision is arbitrary and capricious on the merits and must be annulled.?

Judge Schlesinger, considering the issue of whether TRS misapplied the Overpayment Recovery Rules when it set the terms of Ms. Marin's cost-recovery plan. Essentially, those Rules provide that the monthly pension allowance is to be reduced by 25% until the overpayment is recovered in full.

However, there is an exception permitted by the Rules. In the event the retiree establishes that he or she "did not know or could not have reasonably been expected to know that an overpayment had been made," the recovery will be limited to payments made during the three years prior to the date of the TRS decision and the monthly recoupment rate will be limited to 10%.

Upholding TRS?s determination, the court said although ?Ms. Marin might not have had reason to know about the specific error that resulted in her receiving the overpayments, the consequences of the misallocation would have led a reasonable person to know that she was being overpaid.?

The court?s rationale: Marin was told at that time of her retirement that her final benefit would be $47,323, which was about 77.2% of her final salary of $61,300, plus an additional amount for employer deposits over the years for Increased Take-Home Pay (ITHP).

However, Marin had been receiving a retirement allowance of some $65,000. Further Judge Schlesinger said the $65,000 retirement allowance being paid to her in error exceeded Marin's final salary by nearly $4000 per year.

* After the 25% reduction in her retirement allowance, Ms. Marin's benefits would be $3563.12 monthly or $42,757.44 annually.

The decision is posted on the Internet at:
http://www.courts.state.ny.us/reporter/3dseries/2009/2009_51600.htm

Full post as published by New York Public Personnel Law on July 30, 2009 (boomark / email).