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Miami

Cypen & Cypen
NEWSLETTER
for
January 10, 2013

Stephen H. Cypen, Esq., Editor

1.      PENSION BOARD HIT WITH DAMAGES AND ATTORNEYS FEES:  The Board of Trustees of the Jacksonville Police & Fire Pension Fund appealed a final judgment awarding damages and attorney's fees to Kicklighter, a former lieutenant in the City of Jacksonville Fire and Rescue Department, who was disabled as a result of a heart attack suffered while in the course of his employment. The trial court ruling was based on its finding that the Board unreasonably delayed approving Kicklighter's pension, causing a substantial reduction in his pension rate, failed adequately to inform him regarding necessary information concerning the calculation of his pension benefit and failed to provide him a reasonable time to avoid prejudice by making payment of the deficit in his pension contribution.  The District Court of Appeal affirmed.  After Kicklighter applied for disability pension benefits, the Board’s medical director determined that Kicklighter could no longer perform the duties of a firefighter, and could only be employed with the fire department if an administrative or light duty position was available. The Fire and Rescue Department informed the Board that there were no positions available to accommodate Kicklighter. Subsequently, the Board’s advisory committee unanimously voted to recommend approval of Kicklighter's application. Despite the recommendation of its advisory committee and the lack of light-duty positions, the Board deferred the approval of Kicklighter's application, while unsuccessfully attempting to find Kicklighter a light-duty position with the department. While the Board deferred its determination of Kicklighter's application, he continued to be paid by the fire department at a lower rate of pay than his pre-injury rate of pay. This lower rate of pay was then utilized to calculate his pension benefit, resulting in a substantial reduction.  No light duty position was ever offered to Kicklighter, and, after a four month delay, Kicklighter's pension benefit was eventually approved by the Board.  Although the approval of benefits was entered into the Board's minutes, Kicklighter did not receive written notice of his entitlement to benefits or a determination as to the actual amount of the benefit. Kicklighter subsequently discovered that he was to receive a substantially smaller benefit based upon the difference in pensionable compensation.  The Pension Plan provided for the opportunity to make-up the difference in contributions to receive full pension benefits. The trial court accepted Kicklighter's testimony that he requested, but never received, the amount required to make up the deficit in the pension contribution or the benefit to be derived from such payment. The trial court found that the Board’s delay in approving Kicklighter's application and failure to provide Kicklighter with the amounts required to make up contribution deficits caused Kicklighter to receive a reduction in his monthly pension benefit. Based upon these findings, the trial court awarded relief on Kicklighter's claims for breach of contract, breach of fiduciary duty and declaratory relief.  The trial court correctly determined that a contractual relationship existed between the Board and Kicklighter.  The Board breached the contract under multiple theories, including its failure to identify the amount of contribution payable by Kicklighter to receive his full pension benefit.  The trial court accepted Kicklighter’s testimony that he had requested information on the amount he would need to contribute to make up for the shortfall in his contributions, and requested information on the actual benefit to be derived from making the full contribution.  The court also affirmed the award of attorney's fees to Kicklighter.  Incidentally, the lower court action was brought as an original proceeding against the Board.  The normal procedure would have been to seek review of the Board’s order determining benefits in the circuit court, but here the Board never took final action, so there was nothing to review.  The Board's final minutes approving Kicklighter's application do not constitute a final order for which certiorari review could have been sought, since the minutes failed to address what Kicklighter disputed: the amount of benefits he was to receive.  Board of Trustees of the Jacksonville Police & Fire Pension Fund, Kicklighter, 38Fla.L. Weekly Dl02 (Fla. 1st DCA January 4, 2013).
 
2.      AMOUNTS IN APPLICABLE RETIREMENT PLANS MAY BE TRANSFERRED TO DESIGNATED ROTH ACCOUNTS WITHOUT DISTRIBUTION:
  The American Tax Payer Relief Act of 2012/HR8 (See C & C Newsletter for January 3, 2013, Item 1) contains a provision with reference to Roth conversions for retirement plans.  Under current law, a deferral plan under section 401(k) (including the Thrift Savings Plan), 403(b) or 457(b) governmental plan can have Roth accounts that allow participants to save on a Roth basis. Another words, they can make after-tax contributions to the plan and, all the principal and earnings are tax-free when distributed. Plans can currently allow participants to convert their pre-tax accounts to Roth accounts, but only with respect to money they have to take out of the plan, usually because they have reached age 59½ or separated from service. The provision allows any amount in a non-Roth account to be converted to a Roth account in the same plan, whether or not the amount is distributable. The amount converted would be subject to regular income tax. Section 902 of the Act amends Section 402A(c)(4) of the Internal Revenue Code.  This change is estimated to raise $12.186 billion over ten years. 
 
3.      UBS FINDS CORPORATE PENSIONS’ FUNDING RATIO BASICALLY UNCHANGED:
  The UBS Global Asset Management US Pension Fund Fitness Tracker found that the typical US pension plan’s funding ratio declined by one point during the third quarter of 2012, from 78% to 77%. Year-to-date, it is estimated that the funded status of plans has also declined by one percentage point, while experiencing tremendous volatility in both asset and liability performance. The decrease in funding ratio was primarily driven by two factors:

  • Equity markets performed very well over the quarter, reflecting both global central bank stimulus policies, as well as a generally improved economic sentiment. Fixed income assets also performed positively, although somewhat varied, with large increases across credit bonds, outperforming moderate increases in both the US government bond markets and international government bonds. Cumulatively, aggregate performance of the capital markets led to an increase of nearly 4% for a typical US pension plan’s assets. 
     
  • Liability values were moderately higher over the quarter. US Treasury yields remained largely flat, while credit spreads tightened sharply, with the decrease in credit spreads dominating the change in plan discount rates. For the quarter, pension discount rates are estimated to have decreased by approximately 27 basis points, resulting in an increase in pension obligations.
 
4.      DITTO FOR BNY MELLON
:  BNY Mellon has issued its 2012 Pension Summary.  Like UBS (see Item 3 above), funded ratios of the typical plan have held basically steady.  Asset return for moderate risk portfolio was 0.9% in December, while a typical liability return was -1.7%.  Assets out performed liabilities in December, leading to a 1.9 percentage point increase in funded status for a typical pension plan.  For the year, the funded ratio rose from 75.3% to 76.3%.  
 
5.      A BAD DAY AT HALLMARK:
    My tire was thumping.  I thought it was flat.  When I looked at the tire... I noticed your cat.  Sorry!
 
6.      DEFINITIONS: CLASSIC:
  A book which people praise, but never read
 
7.
      QUOTE OF THE WEEK:   Courage is saying, "Maybe what I'm doing isn't working; maybe I should try something else."  Anna Lappe
 
8.      ON THIS DAY IN HISTORY:  
 In 1945, Baseball writers again fail to elect a new Hall of Famer. 
 
9.
      KEEP THOSE CARDS AND LETTERS COMING:  Several readers regularly supply us with suggestions or tips for newsletter items.  Please feel free to send us or point us to matters you think would be of interest to our readers.  Subject to editorial discretion, we may print them.  Rest assured that we will not publish any names as referring sources. 
 
10.
    PLEASE SHARE OUR NEWSLETTER:  Our newsletter readership is not limited to the number of people who choose to enter a free subscription.  Many pension board administrators provide hard copies in their meeting agenda.  Other administrators forward the newsletter electronically to trustees.  In any event, please tell those you feel may be interested that they can subscribe to their own free copy of the newsletter at http://www.cypen.com/subscribe.htm

 

 

 

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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