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Crossey v. Pennsylvania State Education Association Pension Plan

United States District Court, E.D. Pennsylvania

September 3, 2019




         Michael Crossey has brought this action against the Pennsylvania State Education Association (“PSEA”) Pension Plan (“the Plan”), the Plan's Board of Directors (“the Board”), and individuals who are alleged to have been directors of the Plan, in connection with action taken by the Plan to recover an alleged overpayment of benefits. Defendants seek to dismiss Crossey's complaint under Fed. R. Civ. Pr. 12(b)(6). As explained below, I will grant Defendants' motion in part, and deny it in part.

         I. Federal Rule of Civil Procedure 12(b)(6)

         Under Fed. R. Civ. Pr. 12(b)(6), a party may move for the dismissal of a complaint for “failure to state a claim upon which relief can be granted.” A court considering a 12(b)(6) motion will treat as true all well-pleaded facts in the complaint, which will be construed in the light most favorable to the plaintiff. Santomenno ex rel. John Hancock Trust v. John Hancock Life Insurance Co. (USA), 768 F.3d 284, 290 (3d Cir. 2014). In that light, the complaint will be considered in order to determine whether it contains “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Sweda v. University of Pennsylvania, 923 F.3d 320, 325-6 (3d Cir. 2019), citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2007).

         A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, supra; Connelly v. Lane Construction Corp., 809 F.3d 780, 786 (3d Cir. 2016). Although the plausibility standard is less demanding than a probability requirement, it does require a pleading to show more than a sheer possibility that a defendant has acted unlawfully. Connelly, supra, citing Iqbal, supra, and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007). The plausibility determination is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, supra, at 679.

         Thus, the court must therefore take three steps: (1) it must take note of the elements the plaintiff must plead to state a claim; (2) it should identify allegations that are not entitled to the assumption of truth because they are no more than conclusions; and (3) where there are well-pleaded factual allegations, the court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Connelly, supra, at 787, citing Iqbal, supra, and Twombly, supra, at 570.

         II. Factual and Procedural Background

         A. Crossey's Employment History

         Crossey is a retired teacher who was formerly employed by the Keystone Oaks School District (“the School District”). Crossey's First Amended Complaint (“Complaint”) at ¶ 22. In 2007, Crossey was elected Vice President of PSEA, which is the primary labor organization representing teachers and educational staff in Pennsylvania. Id. at ¶Â¶ 5, 23. At that time, he became an employee of PSEA, while he remained an employee of the School District. Id. at ¶ 24. At this time, PSEA began reimbursing the School District for the salary it paid to Crossey, and for his contributions to the Pennsylvania Public School Employees Retirement System (PSERS”) attributable to his employment with the school district. Id. at ¶ 24.

         In 2011, Crossey was elected PSEA President. Id. at ¶ 30. In November 2013, he retired from the School District, while remaining employed as the PSEA President. ¶ 42. At that point, Crossey began receiving his full salary from PSEA. Id. at Exhibit F at 1. He also ceased accruing service credit under the School District Retirement System. Id. at ¶ 43. Crossey retired from PSEA on August 9, 2016. Id. at ¶ 69.

         B. Crossey's Retirement

         In October, 2007, Crossey expressed interest in a feature of the Plan which allows a PSEA employee to purchase up to twelve additional years of pension plan credit if he has equivalent service credited under an educational system's retirement plan. Id. at ¶ 27; Exhibit A at § 6.2(a). Since Plan benefits are calculated with reference to years of service, the purchase of additional “years” increases the amount of pension benefits to which a beneficiary is entitled. Id. at Exhibit A, §2.5 (benefit accrual), 4.1 (normal or late retirement).[1]

         In November, 2007, Crossey obtained an estimate of the cost to purchase twelve years of pension service credit. Id. at ¶Â¶ 27 and 28. As Crossey has stated in his Complaint, the cost estimate “considered only those wages attributable to [his] employment with PSEA.” Id. at 28. Crossey did not purchase service years at that time. Id. at ¶ 29.

         In June, 2013, however, Crossey completed an application for the purchase of service credits under the Plan. Id. at 32. The Plan's actuary recalculated the cost to Crossey of purchasing twelve years of service credit, and forwarded the calculations to PSEA's Human Resources Department. Id. at ¶ 33. Again, the actuary considered only those wages paid to Crossey attributable to his PSEA employment. Id. at ¶ 35.

         The cost to purchase twelve years of service credit in a lump sum was calculated as $123, 838.32. Id. at ¶ 34. PSEA's Human Resources personnel conveyed these calculations to Crossey, who agreed to purchase the years of service at this price. Id. at ¶Â¶ 36, 38. The purchase was ratified by Todd C. Park, PSEA's Assistant Executive Director for Human Resources. Id. at ¶ 39. Crossey made payment by rolling over funds from his PSERS retirement account to the Plan in April, 2014. Id. at ¶Â¶ 47, 48. Oddly, there is no evidence that Crossey ever asked PSEA how much his monthly pension benefit would be (with or without the additional twelve years of service credit) before making this purchase.

         In March, 2015, Crossey received from the Plan his 2014 Pension Plan Statement. According to Crossey, it estimated that, as of July 1, 2014, he would have been entitled to “a single life annuity in the amount of $3, 160.” Id. at ¶ 51. A copy of this document is not attached to his Complaint as an exhibit, but it does not appear to be disputed that this calculation took into account not only wages attributable to Crossey's employment with PSEA, but also those attributable to his employment with the School District, which were reimbursed by PSEA. Id.

         In April, 2015, Crossey requested from PSEA an estimate of his retirement benefit based on an anticipated August 9, 2016, retirement date. Id. at ¶ 52, and Exhibit B. In December, 2015, he received from the Plan the estimate he had requested. Id. at ¶ 60, and Attachment 3 to Defendants' Motion to Dismiss. Apparently, these calculations were premised on information sent to the actuary by PSEA which made no distinction between the wages attributable to Crossey's PSEA employment, and the wages attributable to the School District employment. Id. at ¶Â¶ 57, 59.

         Between April and June, 2015, Crossey communicated several times with PSEA personnel regarding his retirement options under the plan. In a document not produced in an exhibit, Crossey was apparently offered a retirement option under which he could withdraw his contributions to the payment plan in a lump sum of $153, 005, and receive the balance of his pension benefit in payments of $4, 165.03 during his life, with the guarantee of payments to his wife of $4, 165.03 for 240 months from his retirement date if he were to die before the 240 months elapsed. May 4, 2016, email from Crossey to William Gaskins, attached to Complaint as Exhibit C.

         Crossey confirmed the details of this offer in a May 4, 2016, email to William Gaskins, a PSEA human relations employee. Id. The PSEA employee replied: “Your reading of the benefit choice under 6c is correct. The $4, 165.03 is guaranteed to be paid out for 240 months”. June 7, 2016, email from Gaskins to Crossey, attached to Complaint as Exhibit D. Crossey confirmed the $4, 165.03 amount in June, 2016, with Gaskins' successor, Jerry Oleksiak. June 23, 2016, email from Crossey to Oleksiak, attached to Complaint as Exhibit E. Crossey and his wife formally elected this retirement option on July 29, 2016. Complaint at ¶ 68. The amount of Crossey's benefits was confirmed to PSEA by the actuary, and the Board then approved his retirement application and the amount of his benefit. Id. at ¶Â¶ 69-70.

         Crossey retired as of August 9, 2016. Id. at ¶ 71. His employee contributions to the Plan were rolled over into an IRA account on August 17, 2016. Id. From August 17, 2016, to March, 2018, Crossey received a monthly payment check in the amount of $4, 165.03. Id. at ¶ 72.

         C. The March 15, 2018, Letter from PSEA

         In March, 2018, Crossey received a letter dated March 15, 2018, from Todd Park. Letter of March 15, 2018, attached to Complaint as Exhibit F. Its opening paragraph read:

As a result of an extensive review conducted by PSEA, the PSEA Pension Directors have determined that there was an unintentional oversight in communicating and applying cost options under the Plan related to your purchase of 12 years of past educational service that were credited in full to your final pension benefit calculation. As a result of this oversight, an overpayment situation exists in the benefit you are receiving associated with the 12 years of purchased service at the base cost that was charged to you as further described below.

Id. at 1.

         The letter cited Section 6.2(c) of the Plan, in explaining that, due to PSEA's “unintentional oversight”: “The cost of your 12 purchase service years was based on a partial salary level, however, your benefit associated with the years purchased included the fully compensated salary you received from PSEA.” Id. at 2. In other words, Crossey had purchased his service years at a low rate - in recognition of the fact that not all of his compensation had been paid to him by PSEA until he retired from the School District in November, 2013 - but was receiving benefits at the higher rate he would have received if all of his compensation had come from PSEA in 2011, at the time he became a PSEA employee.

         The letter continued: “The result is that you have not been charged enough to sustain your current benefit payment.” Id. It then set forth options for correcting the overpayment, which were essentially that he could (a) start receiving lower payments, with an additional reduction to pay back the overpayment; or (b) make an additional payment in order to bring his purchase price in line with the level of benefit he was receiving. (This latter choice could be accomplished in two ways, thus the reference to options 1, 2A and 2B, in the letter).

         According to the letter, the overpayment totaled $24, 836.30, as of May 14, 2018. Exhibit F at 2. That sum included the 3% interest which would be charged if repayment was made in a lump sum; if it was to be paid back over a period of time, interest at 6% would be added to the amount due. Id. The letter further stated that, if Crossey did not elect a ...

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