04-0064 Fazio v. Department of Employee Trust Funds (62418)

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“We conclude that no unconstitutional taking occurred because a beneficiary does not acquire a property interest in a lump sum death benefit under § 40.73(1)(c) until the beneficiary applies for a death benefit as required by Wis. Stat. § 40.71(3).We also conclude that the circuit court erred by ordering the department to pay damages to certain other beneficiaries who were not members of the plaintiff class that the court had previously certified.”

Reversed and remanded for entry of an order dismissing this action.

“The first step in a takings analysis is to determine whether a claimant possessed a property interest in the property that the government allegedly took. Id. at 18. In this case, we must decide whether Fazio had a property interest in the investment earnings attributable to the amount of her lump sum death benefit while it remained in the WRS fund after her husband’s death. She clearly acquired a property interest in her death benefit at some point in time, as evidenced by the fact that the department paid the benefit to her. Thus, the dispositive subsidiary question is: When did Fazio’s property interest in her death benefit arise-on the date of her husband’s death as she claims, or not until she filed her lump sum death benefit application and all required documentation to the department as the department maintains? We conclude it is the latter….

“Until the department received Fazio’s written application and the proof of her husband’s death, it could not determine the ‘single cash sum’ to which Fazio might be entitled. Only then could the department perform the alternative calculations under Wis. Stat. §§ 40.73(1)(a) or (am) and (c) to determine which paragraph would provide the higher lump sum payment. This is so, in part, because the amount payable to Fazio under paragraph (a) or (am) continued to increase each month by the addition of interest credited to her husband’s WRS account through ‘the first day of the month in which the death benefit is approved.’ Section 40.73(1)(am). Moreover, although the calculation of the ‘annuity-value’ lump sum death benefit under § 40.73(1)(c) utilizes a deceased participant’s date of death for calculation purposes, nothing in § 40.73 creates an entitlement in the beneficiary to the lump sum benefit as of that date.

“Rather, a lump-sum-death-benefit beneficiary’s entitlement is created under Wis. Stat. § 40.71(3), which plainly specifies when the beneficiary becomes entitled to the benefit: ‘only after receipt by the department’ of the required items.”

Reversed and remanded.

Recommended for publication in the official reports.

Dist IV, Dane County, Fiedler, J., Deininger, J.

Attorneys:

For Appellant: L. Jane Hamblen, Madison

For Respondent: Robert L. Elliott, Milwaukee