ADMINISTRATIVE LAW – Government retirement, changing options after check issued: Bob Lawson v. Kentucky Retirement Systems, et al. (SC 5/21/2009)

Bob Lawson v. Kentucky Retirement Systems, et al.
2007-SC-000540-DG May 21, 2009
Opinion by Justice Noble. All sitting.

Lawson retired from employment with the state after 26 years. He selected a retirement benefit payment option and signed a form acknowledging that under KRS 61.590(3) he could not change his payment option after the first payment “had been issued.” Prior to receiving his first check, Lawson realized he had misunderstood the terms of the payment option and contacted KERS to obtain paperwork to make a change. KERS advised Lawson that since the initial check had been printed by the State Treasurer’s office, no change would be permitted. Lawson began the appeals process, and KERS prevailed before the hearing officer and Board, as well as at the circuit court and Court of Appeals levels.

The Supreme Court affirmed the Court of Appeals’ ruling that KRS 65.590 was neither void for vagueness nor required defining regulation under KRS 13A.100. However, the Court reversed the Court of Appeals’ findings that KERS had correctly applied 61.590(3) and had not misled Lawson. The Court held that payment is “issued” when the check is delivered to the payee—as such, Lawson should have been allowed to change his payment option. Justice Abramson (joined by the Chief Justice) concurred in result only, contending that inasmuch as state workers’ retirement rights have been deemed an “inviolable contract,” contract law requires that the ambiguity contained in 61.590(3) be construed against the drafter (i.e. the Commonwealth). The minority disagreed with the majority’s conclusion that Lawson had either been misled by KERS or that KERS was negligent in their handling of Lawson’s retirement process.

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