Unpaid PFRS Benefits Revert to Estate Absent an Express Written Beneficiary Designation

In Keith Isaac, deceased v. Board of Trustees (A-22-24/089370) (Decided July 31, 2025), Justice John Jay Hoffman, writing for a unanimous Supreme Court of New Jersey held that it was arbitrary, capricious, and unreasonable for the Board of Trustees (the Board) of the Police and Firemen’s Retirement System (PFRS) to distribute withheld pension benefits of former Newark policeman Keith Isaac to his estranged spouse following Isaac’s death.

According to the Court,  the plain language of N.J.S.A. 43:16A-12.2 directs that “unpaid benefits” be distributed to the decedent’s estate unless the PFRS member has nominated a beneficiary by “written designation.”

Facts of Keith Isaac, deceased v. Board of Trustees

On September 12, 2016, the Board approved Isaac’s 2013 application for special retirement, retroactive to the amended date of August 1, 2014. Between August 1, 2014, and September 12, 2016, Isaac had accumulated $208,950.03 in unpaid benefits.

In March 2017, the Division of Pensions and Benefits distributed Isaac’s unpaid benefits to Roxanne Isaac, Isaac’s estranged spouse. Isaac’s estate wrote to the Division, asking that it reconsider its decision. In a letter dated November 21, 2018, the Board informed the estate that “in filing for retirement and listing Roxanne as his spouse . . . Isaac nominated and designated her as his beneficiary,” pursuant to N.J.S.A. 43:16A-12.2. 

Thus, the Board concluded that the Division “correctly paid” Roxanne the unpaid benefits. The estate appealed the Board’s decision, and the Office of Administrative Law (OAL) affirmed. The estate then appealed to the Appellate Division, which remanded the matter to the OAL to conduct a supplemental hearing to uncover Isaac’s probable intent regarding the disposition of his unpaid benefits.

NJ Supreme Court’s Decision in Keith Isaac, deceased v. Board of Trustees

The New Jersey Supreme Court reversed, holding it was arbitrary, capricious, and unreasonable for the Board to distribute Isaac’s withheld pension benefits to his estranged spouse.

“By its plain language, N.J.S.A. 43:16A-12.2 directs that ‘unpaid benefits’ be distributed to the decedent’s estate unless the PFRS member has nominated a beneficiary by ‘written designation,’” Justice John Hoffman wrote. “Because Isaac made no such designation here, we hold that the Board must distribute Isaac’s $208,950.03 in unpaid benefits to his estate in accordance with the statutory mandate.”

In reaching its decision, the New Jersey Supreme Court emphasized the statutory requirement for a written designation. “The language of N.J.S.A. 43:16A-12.2 makes clear that when a member fails to affirmatively nominate a beneficiary ‘by written designation,’ any unpaid benefits must be paid to the member’s estate, whether that estate is governed by a will (via the executor) or intestacy statutes (via the administrator),” Justice Hoffman wrote. “The statute is thus a closed circle that provides its own unambiguous gap-filler: the member’s estate.”

The New Jersey Supreme Court rejected the Board’s contention that Isaac’s inclusion of Roxanne’s name in the “Marital/Survivor Information” section of his PFRS retirement application as simultaneously designating Roxanne as the beneficiary of his unpaid benefits. The Court went on to conclude that, in the absence of a written designation, the benefits must be distributed to Isaac's estate. “Given the stark distinctions between Isaac’s unpaid benefits and his automatic survivors’ pension, we agree with the appellate court’s conclusion that his identification of Roxanne on the retirement application did not also constitute a written designation pursuant to N.J.S.A. 43:16A-12.2,” Justice Hoffman wrote.
Unlike the Appellate Division, the New Jersey Supreme Court found no reason to remand the matter for supplementary fact finding on the question of probable intent. Rather, it found that the $208,950.03 at issue must be directed to Isaac’s estate, in accordance with N.J.S.A. 43:16A-12.2.