Sartwell v. Board of Trustees of the Teachers' Retirement System

SUPREME COURT CASES

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State: Illinois

Court: 4th District Appellate

Docket No: 4-09-0810 Rel

Case Date: 08/12/2010

Preview:NO. 4-09-0810 IN THE APPELLATE COURT OF ILLINOIS FOURTH DISTRICT CARL SARTWELL, Plaintiff-Appellant, v. THE BOARD OF TRUSTEES OF THE TEACHERS' RETIREMENT SYSTEM OF THE STATE OF ILLINOIS, Defendant-Appellee.

Filed 8/12/10

) Appeal from ) Circuit Court of ) Sangamon County ) No. 09MR122 ) ) Honorable ) Peter C. Cavanagh, ) Judge Presiding. _________________________________________________________________ JUSTICE McCULLOUGH delivered the opinion of the court: In February 2009, defendant, the Board of Trustees of the Teachers' Retirement System of the State of Illinois (Board), denied plaintiff, Carl Sartwell, $12,430.54 in salary credit toward his retirement pension for the conversion of noncreditable fringe benefits into salary in the 2005-06, 2006-07, and 2007-08 school years. The Board found that Sartwell failed to timely

appeal a 2005 teachers' retirement system (retirement system) staff determination regarding the conversion and to rebut the presumption of conversion by clear and convincing evidence. On

appeal, the circuit court of Sangamon County affirmed the Board's judgment. Sartwell appeals, arguing (1) his appeal falls within

the six-month appeal period because the staff made a second determination of noncreditability in January 2008, within six months of his May 2008 appeal; (2) the 2005 letter violated his procedural-due-process rights because it failed to notify him it was an appealable staff determination; (3) his increase in salary did not violate the conversion rule; and (4) the conversion rule is arbitrary and therefore invalid. in part, and remand with directions. In February 2004, Sartwell and the Board of Education of Rossville-Alvin Community Unit School District No. 7 (District) agreed to a three-year employment contract. hired Sartwell to The District We affirm in part, reverse

work as the district superintendent and high

school principal for three years beginning in the 2004-05 school year. Sartwell's total creditable earnings toward his retirement That figure included $76,490 in salary The

amounted to $88,010.98.

and $3,600 toward a tax-deferred annuity, totaling $80,090.

District contributed 9.89% of his $80,090 salary into the retirement system, raising his total to $88,010.98 in creditable income. The District also paid $12,912.66 in noncreditable

benefits for medical insurance for Sartwell and his family. After the 2004-05 school year, the District opted to close the high school due to financial pressures. - 2 -

In August 2005, the District and Sartwell entered into a two-year contract for him to become the district superintendent and principal of the district's grade school beginning July 1, 2005. Sartwell's base salary rose to $85,000, while the taxHis compensation

deferred annuity contribution rose to $5,600. totaled $90,600.

The contract also cut the District's payment of Sartwell's wife

medical insurance for Sartwell and his family.

began a new job in 2005, at which she was able to purchase medical insurance for $4,930.56 per year. According to an

affidavit from Sartwell, coverage through the District would have cost over $14,000 for the 2005-06 school year. Sartwell reported his income to the Board as $104,441.52, although it is not clear how he arrived at that figure. The Board's records show that the District contributed

10.37% of Sartwell's $90,600 salary into the retirement system, which would amount to $100,000.22. The Board arrived at a total

of $99,560.43 in reportable earnings, which would indicate the District contributed 9.89% of Sartwell's salary into the retirement system. In any case, the Board accepted Sartwell's figure

and found that he received a raise of $12,430.54 from the 2004-05 to 2005-06 school years. In November 2005, Sartwell received a copy of a letter - 3 -

to the District from an employer services auditor employed by the retirement system. The letter follows, in pertinent part:

"The [t]eachers' [r]etirement [s]ystem has reviewed the contracts submitted on Mr. Sartwell's behalf for the 2004-05 and 2005-06 school years. [The retirement system] periodically reviews employer records to ensure that proper service credit and salary information are reported for its members. ***

If there is a decrease in noncreditable compensation in the last seven creditable school years of employment, the [s]ystem considers the difference to have been converted into salary for the purpose of increasing final average salary. * * * Based upon our review, it is our understanding that beginning with the 2005-06 school year, [the District] discontinued providing Mr. Sartwell with board-paid health insurance benefits. Absent any documentation - 4 ***

to the contrary, [we] must presume the full family coverage previously paid by the [District] on Mr. Sartwell's behalf was converted to salary for the purpose of increasing final average salary. Such converted salary will

be excluded from creditable earnings if Mr. Sartwell retires before the 2011-12 school year." The letter also provided Sartwell with contact information for the retirement system employee who made the conversion determination. Sartwell did not respond to the letter until

October 2007, when he sent a letter to the retirement system seeking to rebut the presumption of conversion communicated in the November 2005 letter. Sartwell alleged that the District

stopped paying for benefits "to save a financially-ailing district a substantial amount of money and further, was pursuant to a change in family status." In December 2007, Sartwell drafted another letter to the retirement system, which stated, in pertinent part, as follows: "As an employee[,] the difference between the premium and the benefit provided by - 5 -

my wife's employer had to be paid through payroll deduction, so the [District] opted to provide the cost of the insurance to me in the form of salary. The cost of the insur-

ance to my wife was *** $2,881.58 annually. The cost of the insurance to the board would have exceeded $14,000 in annual premiums. Thus the [District] achieved a significant cost savings as a result eliminating [sic] the provision of the contract that provided for board-paid family health insurance. There is no additional 'side' payment to me for insurance nor was there ever one. ***

The remaining difference in salary that was provided the [s]uperintendent between the two contracts can be explained by a change in job responsibilities[,] or what I labeled a change 'in employment.' The [District] faced

significant financial problems and declining enrollments. After considering all the op-

tions available to them, the [District] opted to reduce costs by deactivating Rossville- 6 -

Alvin High School and paying a negotiated tuition to two [h]igh [s]chools in neighboring districts to provide the educational services to Rossville-Alvin students. At the

time, the administration of the *** district consisted of one [g]rade [s]chool principal, one [h]igh [s]chool principal, and the [s]uperintendent. As a result of the reorga-

nization, only the [s]uperintendent would remain employed by the district. The

[s]uperintendent's job responsibilities were redefined to include responsibilities of the [g]rade [s]chool [p]rincipal. The [D]istrict

justified the additional compensation because the [s]uperintendent would assume the dual role." In a January 2008 letter, retirement system staff rejected Sartwell's request. The letter noted the existence of

the November 2005 letter and characterized Sartwell's request as one to reconsider the prior decision. On the merits, the retire-

ment system found that neither cost savings and financial gain to the District nor Sartwell's change in job responsibilities - 7 -

overcame the presumption of conversion.

In February 2008,

Sartwell received a letter from the general counsel of the retirement system enclosing the rules for administrative review of the January 2008 denial of his request. Sartwell retired after the 2007-08 school year. Pursuant to the retirement system's conversion finding, the retirement system deducted $12,430.54 from Sartwell's reported salary for the 2005-06 through 2007-08 school years. In May 2008, Sartwell appealed the retirement system staff's denial to the Board, which referred the matter to its claims hearing committee. Sartwell attached affidavits from

himself and Dennis Price, the president of the District's board of education, to his appeal. Sartwell's affidavit restated his

earlier arguments but also admitted that his insurance costs for 2005-06 were $4,930.56. Price's affidavit stated as follows:

"Sartwell's salary was increased *** for the purpose of compensating him fairly for assuming the duties of [g]rade [s]chool [p]rincipal after the deactivation of the high school, and to reimburse Sartwell for the costs of the health insurance premiums he would be paying *** through his wife's employer." - 8 -

The committee recommended upholding the staff decision to deduct $12,430.54 from Sartwell's creditable salary. The

committee's written recommendation found that Sartwell failed to file a timely appeal and, in the alternative, his salary increase violated the conversion rule. Regarding timeliness, the commit-

tee found that the November 2005 letter constituted a staff disposition. Pursuant to section 1650.620 of Title 80 of the

Illinois Administrative Code (Illinois Code) (80 Ill. Adm. Code

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