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Gzaskow v. Public Employees Retirement Board

Court of Appeals of New Mexico

June 5, 2017

MICHAEL GZASKOW and FRANCOISE BECKER, Plaintiffs-Appellants,
v.
PUBLIC EMPLOYEES RETIREMENT BOARD and EACH MEMBER OF THE BOARD IN HIS OR HER OFFICIAL CAPACITY, Defendants-Appellees.

         APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY Francis J. Mathew, District Judge

          VanAmberg, Rogers, Abeita & Gomez, LLP Ronald J. VanAmberg Santa Fe, NM for Appellants.

          Robles, Rael & Anaya, PC Charles H. Rennick Albuquerque, NM New Mexico Public Employees Retirement Association Misty M. Braswell Santa Fe, NM for Appellees

          OPINION

          HENRY M. BOHNHOFF, Judge.

         {1} In 2011, Plaintiff Michael Gzaskow retired from employment with the State of New Mexico and began receiving retirement pension benefits pursuant to the Public Employees Retirement Act (the Act), NMSA 1978, §§ 10-11-1 to -142 (1987, as amended through 2016). At the time of his retirement he was divorced, but he named Plaintiff Francoise Becker to receive retirement benefits in the event of his death; a few months after his retirement, Gzaskow married Becker. In late 2014, shortly before he took an extended overseas trip with Becker, Gzaskow executed and delivered to the Public Employees Retirement Association (PERA) a form that exercised a "one-time irrevocable option to deselect" Becker as his survivor beneficiary and designate his daughter, Sabrina Gzaskow (Daughter), as the survivor beneficiary. Following his return from the trip, Gzaskow advised PERA that the deselection of Becker and designation of Daughter was a mistake and requested that the action be voided. PERA declined to do so, taking the position that the action was not reversible. Gzaskow and Becker (collectively, Plaintiffs) then brought suit in district court (the Complaint) against the Public Employees Retirement Board (PERB), which is responsible for administering PERA, asserting a right to cancellation of the deselection of Becker as survivor beneficiary and seeking declaratory, injunctive, and equitable relief. PERB moved to dismiss the Complaint for lack of subject matter jurisdiction, arguing that Plaintiffs had failed to exhaust the administrative remedy afforded under the Act. The district court granted PERB's motion to dismiss and Plaintiffs now appeal. We affirm.

         I. BACKGROUND

         A. The Act

         {2} Through the Act, the New Mexico Legislature has established a program whereby employees of the State of New Mexico and other public agencies may receive retirement pensions. Participating employees are "members" of PERA and earn the right to receive a pension by meeting various age and service credit requirements. See §§ 10-11-2(M), -3(A); State ex rel. Helman v. Gallegos, 1994-NMSC-023, ¶ 5, 117 N.M. 346, 871 P.2d 1352. The Act establishes PERB to administer the Act and manage the retirement pension program and PERA. Section 10-11-130.

         {3} When a member who qualifies for a pension retires, he or she must elect one of four payment options or "Forms." Section 10-11-116(A). The Forms of Payment are set forth in Section 10-11-117. Under Form of Payment A, the "[s]traight life pension, " the retiree receives a monthly payment and upon his or her death the payments cease. Section 10-11-117(A). Under Form of Payment B, "[l]ife payments with full continuation to one survivor beneficiary, " the retiree receives a reduced monthly payment, but upon his or her death a survivor beneficiary will receive the same payment until the survivor's death. Section 10-11-117(B). Under Form of Payment C, "[l]ife payment[s] with one-half continuation to one survivor beneficiary, " the retiree receives a reduced monthly payment in an amount greater than that received under Form of Payment B, and upon his or her death a survivor beneficiary will receive one-half of that payment. Section 10-11-117(C). Under Form of Payment D, "[l]ife payments with temporary survivor benefits for children, " the retiree receives a reduced monthly payment, and upon his or her death each "declared eligible child" of the retiree is paid a share of the retiree's monthly payment until death or age twenty-five, whichever occurs first. Section 10-11-117(D). Form of Payment A is the default payment option if the retiree is not married at the time of retirement and does not elect another form of payment; Form of Payment C is the default payment option if the retiree is married at the time of retirement and does not elect another form of payment. Section 10-11-116(A)(1), (2). Under each of the Forms of Payment, the pension payments are calculated to have the same overall "actuarial present value" as Form of Payment A. Section 10-11-116(B).

         {4} In addition to selecting a form of payment (other than Form of Payment A), when a member retires he or she will name the survivor beneficiary (or beneficiaries, in the case of more than one declared eligible child under Form of Payment D). Section 10-11-116(A). If the member is married, PERA must obtain the spouse's written consent to the election of form of payment as well as the designation of survivor beneficiary; in the absence of such consent, the election and designation are not effective. Id.

         {5} "An election of form of payment may not be changed after the date the first pension payment is made." Id. Further, after the date of the first pension payment, the survivor beneficiary (or beneficiaries) may not be changed except as provided in Section 10-11-116(C), (D), and (E). Subsection C provides that a retiree who is being paid under Form of Payment B or C with his or her spouse as the designated survivor beneficiary may, upon becoming divorced, elect to have future payments made under Form of Payment A. Alternatively, Subsection D provides that a retiree who is being paid under Form of Payment B or C may, upon the death of his or her designated survivor beneficiary, "exercise a one-time irrevocable option" to designate another individual as the survivor beneficiary. Subsection E provides that a retiree who is being paid under Form of Payment B or C with a living, designated, survivor beneficiary other than his or her spouse or former spouse "may exercise a one-time irrevocable option to deselect the designated beneficiary" and either designate another survivor beneficiary or have future payments made under Form of Payment A. Section 10-1-116(E).

         {6} While a PERA member is employed, his or her spouse ordinarily acquires a community property interest in the member's pension benefit. See generally NMSA 1978, § 40-3-8(B) (1990) (defining community property); Ruggles v. Ruggles, 1993-NMSC-043, ¶¶ 14-32, 116 N.M. 52, 860 P.2d 182 (discussing divorcing spouses' community property interest in employer-sponsored retirement plans); cf. Martinez v. Pub. Emps. Ret. Ass'n, 2012-NMCA-096, ¶¶ 28-36, 286 P.3d 613 (discussing parameters of widowed spouse's statutory interest in PERA survivor benefits). The Act recognizes a spouse's interests in PERA benefits in various ways. First, as mentioned above, Section 10-11-116(A)(2) provides that if a member who is married at the time of his or her retirement does not designate another form of payment, the default is Form of Payment C, life payment with one-half continuation to one survivor beneficiary, with the member's spouse as the survivor beneficiary. Second, again as stated above, Section 10-11-116(A) provides that if the member is married, the consent of member's spouse is necessary to an election of the form of payment and designation of any survivor beneficiary other than the spouse. Third, Section 10-11-136 provides that, at the time of divorce, the court handling the divorce may provide for a division of the marital community's interest in the PERA pension and other benefits.

         {7} Section 10-11-120 addresses denials of claims for benefits under the Act. Benefit claimants shall be notified in writing, with explanation, of a denial of a claim for benefits. Following receipt of the notice,

[a] claimant may appeal the denial and request a hearing. The appeal shall be in writing filed with the association within ninety days of the denial. . . . The retirement board shall schedule a de novo hearing of the appeal before the retirement board or, at the discretion of the retirement board, a designated hearing officer or committee of the retirement board within sixty days of receipt of the appeal. A final decision on the matter being appealed shall be made by the retirement board.

Section 10-11-120(A). Regulations promulgated by the PERB authorize representation by legal counsel, limited discovery including depositions as authorized by the hearing officer, issuance of subpoenas to compel the production of documents and attendance of witnesses, direct and cross examination of witnesses under oath, and transcription of the hearing by a court reporter. 2.80.1500.10(C)(2), (3), (5) NMAC. A dissatisfied claimant may appeal a final decision of PERB pursuant to the provisions of NMSA 1978, Section 39-3-1.1 (1999), which generally provides for record review of administrative agency decisions. Section 10-11-120(B). See, e.g., Johnson v. Pub. Emps. Ret. Bd., 1998-NMCA-174, ¶ 10, 126 N.M. 282, 968 P.2d 793. ("Appeals from decisions of the Board denying disability retirement benefits are reviewed on the record made before the Board.").

         B. Factual History

         {8} The Complaint alleges the following: Gzaskow retired from employment as a physician with the State of New Mexico on January 1, 2011. At that time Gzaskow was divorced. On his PERA retirement application form he selected Form of Payment C and designated Becker as his survivor beneficiary. Plaintiffs were then married on April 15, 2011. Prior to the marriage, Plaintiffs entered into a pre-nuptial agreement: they agreed that Becker would be the designated survivor beneficiary with respect to Gzaskow's PERA benefits, but that she would distribute to Gzaskow's children a portion of any such benefits that she received.

         {9} From time to time thereafter, Plaintiffs took extended trips. Gzaskow claims that he spoke with PERA personnel and discussed with them how to address his retirement benefits in the event both he and Becker were to die while on these trips. Gzaskow claims that he was told that he could pay PERA a $100 fee and have his benefits provisionally recalculated on the assumption that, pursuant to Section 10-11-116(E)(1), he deselected Becker as survivor beneficiary and designated Daughter as the new survivor beneficiary. Gzaskow also claims that he was told that if he and Becker both died while on a trip, Daughter would become the beneficiary if the recalculation had been done. Gzaskow had his benefits provisionally recalculated several times: each time PERA would prepare and provide to Gzaskow a form to accomplish the deselection and new designation. The form would show the recalculated pension and survivor benefit payments for Gzaskow and Daughter: because Daughter was younger than Becker, and in accordance with the requirement in Section 10-11-116(E)(1)(b) that the pension benefit's overall actuarial present value remain the same, Gzaskow's new pension payment would be a reduced amount. The form stated in bold font:

This one-time change to a new beneficiary or change to Form of Payment A is Irrevocable.
. . . .
I have read and understand that this is a one-time removal and selection of a new beneficiary or selection of Form of Payment A. By choosing one of the options above, this will change my beneficiary or payment option until my death or the death of my beneficiary.

         When preparing for extended travel, Gzaskow would execute and give the form to Daughter, with the understanding that she would deliver it to PERA in the event he and Becker died during their travels.

         {10} In October 2014, Plaintiffs planned a trip to Vietnam. Gzaskow repeated the process of having PERA recalculate his retirement benefits if he deselected Becker and designated Daughter as the new survivor beneficiary. This time, however, Gzaskow not only signed the form on October 14, 2014, but also-he claims, mistakenly-delivered it to PERA.

         {11} On November 20, 2014, while Plaintiffs were in Vietnam, PERA sent Gzaskow a letter, acknowledging receipt of the deselection of Becker and new designation of Daughter as Gzaskow's survivor beneficiary. The letter restated Gzaskow's reduced pension payment that had been set forth on the form that he had signed and delivered to PERA. The monthly payment was approximately $1, 700 less than his pre-October 14, 2014 pension benefit. Upon returning from the trip and reading the letter, Gzaskow notified PERA that there was a mistake, that he had not intended to make the deselection of Becker and the new designation of Daughter, and requested that the change be canceled. Gzaskow alleges that PERA personnel knew that Gzaskow was attempting to protect himself should he and Becker die in a common incident by repeatedly initiating the process of deselecting Becker, and that he did not intend to replace Becker as the survivor beneficiary if she was still alive. Gzaskow asserted that under his pre-nuptial agreement with Becker, Becker could not be removed as his survivor beneficiary, and as a result of his mistake he was in breach of that agreement. Gzaskow also provided PERA with an affidavit signed by Daughter renouncing the beneficiary designation. However, PERA declined to cancel the deselection of Becker and designation of Daughter as the new survivor beneficiary. PERA took the position that, Gzaskow having delivered the executed form to PERA, the action was irrevocable, and that under the Act and the regulations PERB had promulgated to implement the Act, nothing could be done to reverse the deselection.

         C. ...


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