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An individual?s right to the payment of the value of accrued sick leave credits deemed deferred compensation is not forfeited upon death

An individual?s right to the payment of the value of accrued sick leave credits deemed deferred compensation is not forfeited upon death
Matter of Shaffer, 2009 NY Slip Op 50939(U), decided on April 30, 2009, Surrogate Court, Nassau County, Judge John B. Riordan, [This opinion is uncorrected and will not be published in the printed Official Reports]

Stephen Shaffer was a teacher employed by the Elmont Union Free School District. Shaffer?s application for retirement was pending at the time of his death and the retirement system approved the application posthumously.

In addition, Shaffer had accrued 95 days of sick leave credit valued at $20,363.27 at the time of his death.

The School District declined to pay this amount to Shaffer?s estate, contending that the collective bargaining agreement [CBA] between the District and the Elmont Elementary Teachers Association provided that ?accrued sick leave be paid into a ?403 (b)?* account.? As Shaffer had not established a §403(b) account prior to his death, the District, arguing ?impossibility,? said that it was unable to effectuate payment of the accrued sick leave because a §403(b) account cannot be created after death.

In effect, the District claimed that under the terms of the COB Shaffer?s failure to establish a §403(b) account prior to his death resulted in the forfeiture of his accrued sick leave credit.

Judge Riordan agreed that a §403(b) account cannot be established posthumously but said that ?forfeitures are not favored in law or in equity and the court will avoid a finding of forfeiture in the construction of a contract.?

In this instance, said the court, there is no express language in the CBA that provides for a forfeiture in the event a §403(b) account is not established by the individual and no such provision should be read into the contract. Further, Judge Riordan concluded the creation of a §403(b) account was not a condition to payment for accrued sick leave under the CBA.**

Holding that the value of Shaffer?s accrued sick leave was in the nature of deferred compensation, the court rejected the District?s argument that Shaffer?s failure to establish a §403(b) made it impossible for it to perform under the terms of the COB.

Judge Riordan said that ?impossibility will not excuse a condition if the existence of the condition is not a material part of the exchange? and in this instance the creation of a §403(b) account was not a material part of Shaffer?s right to deferred compensation. Thus accepting the Districts argument would result in its being discharged of its obligation to pay Shaffer?s deferred compensation and would result in a forfeiture of vested rights.

Accordingly, Judge Riordan granted Janet Shaffer?s motion as Executrix of the Estate of Stephen Shaffer for summary judgment and the District was directed to pay the estate Stephen Shaffer $20,363.27.

* The ?403(b)? referred to is a Tax Deferred Annuity that could be established by Shaffer pursuant to §403(b) of the Internal Revenue Code.

** In addition, Judge Riordan commented that ?even if it were determined that the creation of a ?403 (b)? account is a condition precedent, the District should not be permitted to withhold payment of the funds.?

The decision is posted on the Internet at:
http://www.courts.state.ny.us/reporter/3dseries/2009/2009_50939.htm

Full post as published by New York Public Personnel Law on May 18, 2009 (boomark / email).