(A news report published in the New Jersey Law Journal on yesterday’s oral argument in the New Jersey Supreme Court is republished in full below.)
Court Weighs Designating Trusts as Beneficiaries in State Pension Plans
Michael Booth, New Jersey Law Journal, February 04, 2014
New Jersey’s high court is deciding whether public employees should be allowed to direct their pensions’ death benefits to special-needs trusts for their disabled children.
Retired firefighter Thomas Saccone has been trying for more than five years to have benefits put in trust for his son, Anthony, in order to avoid the ineligibility for public assistance that would result if the son got the money directly.
The Board of Trustees of the Police and Firemen’s Retirement System has refused him, saying the law is plain and unambiguous that benefits are payable only to a surviving spouse or child, not to designated beneficiaries.
The Appellate Division affirmed that decision, and the Supreme Court heard the appeal Tuesday in Saccone v. Board of Trustees of the Police and Firemen’s Retirement System.
Saccone’s attorney, Donald Vanarelli of Westfield, said the PFRS board and the Appellate Division “blindly adhered to a literal reading of the statute.”
He said special-needs trusts are now accepted public policy when it comes to estate planning and the court should allow PFRS members to use them, especially for disabled children.
The justices seemed warm to the idea, yet expressed doubt on whether the law leaves any wiggle room.
“How do we read the statute to reach that outcome?” asked Chief Justice Stuart Rabner.
“You can interpret the statute to read ‘child’ as ‘trust,'” Vanarelli said.
He noted that the statute was written in the mid-1960s, whereas special-needs trusts came into common use only in the 1990s. Statutory construction should keep pace with the times, he said.
Justice Anne Patterson said that might be an argument for the Legislature.
Judge Ariel Rodriguez asked whether there have been legislative initiatives to update the statute.
“I’m not aware of any attempts,” Vanarelli said. “There have been some discussions.”
When her turn came, Assistant Attorney General Melissa Raksa said the plain language of the statute does not allow for the requested interpretation. “Members are not free to select a beneficiary,” she said, adding she was unaware of any statutory construction that would allow benefits to pass through a trust.
Justice Barry Albin noted that with a special-needs trust, the child ultimately is the beneficiary. Why, he asked, would the state want a result in which the child would not benefit?
“You have to interpret the statutes as written,” Raksa replied. “The Legislature has identified the child as a beneficiary; it has not identified any other entity.”
Rabner asked how a statute could be read so as to harm a “most vulnerable” child, such as Anthony Saccone.
Raksa said she understood the beneficent motive for what Thomas Saccone is trying to do. “The Legislature is in the best position to reconcile competing public policies,” she said.
Judge Mary Cuff asked whether the PFRS board was “hostile” to the notion of special-needs trusts.
The board is not hostile but its job is to interpret the pension statutes, not to engage in estate planning, Raksa replied.
For additional information concerning special needs trusts and disability planning, visit:
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