IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Estate of Lynn D. Wilson : by Donna Killinger, Executrix

, :

Petitioner :

:

v. :

: State Employees’ Retirement Board

, : No. 1253 C.D. 201 6

Respondent : Argued : November 15 , 2017

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge

HONORABLE RENÉE COHN JUBELIRER, Judge

HONORABLE ROBERT SIMPSON, Judge

HONORABLE P. KEVIN BROBSON, Judge

HONORABLE ANNE E. COVEY, Judge

HONORABLE MICHAEL H. WOJCIK, Judge

HONORABLE JOSEPH M. COSGROVE , Jud ge

OPINION BY

JUDGE COVEY FILED: December 20, 2017

Estate of Lynn D. Wilson (Wilson) by Donna Killinger ( Claimant )

,

Executrix (Estate) petitions this Court for review of the Pennsylvania State

Employees ’ Retirement Board’s (Board) June 28, 2016 or der affirming the

Pennsylvania State Employees ’ Retirement System’s (SERS) denial of the Estate’s

request to effectuate Wilson’s option change and pa y his death benefit . The Estate

presents two issues for this Court’s review: (1 ) whether the Board err ed, abuse d its

discretion or capriciously and arbitrarily determined that Wilson ’s beneficiary

designation was not accepted because SERS did not receive Wilson’s beneficiary

change until after Wilson’s death ; and (2) whether Wilson’s retirement should vest in

the Estate if the Board does not accept Wilson’s beneficiary change . After review,

we reverse.2 The facts as found by the Board are un disputed. Wilson became a SERS

member on September 21, 1977, by virtue of his employment with the Department of

Public W elfare. Wilson retired effective March 1, 1997, after electing to receive an

Option 2 annuity and naming Christene Wilson, his wife, as his survivor annuitant.

Electing an Option 2 annuity meant that if Wilson predeceased his designated

survivor annuitan t, she would receive the same monthly benefit Wilson receiv ed

while he was alive. In addition, because a n Option 2 annuity was elect ed, if Wilson’ s

designated survivor annuitant predeceased him, Wilson ’s retirement benefit would

cease upon his death

, unle ss he change d his survivor annuitant designation.

A SERS member whose designated survivor annuitant predeceases him

may change his survivor benefits by filing an Application for Option Change form

( SERS Application) with SERS. W il son’ s wife and designat ed survivor annuitant,

Christen e Wilson, predeceased Wilson on November 27, 2011. By letter dated May

22, 2012, to Wilson, SERS explain ed that, because his designated survivor annuitant

had died, Wilson could re

- elect his retirement option and select one of several other

options, including an option that would allow him to designate a different survivor

annuitant. SERS ’ May 22, 2012 letter stated that any option change would be

effective on the date SERS receives the completed SERS Application and require d

attachments

.

Wilson completed a SERS Application

, which he signed and dated June

1, 2012. Wilson also completed a R etired Member Beneficiary Nomination form

( Beneficiary Nomination ), nam ing Diana L. Johns (Johns) , his oldest daughter, as

100% princip al beneficiary, and Claimant, his youngest daughter, as 100% contingent

beneficiary. Wilson checked the “yes” box next to th e statement that he understood

that his option change election would be effective on the date SERS received his

SERS Application

. Wilson died on June 9, 2012. SERS received Wilson’ s3

completed SERS Application, together with the completed Beneficiary Nomination

,

on June 13, 2012.

When SERS received Wilson’s completed SERS Application and

Beneficiary Nomination it had not yet rec eived notice of Wilson’ s death, and took the

necessary administrative steps to change Wilson’ s option in accordance with the

documents

. O n June 26, 2012, SERS sent Wilson a letter st ating that his retirement

account had been recalculated in order to chang e his retirement option from Option 2

to Option 1 as requested

. On July 10, 2012, SERS received notification of Wilson’ s

June 9, 2012 death from Johns

. By November 29, 2012 and January 18, 2013 letter s

to the E state, SERS advised that it w ould not honor Wilson’ s option change because

SERS received Wilson’s SERS Application and Beneficiary Nomination after the

date of hi s death and therefore determined that Wilson’s death benefit was based on

his original option sele ction, which meant that, since Wilson’ s designated survivor

annuitant, his wife, had predeceased him, there were no monies remaining to be paid

,

and SERS stopped the annuity

.

By May 13, 2013 letter, the E state ’s Counsel asked SERS to reconsider

its decision and allow the E state to fi le an appeal. By November 6, 2013 letter,

SERS ’ Benefit Determination Division Director Debra G. Murphy responded that

SERS had reviewed Wilson’ s file again, concluded that SERS ’ prior determination

was correct, and explained the Estate’ s appeal rights. On November 23, 2013

, the

E state appealed from SERS ’ determination. SERS ’ Appeals Committee (Appeals

Committee) denied the Estate’ s request to change Wilson’ s retirement option in

accordance with Wilson’s SERS Application and Beneficiary Nomination

. Cla imant

appealed from the Appeals Committee ’s determination and a hearing was held on

February 25, 2015 b efore a Hearing O fficer. On August 13, 2015, the Hearing

Officer issued an Opinion and Recommendation that Claimant’s request be denied.

Claimant filed timely exceptions with the Board. On June 28, 2016, the Board4

accept ed and adopt ed the Hearing O fficer’s Opinion and Recommendation, as

modified 1 and denied Claimant’s appeal. Claimant appealed to this Court. 2

Es sentially, Claimant argues that because Wilson’s SERS Application

and Beneficiary Nomination were executed and mailed before Wilson’s death, his

retirement should have b een changed from Option 2 to Option 1 and Johns should be

designated his 100% principal beneficiary and Claimant, his 100% cont ingent

beneficiary . We agree.

At the outset, as the Board acknowledged, the Hearing Officer began her

discussion by referring to Wilson’s wife as a beneficiary, 3 rather than a survivor

1 Pursua nt to Section 35.211 of General Rules of Administrative Practice and Procedure , 1

Pa

. Code § 35.211, either party may file exceptions within 30 days. SERS filed exceptions rais ing

issue s with statements contained in the body of the Hearing Officer’ s Opini on and

Recommendation. First, SERS asserted that the identity of SERS ’ counsel who filed the Answer in

this matter is misstated on page one of the Opinion and Recommendation. The Board sustain ed this

exception. SERS next took exception with the Hearing Officer’ s discussion on page ten of her

Opinion and Recommendation where she misstated the distinction between a survivor annuitant and

a beneficiary, as those terms are defined by the State Employees’ Retirement Code (Retirement

Code) , 71 Pa.C.S. § § 5101

- 595 8

. Because survivor annuitants and beneficiaries are two separate

and distinct classes of people under the Retirement Code, the Board sustain ed this exception as

well. Wilson’ s spouse was his designated survivor annuitant, as the O ption 2 selection th at he made

at retirement did not provide for the naming of a beneficiary to receive a lump sum death benefit,

but rather a survivor annuitant who would receive a lifetime annuity if living at his death.

2 Our scope of review is limited to determining wheth er constitutional

rights were violated, whether the adjudication is not in accordance

with the law, whether local agency procedures have been violated, or

whet her ‘ any findings of fact made by the agency and necessary to

support its adjudication are not su pported by substantial evidence. ’

Sandusky v. Pa. State Emps

. ’ Ret . Bd

., 127 A.3d 34, 47 n.17 (Pa. Cmwlth. 2015) (quoting Drennan

v. City of Phila

. , Bd

. of Pensions & Ret

. , 525 A.2d 1265, 1266 ( Pa. Cmwlth. 1987) ).

3 The Retirement Code defines a “benefic iary” as follows:

In the case of the system, the person or persons last designated in

writing to the [B] oard by a member to receive his accumulated

deductions or a lump sum benefit upon the death of such member. In

the case of the plan, the person or pers ons last designated in writing to

the [B] oard by the partici pant to receive the participant’ s vested5

annuitant. The State Employees’ Retirement Code (Retirement Code) d efines a

“survivor annuitant” as “[t] he person or persons last designated by a member under a

joint and survivor annuity option to receive an annuity upon the death of such

member. ” 71 Pa.C.S. § 5102. The Hearing Officer expounded:

A duly [

- ] executed ret irement beneficiary nomination form

cannot be superseded even by a signed nomination of

beneficiaries form if that latter form has not been filed with

the Board

. Hess v. [] Pub

. Sch

. [ Emps.’ ] Ret [.] Bd., 460

A.2d 1231, 1232 (Pa. Cmwlth. 1983). Therefore, Claimant

has not sustained her burden of proof in this matter.

Hearing O fficer Op. and Rec. at 10

- 11. Importantly, the Hearing Officer’s reliance

upon Hess is misplaced as that case is clearly distinguishable from the instant matter.

In Hess, the dece de nt made oral representations that he desir ed to change his

“beneficiary

, ” but in fact never completed a Beneficiary Nomination, much less file d

one with the Public School Employes ’ Retirement B oard. Here

, Wilson completed

and executed his SERS Application and Beneficiary Nomination , and SERS received

b oth

.

Notwithstanding, the Board insists that it is not bound by Wilson’s

SERS Application and Beneficiary Nomination because SERS did not receive them

before Wilson’s death. The Board relies upon Section 3 1.11 of the General Rules of

Administrative Practice and Procedure ( GRAPP)

, 4 and Harasty v. Public School

Employees’ Retirement Board , 945 A.2d 783 (Pa. Cmwlth. 2008) , to support its

conclusion

.

The Harasty Court rejected a SERS member’s (claimant) argu ment that

because he mailed a written notice before the statutory deadline, his notice should be

accumulated total defined contributions or a lump sum benefit upon

the death of the participant.

71 Pa.C.S. § 5102

.

4 1 Pa. Code §§ 31.1

- 35.251

.6

considered timely. Specifically, Section 8305.1 (b) of the Public School Employees’

Retirement Code, the statute referenced in the Harasty case

, requires: “ The member

must elect to become a Class T

- D member by filing a written notice with the [ Public

School Employes’ Retirement B] oard on or before December 31, 2001 , or before

the termination of school service or State service as applicable, whichever first

occur s. ” 24 Pa.C.S. § 8305.1 (b) (emphasis added) . Section 31.11 of GRAPP

provides:

Pleadings, submittals or other documents required or

permitted to be filed under this part , the regulations of the

agency or any other provision of law shall be received for

f iling at the office of the agency within the time limits, if

any, for the filing. The date of receipt at the office of the

agency and not the date of deposit in the mails is

determinative

.

1 Pa. Code § 31.11 (emphasis added )

. Because there was a statutor y deadline and

GRAPP applied, the Harasty Court properly rejected the claimant’s argument that the

m ail box rule applied

. 5

However, t here is no statutory deadline in this case

. Rather, with out

supporting legal authority, the Board determined that Wilson’s June 9, 2012 death

date was the applicable deadline and, based on GRAPP, Wilson missed that deadline.

To the contrary , since Wilson’s death date could not possibly be known in advance,

Wilson had absolutely no ability to guarantee SERS recei ved his SERS Application

and Beneficiary Nomination before then . Hence, it is untenable to conclude that

Wilson’s document s were untimely because SERS did not receiv e them before he

died . The dispositive issue , as evidenced by SERS’ May 22, 2012 letter, is not

5 “ The m ailbox rule creates a rebuttable presumption that an item which is properly mailed

will be received; the presumption cannot be nullified by only an assertion that the item was not

received. ” C.E. v. Dep’t of Pub. Welfare, 97 A.3d 828, 832 (Pa. Cmwlth. 201 4).7

whethe r SERS received the forms before Wilson’s death, but rather, whether Wilson

complete d and file d the forms. SERS’ May 22, 2012 6 letter to Wilson stated:

When you retired, you selected Option 2, which provides a

monthly annuity for your designated survivor upon your

death. Because your designated survivor has died, you are

permitted to re

- elect your retirement option and select one

of the following: Maximum Single Life, Option 1, Option 2,

Option 3 or a Special Option 4. If you select an option that

provid es a survivor annuity, you may designate a different

survivor.

SERS prepared the enclosed option change estimate at your

request

. The enclosed benefit estimates are based on your gender and current age. The estimate calculations for

Option 2 and Option 3 also are based on the age and gender

of the person you identified.

Also enclosed are [ a SERS Application ] and [ Beneficiary

Nomination]

. To select a new option you must complete

the enclosed [ SERS Application ]

.

If you select Option 1, you must also comple te the

[ Beneficiary Nomination ] with the names of your death

beneficiaries. If you do not select Option 1, do not

complete the [ Beneficiary Nomination]

.

Reproduced Record ( R.R. ) at 85a

- 86a (emphasis added). The letter concluded:

Electing a new option is likely to reduce the amount of

your monthly annuity payment. The option change will

be effective the date SERS receives your completed

[ SERS Application ] and required attachments ; however,

it will take up to sixty days for SERS to process the change.

(Sp ecial Option 4 selections also must be deemed to be

actuarially sound and may take longer to process). After

your new monthly annuity payment is calculated, SERS

will provide you with a bill for the amount you were

overpaid

.

6 Wilson’s spouse died on November 27, 2011. SERS did not issue its letter until six

months lat er.8 Should you have any questions or need assistance

completing the appropriate forms, please feel free to contact

me at number listed i n the letterhead.

R.R. at 86 a (emphasis added).

There is no dispute that Wilson completed a SERS Application and

Beneficiary Nomination, and filed the s ame with SERS. If Wilson had not died, his

option change and possible reduction in benefits would have been effective when

SERS recei ved his forms. T he date of SERS’ receipt is irrelevant in relation to

Wilson’s option change and new beneficiaries , parti cularly whe n there are no

promulgated rules or regulations requiring that the SERS Application and Beneficiary

Nomination be filed before a member’s death. Moreover , the definition of

“beneficiary” inclu d e s “ the person or persons last designated in writin g to the [B] oard

by a member . . . .” 71 Pa.C.S. § 5102. Here

, SERS confirm ed it received Wilson ’s

last written designat ion of Johns as 100% principal beneficiary, and Claimant as

100% contingent beneficiary

. Finally, non e of the Board’s cited cases hol d that

GRAPP is applicable herein and requires a different conclusion. See Harasty,

(statutory deadline triggered GRAPP) ; R osenstein v. Pub. Sch. Emps

. ’ Ret

. Sys., 685

A.2d 624 (Pa. Cmwlth. 1996) (claimant was never designated as a substitute survivor

ann uitant or beneficiary); Luckhardt v. State Emps

. Ret. Bd

. , 459 A.2d 1347, 1348 n. 4

(Pa. Cmwlth. 1983) (“ formal proceedings before the Board are governed by

[GRAPP]”)

.

Based on the circumstances herein that SERS received Wilson’s last

designated benefici ar ies notice

, Wilson’s option change was effective upon SERS

receipt and, thus, the Board erred by failing to honor Wilson’s option change and pay

the designated beneficiaries his death benefit

. 7

7 Given the disposition of the first issue, the second issue is moot.9 For all of the above reasons, the Board’s order is revers ed

.

___________________________ ANNE E. COVEY, JudgeIN THE COMMONWEALTH COURT OF PENNSYLVANIA

Estate of Lynn D. Wilson : by Donna Killinger, Executrix, :

Petitioner :

:

v. :

: State Employees’ Retirement B oard, : No. 1253 C.D. 2016

Respondent :

O R D E R

AND NOW, this 20 th day of December , 201 7

, the Pennsylvania State

Employees ’ Retirement Board’s June 28, 2016 order is reversed

.

___________________________ ANNE E. COVEY, JudgeIN THE COMMONWEALTH COURT OF PENNSYLVANIA

Estate of Lynn D. Wilson : by Donna Killinger, Executrix, :

Petitioner :

:

v. :

:

State Employees’ Retirement Board, : No. 1253 C .D. 2016

Respondent : Argued: November 15

, 201 7

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge

HONOR A BLE RENÉE COHN JUBELIRER, Judge

HONORABLE ROBERT SIMPSON, Judge

HONORABLE P. KEVIN BROBSON, Judge

HONORABLE ANNE E. COVEY, Judge

HONORABLE MICHAEL H. WOJCIK, Judge

HONORABLE JOSEPH M. COSGR OVE, Judge

CONCURRING OPINION

BY JUDGE COSGROVE FILED: December 20, 2017

I join the exceptionally well

- written Majority opinion in its entirety. I

write separately to emphasize the danger posed by administrative directives which

require an agency to have actually received a particular item before giving that item

effect.

In this case, without regulatory, statutory, or case law support, the State

Employees’ Retirement System ( SERS ) argued that Lynn D. Wilson’s ( Mr. Wilson )

change of retirement option should be rejected because, although Mr. Wilson

properly executed and actually mailed the change form, it w as not received by SERS

prior to his death. Discounting this argument, the Majority correctly notes that

nothing impeded the change request from taking effect prior to actual receipt byJMC

- 2

SERS. Mr. Wilson did all he could to have his wishes carried out by completing the

necessary form and dropping it in the mail. Others in his and similar situations, i.e.,

where an individual seeks a benefit or service to which he or she is allowed, follow

that same process countless times each week. But how, when, where (or if) the

design ated recipient agency actually “ receives” the item is another question. In the

entangled bureaucratic webs which encircle state agencies it may be difficult, with

any level of certainty, to determine what exactly constitutes “receipt” an d whether

something which must be received by a certain date was actually “received” on time,

if at all.

In the present case, despite SERS’ best effort, the Majority recognized

that Mr. Wilson’s wishes did not need a receipt by SERS for them to be effect ive.

Had the Majority said otherwise, however, and in the face of specific requirements

in other administrative areas, see, e.g., 1 Pa.Code § 31.11, a separate and even

constitutional due process problem may have arisen. In those areas where receipt

remai ns administratively required, this potential problem can be avoided through an

understanding of the present Majority’s logic, as well as recognition and

administrative adoption of “[t] he venerable common law ‘mailbox rule .’ ”

Commonwealth v. Thomas

, 814 A. 2d 754, 758 ( Pa. Supe r. 2002). This would avoid

the problem SERS tried to create here, a problem which potentially lurks elsewhere

in our administrative machinery.

___________________________ JOSEPH M. COSGROVE, Judge