Medina County Courthouse

Friday, January 29, 2010

Retirement Plan Decision

By Ohio Supreme Court Justice Paul Pfeifer

For young people just starting out in the workforce, retirement plans usually aren’t a top priority. But as the years roll along priorities change, and retirement plans become mighty important. Here at the Supreme Court of Ohio we recently reviewed a case that focused on how one man’s retirement plans went awry.

In 1998, Robert N. McLaughlin, a member of the Ohio Public Employees Retirement System (“PERS”), applied for retirement. He elected to receive his pension benefits under “Plan D,” which provides a joint-survivorship annuity paying him for life and thereafter paying his surviving spouse. Robert designated his wife as his beneficiary.

But that all changed five years later when Robert divorced his wife and elected to have his pension-payment plan changed to Plan B, which provides a single-life annuity to the retiree with no monthly payments to any surviving spouse.
Robert signed a form which stated, in part, that he understood “that the single life annuity is to be paid throughout my life only and terminates at my death with no further payment.”

The form also stated that he had the right to make later changes. This was an important point because, in March 2006, Robert married Donna J. Shisler. He now wanted to make another change. The following month Robert designated Donna as his PERS beneficiary, but he did not at that time change his pension-payment plan – he continued to be paid a monthly benefit based on a single-life annuity under Plan B.

In December 2006, Robert requested an application to change his payment plan. He completed the application in late January 2007, but he mistakenly elected all of the listed payment plans (Plans A, C, and D) instead of following the instructions and choosing only one plan.

PERS returned the form to him with instructions that he was required to choose one plan. Finally, on February 25, 2007, Robert completed and signed the application to change his pension-payment plan from Plan B to Plan D – a joint-survivorship annuity, with Donna as the beneficiary. Robert mailed it to PERS on March 1, 2007. The next day, he died.

PERS received Robert’s request form on March 5, 2007. When Donna eventually requested survivor benefits based on Robert’s attempted change of the pension-payment plan, PERS refused because he had died before the application was received.
Donna filed a complaint in the court of appeals seeking to compel PERS to accept Robert’s application and to pay her the monthly survivor benefit in accordance with his intentions. The court of appeals ruled against her; after that, the case came before us for a final review.

Donna argued that PERS abused its discretion in denying her survivorship benefits. She claimed that under Ohio law, a properly executed PERS member’s request for a change in a pension plan is effective on the date it is received, notwithstanding the member’s prior death.

The pertinent law states that following a marriage or remarriage, a member may elect a new plan of payment, and that the newly elected plan “shall become effective on the date of receipt by the board of an application form…”

By a five-to-two vote, our court concluded that the language of this law “expressly provides that an election to change a retiree’s pension-payment plan after remarriage is not effective until it is received by the PERS board.”

According to the majority, Donna correctly observed “that this provision does not specify that an election to change a pension-payment plan is invalidated if the retiree dies before the election is received by the PERS board.” The majority concluded, however, that by reading this law in conjunction with other related laws, the plan is indeed invalidated if the retiree dies before the PERS board receives the application to change it.

Justice Evelyn Lundberg Stratton and I cast the dissenting votes in this case because we believed PERS abused its discretion by denying Donna’s request.
As the majority conceded, the pertinent provision in the law “does not specify that an election to change a pension-payment plan is invalidated if the retiree dies before the election is received by the PERS board.”

Accordingly, nothing in the law necessitates invalidation of Robert’s election to change his payment plan simply because he died before the PERS board received his plan change; our court should not add language to the law that does not exist.
Moreover, by finding it necessary to read this law in conjunction with other related laws in order to arrive at its conclusion, the majority implicitly recognized that the law, as written, is ambiguous. And because of that ambiguity – as we have determined in prior cases – we must read it “liberally in favor of the interests of the public employees and their dependents that the pension statutes were designed to protect.” Furthermore, we must also avoid an illogical or absurd result in interpreting this ambiguous provision.

Had we applied these long-standing rules of construing statutes, our court should have concluded that Robert intended that Donna receive the joint-survivorship annuity upon his death and that he took all the steps required by the law to make that happen.

And it’s not as if his intentions were unknown. He sent in a completed form that selected all the payment plans, an oversight that perhaps could have and should have been corrected with a simple phone call. Instead he was asked to send another completed form, which he did. There is nothing else Robert could have done to effectuate his intentions, except not die.

Justice Stratton and I concluded that PERS abused its discretion in adopting an interpretation of the law that was not supported by its plain language, and that the majority’s holding was contrary to our duties to liberally construe pension provisions in favor of members and their beneficiaries, and to avoid illogical results.

Nevertheless, the majority reached a different conclusion, and thus Donna won’t receive any benefits from Robert’s pension.

EDITOR’S NOTE: The case referred to is: State ex rel. Shisler v. Ohio Pub. Emps. Retirement Sys., 122 Ohio St.3d 148, 2009-Ohio-2522. Case No. 2008-2102. Decided June 4, 2009. Majority opinion Per Curiam.

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