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Cypen & Cypen
NEWSLETTER
for
FEBRUARY 2, 2004

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. STATUTE OF LIMITATIONS BEGAN TO RUN WHEN EMPLOYEE WAS HIRED AND DENIED PARTICIPATION IN CITY PENSION PLAN:
Petrosino worked for the City of Hollywood from 1987 to 1999 as a community development housing inspector. Because his position was funded by federal grant, at the time Petrosino was hired the City deemed such employees not qualified to participate in the City’s pension plan. In 1994, the City changed its position on the status of community development employees, and gave them the option to join the pension plan, without credit for prior service. Petrosino rejected the option and elected not to join. In 2001, Petrosino filed a suit for declaratory judgment, claiming he had met the definition of “employee” for purposes of inclusion in the pension plan. Both parties agreed that the applicable statute of limitation is five years. The trial court ruled that Petrosino’s claim was not time-barred because it did not accrue until his 55th birthday in 2001 -- the first time he became eligible to apply for benefits. The City contended that the claim was time-barred because the cause of action arose in 1987 when Petrosino was hired by the City and informed that he was ineligible to participate in the pension plan. On review of the trial court’s ruling in favor of Petrosino, the district court of appeal reversed. For Petrosino to prevail in a declaratory judgment action, the following elements had to be present:

(1) A bona fide, actual, present practical need for the declaration.

(2) The declaration should deal with a present, ascertained or ascertainable state of facts or present controversy as to a state of facts.

(3) Some immunity, power, privilege or right of the complaining party is dependent upon the facts or the law applicable to the facts.

(4) There is some person or persons who have, or reasonably may have an actual, present, adverse and antagonistic interest in the subject matter, either in fact or in law.

(5) The antagonistic and adverse interests are all before the court by proper process or class representation and that the relief sought is not merely the giving of legal advice by the courts or the answer to questions propounded from curiosity.

Because all five elements existed at the time Petrosino was hired and was informed he could not participate in the pension plan, his cause of action accrued in 1987, and is clearly barred by the statute of limitations. City of Hollywood v. Petrosino, 29 Fla. L. Weekly D163 (Fla. 4th DCA, January 7, 2004)

2. PROVIDENCE WILL ATTEMPT TO REVOKE PENSIONS:
The City of Providence, Rhode Island, has suspended two police officers and will try to revoke their pension benefits over allegations of cheating on police promotional tests. (We assume that the two, a former chief and captain, are in some sort of DROP plan, which explains why they are active and also receiving pensions.) The investigation, reported by Associated Press, concluded that the two ranking officers had received test materials before promotional exams between 1996 and 1999. The city will attempt to revoke or curtail the subject pension benefits for “dishonorable service.” It is not clear whether “dishonorable service” constitutes a ground for pension forfeiture under Rhode Island law or under the subject local plan. Other charges may stem from the investigation into allegations of cheating on the tests. The city called the suspensions the first step to restoring the broken trust in a department that has been plagued by low morale and embarrassing revelations, including last year’s discovery that a computerized system was secretly recording all officers’ telephone calls.

3. IRS ISSUES REVENUE RULING ON ROLLOVERS:
Prior to enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001, certain restrictions applied to rollovers by individuals of funds accumulated in retirement plans maintained by their employers or in IRAs maintained by them. EGTRRA, as amended by the Job Creation and Worker Assistance Act of 2002, substantially increased the rollover opportunities available to individuals, by expanding both types of plans eligible to accept rollovers and the types of funds that can be rolled over. Rules applicable to rollovers (including new portability rules) are contained in Sections 402(c), 402(c)(2), 401(a)(31), 308(d)(3)(A), 402(c)(10) and 402(f) of the Internal Revenue Code. The new revenue ruling holds that if an eligible retirement plan separately accounts for amounts attributable to rollover contributions to the plan, distributions of those amounts are not subject to the restrictions on permissible timing that apply, under applicable requirements of the Internal Revenue Code, to distributions of other amounts from the plan. Accordingly, the plan may permit distribution of amounts attributable to rollover contributions at any time pursuant to an individual’s request. Rev. Rule. 2004-12.

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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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