SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter comes before the South Carolina Administrative Law Court (ALC or Court) pursuant to S.C. Code Ann. § 9-21-60 (Supp. 2006) upon request for a contested case hearing filed by Clarence Lowman, Jr. (Petitioner). Petitioner contests the Final Agency Determination issued by Respondent South Carolina Budget and Control Board, South Carolina Retirement Systems (Respondent or Retirement Systems), which denied his request to purchase service credit for his withdrawn service in the South Carolina Retirement System after the date of his retirement under the Police Officers’ Retirement System. After proper notice, a hearing was held before me on April 10, 2007, at the ALC.

STIPULATIONS OF FACT

At the hearing into this matter, the parties entered the following written stipulations of fact into the Record pursuant to ALC Rule 25(C):

1. Petitioner Clarence Lowman, Jr. (Petitioner) was employed by the South Carolina Forestry Commission (Forestry Commission) between November 1, 1996, and June 2, 2006, a period of nine years, seven months, and one day. During his employment with the Forestry Commission, Petitioner was an active member of the Police Officers’ Retirement System (PORS).

2. As a result of his employment with the Forestry Commission, Petitioner is credited in PORS with nine years, seven months, and one day of “earned service,” as defined by S.C. Code Ann. § 9-11-10(15) (Supp. 2006).

3. On April 26, 2006, Petitioner submitted an application for disability retirement benefits under PORS to Respondent South Carolina Retirement Systems (Retirement Systems). Petitioner’s application for disability retirement was approved by the Retirement Systems on June 2, 2006, and Petitioner was retired under PORS with an effective date of retirement of June 2, 2006. Petitioner received his first check for disability retirement benefits from the Retirement Systems on or about June 30, 2006.

4. Prior to his employment with the Forestry Commission, Petitioner was employed by the City of Florence Fire Department (Florence Fire Department) between 1982 and 1985, for a period of three years. During his employment with the Florence Fire Department, Petitioner was an active member of the South Carolina Retirement System (SCRS).

5. As a result of his employment with the Florence Fire Department, Petitioner earned three years of “earned service,” as defined by S.C. Code Ann. § 9-1-10(9) (Supp. 2006), in SCRS.

6. Petitioner’s employment with the Florence Fire Department ceased in 1985, and on or about December 11, 1986, Petitioner withdrew the entirety of his retirement contributions form SCRS. As a result of the withdrawal of his contributions form SCRS, Petitioner is no longer credited by the Retirement Systems with any earned service in SCRS.

7. Petitioner did not contact the Retirement Systems about reestablishing credit for his SCRS service with the Florence Fire Department through a service purchase prior to a September 12, 2006 telephone call made by the Forestry Commission to the Retirement Systems on his behalf. Prior to that call, Petitioner’s only contact with the Retirement Systems after the date of his retirement was a telephone call he made on August 11, 2006, regarding some insurance paperwork and a call he made on September 11, 2006, concerning the direct deposit of his benefits checks.

FINDINGS OF FACT

Having observed the witnesses and exhibits presented at the hearing and taking into consideration the burden of persuasion and the credibility of the witnesses, I make the following findings of fact by a preponderance of evidence:

While employed at the South Carolina Forestry Commission as a forestry warden, Petitioner learned that he had developed cancer in his neck and throat. On August 15, 2005, he went on leave to receive treatment for that condition. After undergoing extensive medical treatment, Petitioner sought to return to work at the Commission. However, he was informed that as a result of his condition he could no longer perform his duties at the Commission. He was therefore encouraged to retire. In determining whether to seek disability retirement, Petitioner asked the Commission’s staff if his health insurance premiums would be affected by his retirement. He was specifically informed by Jackie Amerson, the human resource representative for the Commission, that because he was vested (had five years) in the retirement system, his health insurance premiums would not be affected by his retirement. That advice upon which Petitioner relied in making his decision to seek disability retirement was erroneous.[1]

After Petitioner began receiving his disability retirement benefits, he was notified by the Employee Insurance Program (EIP) that he did not qualify for state-funded health insurance premiums because he did not have at least ten years of credited service in one of the State’s retirement systems. Thus, EIP held Petitioner responsible for paying the entire monthly premium for his health insurance. That determination was quite disconcerting because if Petitioner had been correctly advised that he needed at least ten years of service in one of the State’s retirement systems, he could have simply purchased five months of the time he previously earned at the Florence Fire Department. Consequently, Petitioner submitted a letter to the Director of the Retirement Systems on September 15, 2006, asking that he be allowed to purchase enough credit from his withdrawn SCRS service to qualify him for the state-funded health insurance premiums.

On October 25, 2006, the Retirement Systems issued a Final Agency Determination denying Petitioner’s request to purchase additional service credit after his retirement. In particular, the Department concluded that, pursuant to S.C. Code Ann. § 9-11-50 (Supp. 2006), only an “active member” of PORS could purchase service credit in the System and therefore since Petitioner was a retired member of the System he is not eligible to purchase such credit.

CONCLUSIONS OF LAW

Based on the foregoing Findings of Fact, I conclude the following as a matter of law:

This Court has jurisdiction to decide the issues in this case pursuant to S.C. Code Ann. § 9-21-60 (Supp. 2005) of the South Carolina Retirement Systems Claims Procedures Act. See also S.C. Code Ann. § 1-23-600(B) (Supp. 2006). As the moving party, Petitioner bears the burden of establishing, by a preponderance of the evidence, that he satisfies the requirements of the applicable service-purchase statutes and is entitled to purchase the service credit he seeks. See Leventis v. S.C. Dep’t of Health & Envtl. Control, 340 S.C. 118, 132-33, 530 S.E.2d 643, 651 (Ct. App. 2000) (holding that the burden of proof in administrative proceedings generally rests upon the party asserting the affirmative of an issue); see also 73A C.J.S. Public Administrative Law and Procedure § 128, at 35 (1983) (“In administrative proceedings, the general rule is that an applicant for relief, benefits, or a privilege has the burden of proof, and the burden of proof rests upon one who files a claim with an administrative agency to establish that required conditions of eligibility have been met.”).

Purchase of Service Credits under PORS and SCRS

Petitioner argues that he should be eligible to purchase service credit from the Retirement Systems after the date of his retirement. Petitioner’s request to purchase credit for his SCRS service does not specify whether he wishes to purchase the credit in PORS or in SCRS. The PORS provides, in relevant part, that:

“[a]n active member may establish service credit for any period of paid public service by making a payment to the system . . . not less than sixteen percent of the member’s current salary or career highest fiscal year salary, whichever is greater, for each year of credit purchased.

S.C. Code Ann. § 9-11-50(A) (Supp. 2006). Likewise, the SCRS provides that:

[a]n active member who previously withdrew contributions from the system may reestablish the service credited to the member at the time of the withdrawal of contributions by repaying the amount of the contributions previously withdrawn, plus regular interest from the date of the withdrawal to the date of repayment to the system.

S.C. Code Ann. § 9-1-1140(G) (Supp. 2006).

Notably, both Systems restrict the ability to purchase service credit to “active members” in the System. See S.C. Code Ann. § 9-11-50(A)-(G) (Supp. 2006) (all of the cited provisions authorizing only “active members” of PORS to purchase various types of service credit in the System); see also, S.C. Code Ann. § 9-1-1140(A)-(G) (Supp. 2006) (all of the cited provisions authorizing only “active members” of SCRS to purchase various types of service credit in that system). Furthermore, both Systems define an “active member” as a member or employee “who is compensated by an employer participating in the system and who is making regular retirement contributions to the system.” S.C. Code Ann. §§ 9-1-10(2) and 9-11-10(3) (Supp. 2006) (emphasis added). Thus, under the clear terms of these statutes, a retired member of PORS who is neither currently compensated by an employer participating in the System nor currently making regular retirement contributions to the System is not an active member of PORS and is not eligible to purchase additional service credit in the System. Likewise, a former member of SCRS who has separated from his service with an employer in the System and who has withdrawn his retirement contributions from the System is not an active member of SCRS and is not eligible to reestablish credit for his prior service, unless and until he once again becomes an active member in the System.[2]

Here, since his retirement under a disability allowance on June 2, 2006, Petitioner has not been compensated by the Forestry Commission or any other employer participating in PORS, and has not made any additional retirement contributions into the System. Accordingly, Petitioner is no longer an “active member” of the PORS. Likewise, since his employment with the Florence Fire Department ceased in 1985, Petitioner has not been compensated by an employer participating in SCRS, and has not made any additional retirement contributions into that System. Consequently, Petitioner is not an active member of PORS or SCRS and, thus, is ineligible to purchase service credit in either system. More specifically, because Petitioner is not an active member of PORS, he is not eligible to purchase service credit in the System under Section 9-11-50(A) or any of the other service-purchase provisions of Section 9-11-50. Furthermore, since Petitioner is not an active member of SCRS, his not eligible to purchase service credit in that System under Section 9-1-1140(G) or any of the other service-purchase provisions of Section 9-1-1140.

Estoppel

Petitioner contends that despite the above statutory preclusions to his purchase of service credit, the Retirement Systems should be estopped from denying his request because of the representations made by his employer regarding his post-retirement health insurance premiums. In other words, Petitioner seeks to rectify the inequity that has been thrust upon him as a result of the Forestry Commission human resources employee’s assurance that his insurance premiums would be unaffected by his retirement. His proposal is simply that the Department be estopped from asserting the statutory defense that he is not allowed to purchase the service credit because he is no longer an “active” employee.

His petition has merit in an equitable sense because as a result of a State of South Carolina employee’s promise that his insurance premiums would be unaffected by his retirement, Petitioner chose to retire. Moreover, if he had only been informed of the need to have ten years of credited service he could had simply purchased a mere five months of the three years he had earned while an employee of the Florence Fire Department. Those credits would have given Petitioner the needed ten years of service credit to avoid the demand now placed upon him to pay the full insurance premium rather than a state-funded premium. Furthermore, if the issue is not resolved in this case, the State of South Carolina will probably be involved in further litigation simply to resolve what arguably should have been resolved much earlier.

Nevertheless, the authority to settle the inequity resulting from the actions by an employee of the Forestry Commission is not present in this case. Here, the issue is whether the Retirement Systems should be estopped from following the requisites of a statute. There is, however, no evidence that the Retirement Systems made any representations to Petitioner before his retirement regarding his eligibility to purchase service credit after retirement.[3] Under the doctrine of equitable estoppel, the party to be estopped must, among other things, have engaged in “conduct that amounts to a false representation or concealment of material facts or is at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those that the party subsequently attempts to assert.” McDaniel v. S.C. Dep’t of Pub. Safety, 325 S.C. 405, 411, 481 S.E.2d 155, 158 (Ct. App. 1996). Here, the sole allegation is that Petitioner’s former employer assured him that his health insurance premiums would not increase upon his retirement. That representation does not touch upon the question of Petitioner’s eligibility to purchase service credit after retirement. Rather, the evidence reflects that Petitioner’s first discussions with the Retirement Systems concerning his eligibility to purchase service credit for his prior SCRS service did not occur until September 2006, at which time he was correctly advised that, as a retiree, he was not eligible to purchase such credit.

Furthermore, even if the Forestry Commission’s statements about Petitioner’s eligibility for state-funded insurance premiums from the Employee Insurance Program are somehow construed as implicating his eligibility to purchase service credit from the Retirement Systems, Petitioner’s estoppel claim must still fail. South Carolina’s courts have repeatedly recognized that, while “[a] governmental body is not immune from the application of the doctrine of estoppel where its officers or agents act within the proper scope of their authority,” the government “cannot be estopped . . . by the unauthorized or erroneous conduct or statements of its officers or agents which have been relied on by a third party to his detriment.” S.C. Coastal Council v. Vogel, 292 S.C. 449, 453, 357 S.E.2d 187, 189 (Ct. App. 1987); see also, e.g., Goodwine v. Dorchester Dep’t of Soc. Servs., 336 S.C. 413, 419, 519 S.E.2d 116, 118-19 (Ct. App. 1999); Serv. Management, Inc. v. State Health & Human Servs. Fin. Comm’n, 298 S.C. 234, 238, 379 S.E.2d 442, 444 (Ct. App. 1989). In the case at hand, there is no evidence that the Forestry Commission’s employee was affiliated with, or had authority to speak for, either the Retirement Systems or the Employee Insurance Program. Thus, there is no evidence that the Forestry Commission’s employee was authorized to make determinations for the Retirement Systems regarding an employee’s eligibility to purchase service credit or determinations for the Employee Insurance Program concerning an employee’s eligibility for state-funded health insurance premiums. See, e.g., McDaniel v. S.C. Dep’t of Pub. Safety, 325 S.C. 405, 411, 481 S.E.2d 155, 158 (Ct. App. 1996) (rejecting an argument that the erroneous advice of McDaniel’s probation officer should estop the Department of Public Safety from revoking his driver’s license for a drunk driving conviction, because “[a] statement by a probation officer, who is in no way connected with the Department and who has no responsibility regarding the suspension of McDaniel’s license, could not possibly serve to bind the Department”); Mannelin v. Driver & Motor Vehicle Servs. Branch, 31 P.3d 438, 442 (Or. Ct. App. 2001) (recognizing, in response to an estoppel claim against a government agency, that “[i]n the absence of statutory authority, statements of one government agency cannot bind another”). Moreover, the parties further stipulated that the statements made by Petitioner’s former employer were erroneous.[4] See, Vogel, 292 S.C. at 453, 357 S.E.2d at 189 (holding that the Coastal Council could not be estopped from requiring Vogel to remove an illegally-constructed deck because of an erroneous representation from a Council employee that no permit was required to build the deck). Therefore, since the assurances made to Petitioner by the Forestry Commission were both unauthorized and erroneous, the Retirement Systems cannot be estopped from denying his service-purchase request as a result of those statements.

Finally, regardless of the source of the statements Petitioner relies upon for his estoppel argument, it is generally recognized that “administrative officers of the state cannot estop the state through mistaken statements of law.” Greenville County v. Kenwood Enterprises, Inc., 353 S.C. 157, 172, 577 S.E.2d 428, 436 (2003), overruled on other grounds by Byrd v. City of Hartsville, 365 S.C. 650, 620 S.E.2d 76 (2005); see also Rainaldi v. Pub. Employees Retirement Bd., 857 P.2d 761, 768 (N.M. 1993) (“Generally, statements of opinion on a matter of law raise no estoppel where the facts are equally well known to both parties.”); Mannelin, 31 P.3d at 442 (holding that, for estoppel to lie against a government agency, the statement “must be one of ‘existing material fact and not of intention, nor may it be a conclusion from facts or a conclusion of law’”). In particular, it has been held that “estoppel cannot lie against the state when the act sought to be carried out through the use of estoppel is contrary to law.” Rainaldi, 857 P.2d at 769; see also La. State Troopers Ass’n v. La. State Police Retirement Bd., 417 So. 2d 440, 445 (La. Ct. App. 1982) (“It is well settled that equitable considerations and estoppel cannot be permitted to prevail when in conflict with positive written law.”); Bresnhan v. Bass, 562 S.W.2d 385, 390-91 (Mo. Ct. App. 1978) (“The rule is . . . that estoppel can only operate in favor of a party in a case where there is no provision of law forbidding the party against whom the estoppel is to operate from doing the act which is sought to be carried out through its operation.”). Accordingly, Petitioner’s estoppel claim must fail because not only were the assurances of Petitioner’s former employer mistaken statements of law with regard to his eligibility for state-paid insurance premiums, but the remedy sought by Petitioner to address those mistaken assurances—namely, allowing him to purchase service credit after his retirement—would require the Retirement Systems to violate the statutes it is charged with administering.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law:

IT IS HEREBY ORDERED that Petitioner’s request to purchase service credit from the Retirement Systems is denied.

AND IT IS SO ORDERED.

___________________________________

Ralph King Anderson, III

Administrative Law Judge

April 19, 2007

Columbia, South Carolina