A New York state court has ruled that a retired New York City attorney must pay back nearly $33,000 in extra pension money she received over seven years due to a computer error.
Acting Supreme Court Justice Manuel J. Mendez in Manhattan ruled last week in Olick v. D'Alessandro, 115369/10, that under city law, the New York City Employees Retirement System (NYCERS) is authorized to recover overpayments, regardless of when it becomes aware of the error.
The plaintiff, Alice D. Olick, filed a petition against NYCERS in November, alleging that the retirement system violated Article 78 of the New York Civil Practice Laws and Rules in deciding to reduce her benefits and deduct excess benefits it had already paid her from future payments.
Olick began working for the state public school system as a North Bellmore teacher in 1957 and retired from teaching in 1962, according to Justice Mendez's opinion. During that time, she belonged to the New York State Teachers Retirement System. In 1979, she began working for the city Corporation Counsel's Office and joined NYCERS.
Olick retired from the office in 2002. In 2003, she consulted with NYCERS about her retirement options and chose one that reduced her annual pension to $62,381 from $69,105, but provided that half the pension amount would be paid to her husband each year if she died before he did, according to the opinion. After making her choice, she received a document entitled "A Permanent Record of Your Retirement Resolution."
In March 2009, Olick was told that, due to an earlier error, she would receive a "revised benefits letter" with a larger pension amount, and a lump sum payment of the additional back benefits she was owed, according to the opinion. But in December 2009, a NYCERS employee told her by phone that her pension was actually being decreased. She later received a letter telling her that her benefits would be reduced by nearly $1,000 per month and that she owed NYCERS $32,880 for past overpayments, which would be deducted from future payments.
The letter said the change was due to "a programming error" in the computer program that calculated her original pension.
Olick asked the Supreme Court to reverse NYCERS' decision, saying that it was arbitrary and capricious because it gave her only eight-days notice and ignored the facts that she had been told her original pension calculation was "permanent," that she had paid taxes on the overpayments and that she and her husband had planned their retirement based on the original pension calculation. She argued that the city was estopped from reclaiming the overpayments or lowering her future payments by its earlier statements.
In rejecting Olick's petition, Justice Mendez pointed to New York City Administrative Code §13-182, Retirement and Pensions, which says that if "any change or error in records result in any member or beneficiary receiving from the retirement system more or less than he or she would have been entitled to receive otherwise, on the discovery of any such error such Board shall correct such error, and as far as practicable, shall adjust the payments in such a manner that the actuarial equivalent of the benefit to which he or she was entitled shall be paid."
The judge said the statute clearly applied in Olick's case, citing several previous decisions in which state courts had allowed pension funds to recover payments made in error. In the most recent of those cases, Marin v. Teacher's Retirement System of the City of New York, 897 NY2d 670 (2009), the retirement system was allowed to recover over $300,000 in overpayments made over 12 years.
"The doctrine of estoppel can only be applied against a governmental entity if failure to apply the doctrine would defeat a right legally and rightfully obtained," Mendez wrote. Since Olick never had a legal right to the overpayments, estoppel did not apply, he wrote.
"That Petitioner relied on letters and statements made by NYCERS employees is of no consequence," the justice wrote. "Petitioner cannot allege that the agency is estopped from recouping any overpayment because she received the pension for seven years before NYCERS discovered the error."
In fact, Mendez said, the statute requires NYCERS to recover the overpayments.
Assistant Corporation Counsel David Priddy, who represented the city, said in a statement, "We are pleased the court recognized the long standing legal principle that estoppel is not available against a governmental agency, and NYCERS' duty to correct errors and recoup payments made in error."
Robert J. Semaya of Moses & Singer, who represented Olick, could not be reached for comment.