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Cypen & Cypen
APRIL 7, 2005

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


The International Foundation’s Benefits & Compensation Digest has an interesting article on early retirement and phased retirement programs for the public sector. According to the Bureau of Labor and Statistics, there are 76 million baby boomers -- those born between 1946 and 1964 -- more than one-quarter of all Americans. These individuals are beginning to reach retirement age, and BLS estimates there will be a shortfall of 10 million workers by the year 2010. Close to half of all government workers are aged 45 or older; half of private sector employees are under 35. Public sector employers will feel the effect of an aging baby boom generation much earlier than the private sector: the average age of this employee population is significantly older than public sector employees (particularly public safety occupations) who generally retire at an earlier age. As state and local government employers continue to experience budget shortfalls, developing phased or transitional retirement arrangements within their retirement system may not seem like a priority. However, aging of the baby boom generation will likely result in the public sector’s needing to find creative solutions sooner, rather than later, to insure it can meet the needs of this employee population and maintain a sufficient workforce. This issue is going to become more important over the next five to ten years and there likely will continue to be many changes to the look and culture of future generations of retirees. The issue of retirement is also a top priority for federal legislators and regulators, who are working to enhance and protect the financial security of Americans’ retirement years. There will likely be legislative changes that will alter the design or features of employer-sponsored retirement plans in the near future. State and local governments need to be involved proactively in this legislative and regulatory process, to provide input on proposals to ensure the unique needs of this workforce are understood and addressed. [Benefits & Compensation Digest, Vol. 42, No. 4, April 2005, pages 31 et. seq.]


When we last heard about Lynn Catterton, she was obtaining reversal of denial of her service-incurred disability pension by the Orlando Police Pension Board of Trustees (see C&C Newsletter for April 7, 2004, Item 5). Then, the court held that Catterton’s Paroxysmal Supraventricular Tachycardia entitled her to the presumption in Section 185.34, Florida Statutes, which trumped the plan’s exclusion for pre-existing conditions. As we said, that court quashed the board’s decision and remanded thereto for further proceedings. On remand, the board again denied Catterton’s application for service-incurred disability. And the court, again, quashed the board’s denial. In beginning its analysis, because of the presumption, the board was required to conclude that Catterton’s PSVT was suffered in the line of duty, thus supplying the element of work-relatedness. From there, the board was required to consider all evidence presented. If there was evidence supporting the work related element of Catterton’s condition, the board was then required to determine whether there was clear and convincing evidence to the contrary. If the evidence was conflicting, it was required to conclude that the presumption prevailed. The court concluded that the evidence presented to the board was conflicting. Based thereon, the presumption should prevail as a matter of law. The appellate panel also granted Catterton’s motion for attorney’s fees and costs. Catterton v. City of Orlando, Police Pension Board, 12 Fla. L. Weekly Supp. 300 (Fla. 9th Cir., October 27, 2004).


Except for substitution of “age” for “race, color, religion, sex, or national origin,” the language of Age Discrimination in Employment Act of 1967 is identical to the language in Title VII of the Civil Rights Act of 1964. Unlike Title VII, however, ADEA significantly narrows its coverage in permitting any “otherwise prohibited” action “where the differentiation is based on reasonable factors other than age.” Another difference between ADEA and Title VII makes clear that the disparate-impact theory’s scope is narrower under ADEA than under Title VII: the amendment to Title VII in the Civil Rights Act of 1991, which expanded Title VII’s coverage, did not amend ADEA or speak to age discrimination. Congress’ decision to limit ADEA’s coverage by including a “reasonable factors other than age” provision is consistent with the fact that age, unlike Title VII’s protected class of occasions, not uncommonly has relevance to an individual’s capacity to engage in certain types of employment. Thus, although the United States Supreme Court has now ruled that disparate-impact claims are available under ADEA, it affirmed dismissal of those claims where the employer’s plan was based on reasonable factors other than age, and complainants thus could not set forth a valid disparate-impact claim. Smith v. City of Jackson, Mississippi, Case No. 03-1160 (U.S., March 30, 2005).


The Bankruptcy Code permits debtors to exempt certain property from the bankruptcy estate, allowing them to retain those assets rather than divide them among their creditors. Specifically, 11 U.S.C. §522(d)(10)(E) provides that a debtor may withdraw from the estate his right to receive a payment under a stock bonus, pension, profitsharing, annuity or similar plan or contract on account of age. Several years after Richard and Betty Jo Rousey deposited distributions from their pension plans into Individual Retirement Accounts, they filed a joint petition under Chapter 7 of the Bankruptcy Code. They sought to shield portions of their IRAs from their creditors pursuant to the foregoing section. The bankruptcy trustee objected to the exemption, claiming that IRAs are not “similar” to plans specified in the statutory exemption, and even if they were, the IRAs gave the Rouseys no right to receive payment “on account of age,” but were instead savings accounts readily accessible at any time for any purpose. The Eighth Circuit Court of Appeals upheld the objection. On review, a unanimous U. S. Supreme Court held that IRA assets are exempt because they fulfill both of the §522(d)(10)(E) requirements at issue: they are similar plans or contracts to those enumerated therein and they confer a right to receive payment on account of age (the 10% tax penalty that applies to withdrawals from IRAs made before the accountholder turns 59½ is substantial). Rousey v. Jacoway, Case No. 03-1407 (U.S., April 4, 2005).


The Florida Advisory Council on Condominiums comprises seven members, plus the Director of the Division of Florida Land Sales, Condominiums and Mobile Homes, who serves as an ex officio nonvoting member. The Florida Government-in-the-Sunshine Law provides that all meetings of any board or commission of any agency or authority of any county, municipal corporation or political subdivision at which official acts are to be taken are declared to be public meetings open to the public at all times, and no resolution, rule or formal action shall be considered binding except as taken or made at such meeting. As a statute enacted in the public interest to protect the public from “closed-door” politics, the Sunshine Law must be broadly construed to effect its remedial and protective purposes. The public is entitled to participate in a meaningful way in the decision-making process. Although an ex officio member, the Director is statutorily-designated as a member of the Council, a collegial body. He is involved in decision-making by the Council as a participant in meetings, despite his nonvoting status. Thus, according to the Florida Attorney General, meetings between a voting member of the Council and the Director, who serves as an ex officio nonvoting member, are subject to the provisions of the Sunshine Law. AGO 2005-18 (March 19, 2005).


Does the idea of individual accounts for Social Security sound good? Sure: be the master of your own destiny, the captain of your own ship. But is that ship the Titanic, the Lusitania or the Andrea Doria? As we have been saying for years, when it comes to investment acumen, people are given way too much credit. Thus, the results of a recent study by Cambridge Brand Analytics for JPMorgan Retirement Plan Services, reported in, are no surprise. Only 4% of respondents in this 401(k) quiz could correctly place investments in order from most conservative to most aggressive! (Answer: Stable Value Fund, Bond Fund, Growth Fund, Company Stock). And only 16% were able to identify Stable Value Fund as the most conservative. Just 25% indicated correctly that investing too conservatively was the most common mistake made. However, 47% of respondents knew that they should reallocate their assets when their investment goals or time horizon changes and to keep overall asset allocation balanced appropriately. About 50% correctly answered how much money was needed for a comfortable retirement: 70% of annual income.

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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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