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Cypen & Cypen
NEWSLETTER
for
APRIL 6, 2006

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. FLORIDA APPELLATE COURT APPLIES QDRO TO FRS DROP ACCOUNT:

Almost ten years ago, we said that a Qualified Domestic Relations Order cannot be enforced against a governmental plan that contains an anti-alienation clause (see Special Supplement to C&C Newsletter dated February, 1997). Basically, an anti-alienation clause provides that pensions are not assignable or subject to any legal process. Most public plans, firefighter and police officer included, contain such clauses. In addition, anti-alienation provisions can be found in Section 175.241, Florida Statutes (firefighters) and Section 185.25, Florida Statutes (police officers). These clauses are applicable to all funds created under said chapters (“local law” as well as “chapter”), regardless of whether or not the plan itself contains an anti-alienation clause. The Florida Retirement System contains an anti-alienation clause virtually identical to the ones in Chapters 175 and 185, Florida Statutes. However, FRS routinely honors QDROs, which is not our problem. In the subject case, the former wife appealed a QDRO that denied her any share in her former husband’s Deferred Retirement Option Program. The parties had entered into a property settlement agreement that granted each party a one-half interest in the other party’s pension plan accruing during the marriage. Subsequently, the Florida Retirement System was amended to include a DROP. See Section 121.091, Florida Statutes. (Under FRS’s DROP, benefits accrue interest at 6.5% during the maximum 5-year term and a 3% cost-of-living adjustment is also applied.) Here, the ex-husband’s DROP had accumulated $269,000. The trial court denied the ex-wife’s request to participate in her former spouse’s DROP benefits, holding that she was not entitled to receive her share of his pension until he terminated the DROP and began receiving his monthly benefit. In reversing, Florida District Court of Appeal distinguished an earlier 2004 decision and relied upon one from 2000, which held that once a judgment of dissolution is entered, a former wife’s share of her former husband’s DROP becomes her individual property. Russell v. Russell, 31 Fla. L. Weekly D849 (Fla. 4th DCA, March 22, 2006). Editorial Note: If one assumes that a QDRO is appropriate in this case -- which we do not -- the decision is logical and follows.

2. U.S. NEWS RANKS LAW SCHOOLS:

Did you ever wonder where your lawyer went to law school. Well, U.S. News & World Report has issued its ranking of the top 100 law schools for 2007. Surprisingly, Harvard Law School was bumped to third place, an unfamiliar spot for the school that usually duels for number one with Yale Law School. Here are the top ten:

1. Yale Law School

2. Stanford Law School

3. Harvard Law School

4. Columbia Law School

5. New York University School of Law

6. University of Chicago Law School
7. University of Pennsylvania Law School

8. University of California, Berkeley School of Law

9. University of Michigan Law School

10. University of Virginia School of Law

Which reminds us of an old joke. What do you call someone who graduates first in his law class? “Professor.” What do you call someone who graduates last in his law school class? “Your Honor.” Note to any judge who reads this item: It’s just a joke.

3. STATES’ TAX REVENUES JUMP:

According to Bloomberg News, U.S. states collected 9.7% more in taxes in 2005 than 2004, as individual income levels and sales rose. State tax collections rose to $649 Billion in fiscal 2005, $57.5 Billion more than a year earlier. Taxes collected from individual income rose 13% to $221 Billion, while those in general sales increased 7.2% to $212 Billion. The two figures make up more than two-thirds of all state collections and do not include local government taxes. On average, each state collected $2,192 per person, up 8.7%. Per capita taxes were highest in Vermont at $3,600, followed by Hawaii and Wyoming. The lowest was South Dakota at $1,430.

4. STEEL MAKER’S PENSION PLAN WILL CONTINUE:

The New York Times reports that, in a rare victory for the federal pension insurance program, the government says it will stop going after the assets of industrialist Ira L. Rennert because it has been assured that Mr. Rennert will keep a disputed steelworkers’ pension plan going. That means Mr. Rennert’s $185 Million estate in the Hamptons is safe (see C&C Newsletter for February 9, 2006, Item 1). Rennert’s company, Renco Group Inc., has owned the pension plan’s sponsor, WCI Steel Inc., since 1988. The steel company, based in Warren, Ohio, went bankrupt in 2003, and in the jockeying over who would bring it out of bankruptcy, the pension fund seemed at risk of being abandoned. The reorganization plan indicated the pension fund could be left in an empty shell because either Mr. Rennert or the Pension Benefit Guaranty Corporation would eventually come to its rescue. But the government, fearing it was about to get stuck for tens of millions of dollars in unfunded obligations, took the first steps of foreclosing on Mr. Rennert’s holdings, in an effort to make him keep the plan and pay for the pensions. This week, PBGC said it was dropping those proceedings because it is now satisfied that Renco Group Inc. will continue to administer the pension plan and put money into it, even after Renco no longer owns WCI Steel Inc. Wow -- it looks like the government may have actually won one for a change.

5. ELECTRONIC DISCUSSION BOARD MAY VIOLATE FLORIDA SUNSHINE LAW:

In an Informal Opinion dated March 23, 2006, the Florida Attorney General discussed the Sunshine Law and propriety of an electronic discussion board. A municipality contacted the Attorney General’s Office regarding use of an electronic discussion board for conducting public meetings and the implications of the Government-in-the-Sunshine Law on such proposal. The electronic discussion board would be maintained by the municipality for the sole purpose of discussing matters that will ultimately come before a voting body of the municipality and implements the following “protections:”

1. Each topic of discussion to be posted by the municipality on the internet board is noticed in the same manner as a public meeting, pursuant to Section 286.011, Florida Statutes.

2. Each topic of discussion on the electronic discussion board is open for discussion for a period of one month.

3. The municipality makes computers with access to the discussion board available within its jurisdiction to the public.

4. The municipality allows public participation on the electronic discussion board to the same degree as all voting members of the municipal body.

5. The full text all of discussions posted on the discussion board is archived as a public record and available upon request.

6. Any vote upon the issues discussed on the electronic discussion board will take place at a publicly noticed “live” meeting of the municipal body.

Adhering to a 2002 AGO, the Attorney General’s Office continues to have reservations about any proposal for a public meeting that places the burden on the public constantly to monitor the site in order to participate meaningfully in the discussion and that extends this burden over the course of days, weeks or months. In light of such concerns, the Attorney General’s Office suggests that use of an electronic bulletin board by the municipality to discuss matters that may foreseeably come before the municipality’s commission over an extended period of time would not comply with the spirit or letter of Florida’s Government-in-the-Sunshine Law.

6. 2005 PUBLIC PENSION FUNDING RATIOS VIRTUALLY UNCHANGED FROM 2004:

A Plansponsor.com review of the 2006 Wilshire Report on State Retirement Systems: Funding Levels and Asset Allocation says that the ratio of pension assets to liabilities in 2005 was 87% -- up from 2004's 86%. The report covers 125 pension funds. For the 58 state retirement systems that reported actuarial data for 2005, pension assets and liabilities were $612.8 Billion and $762.4 Billion, respectively The funding ratio for these 58 state pension plans was 80% in 2005, up from 79% the year before. Meanwhile, for those same 58 systems that reported actuarial data for 2005, pension assets grew 8.3%, or $47.1 Billion, from $565.7 Billion to $612.8 Billion, while liabilities grew 6.3%, or $45.2 Billion, from $717.2 Billion to $762.4 Billion. The slightly faster pace in rising asset values compared with the continued steady growth in liabilities for the 58 state pension plans led to a modest reduction in aggregate shortfall, as the $151.5 Billion shortfall in 2004 narrowed to $149.6 Billion.

7. WEST VIRGINIA TEACHERS SCRAP DC PLAN FOR DB PLAN:

The National Conference on Public Employee Retirement Systems reports that West Virginia Teachers have voted to abandon their defined contribution accounts and return to the secure retirement provided by a defined benefit plan. The vote was almost 2/3 in favor of the DB plan. In 1990, the State Legislature, in a move designed to “save money,” decided to eliminate the DB plan for new teachers and place them in a DC arrangement, with individual accounts. The state soon found that this move neither saved money nor provided teachers with adequate retirement income. Recruitment of teachers and loss of experienced teachers to surrounding states was a concern. So in 1995 the State Legislature abolished the DC plans for new hires and placed them under the DB plan. The change from DC to DB saved the state money and provided a better plan and guaranteed retirement income for the state’s teachers. However, some teachers were left in limbo. They were given the choice as a group: either stay in the DC plan or return to the DB plan. The Legislature set two thresholds for the vote. A majority of teachers had to vote and then a majority of those voting had to approve returning to the DB plan. Both conditions were easily met.

8. QUOTE OF THE WEEK:

“For every problems there is an answer that is clear, simple, and wrong.” H. L. Mencken

Copyright, 1996-2006, all rights reserved.

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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