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Nevada Public Employees Retirment Board v. Smith

Supreme Court of Nevada

October 3, 2013

NEVADA PUBLIC EMPLOYEES RETIREMENT BOARD, and its Board Members; Sue Defrancesco; Charles Silvestri; Elizabeth Fretwell; Purisimo Hernandez; David F. Kallas; George Stevens; and Warren Wish, Appellants,
v.
Douglas E. SMITH, Respondent.

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[Copyrighted Material Omitted]

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Woodburn & Wedge and W. Chris Wicker and Jessica H. Anderson, Reno, for Appellants.

Chuck R. Gardner, Las Vegas, for Respondent.

BEFORE THE COURT EN BANC.

OPINION

PICKERING, C.J.:

On this appeal we consider NRS 286.541(2), governing retirement by members of the Public Employees' Retirement System (PERS). PERS interprets NRS 286.541(2) as limiting retirement eligibility. In its view, a member who goes from one PERS-eligible job to another without a break in service and retiring from PERS may not thereafter retire and receive benefits from PERS, until the member effectively retires from his or her new PERS-eligible job. A contrary interpretation, PERS maintains, would allow in-service distributions, violating NRS 286.541 and the Internal Revenue Code plan-qualification provisions on which PERS depends.

The district court disagreed. In its view, NRS 286.541(2) determines retirement benefit dates, not retirement eligibility. Thus, the district court held that PERS should have allowed respondent Douglas Smith to retire and receive benefits from PERS based on his prior public service, even after he was sworn in as a district court judge, another PERS-eligible position. The district court also held that, under NRS 286.190(3)(a), PERS could and should have equitably excused Judge Smith's noncompliance with NRS 286.541, and allowed him to reverse his eventual election to transfer from PERS to the Judicial Retirement System (JRS), despite NRS 1A.280(6), which makes such an election irrevocable.

The district court erred in its interpretation of the controlling statutes and in reviewing the PERS Board's decision de novo, rather than deferentially. We therefore reverse and reinstate the PERS Board's determination that Judge Smith is not eligible to receive retirement benefits at this time.

I.

Public Employees' Retirement System members may not receive PERS retirement benefits until they effectively retire from PERS. NRS 286.541.[1] Under NRS 286.520(1)(a)(2), benefit payments ordinarily cease if a retired employee resumes work for a PERS-eligible employer. But NRS 286.520(5) provides an exception for " a retired employee [who] is chosen by election or appointment to fill an elective public office." Such a retired employee may continue receiving PERS benefits, so long as the new office is not the same as the office in which the employee earned the benefits.

In this case, respondent Douglas Smith meant to avail himself of NRS 286.520(5). A sitting justice of the peace with 23 years of creditable PERS service, Judge Smith ran for and was elected to the Eighth Judicial District Court in November of 2008. He planned to retire as a justice of the peace, start receiving benefits (reduced for early retirement) from PERS, take office as a district court judge, and then elect to participate in JRS rather than PERS.[2] Judge Smith

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believed that this would allow him to receive PERS retirement benefits, in addition to his district judge salary, while accruing a second set of retirement benefits under JRS, eventually receiving benefits under both PERS and JRS.[3]

Judge Smith consulted PERS staff in November and December 2008 about retirement options. He received estimates based on different scenarios, using an expected retirement date of December 31, 2008. PERS staff also provided Judge Smith with materials explaining how PERS determines effective retirement dates and the implications of taking other public employment before and after retiring from PERS. The PERS Preretirement Guide includes a section, " Some Pitfalls and How to Avoid Them," which cautions: " As we have stated before, your effective date of retirement is the day after your last day of employment, the day your application is received [by] PERS ..., or the date requested on the application, whichever is later .... You must take the initiative. No one will automatically do it for you, and no one, including your public employer, can file your retirement paperwork. " Public Employees' Retirement System of Nevada, Preretirement Guide 13 (March 2008 revision).

Separately, Judge Smith consulted Clark County about health insurance. Justices of the peace are paid by the County, while district judges are paid by the State, and Judge Smith faced a gap between plans. Judge Smith learned that he could extend his and his family's County-paid health insurance up to February 1 if he continued as a justice of the peace into January. Under the Nevada Constitution, Article 6, Section 5, Judge Smith's term as a district judge began, and he was sworn in, on January 5, 2009, the first Monday in January. To maximize his insurance coverage, Judge Smith provided a resignation letter to Clark County designating Sunday, January 4, 2009, as his last day as justice of the peace. Clark County reported Judge Smith's termination date as January 4, 2009, and afforded him insurance coverage through January 31, 2009. Judge Smith received his last Clark County paycheck on December 19, 2008.

Judge Smith waited until January 8, 2009, to file the papers required to retire from PERS.[4] By then, he had been sworn in as a district court judge. In that capacity, he was employed by a PERS-eligible employer and earning creditable service with PERS. After research, PERS staff determined that, consistent with NRS 286.541(2), Judge Smith could not retire from PERS while employed in a PERS-eligible position. PERS therefore denied Judge Smith's application for retirement benefits.

Judge Smith appealed staffs determination to the PERS Board. At the PERS Board hearing, Judge Smith cited NRS 286.190(3)(a) and asked for an equitable exception to NRS 286.541(2). He acknowledged that PERS staff made no misrepresentations to him but argued that it was unduly harsh to deny him early retirement benefits because he filed his paperwork three days late. The Board debated whether it could make an exception to NRS 286.541(2) and, if so, whether it would be allowing an in-service distribution and deviating from operational guidelines, which could jeopardize PERS with the IRS.

The Board denied Judge Smith's appeal in its written findings of fact, conclusions of law, and decision. It held that " [t]he applicable provisions of the Retirement Act [NRS 286.541(2) ] clearly prohibit a member from retiring while he is actively employed and receiving service credit." ...


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