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Lagerman v. Arizona State Retirement System

Court of Appeals of Arizona, First Division

March 7, 2019

SUSAN LAGERMAN, Plaintiff/Appellant,
v.
ARIZONA STATE RETIREMENT SYSTEM, Defendant/Appellee.

          Appeal from the Superior Court in Maricopa County No. LC2017-000102-001 The Honorable Patricia A. Starr, Judge

          Robaina & Kresin PLLC, Phoenix By Thomas T. Griffin Counsel for Plaintiff/Appellant

          Arizona State Retirement System, Phoenix By Jothi Beljan Counsel for Defendant/Appellee

          Judge Randall M. Howe delivered the opinion of the Court, in which Presiding Judge Diane M. Johnsen and Judge Maria Elena Cruz joined.

          OPINION

          HOWE, JUDGE

         ¶1 Susan Lagerman appeals the superior court's order affirming a decision by the Arizona State Retirement System ("ASRS") that she (1) could not elect to begin receiving retroactive retirement benefits payable before the date she submitted her retirement application and (2) did not warrant a retroactive retirement date. She also argues that ASRS violated its fiduciary duty in denying her request for a retroactive retirement date. She further argues that ASRS breached statutory and constitutional provisions protecting her retirement benefits against forfeiture, diminution, or impairment.

         ¶2 We affirm. The plain language of A.R.S. § 38-764(A) prohibits an ASRS member from electing a retirement date before the date that ASRS receives the member's retirement application. Also, Lagerman's request for a retroactive retirement date was properly denied because she was unable to show that she could not have submitted a retirement application before the retroactive date that she had sought. Further, ASRS did not violate its fiduciary duty to Lagerman, and it did not cause her to forfeit her benefits or cause her benefits to diminish or become impaired.

         FACTS AND PROCEDURAL HISTORY

         ¶3 In 1978, Lagerman became an ASRS member when she was hired as a securities examiner with the Arizona Corporation Commission, and her membership continued when she later worked as an attorney with the Arizona Attorney General's Office ("AGO") from 1981 to February 2003. An active member is a state employee who works at least 20 weeks in each fiscal year, works at least 20 hours each week, and makes member contributions to ASRS. A.R.S. § 38-711(1). As an ASRS member, Lagerman received annual member statements. After Lagerman left the AGO in February 2003, ASRS mailed her an annual member statement for the time period of July 1, 2003 through June 30, 2004. The member statement included Lagerman's early retirement date (the earliest date she could retire under the law) and her normal retirement date for all three statutory definitions of normal retirement. For ASRS members who joined before July 1, 2011, "normal retirement date" means the earliest of the following: (1) a member's 65th birthday, (2) a member's 62nd birthday and completion of at least ten years of service, or (3) the first day that the sum of a member's age and years of service equals 80. A.R.S. § 38-711(27)(a). Lagerman's earliest normal retirement date was December 23, 2007, under the 80-points definition.

         ¶4 Although Lagerman was not an active member in 2005, ASRS allowed her to complete a service purchase that she had submitted in 2003 because it had not timely processed her request. An active member of ASRS may purchase credited service for prior public employment by paying a certain amount into ASRS. A.R.S. § 38-743. The service purchase accelerated Lagerman's 80-points normal retirement date to July 23, 2005, which was reflected in her member statement for the time period of July 1, 2004 through June 30, 2005.

         ¶5 In summer 2006, Lagerman was diagnosed with cancer and underwent chemotherapy. During and following chemotherapy, Lagerman's mental and physical abilities deteriorated; she had difficulty concentrating and holding conversations. During this time, ASRS continued to mail her annual member statements from the fiscal year beginning July 1, 2005, through the fiscal year beginning July 1, 2010. Each member statement that she received moved the stated normal retirement date to the end of the applicable period. The member statements also stated that "[r]etirees receiving a monthly benefit are permitted under certain circumstances to return to work and still receive their benefit. For details on the return to work options, visit the ASRS website."

         ¶6 ASRS stopped mailing the member statements to its members, including Lagerman, June 30, 2011. ASRS gave notice to its members that they must access their retirement information on their ASRS online accounts. Lagerman had already created an online ASRS account in 2007. She had also contacted ASRS in 2008 for assistance in resetting her account password.

         ¶7 On April 6, 2016, ASRS received Lagerman's completed ASRS retirement application and processed her retirement effective as of that date. Lagerman appealed to the ASRS Assistant Director and requested a retirement date of August 2006. In her appeal letter, she noted that she had attended a benefits exposition at the AGO at which the ASRS representative stated that employees could not work more than 20 hours per week after retirement. She also noted that in 2003 the AGO informed her that she could not work more than 20 hours per week after retiring. She further noted that when she left the AGO, she "did not retire because [she] wanted to continue [her] professional career with full time work." The ASRS Assistant Director denied her appeal.

         ¶8 Lagerman appealed to the ASRS Director, who denied the appeal. She then appealed that decision, and an administrative law judge ("ALJ") held a hearing in January 2017. During the hearing, Lagerman's counsel asked ASRS employee Jenna Orozco whether the lump sum amount ASRS would have to pay Lagerman if it granted her request for a retroactive retirement under A.R.S. ยง 38-715(D)(4) was a factor in denying the request. Orozco denied that ASRS considered the amount of money that it would have to pay Lagerman when it rejected her request. Another ASRS employee, Ryan Falls, testified that he had no knowledge about the facts in Lagerman's case and was called to testify only about the actuarial concepts of the retirement system. During ...


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