Kennebec County v. ME Public Employees Retirement System: An Important Ruling for ME’s Governmental Employers

The ME Supreme Judicial Court (Law Court) recently handed down an important ruling limiting the administrative authority of the ME Public Employees Retirement System (MPERS). In Kennebec County v. ME Public Employee’s Retirement System (Kennebec County), three employees of Kennebec County claimed that, at the time they were hired as full time employees, the County had failed to inform them of their eligibility to join MPERS. As a consequence, the employees argued, they were entitled to benefits as if they had enrolled in MPERS as of their respective dates of hire (1986, 1987 and 2000). This would have required the County to fund benefits (plus interest) for as much as 22 years in arrears, which would have been devastating to the County.

The MPERS Board of Trustees ruled that the County had a statutory obligation to inform the employees of their eligibility and that, because the County could not provide specific documentation regarding each of the individual employee-plaintiffs, the County had failed in its duty to inform them. The Law Court reversed the MPERS decision, ruling that MPERS has no authority over the enrollment process or anything that occurs prior to it. The Court said that to hold otherwise could invite “inconsistent and speculative decision-making, reliant on faded memories and imprecise or discarded records of events twenty or thirty years in the past.”

Kennebec County leaves some important issues unresolved, including: (1) what effect Section 17054-A may have on retroactive claims for benefits;[1] and (2) what contractual rights employees may have regarding enrollment, including rights under collective bargaining agreements.

Three take-home points from Kennebec County

1. Employers should institute regular procedures for educating newly hired employees of their eligibility to enroll in MPERS, and what the general terms of that enrollment will be.
2. Employers should adopt election procedures that clearly document: (1) the offer of MPERS enrollment to each eligible employee, (2) each employee’s actual election and (3) the communications with MPERS regarding each employee’s election and enrollment. These documents should be kept on file permanently.
3. This case could potentially give rise to the need for local administrative hearings to determine eligibility. Employers may see an influx of hearing requests.

If you have any questions about this alert, or other employee benefits matters, please contact Steve Gerlach at 207-774-1200 or sgerlach@bernsteinshur.com. Steve is a Chambers rated ERISA attorney and a member of Bernstein Shur’s Labor & Employment Practice Group. He represents business, nonprofit and governmental employers in matters of executive compensation, employee benefits, the Affordable Care Act and ERISA.

[1] In 2013, the Legislature passed this section, which requires employers to provide election procedures and maintain records of employees’ elections. It went into effect after the Kennebec County case was filed, and was thus not applicable in this case—the Court specifically declined to comment on what effects it might have on future cases.