CalSTRS Was Not On Inquiry Notice Of A Reporting Error That Led To An Overpayment Of Benefits To A Retiree Until It Began An Audit Of His Benefits

CATEGORY: Public Education Matters
CLIENT TYPE: Public Education
DATE: Aug 31, 2020

Ernest Moreno served as president of East Los Angeles College in the Los Angeles Community College District. In 2006, he entered into a contract with the District to be the interim president of Los Angeles Mission College for the 2006-2007 school year. The contract entitled Moreno to a one-time $25,000 payment for the additional work and allowed Moreno to elect when to receive the payment. The District renewed the contract with Moreno for the 2007-2008 school year, and he chose to take both one-time payments, totaling $50,000, during the 2007-2008 school year.

In September 2008, Moreno met with a benefits counselor employed by the District but trained by CalSTRS, to discuss retirement. When Moreno learned the amount of his projected final, one-year compensation reported to CalSTRS, he told the counselor it should be $50,000 higher. The counselor told Moreno to contact the District to correct any reporting error. Moreno again met with the counselor in February 2009, at which time the counselor confirmed Moreno’s one-year compensation increased by $50,000. Moreno also met with a CalSTRS benefits counselor in 2010 and 2011, and they reviewed a benefit counseling preparation sheet showing Moreno’s one-year compensation as the higher amount. Moreno retired in August 2011.

In 2012, CalSTRS’s Compensation Review Unit received a report from its Information Technology Services Unit containing the names of retired members with high salaries, high increases in salary, or high special compensation. Moreno’s name was on this report.

In December 2014, the Compensation Review Unit selected Moreno for audit. Based on the Compensation Review Unit’s review, CalSTRS determined the District incorrectly reported the additional $50,000 Moreno by crediting this amount to Moreno’s defined benefits account instead of his defined benefits supplement account.

CalSTRS notified Moreno of the discrepancy and necessary adjustments in February 2015. Moreno appealed CalSTRS’s decision, and an administrative law judge denied the appeal.

Moreno filed a petition in a trial court asking the court to bar CalSTRS from correcting the overpayment. Moreno argued CalSTRS’s correction of Moreno’s retirement benefit and collection of overpayment were barred by the statute of limitations in Education Code section 22008, subdivision (c) and equitably estopped. Moreno did not challenge the accuracy of CalSTRS’s determinations. The trial court denied Moreno’s petition, finding that CalSTRS did not have notice of the reporting error until the Compensation Review Unit’s audit in December 2014. Moreno appealed.

On appeal, Moreno argued CalSTRS was barred from adjusting his retirement benefits and collecting the overpayment because the statute of limitations found in Education Code section 22008, subdivision (c). He argued CalSTRS was on inquiry notice of the reporting error when Moreno met with the benefits counselor in 2008 or, in the alternative, when Moreno’s name appeared on the list generated by the CalSTRS Information Technology Services Unit in 2012.

Education Code section 22008 established a three-year limitations period in connection with “payments into or out of the retirement fund for adjustments of errors or omissions with respect to the Defined Benefit Program or the Defined Benefit Supplement Program…”

However, the Court of Appeal agreed with the trial court’s rejection of this argument. While the counselor may have been on notice that the District adjusted its reporting of Moreno’s salary, this did not place CalSTRS on inquiry notice that the amount reported by the District in 2009 was incorrect. The Court of Appeal found the same true of the 2010 and 2011 meetings with a different CalSTRS employee. Moreno did not identify any discussion during those meetings that would put CalSTRS on inquiry notice that there was anything questionable about the District’s reporting of his compensation.

Moreno also argued CalSTRS was on inquiry notice when Moreno’s name appeared on the list generated by the CalSTRS Information Technology Services Unit in 2012. But there is no evidence Moreno appeared on the list for any reason other than being a high-salary earner. CalSTRS completed the audit and notified Moreno about the overpayments in 2015, within the three-year limitations period.

Finally, Moreno argued CalSTRS was solely responsible for the alleged overpayments. But the record did not support his assertion. According to the record, the District revised its compensation report based on urging by Moreno and reported the incorrect increased compensation to CalSTRS.

Therefore, the Court of Appeal concluded the evidence supported the trial court’s determination that CalSTRS was not on inquiry notice of the overpayments to Moreno before December 2014.

Moreno further argued CalSTRS must be equitably estopped from adjusting his retirement benefits and collecting the overpayments. However, the Court of Appeal held that Moreno’s attempt to invoke equitable estoppel failed because CalSTRS was not aware that it incorrectly calculated Moreno’s retirement benefits until at least December 2014 when CalSTRS audited Moreno’s retirement benefits. Equitable estoppel did not apply unless CalSTRS was on notice before December 2014, which it was not. Therefore, CalSTRS was not equitably estopped from adjusting Moreno’s retirement benefits and collecting the overpayment.

Moreno v. California State Teachers’ Ret. Sys. (2020) 52 Cal.App.5th 547.