SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3595-18

BARBARA ZILBERBERG,

Petitioner-Appellant,

v.

BOARD OF TRUSTEES,

TEACHERS' PENSION AND 

ANNUITY FUND,

Respondent-Respondent.

__________________________

Argued May 5, 2021 – Decided June 22, 2021

Before Judges Fuentes, Whipple and Firko.

On appeal from the Board of Trustees of the Teachers' 

Pension and Annuity Fund, Department of Treasury.

Stephen B. Hunter argued the cause for appellant 

(Detzky Hunter & Defillippo, LLC, attorneys; Stephen 

B. Hunter, of counsel and on the brief).

Amy Chung, Deputy Attorney General, argued the 

cause for respondent (Gurbir S. Grewal, Attorney 

General, attorney; Melissa H. Raksa, Assistant 

Attorney General, of counsel; Juliana C. DeAngelis, on 

the brief).

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the 

internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
2

A-3595-18

PER CURIAM

Barbara Zilberberg appeals from a March 11, 2019 final administrative 

determination of the Board of Trustees (Board) of the Teachers' Pension and 

Annuity Fund (TPAF), rejecting her request to waive a portion of interest 

payment owed on her pension loan. We affirm.

In 2004, Zilberberg, a former school psychologist, applied for a pension 

loan from TPAF and received $26,860 on March 31, 2004. TPAF is a taxqualified governmental plan under the Internal Revenue Code (IRC), which 

regulates how members may borrow and repay money from TPAF. Pension 

loans through TPAF are repaid by active employees through payroll deductions, 

or by retirees through pension check deductions; IRC and statutory requirements 

for repayment maintain TPAF's tax-qualified status. Zilberberg's loan 

repayment schedule planned for forty-nine deduction payments of $607.22 each, 

totaling $29,753.78, which included the calculated interest rate of 4% per year.

The Division of Pensions and Benefits (Division) administers the public 

pension system, Burgos v. State, 222 N.J. 175, 184 (2015), which includes 

TPAF, N.J.S.A. 18A:66-1 to -93. Ibid. The pension plans guarantee participants 

certain benefits paid upon retirement and are based on the participant's salary 

and time spent contributing to the pension system. Id. at 184-85. "The benefits 
3

A-3595-18

are paid using revenues received from employee contributions, public employer 

([such as] State) contributions, and investment returns." Id. at 185.

Zilberberg retired July 1, 2004, three months after she received her initial 

loan payout. As of her retirement date, Zilberberg had made two of the fortynine loan payments via payroll deduction; the outstanding principal balance 

after the two payments was then $25,973.83. Due to a mistake in billing, 

Zilberberg's retirement payments were not deducted from her pension checks 

past June 30, 2004. In other words, the Division did not deduct Zilberberg's 

loan payments once she had retired. Zilberberg did not inquire about her loan 

repayment status between 2004 and 2017.

In September 2017, the Division sent a letter to Zilberberg, notifying her 

that an audit of pension loans had revealed the balance due. As a result of not 

making loan payments or having them deducted from her pension checks, 

Zilberberg still owed the outstanding balance of $25,973.83. However,

Zilberberg owed additional accrued interest of $21,227, for a total of $47,200.83 

when combined with the loan principal. The Division informed Zilberberg in 

the September 2017 letter that it would begin deducting loan payments from her 

monthly retirement allowance to cover the repayment of principal and interest. 
4

A-3595-18

Zilberberg contacted the Division after receiving the letter. She contended 

the Division was not entitled to the additional accrued interest because of its 

failure to recover the balance from her due to its improper billing. Later, she 

offered to repay the remaining balance and five years of interest, at 4%, in a 

lump sum payment if the Board would waive the interest accrued after the

original five-year term. The Board rejected her offer on November 1, 2018.

On January 14, 2019, Zilberberg appealed the Board's decision and 

requested that the matter be transferred to the Office of Administrative Law. In 

February, the Board determined that there were no material facts in dispute and 

directed the Board Secretary to prepare and issue a final administrative 

determination. On March 11, 2020, the Board issued its decision denying 

Zilberberg's request to waive the accrued interest assessed on her outstanding 

loan obligation. The decision noted that the State had entered into a closing 

agreement with the Internal Revenue Service (IRS) under which outstanding 

pension loans, plus interest, would be repaid to State-administered retirement 

systems, including TPAF, to protect their tax-qualified status.

1

1 On March 2, 2018, the State and the Commissioner of the IRS entered into a 

closing agreement that required TPAF to repay outstanding pension loans, 

including interest, to comply with statutory requirements and to maintain the 

pension plans' tax-qualified status.
5

A-3595-18

This appeal followed.

I.

We "have 'a limited role' in the review of [administrative agency] 

decisions." In re Stallworth, 208 N.J. 182, 194 (2011) (quoting Henry v. 

Rahway State Prison, 81 N.J. 571, 579 (1980)). "[A] 'strong presumption of 

reasonableness attaches to the actions of the administrative agencies.'" In re 

Carroll, 339 N.J. Super. 429, 437 (App. Div. 2001) (quoting In re Vey, 272 N.J. 

Super. 199, 205 (App. Div. 1993)). "In order to reverse an agency's judgment, 

an appellate court must find the agency's decision to be 'arbitrary, capricious, or 

unreasonable, or [] not supported by substantial credible evidence in the record 

as a whole.'" Stallworth, 208 N.J. at 194 (alteration in original) (quoting Henry, 

81 N.J. at 579).

To evaluate whether the Board's decision to deny Zilberberg's request for 

a waiver of accrued interest – which Zilberberg states was based on the Board's

own inaction – was arbitrary, capricious, and unreasonable, we first examine the 

decision in line with Stallworth, 208 N.J. at 194. Initially, we assess whether 

the agency followed the law, or rather: 

[W]hether the record contains substantial evidence to 

support the findings on which the agency based its 

action; and [] whether in applying the legislative 

policies to the facts, the agency clearly erred in 
6

A-3595-18

reaching a conclusion that could not reasonably have 

been made on a showing of the relevant factors.

[Ibid. (quoting In re Carter, 191 N.J. 474, 482-83 

(2007)).]

Here, the Division informed Zilberberg that the loan disbursement would 

need to be repaid with interest for the duration of the loan. The I.R.C., § 72(p), 

N.J.S.A. 18A:66-35, N.J.S.A. 18A:66-35.1, and N.J.S.A. 18A:66-63 controlled

the interest obligation, even though it was the Division's fault the payments were 

not deducted from Zilberberg's pension checks.

Under the IRC when a pension loan is not repaid within five years of its 

distribution, the loan funds are essentially converted to taxable income as a 

"deemed distribution." I.R.C. § 72(p)(2)(B) sets forth an exception from a 

taxable deemed distribution for a loan from a qualified employer plan, provided 

the loan is repaid within five years. I.R.C. § 72(p)(1) ("If during any taxable 

year a participant or beneficiary receives, directly or indirectly, any amount as 

a loan from a qualified employer plan, such amount shall be treated as having 

been received by such individual as a distribution under such plan."). In its 

closing agreement with TPAF, the IRS repeats the requirements of I.R.C. § 

72(p)(1). The agreement references that there were loan participants who did 

not make any repayments to the loan since separation from employment.
7

A-3595-18

Although Zilberberg did not provide her loan agreement for our review, the 

provisions of I.R.C. § 72(p)(1) were in effect before Zilberberg's loan 

disbursement, and TPAF has a statutory duty to collect interest on distributions.

Repayment of interest to TPAF is crucial to maintain the pension plan's 

tax-qualified status. If Zilberberg were to fail to pay the interest associated with 

the loan, the pension system and its members could face challenges to their 

status. In its November 13, 2018 letter to Zilberberg, the Board explained that 

"all loans are subject to . . . I.R.C. [§] 72(p)." The letter also states that "[f]ailure 

of the TPAF to comply with [I.R.C. §] 72(p) could result in plan disqualification, 

meaning the TPAF could lose its tax-qualified status."

TPAF further explains that Zilberberg must repay the loan obligation with 

applicable interest, citing IRS Revenue Procedure 2016-51, § 6.02(1). This 

provision sets out the process for correcting failure to follow pension plan rules

– in this case, repayment within five years:

(1) Restoration of benefits. The correction method 

should restore the plan to the position it would have 

been in had the failure not occurred, including 

restoration of current and former participants and 

beneficiaries to the benefits and rights they would have 

had if the failure had not occurred.

[IRS Rev. Proc. 2016-51, § 6.02(1).]
8

A-3595-18

N.J.S.A. 18A:66-35 details the statutory requirement for members' 

repayment to the retirement system:

Any member who has at least [three] years of 

service to his credit for which he has contributed as a 

member may borrow from the retirement system, an 

amount equal to not more than 50% of the amount of 

his accumulated deductions, but not less than $50; 

provided, that the amount so borrowed, together with 

interest thereon, can be repaid by additional deductions 

from compensation, not in excess of 25% of the 

member's compensation, made at the same time 

compensation is paid to the member. The amount so 

borrowed, together with interest on any unpaid balance 

thereof, shall be repaid to the retirement system in equal 

installments by deduction from the compensation of the 

member at the time the compensation is paid or in such 

lump sum amount to repay the balance of the loan but 

such installment shall be at least equal to the member's 

rate of contribution to the retirement system and at least 

sufficient to repay the amount borrowed with interest 

thereon. Not more than two loans may be granted to 

any member in any calendar year. Notwithstanding any 

other law affecting the salary or compensation of any 

person or persons to whom this article applies or shall 

apply, the additional deductions required to repay the 

loan shall be made.

The rate of interest for a loan requested by a 

member . . . shall be 4% per annum on any unpaid 

balance thereof. For a loan requested after the effective 

date of that act, the rate of interest per annum shall be 

a commercially reasonable rate as required by the [IRC]

to be determined by the State Treasurer on that effective 

date, and on January 1 of each calendar year thereafter. 

An administrative fee in an amount set by the State 

Treasurer for each calendar year may be charged for 
9

A-3595-18

any loan requested after the effective date . . . . Loans 

shall be made to a member from his accumulated 

deductions. The interest earned on such loans shall be 

treated in the same manner as interest earned from 

investments of the retirement system.

[N.J.S.A. 18A:66-35 (emphasis added).]

N.J.S.A. 18A:66-35.1 states, in pertinent part, that:

In the case of any member who retires without 

paying the full amount so borrowed, the Division shall 

deduct from the retirement benefit payments the same 

monthly amount which was deducted from the 

compensation of the member immediately preceding 

retirement until the balance of the amount borrowed 

together with the interest is repaid.

Notably, N.J.S.A. 18A:66-63 is especially applicable here:

If any change or error in records results in a 

member or beneficiary receiving from the retirement 

system more or less than he would have been entitled 

to receive had the records been correct, then on 

discovery of the error, the board of trustees shall correct 

it and, so far as practicable, adjust the payments in such 

a manner that the actuarial equivalent of the benefit to 

which he was correctly entitled shall be paid.

[N.J.S.A. 18A:66-63 (emphasis added).]

Zilberberg seeks relief under the "so far as practicable" clause in N.J.S.A. 

18A:66-63, arguing it is not practicable to adjust her payments upward.

However, compliance with IRC and IRS requirements is most practicable here,

and the Board's decision was not arbitrary, capricious, or unreasonable. The 
10 A-3595-18

Board's decision comported with the IRS requirement that TPAF collect a sum 

sufficient to repay the amount borrowed with interest thereon. IRS Rev. Proc. 

2016-51, § 6.02(1). Zilberberg's unpaid loan installments militated adjustment 

by statute. N.J.S.A. 18A:66-63. Zilberberg received more from the retirement 

system than she was entitled to receive, and she is not permitted to benefit from 

the Board's billing mistake. The statutes are clear that the Board must correct 

its error and adjust Zilberberg's deductions to include the interest that will 

maintain TPAF's tax-qualified status.

II.

Zilberberg's remaining arguments lack merit. Zilberberg argues that the 

Board's deduction of the principal and balance from her pension payments is 

barred by N.J.S.A. 2A:14-1, which addresses the statute of limitations for 

actions in breach of contract. However, since the Board has not taken an action 

at law against Zilberberg, no statute of limitations is implicated here. Zilberberg

further argues that the doctrine of laches applies to this case, foreclosing the 

Board from collecting the loan amount plus interest because the Board sat "on 

its rights for thirteen years."

The doctrine of laches applies when there is neglect for an unreasonable 

and unexplained length of time, under circumstances permitting diligence, to do 
11 A-3595-18

what in law should have been done. More specifically, it is inexcusable delay 

in asserting a right. Lavin v. Bd. of Educ. of the City of Hackensack, 90 N.J. 

145, 151 (1982) (quoting Hall v. Otterson, 52 N.J. Eq. 522, 535 (Ch. 1894)). 

We see no reason to apply the doctrine of laches here. The Board fulfilled its 

statutory duty to adjust Zilberberg's pension payments so it would be able to 

recoup the loan payments plus interest. See N.J.S.A. 18A:66-35; IRS Rev. Proc. 

2016-51, § 6.02(1). There was no civil collections action against Zilberberg, so 

no equitable claim can be asserted against the Board to bar such an action.

Last, Zilberberg refers us to Sellers v. Board of Trustees of the Police and 

Firemen's Retirement System, 399 N.J. Super. 51 (App. Div. 2008), to support 

her argument that an equitable remedy is warranted. In Sellers, we recognized 

that the Board has "the authority to apply equitable principals to provide a 

remedy when justice so demands, provided the power is used rarely and 

sparingly, and does no harm to the overall pension scheme." Id. at 62 (emphasis 

added). Zilberberg's circumstances do not reach that standard. Rather, she has 

benefited from an interest-free loan for thirteen years, and the Board must take 

steps to ensure that her failure to pay interest does not harm the pension scheme.

Affirmed.