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Cypen & Cypen
NEWSLETTER
for
JUNE 23, 2005

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. A SUMMARY OF MILITARY LEAVE DEVELOPMENTS:

A cover story in the upcoming Benefits & Compensation Digest is entitled “Employees on the Front Lines: A Summary of Military Leave Developments.” On September 20, 2004, the U.S. Department of Labor issued proposed regulations interpreting the uniformed services Employment and Reemployment Rights Act. The proposed regulations were issued to provide clarification to employers on how to comply with USERRA in key areas, but do not represent a significant change from previous interpretations. Employers must be aware of the obligations imposed by USERRA, which the proposed regulations reiterate applies to virtually all employers. USERRA makes it unlawful for any employer to deny employment to employees or potential employees who: are currently members of the uniformed services, apply for membership in the uniformed services, are currently on active duty or have applied or have an obligation to enter active duty. (The proposed regulations do make a distinction between state and federal service while in the National Guard or the Air National Guard. Reservists are only protected by USERRA if serving in a federal service capacity. USERRA does not protect a reservist in the National Guard or Air National Guard if he is called upon to serve in nonfederal service.) The proposed regulations clarify that a returning employee is eligible for reemployment with the employer when each of the following criteria is satisfied:

  • The individual was absent from a position of civilian employment by reason of service in the uniformed services.
  • The individual’s employer was given advance notice of the service (subject to certain exceptions).
  • The individual has five years or less of cumulative service in the uniformed services with respect to a position of employment with a particular employer (subject to certain exceptions).
  • The individual returned to work or applied for reemployment in a timely manner after conclusion of service.
  • The individual’s military service did not terminate because of a disqualifying event or under other than honorable conditions.

The proposed regulations clarify how the provisions of USERRA apply to the following employee compensation and benefits:

  1. Pay. The employee’s rate of pay upon return to work is determined by the escalator principle of the proposed regulations (apparently contrary to a recent federal appellate court decision, see C&C Newsletter for December 9, 2004, Item 4).
  2. Health Plans. An individual who leaves work to perform military service has the right to elect to continue the existing employer-based health plan coverage for a period of time while in the military, and must be reinstated in the employer’s health plan without a waiting period or exclusion.
  3. Pension Plans. The employee is allowed to repay any distributions from a pension plan that he received before becoming reemployed. In case of a defined benefit plan, the amount the employee must repay includes any interest that would have accrued had the monies not been withdrawn. If the amount of the employee’s pension benefit is determined by a service-based formula, the pension benefits should be the same as though the employee had remained continuously during the period of leave. An employee is allowed, but not required, to make up contributions he would have been allowed to make in the plan during the period of military service over a period of three times the length of military leave, but no more than five years. (In Florida, firefighters and police officers are entitled to receive the “lost” time without employee contribution.)

The article also briefly treats the Veterans Benefits Improvement Act of 2004 (see C&C Newsletter for December 23, 2004, Item 1).

2. LAW ENFORCEMENT VEHICLE IS NOT A COMMERCIAL VEHICLE:

A homeowners’ association prohibits parking of commercial vehicles within the community except when parked in a garage with the garage door fully closed. The term “commercial vehicle” is defined under the homeowners’ association rules as all automobiles, trucks and other vehicular equipment including station wagons that bear signs or shall have printed on the sides reference to any commercial undertaking or enterprise. The association advised a police officer that the parking of his marked police cruiser in his driveway may violate the prohibition against commercial vehicles. The law officer is with a municipality other than the one within which the homeowners’ association is located, and has been assigned a marked police cruiser to take home. In a slam-dunk opinion (a page and a half), the Florida Attorney General held that a marked police vehicle does not constitute a vehicle with reference to a commercial undertaking or enterprise. “Commercial” generally means having financial profit as its primary aim. Provision of law enforcement services is an integral and constituent part of government. It is the performance of a governmental duty owed to the general public at large. The assignment of a police vehicle to an officer to drive during off-duty hours may provide quicker response when called to an emergency -- a direct benefit to the public. In addition, presence of a police vehicle in a neighborhood may serve as a deterrent to crime. (AGO 2005-36, June 16, 2005.)

3. QUESTIONS OF TIMELINESS OF REQUEST FOR ARBITRATION TO BE DECIDED BY ARBITRATOR:

Any questions of timeliness as to a request for arbitration are to be decided by the arbitrator, not the trial court. The foregoing is true even if the time requirement for arbitration is labeled a condition precedent. Mere delay creating untimeliness is distinct from active participation that creates a waiver. Combining analyses of the issues of timeliness and waiver is reversible error. Alderman v. City of Jacksonville, Fire and Rescue Division, 30 Fla. L. Weekly D1368 (Fla. 1st DCA, May 31, 2005).

4. WORKERS’ COMP CARRIER ON RISK AT TIME OF LAST INJURIOUS EXPOSURE LIABLE FOR OCCUPATIONAL DISEASE:

A city firefighter suffered a heart attack in 1991, while Florida League of Cities, Inc. provided workers’ compensation coverage. At that time, claimant was, and continues to be, entitled to the statutory presumption of compensability for coronary artery disease provided by Section 112.18(1), Florida Statutes. Nevertheless, claimant had received full salary during his hospitalization and recovery. Preferred Governmental Solutions assumed the workers’ comp risk on October 1, 2000, after which claimant again suffered cardiac complications. The judge of compensation claims ruled that Preferred Governmental Solutions was not liable because claimant had been paid in full, and, therefore, was not disabled. The district court of appeal reversed: under Section 440.151(5), Florida Statutes, the carrier on risk at time of last injurious exposure shall alone be liable when compensation is payable for an occupational disease. In this case, claimant’s performance of his firefighting duties constituted the last injurious exposures before his periods of disablement in 2001 and 2003. “Disability” means incapacity, because of an injury, to earn in the same or any other employment the wages that the employee was receiving at time of injury. Determining whether a person is disabled for purposes of workers’ compensation turns upon the person’s capacity to earn income, not upon the employer’s decision to pay the injured person’s salary while he is incapacitated. There is no dispute that, during the periods in question, claimant was incapable of performing his duties as a firefighter and, thus, did not have actual capacity to earn his wages as a firefighter. City of Mary Esther v. McArtor, 30 Fla. L. Weekly D1413 (Fla. 1st DCA, June 7, 2005).

5. WIFE WHO RECEIVED “FULL OWNERSHIP” OF HER PERCENTAGE OF HUSBAND’S FRS RETIREMENT CAN SEEK MODIFICATION OF QDRO:

This case stems from a Qualified Domestic Relations Order entered in conjunction with a dissolution of marriage involving a husband who was a member of the Florida Retirement System. (Remember, FRS honors -- inappropriately, in our judgment -- QDROs. See Special Supplement to Cypen & Cypen Newsletter, February, 1997.) Prior to final hearing, the parties entered into a settlement agreement by which the wife was awarded “full ownership” of her percentage of the husband’s State of Florida retirement as stated in the QDRO. Subsequently, the wife sought to modify the QDRO, asking the court to conform it to the terms of the settlement agreement, which had described the retirement award in terms of equitable distribution, not alimony. Specifically, she challenged the wording contained in the QDRO that conditioned payment of her share of the husband’s retirement on contingencies that rendered the award more in the nature of alimony than equitable distribution. The trial judge granted summary judgment in favor of the husband, but on the wife’s appeal, the appellate court reversed. Although the wife’s motion was improperly styled as a motion to modify, the allegations directed the trial court’s attention to the issue of whether the QDRO properly carried out the terms of the agreement that was ratified and incorporated into the final judgment. A reading of the agreement led the higher court to conclude that the parties intended the distribution to include “full ownership”; thus, limitations regarding the wife’s marital status or the length of her life are not consistent with such full ownership. Where a party only seeks to receive what is contemplated by a property settlement agreement incorporated into a final dissolution judgment, the relief sought is enforcement rather than modification. Self v. Self, 30 Fla. L. Weekly D1467 (Fla. 2d DCA, June 10, 2005). (One problem may have been that the parties were not represented by attorneys at the time of settlement and dissolution of their marriage. In other words, the Selfs were self-represented. Couldn’t resist.)

6. MERCER RELEASES RESULTS OF ANNUAL REVIEW OF S&P 500 RETIREMENT PROGRAMS:

In reviewing data in its annual study of retirement plans offered by S&P 500 companies, Mercer found some surprising results. Based on investment performance of plan assets, 2004 should have been a good year for pension plans and their sponsors. Investment returns were good for the second year in a row, following the dismal period from 2000-2002. But, curiously, plan costs did not decrease as one might have expected. Some specific findings are

  • At the median, investment return was 18.1% for 2003 and 12.2% for 2004.
  • The median liability return was, respectively, 17.9% and 12.2% for fiscal years 2003 and 2004.
  • Between the end of fiscal years 2002, 2003 and 2004, the median funded status (ratio of plan assets divided by plan liabilities) increased steadily, from 75% to 81% to 83%.
  • For 2004, the median expected return remained at 8.5%.
  • The distribution of assumed rate of future salary decreased slightly from 4.15% in 2002 to 4% in 2003, where it remained at the end of 2004.
  • Average asset allocation for fiscal years 2003-2004 is still fairly traditional, with about 65% of plan assets allocated to equities.

Mercer believes that these data will make some private companies continue to question whether a defined benefit plan is an appropriate retirement vehicle. However, most companies will probably opt to continue their defined benefit plans (or some modification thereof), recognizing the significant value they deliver to the company and its employees. These companies will also recognize that this value comes at a cost that is independent of the investment results of plan assets. Their benefit policy decisions will be based on the “true” economic cost of the program, undistorted by the risk and rewards of bearing investment risk on the plan assets.

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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