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Cypen & Cypen
APRIL 17, 2008

Stephen H. Cypen, Esq., Editor


Brown and Whitfield were injured in line of duty as officers of the City of Los Angeles Police Department. They both applied for benefits under the city’s disability retirement pension, which contains an offset: disability pension payments are reduced by the amount of any worker’s compensation award the officer receives for the disabling injury. The officers sued the city, alleging violations of (1) Title II of the Americans with Disabilities Act of 1990, (2) California’s Fair Employment and Housing Act and (3) 42 U.S.C. § 1983. The city provides two distinct retirement pension plans for police officers: a service pension and a disability pension. The service pension is based on length of service and age, while the disability pension is available only to officers who have sustained work-related injuries and whom the department cannot reasonably accommodate in employment. The two pensions are also funded differently. Service pensions are funded in part by employee contributions, but disability pensions are funded exclusively by city contributions and investment returns. Officers disabled after on-the-job injuries and eligible for a service pension can choose either one. No offset results if the injured officer elects the service pension. However, if an injured officer chooses the disability pension, the city reduces payments by the amount of any worker’s compensation award the officer receives for the disabling injury. The city adopted this offset to prevent what it characterizes as “double payment” for a disabling work-related injury. The city also believes that the offset is needed to preserve the tax-exempt status of the pension payments. The federal trial judge granted the city’s motion for summary judgment, and the circuit court of appeals affirmed. The court previously held that ADA claims concerning employment discrimination may not be asserted under Title II, which covers government entities, but lie only under Title I, which covers employers. Even under Title I, to prevail, it must be shown that the city’s offset policy discriminates “by reason of” disabilities. The city’s police pensions here are nondiscriminatory. In addition to the disability retirement pension, the city also provides the seniority-based service pension, which is not subject to offset for worker’s compensation and which is clearly distinct from the disability pension program as evidenced by the different funding mechanisms. Officers who qualify for disability pensions may elect to receive service pensions if they are eligible. The limitation on disability pensions does not discriminate “by reason of” disability. The offset does not treat disabled officers differently or create disproportionate burdens because of the nature of their limitations or even their status as individuals with disabilities. It simply limits the type of compensation for work-related injuries that happens to be available only to individuals who are disabled. Most importantly, the limitation merely pertains to the cause of the injury; that is, whether it was sufficiently work-related that the officer receives worker’s compensation. This situation is not discrimination “by reason of” disability. Our readers know that Florida requires a worker’s compensation offset, which, unlike Los Angeles, is applied only in limited circumstances. (See C&C Newsletter for May 12, 2004, Item 1 and C&C Newsletter for September 30, 2004, Item 1). However, in Florida, disability pensions are generally not funded solely by employer contributions. Brown v. City of Los Angeles, Case No. 06-55699 (U.S. 9th Cir., April 10, 2008).


In another California offset-type case, the court was faced with interpretation of the term “disability allowance.” The statute in question says “no provision of this chapter shall be construed to authorize any member, credited with service in more than one entity and who is eligible for a disability allowance, whether service connected or nonservice connected to receive an amount from one county that, when combined with any amount from other counties or the Public Employees’ Retirement System, results in a disability allowance greater than the amount the member would have received had all the member’s service been with only one entity.” In reversing a trial court ruling to the contrary, a California state appellate court, using well-settled principles of statutory interpretation and legislative history, held the term “disability allowance” means all benefits a member receives from reciprocal systems or from the California Public Employees’ Retirement System for retiring concurrently due to disability, regardless of whether those benefits are labeled disability retirement or service retirement. Block had been employed by the Buena Park Fire Department from 1967 until October 1, 1994, last as a fire captain. As an employee of the Buena Park Fire Department, Block was a member of CalPERS. After the Buena Park Fire Department merged with the Orange County Fire Authority on October 1, 1994, Block worked as a fire captain with the Orange County Fire Authority until March 1, 2001. As an employee of the Orange County Fire Authority, Block was a member of the Orange County Employees’ Retirement System. Block applied for and received a service-connected disability retirement from OCERS. Concurrently, he applied for and received service retirement benefits from CalPERS. Because Block retired concurrently from OCERS and CalPERS, he was permitted to use his highest average salary under either retirement system to calculate his benefits under both systems. Block’s pension from CalPERS was over 75% of average monthly compensation. His service-connected disability retirement benefit from OCERS was 50% of said average compensation. Thus, combined, Block’s CalPERS monthly benefit and OCERS monthly benefit would have been almost 125% of final average monthly compensation. Had Block been in one system for his 35.5 years of service, the maximum monthly benefit he could have received would have been 93% of average compensation. OCERS Board appropriately applied a prorata reduction to Block’s retirement benefit, finding that the statute was clearly intended to eliminate the possibility that an employee receiving benefits under the County Employees’ Retirement System could be eligible for more than 100% of salary upon retirement because of successive coverage in more than one public retirement system. Block v. Orange County Employees’ Retirement System, Case No. G038123 (Cal. App. 4th, April 10, 2008).


The Palm Beach Post reports that Florida’s State Board of Administration, which put $1.2 Billion in local government tax collections at risk of being devoured by the U.S. mortgage crisis, has paid more than $28,000 in bonuses this year to employees for their team work and “superior accomplishments.” Records show that 17 employees received awards as high as $2,500 for their work during a two-week, $16 Billion run on withdrawals set off by news in November that the Board had invested state pensions, local taxes and insurance premiums in risky mortgage-backed securities. The interim director of the Board stood by the rewards, saying that the recipients went the extra mile to be responsive to auditors, and worked literally seven days a week for up to 14 hours a day. The director has also approved other bonuses, based on performance of the state pension fund, for 35 other employees, totaling $239,000. He has, however, withheld nearly $50,000 in bonuses from four top executives of the Board. Is this a great country, or what? (Come to think of it, we are really just a bunch of pikers. As part of Bank of America’s takeover of Countrywide Financial Corp., CEO Angelo Mozilo is set to receive $10 Million in stock and President David Sambol will get about $9 Million. Sambol will receive another $28 Million in cash and stock to stay with the combined company. Mozilo also reportedly stood to collect a windfall of $115 Million after the takeover, but facing heavy criticism from Congress, graciously agreed to forfeit $37.5 Million.)


Chrysler’s pension fund is overfunded by $3.1 Billion, according to the Detroit Free Press. When a controlling stake in Chrysler was sold to Cerberus Capital Management last August, the pension fund was overfunded by $2 Billion. That money is being tapped for early-retirement payouts, allowing UAW members to make payments as 401(k) rollovers to defer taxes. Chrysler’s UAW retirees are to receive four lump-sum payments through the life of the 4-year contract.


RetiredPlayers.Org reports that an amendment made to the Bert Bell/Pete Rozelle NFL Player Retirement Plan, effective as of April 1, 2007, reduces the monthly pension benefit of plan participants who elected the qualified joint and survivor annuity option or the life and contingent annuity option. The reduction can be as large as 6.3% of the monthly benefit. A vested player may elect to receive benefits in one of five forms: life only; qualified joint and survivor annuity; life only (with Social Security adjustment); life and contingent annuity; and ten-year certain and life. The amendment effects players who have elected either the qualified joint and survivor annuity or the life and contingent annuity, named their spouses beneficiary and begun drawing a pension after April 1, 2007. The group covers players who have yet to begin drawing a pension, including all active players. The amendment implemented a “pop-up” provision. If the player’s spouse dies before him, the pop-up provision allows him to go back and reclaim his life only pension benefit. Although the pop-up provision seems like an improvement at first glance, when comparing the pre-pop-up provision table with the new pop-up provision table, it is clear that players who draw their pensions after April 1, 2007 receive lower monthly payments and are essentially subsidizing the pop-up provision for all retirees who began drawing their pensions before that date. We would say the league should be penalized for unsportsmanlike conduct.


Somewhat apropos of the above item, Wilber Marshall, former standout linebacker for the Washington Redskins and Chicago Bears, has won his appeal against the NFL retirement plan. Marshall, who at 45 is riddled with degenerative arthritis, and his trustee in bankruptcy sued The Bert Bell/Pete Rozelle NFL Player Retirement Plan and the NFL Player Supplemental Disability Plan under the Employee Retirement Income Security Act. They sought a determination that (1) the Plan’s Retirement Board erred in determining the onset date of Marshall’s total and permanent disability and that (2) he was entitled to retroactive benefits for an additional eight-month period. The Board arbitrarily selected a date of a doctor’s examination as the onset date. The record, however, contained evidence establishing an earlier onset date, and the bankruptcy court entered judgment in favor of Marshall and the trustee. However, the district court reversed. Finding that the bankruptcy court’s ultimate determination was correct, the court of appeals reversed and reinstated the judgment. The Plans have a very tough disability hurdle: one must be totally disabled to the extent that he is substantially prevented from or substantially unable to engage in any occupation or employment for a remuneration or profit. Marshall (or his trustee) should receive approximately $72,000, plus attorneys’ fees and costs against the Plans. Meiburger v. The Bert Bell/Pete Rozelle NFL Player Retirement Plan, Case No. Civ 06-2112 (U.S. 4th Cir., January 14, 2008). Note: The opinion is “unpublished,” which means it is not binding precedent in the circuit. We often wonder how courts determine whether their opinions will be precedential or not.


According to data from United States Department of Labor, Bureau of Labor Statistics, the employer premiums in state and local government averaged $394.48 per month for single coverage medical plans and $783.59 per month for family coverage, in September 2007. The numbers are fairly similar for elementary/secondary schools, junior colleges/colleges/universities and hospitals.


In a similar vein to the above item, according to data from United States Department of Labor, Bureau of Labor Statistics, long-term care insurance was offered to 26% of state and local government workers in September 2007. Such insurance was the quality-of-life benefit most commonly offered to employees of state and local governments. Another quality-of-life benefit, employer assistance for child care, was available to 19% of state and local government workers. Childcare resource and referral services were available to 10% of workers, and on- and off-site childcare, to 9%; employer-provided funds for childcare were available to 4%. Subsidized commuting was available to 10% of state and local government employees, and adoption assistance to 8% of employees.


Four in ten American adults (41%) are holding off on major life decisions either because they are financially strapped or worried about the U.S. economy, according to a Harris Interactive poll conducted for American Institute of Certified Public Accountants. These decisions include home ownership, higher education, marriage, children, medical procedures and retirement. The figure represents an 11 percentage-point increase from last year, when 30% of U.S. adults said they were delaying these life decisions for the same reasons. Of the 41% who said they are postponing life goals, 28% cited a lack of savings as the principal reason, while 18% pointed to concerns about the country’s economic state. General anxiety over the economy is high, with 54% of the entire survey sample expressing a pessimistic outlook over the next year. The study was conducted between March 5, 2008 and March 9, 2008 among more than 1,000 Americans over the age of 18. Results were weighted for education, age by sex, race, household size (number of adults), number of voice/telephone lines in household and 8-point region where necessary to align them with their actual proportions in the population.


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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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