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Estate of Wilson v. State Employees' Retirement Board

Supreme Court of Pennsylvania

November 20, 2019


          ARGUED: April 10, 2019

          Appeal from the Order of the Commonwealth Court entered December 20, 2017 at No. 1253 CD 2016, reversing the order of the State Employees' Retirement Board entered June 28, 2016, at No. 2014-04.




         In this discretionary appeal, we consider whether a requested change of beneficiary designation and plan option for benefits payable under the State Employees' Retirement System (SERS) is effective upon mailing or upon receipt by SERS, where SERS did not receive the required change documentation until after the SERS member's death. We hold the change is not effective until receipt by SERS, the common law mailbox rule does not apply, and the Commonwealth Court erred in holding to the contrary. We therefore reverse and remand for reinstatement of the order of the State Employees' Retirement Board (Board) denying the petition of the Estate of Lynn D. Wilson.

         The facts as found by the Board are undisputed. Wilson became a member of SERS on September 21, 1977, as a benefit of his employment with the Department of Public Welfare. Estate of Wilson by Killinger v. State Employees' Retirement Board, 177 A.3d 1020, 1021 (Pa. Cmwlth. 2017) (en banc). Upon a member's retirement from state employment, the State Employment Retirement Code, 71 Pa.C.S. §§5101-5958 (the Code), provides a member with several options for distribution of his retirement benefit. Relevant to this appeal are Option 1 and Option 2, which respectively provide:

(1) Option 1. - A life annuity to the member with a guaranteed total payment equal to the present value of the maximum single life annuity on the effective date of retirement with the provision that, if, at his death, he has received less than such present value, the unpaid balance shall be payable to his beneficiary.
(2)Option 2. - A joint and survivor annuity payable during the lifetime of the member with the full amount of such annuity payable thereafter to his survivor annuitant, if living at his death.

71 Pa.C.S. §5705(a). Section 5907(j) of the Code further provides: "A member who is eligible and elects to receive a reduced annuity under Option 1, 2, 3, or 4, shall nominate a beneficiary or a survivor annuitant, as the case may be, by written designation filed with the board at the time of his retirement." 71 Pa.C.S. §5907(j).

         Wilson retired on March 1, 1997, and elected to receive the Option 2 annuity with his wife, Christene Wilson, named as his survivor annuitant.[1] Under this selection, Wilson began receiving a monthly annuity payment of $741.38. See Hearing Exhibit SERS-4. The Option 2 annuity selection provided that if Wilson predeceased his designated survivor annuitant, she would continue to receive this monthly benefit for the remainder of her life. The Option 2 selection further provided that if Christene, as Wilson's Option 2 survivor annuitant, predeceased him, the monthly benefit would be extinguished upon his death unless, prior to his death, he changed his survivor annuitant designation or benefit option. See 71 Pa.C.S. §5705(a).

         Christene Wilson did predecease her husband; she died in a car accident on November 27, 2011. Upon receiving notification of Christene's death, SERS sent a letter dated May 22, 2012, explaining that due to the death of his designated survivor annuitant, Wilson could amend his retirement option election.[2] See Hearing Exhibit SERS-4. The May 22, 2012 correspondence provided Wilson with instructions and documentation to make an option change and specifically provided: "We cannot process your option change application until we receive that document." Id. (emphasis added). The May 22, 2012 correspondence included an "Option Change Estimate" stating a switch from Option 2 to Option 1, for example, would reduce Wilson's monthly payment by $148.21, and his new monthly payment would be $593.17. Id. Finally, the May 22, 2012 correspondence provided an Option Change Counseling Checklist, which required Wilson to affirm his understanding of the options in order to assist him in making an informed decision prior to selecting changes to his retirement plan. See Hearing Exhibit SERS-5. The checklist provided the following information relevant to the present appeal:


* * *
Since my designated survivor predeceased me, there will be no death benefit payable unless I select a new option plan . . . other than the portion of my last month's check due to me at the time of my death.
* * *
I understand that my option change election will be effective the date my Application for Option Change is received at SERS. It may take up to sixty days to process the change. Any increase will be paid retroactively and any decrease to my benefit will cause a retroactive billing.

Id. (emphasis added).

         Wilson checked "yes" to the items on the Option Change Checklist, thereby affirming his understanding of his options and the procedure to effectuate a change in his option selection, and signed and dated it June 1, 2012. Also on June 1, 2012, Wilson completed and signed an Application for Option Change (SERS Application) and a Retired Member Beneficiary Nomination, which we refer to collectively as the "Option Change Documents." The executed Option Change Documents reflected Wilson's new election of the Option 1 benefit, and named his daughters Diana L. Johns and Donna I. Killinger as the Principal and Contingent Beneficiaries, respectively.[3] Id.

         Wilson died on June 9, 2012. The Option Change Documents were date-stamped as received by SERS on June 13, 2012. As SERS had not yet received notice of Wilson's death when it received the Option Change Documents, SERS took the administrative steps to change Wilson's retirement option to Option 1. On July 10, 2012, however, SERS received notification of Wilson's death from his daughter, Diana Johns. In subsequent correspondence to Wilson's Estate dated November 29, 2012, SERS confirmed the Option Change Documents were not received by SERS prior to Wilson's death, and consequently, the changes reflected in those documents were not effective. Accordingly, SERS informed the Estate that at the time of Wilson's death, Option 2 was the elected benefit on the account, and as there is no death benefit available under Option 2, there was no benefit payable to the Estate after the death of both Wilson and his survivor annuitant Christene.[4] See Hearing Exhibit SERS-9; see also 71 Pa.C.S. §5705(a)(2) (joint and survivor annuity is payable to member during his lifetime and is thereafter payable to survivor annuitant "if living at [member's] death"). Additionally, SERS stated because there was no payable death benefit under Option 2, the June 2012 retirement benefit paid to Wilson before SERS learned of his death was an overpayment, which must be returned to SERS. See Id.

         The Estate, through counsel, wrote to SERS and asked the agency to reconsider its determination that Wilson's change from Option 2 to Option 1, and selection of beneficiaries, was not effective, noting that while the Option Change Documents were received after Wilson's death, they had been dated, signed and mailed prior to his death. See Hearing Exhibit SERS-10. SERS responded by reiterating the option change was ineffective because it was not received until after Wilson's death, and SERS lacked authority under the Code to permit an option change or beneficiary designation after a member's death. See Hearing Exhibit SERS-11, citing 71 Pa.C.S. §5705(a)(2) (describing Option 2 benefit, which terminates upon death of member and is paid to survivor annuitant, only if living at member's death); 71 Pa.C.S. §5907(j) (describing limited circumstances under which member can nominate new survivor annuitant).

         The Estate then filed an appeal to the SERS Appeals Committee, again seeking to effectuate Wilson's option change. See Hearing Exhibit SERS-12. On February 14, 2014, the Appeals Committee denied relief. See id. Hearing Exhibit SERS-14. The Appeals Committee reiterated its position that, for an option change request to be honored, the Option Change Documents must be received by SERS prior to the member's death. Id., citing 71 Pa.C.S. §5907(j) (members may change retirement option upon death of survivor annuitant; in that case, member may nominate a beneficiary "by written designation filed with the board").

         On the Estate's subsequent appeal to the Board, Hearing Officer Ruth Dunnewold held a hearing on February 25, 2015. At the hearing, SERS employee Dana Shettel testified SERS received Wilson's completed application for option change and a beneficiary nomination form on June 13, 2012. See N.T. 2/25/15 at 9. Shettel further testified Wilson's daughter, Dianna Johns, certified to SERS that Wilson died on June 9, 2012. See id. In addition, Joseph Torta, the Director of the Office of Member Services testified a SERS member can change his option election in the event his survivor annuitant predeceases him, and in order to effectuate a change of retirement benefits, a member must contact a regional counseling center to discuss options and elect to make an option change. Id. at 25-26. Torta further testified a member who wishes to make a change is required to bring the relevant documents to a field office and file in person, or mail the paperwork. Id. Torta also testified documents are considered to be "filed" when they are received by SERS. Id. at 27. Torta also testified Wilson's documents were received and date-stamped on June 13, 2012. Id. at 28. Torta further testified SERS determined the Option Change Documents were received after Wilson's death, and thus did not effectively change Wilson's prior benefit election. Finally, Torta stated that, because the documents were not received prior to Wilson's death, and because Christene, Wilson's survivor annuitant, ...

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