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Cypen & Cypen
AUGUST 27, 2009

Stephen H. Cypen, Esq., Editor


Former police officers of the City of St. Petersburg, Florida, who voluntarily terminated their employment prior to vesting in the City’s Police Retirement System brought suit against the City and the Pension Board seeking a determination that they were entitled to a refund of their employee contributions.  The pension plan specifically states that contributions of non-vested members are forfeited upon termination of employment.  Chapter 185, Florida Statutes, was substantially revised in 1999 to provide consistency and uniformity among police pension plans created by municipalities.  Section 185.01, Florida Statutes, provides that the minimum benefits and minimum standards set forth in the chapter may not be diminished by local ordinance.  Section 185.19, Florida Statutes, provides that any police officer leaving service of a municipality before accumulating aggregate time of 10 years toward retirement and before being eligible to retire under provisions of the chapter shall be entitled to a refund of all of his contributions made to the pension plan, without interest, less any benefits paid to him.  The City and Pension Board relied upon Section 185.35, Florida Statutes, for the proposition that refund of employee contributions is a “benefit” and, thus, in accordance with that section, must only be paid as funding is available.  The former employees countered that the refund is a “standard” of the statute and does not fall under Section 185.35, Florida Statutes.  The Florida Division of Retirement supported the City and Pension Board.  However, Patricia Shoemaker, Benefits Administrator, Municipal Police Officers’ & Firefighters’ Retirement Funds, testified through deposition that the subject plan is the only one in the State of Florida that requires officers to forfeit their contributions.  The Court speculated that other municipalities may have not included a provision requiring forfeiture of employee contributions because the clear language of Section 185.19, Florida Statutes, prohibits them from doing so.  In fact, it appears that if the refund were intended to be a benefit, then the language of Section 185.19, Florida Statutes, would have said the refund is to be less any other benefits paid.  “Benefits” under the plan are those payments due to retirement, disability or death.  Although the Court did not decide whether “clearly erroneous” was the proper standard of review, the Court found, in fact, that the Division of Retirement’s interpretation was clearly erroneous.  In granting summary for the former officers, the Court also brushed aside the arguments that refund of monies is an unconstitutional “unfunded mandate” and that the officers waived their right to a refund by knowingly joining a pension plan with a forfeiture provision.  Remia v. City of St. Petersburg Police Pension Board Trustees, Case No. 06-9209 (Fla. 6th Cir., August 13, 2009). 


Raymond T. Edmondson, Jr., Chief Executive Officer of the Florida Public Pension Trustees Association, has written a guest column in the (Jacksonville) Florida Times-Union, entitled “Public Sector Pension Plans Unfairly Portrayed in Media.”  Edmondson says editorial writers and columnists across Florida have lambasted public pension benefits in recent months, declaring that public pension plans are a relic of outdated economic models and provide overly generous benefits.  The standard argument is that taxpayers are footing the bill for lavish retirement benefits for public employees who are living high on the hog at taxpayer expense.  Portraying government employees as "haves" and private sector employees as "have-nots" is a creative, but inaccurate, twist on historical reality.  Claims that guaranteed pension benefits (that is, defined benefit plans) are no longer needed to attract and retain highly qualified professionals to the public sector are bogus.  The American Federation of Teachers 2008 annual survey revealed that, for the ninth consecutive year, public employee compensation lagged the private sector.  Despite a lower average pay scale, public sector jobs still attract some of the best and brightest minds in a wide range of professions, precisely because of security of guaranteed pensions.  And while a one-sided debate rages over cost of these pensions, little attention has been paid to the important economic impact they have.  Expenditures from those benefit payments supported $1.3 Billion in federal, state and local tax revenue in Florida, as well as 62,587 jobs and $9.12 Billion in economic activity.  Most public employees also contribute a percentage of their earnings into the pension plan.  Some pay an additional 7.65 percent of earnings into Social Security and Medicare, for benefits they do not automatically receive.  The average pension benefit from the Florida Retirement System is $1,354 per month, or $16,248 per year -- hardly a lavish income.  Although public pension systems vary from state to state, nationwide 81.6 percent of pension plan payouts came from earnings on investments while employees paid 5.9 percent and taxpayers paid 12.5 percent -- a small price to pay for the myriad public services provided.  For years, private sector employers took full advantage of a booming stock market to pad margins of their profitability by discarding the safety net of guaranteed pension plans for their employees.  Now, one need only look at the spectacular failure of privately funded 401(k)-type defined contribution plans caused by the most recent economic crisis to conclude that we do not need fewer DB plans:  we need more of them. 


In this difficult economy, the 10th Annual Transamerica Retirement Survey found that while nearly half of U.S. employers surveyed had taken cost-cutting measures such as lay-offs and salary freezes, relatively few had reduced or eliminated retirement benefits.  When asked what cost-cutting measures their company had implemented in the past 12 months, only 10% of employers surveyed indicated they reduced or eliminated retirement benefits.  This number pales in comparison to the 39% that had implemented lay-offs or downsizing, 23% that reported frozen salaries and 20% that eliminated bonuses.  The reluctance of employers to reduce retirement benefits is supported by additional findings that most employers (81%) agree that their employees view a 401(k) or similar plan as an important benefit, and that most employers (79%) who offer a 401(k) or similar employee-funded  retirement plan also believe it is important for attracting or retaining employees.  The overall percentage of employers that made any change to their retirement plans in the last 12 months (24%) remains constant with past surveys.  The most notable difference from the previous survey, conducted in late 2007, was a decline in percentage of employers making changes to their investment lineup (9% in 2009 vs. 14% in 2007).  The percentage of employers offering a match fell slightly from 80% to 76%, with the most pronounced decline among large companies with 500 or more employees (78% in 2009 vs. 87% in 2007).  This year’s survey found that fewer than 5% of employers decreased their company  match in the last 12 months compared to 2% who reported doing so in the 2007 survey.  Only 21% of employers surveyed offered a company-funded defined benefit pension plan.  Among them, 85% are not considering any changes to it within the next 12 months and 9% are not sure.  Looking into the future, relatively few employers indicate they are considering  making changes to their retirement plans in the next 12 months.  Eighty-three percent of employers now say they are not planning any changes in the next year, while 11% indicate they are considering some form of change.  The vast majority (95%) of employers that offer a 401(k) or similar plan agreed that they are satisfied with their retirement plan provider.  Finally, the survey also asked employers what they thought should be the top priority for the President and Congress to improve Americans’ retirement security.  The top three most frequently cited responses were (1) educating Americans early in life by implementing financial literacy curriculum in the schools; (2) providing tax credits to workers who make contributions to an IRA or 401(k); and (3) encouraging plans to offer to pay benefits in a form that guarantees retirees a set level of monthly income in retirement, regardless of how long they live.  (We are surprised that the third one, which means having a defined benefit plan, was not listed first.) 

 4.            THE TAX-DEFERRAL TRAP?: 

Novel advice on how to save for retirement:  do not put any more money in your tax-deferred retirement savings!  Such advise is heresy in a world where people hate taxes and it has been taken as gospel that you should defer them if you can.  A commentary in Forbes magazine from William Baldwin admits that for two decades Forbes has been advising people to maximize their tax-deferred accounts, and, at the other end, to minimize withdrawals.  “Let your earnings compound tax free.  Deferral is magic.”  This advice is not necessarily true anymore.  After a year of turmoil in Washington and on Wall Street, it may be time to rethink savings.  You might be better off skipping the 401(k).  Maybe you should pay tax on your salary now and put what's left in a mix of high-yielding municipal bonds and low-yielding growth stocks.  A threshold question is whether your tax-favored account qualifies for an employer match.  If it does, you should probably opt for it.  But if your employer does not chip in or if you are self-employed, then deferral is not a sure winner at all.  Three things have changed in the past year.  One is that the likelihood of rising taxes is much greater now than it was before the recession-crash-election.  The old thinking was that you should defer your bills until you are in a lower bracket at retirement.  Now, a higher tax bracket is more like it.  If you are 45 and prosperous, plan on big federal deficits and higher income taxes when you retire in 2031.  Second change:  If you had money in the stock market a year ago, you are probably sitting on a lifetime of capital loss carryforwards now (at least if you follow the usual advice to take losses and let winners ride).  So, any capital gains you realize in coming years are effectively exempt from tax.  Third change:  Yields on municipal bonds are now competitive with those on U.S. Treasuries.  You can earn almost as much aftertax by owning munis in an undeferred account as Treasuries in a tax-protected one.  Besides, tax-deferred 401(k)s come at a cost.  There are penalties for early withdrawal, and unless your employer cut a good deal with the operator of the plan, higher fees than you would pay on your own if you comparison-shop.  Deferral still might make sense, though, for people planning a retirement move from New York City to Orlando or Los Angeles to Reno; they at least have a fighting chance of enjoying a lower tax rate.  (Plus, in Reno, you have a chance to double your money on one roll of the dice.) 

Lack of a Social Security cost-of-living adjustment next year (see C&C Newsletter for May 7, 2009, Item 1) will have a ripple effect on some Medicare premiums, according to the Dallas Morning News.  Many older adults were quick to lament the prospect of no COLA for 2010, when federal budget experts said earlier this year that beneficiaries probably should not expect one because of low inflation.  But few seniors gave much thought to what lack of an increase in their Social Security benefits will mean for the Medicare Part B premiums they will pay in 2010 for physician services and other outpatient care.  Why would they?  Typically, Social Security COLAs have no bearing on Medicare Part B premiums.  The adjustment is more than enough to cover the higher Medicare premium.  However, what happens when there is no COLA?  Now that July's flat Consumer Price Index seems to confirm earlier projections, more seniors have begun to ask that question.  Three in four Medicare beneficiaries are protected by a "hold-harmless" provision in the law that ensures  their Medicare premiums will not go up any more than their Social Security benefits.  So next year, if they get the same amount from Social Security, they will pay Medicare the same $96.40 per month they do today.  On the other hand, the remaining 25 percent will not be so lucky, including: 

  • Higher-income beneficiaries whose modified adjusted gross income exceeds $85,000 for individuals and $170,000 for couples in 2009. 
  • New enrollees who did not collect Social Security benefits or were not covered by Part B a year earlier. 
  • Low-income individuals whose Medicare Part B premiums are paid by Medicaid. 

Higher premiums will be charged to those beneficiaries, or, in case of low-income individuals, to state Medicaid programs.  The latest estimate for next year's Part B premium is $104.20 per month, though higher-income beneficiaries can expect to pay a surcharge on top of that amount.  One final note for the majority of beneficiaries who may think they have dodged the bullet:  the hold-harmless provision does not apply to Medicare's prescription drug coverage, so some seniors may still get a smaller Social Security payment next year if their drug premiums increase.  (Incidentally, the Social Security Trustees project no cost of living increases for the next two years, something that has not occurred since automatic adjustment were adopted in 1975.  Before 1983, cost of living increases were awarded in July.  Starting in 1984, they have been awarded in January, which moved 1983's adjustment to January 1984.) 


Ever since Maury Hernández emerged from a coma almost two years ago, he has received countless demonstrations of the community's affection and been highly decorated.  Through it all, Hernández, shot in the head while on duty, has yearned for only one thing: to return to the Broward Sheriff's Office.  He was ecstatic when he was scheduled to meet with BSO in early August.  The night before, he filled four notebook pages with new handwritten ideas.  And in the morning, he suited up in his old uniform, which now includes a green honor medal usually presented posthumously to fallen officers.  He came that close.   Now, according to the Miami Herald, Hernández was devastated after the meeting: he says BSO officials told him he would go out on permanent disability retirement.  Hernández, 30, who suffers from motor-function problems on the left side of his body, said “It's the worst betrayal of my life.  Everybody knew I wanted to go back to work.”  Meanwhile, BSO says no final decision has been made on Hernández's case.  Nevertheless, Hernández says disability retirement was the only offer on the table. “‘If they really want the best for me, they should have asked me, knowing that going back to work is what my heart wants.’  Hernández almost died protecting his community, and BSO, for all its proclamations of love and admiration for him, responds by shattering his dream of returning to the work he loves.  Shameful.  It's deviously hypocritical coming after Hernández became Al Lamberti's poster child during his campaign for sheriff and never missed a photo-op next to the hero.”  Oh, and as might be expected, Hernández is not thinking of conceding defeat:  he has hired an attorney.  What a story. 


In the category of “you have got to be kidding,” Green Bay, Wisconsin, has a black police officer for the first time in the 152-year history of its police department.  Solomon Ayres starts the first phase of a 17-week training regime this month.  He says he expects some resistance from both black and white residents, but  believes his life experiences will help defuse difficult situations and make him open to different points of view.  In the understatement of the year, the head of Green Bay’s Police and Fire Commission says hiring a black recruit is a long-awaited step in the right direction.  Census figures show that African-Americans make up about 2.5 percent of Green Bay’s more than 98,000 people.  Its police department has 177 officers, including 15 women, four American Indians or Alaska natives, one Hispanic and one middle linebacker.  (We made the last one up.)  Incidentally, speaking of linebackers, the Green Bay Packers seem to be a lot more progressive than the police department.  Robert Mann was the first African-American player to suit up for the Green Bay Packers during an NFL game.  He attended college at Michigan and played for the Detroit Lions before moving to the Packers in 1950.


According to the National Insurance Crime Bureau, the following are the most popular cars among thieves: 

 1. Honda Civic (1995)
 2. Honda Accord (1991)
 3. Toyota Camry (1989)
 4. Ford F-150 (1997)
 5. Chevrolet C/K 1500 (1994)
 6. Acura Integra (1994)
 7. Dodge Ram pickup (2004)
 8. Nissan Sentra (1994)
 9. Toyota pickup (1988)
10. Toyota Corolla (2007)

Astute readers will notice that only three domestic brands made the list, and all of them were trucks.  One other point:  while types of vehicles stolen remained constant from year to year, overall car theft in the U.S. has declined almost 9%.  Hard to believe some of these stolen cars are more than twenty years old. 


A man who repeated a gag from the Seinfeld show while at work has been fired for se.xual harassment.  John Preston and several of his co-workers at the Brain Injury Association of Iowa (how appropriate) attended an outdoor retreat, during which one female worker said that whenever she or her husband sneezed, the other would respond by saying “You are so good looking.”  For the rest of the retreat, Preston and others adopted the routine, derived from an episode of Seinfeld in which the characters used the phrase “You are so good looking” in place of “God Bless you.”  After the retreat, Preston sent the female worker a series of e-mails in which he reiterated that she was good looking.  Subsequently, Preston stopped the woman in a hallway at work and massaged her shoulders while speaking to her.  Preston was fired for se.xual harassment, and denied unemployment benefits.  (Query:  would Preston have been fired but for the unauthorized touching?)  Incidentally, Iowans must be big on Seinfeld-like harassment.  In at least two other cases, male-on-female harassers were fired for doing well-known Seinfeld routines, including the one about the woman whose name rhymed with part of the female anatomy.  All of these important events were reported on 

Passionate text messages sent to mistresses and lovers can now be used as evidence against you in a divorce.  The Associated Press reports the recent ruling by France’s Supreme Court to accept phone exchanges as legitimate proof of adultery will make it easier for the French to get divorced.  Previously, French husbands and wives often had to wait for years to escape a marriage if they could not prove their spouse was misbehaving or mistreating them.  Text messages have long been accepted as official proof in murder and other criminal trials in France, and the new decision extends such practice into family law.  E-mail also is accepted as evidence in trials.  Getting a divorce can be a lengthy and painful procedure in France.  If the spouses fail to agree to separate by mutual consent, those filing for divorce must prove the spouse was cheating or abusing or mistreating them.  If the judge is not convinced, divorce will be pronounced only after two years of living separately.  Up until 2004, French law required couples to wait as long as six years.  In the United States, phone text messages are accepted in most states as evidence in trials, if they are proved to be authentic.  LOL.  


A recent online survey by The Segal Company of 80 state and local governments found that: 

  • More than 70 percent of the jurisdictions are putting a freeze on hiring.
  • Fifty-six percent are freezing pay.
  • Almost half are reducing their workforce.
  • Almost one-third are freezing pay and instituting a reduction in force.
  • About one quarter are implementing a pay freeze and requiring employees to pay a larger share of benefits.
  • Fifteen percent are implementing a pay freeze, requiring higher benefit contributions and instituting a reduction in force.

Headquartered in New York City, The Segal Company provides benefits and human resources consulting for public sector organizations. 


Here are the final 5 out of 50 lessons on life from the columnist: 

46. Life is too short for long pity parties. Get busy living, or get busy dying.
47. You can get through anything if you stay put in today.
48. A writer writes. If you want to be a writer, write.
49. Read the Psalms. They cover every human emotion.
50. If you don't ask, you don't get.


Do not corner something that you know is meaner than you. 


A backward poet writes inverse. 

15.            QUOTE OF THE WEEK: 

“Just because your voice reaches halfway around the world doesn’t mean you are wiser than when it reached only to the end of the bar.”  Edward R. Murrow

Copyright, 1996-2009, 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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