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Cypen & Cypen
August 22, 2013

Stephen H. Cypen, Esq., Editor

1.   FLORIDA DIVISION OF RETIREMENT RELEASES POLICE AND FIRE PREMIUM TAX MONIES REPORT: Sarah Carr, Benefits Administrator, Municipal Police Officers’ & Firefighters Retirement Funds, Florida Department of Management Services, Division of Retirement, has released the initial distribution requests for the 2012 police and fire premium tax monies. The lists are available at (police) and (fire). Initial monies will be distributed on August 23, 2013.  Please make sure your board has followed up and submitted all necessary information to the Division in order to receive their premium tax monies.  There may be a few plans that submitted information late, which will be included on the next distribution request.  As you will see, the total for police is $62,608,000 and for fire $72,471,000.
2. PENSION 2013 ASSUMPTION AND DISCLOSURE SURVEY:PwC has presented its analysis of the 2012 year-end pension assumptions and disclosures. The analysis covered 100 companies, including Fortune 100 and other large established companies.  Here are some survey highlights: 

  • The 2012 median expected long-term rate of return on pension plan assets decreased 25 basis points since 2011 (from 8.00% to 7.75%) and 55 basis points since 2007 (from 8.30% to 7.75%).  
  • The 2012 median salary scale assumption is unchanged since 2011 (at 4.00%), but has decreased 25 basis points since 2007 (from 4.25% to 4.00%).  
  • Median plan funding levels remained constant from 2011 to 2012, with pension plan assets equal to approximately 77% of the projected benefit obligation at the end of both years. By comparison, in 2007 the median funding percentage was 100%; thus there has been a 23% reduction in funding levels since then.  
  • Median deferred losses for pension also remained constant at 37% of PBO at the end of 2012 and at the end of 2011. In 2007, deferred losses were 12% of PBO.  
  • Median asset allocations remained relatively constant at 46% equity, 37% debt/fixed income, and 15% other, in 2012, compared to 45% equity, 35% debt/fixed income and 6% other in 2011.  However, in 2007 the median values were 64% equity, 29% debt/fixed income and 6% other. 

All in all, not a bad report card. 
3. PUBLIC HAS NO RIGHT TO BE HEARD AT CITY COMMISSION MEETING…AT LEAST UNTIL OCTOBER 1, 2013: Section 286.011, Florida Statutes, the Florida Sunshine Law, provides that
All meetings of any board or commission of any state agency or authority or of any agency or authority of any county, municipal corporation, or political subdivision, except as otherwise provided in the Constitution, 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. The board or commission must provide reasonable notice of all such meetings. 
Herrin filed a complaint for declaratory injunctive relief, alleging that the City of Deltona violated the Sunshine Law by not allowing her to speak at a city commission meeting. The complaint sought to nullify a memorandum of understanding and to enjoin the City from entering into further agreements based on the MOU. Trial court granted the city’s motion for summary judgment, ruling that the public had no right to participate in the City's decisionmaking process, and the appellate court affirmed. Herrin failed to point to any case construing the phrase “open to the public” to grant the public the right to speak. The remedy Herrin sought was more appropriately left to the legislative process or the local public officials.  The phrase “open to the public” most reasonably means that meetings must be properly noticed and reasonably accessible to the public, not that the public has the right to be heard at such meetings. Incidentally, the appellate court reviewed passage of Chapter 2013-227, Laws of Florida, (now codified as Section 286.0114, Florida Statutes), as consistent with and support for its interpretation (see C & C Newsletter Special Supplement for August 15, 2013). As previously reported, the law, which takes effect October 1, 2013, specifically provides that the public be allowed a reasonable opportunity to be heard on a proposition before a board or commission. Under Herrin’s interpretation of the Sunshine Law, section 286.0114 would be superfluous.  Herrin v. City of Deltona, 38 Fla.L.Weekly D1767 (Fla. 5th DCA August 16, 2013).
4. MICHIGAN FINANCIAL EMERGENCY STATUTE MAY HAVE VIOLATED MICHIGAN CONSTITUTION; ACTIONS TAKEN THEREUNDER PRIOR TO VOTER REJECTION OF SAID LEGISLATION MAY BE VOID: Like many Michigan municipalities, the City of Pontiac has experienced significant economic difficulties, especially since the 2008 financial collapse. To address Pontiac’s problems, Governor appointed an emergency manager. Acting under Public Act 4, the then-existing emergency manager law, the emergency manager modified the collective bargaining agreements of Pontiac’s retired employees. He also modified severance benefits, including pension benefits, that Pontiac had given to other retirees not covered by collective bargaining agreements. In a recent case, those retired employees challenged the emergency manager’s power to reduce their retirement benefits. The retired employees say that the emergency manager and the City violated their federal constitutional rights, including rights given under the Contracts Clause, the Due Process Clause and the Bankruptcy Clause. They do not specifically argue that the emergency manager violated Michigan’s Constitution when he changed their pension rights. [Why not?]  But, the Michigan Legislature may have violated the Michigan Constitution when it passed Public Act 4. In addition, Michigan voters rejected Public Act 4 by referendum, and the rejection may have rendered the emergency manager’s actions void. With their complaint, the retired employees filed a motion for temporary restraining order and motion for preliminary injunction to stop certain emergency manager orders from taking effect. The district court denied the TRO, and denied the motion for a preliminary injunction.  On appeal, despite the parties’ inadequate briefing of state-law issues, the circuit court declined to decide the case on federal constitutional grounds. Because state law could provide an alternative basis for deciding this case, the appellate court vacated and remanded to the district court to conduct additional fact-finding, and consider the state-law issues. Specifically, did two-thirds of both houses of the Michigan Legislature vote to make Public Act 4 immediately effective, and, since Michigan voters rejected Public Act 4 in a referendum, did the acts taken under the rejected law have any power? Because similar issues face many Michigan municipalities, the court asked the district court to expedite consideration of the remanded case.  City of Pontiac Retired Employees Association v. Schimmel, Case No. 12-2087 (U.S. 6th Cir. August 9, 2013). (Postscript: we understand the emergency manager has been discharged since this decision.)
5. RETIREES ENTITLED TO RECEIVE HEALTH CARE FOR LIFE WITHOUT CONTRIBUTIONS: M&G POLYMERS USA, LLC.  appealed the permanent injunction granted by the district court in favor of retirees and dependents of retirees from an M&G plant.  The retirees brought a class action against M&G after it announced that the retirees would be required to make health care contributions. The district court found M&G liable for violating both a labor agreement and an employee welfare benefit plan. The district court issued a permanent injunction ordering M&G to reinstate the retirees to the current versions of the benefits plans they were enrolled in until 2007 to receive health care for life without contributions. On appeal, M&G asked the Court to reverse the liability determination and injunction. The retirees requested the Court to reinstate them to the pre-2007 versions of their benefits plan. M&G argued that the district court clearly erred when it found that (1) certain letters requiring retiree contributions to health care costs were not a part of the retirees’ labor agreements; and (2) the retirees’ right to lifetime health care vested at retirement. The retirees cross-appealed, arguing that, although the district court correctly held a right to lifetime contribution-free benefits vested, it erred by restoring them to the current versions of their benefits plan, as opposed to the pre-2007 versions. The appellate court affirmed.  The district court’s presumption that, in absence of extrinsic evidence to the contrary, the collective bargaining agreements indicated an intent to vest lifetime contribution-free benefits was in accordance with prior case law and the CBA language itself promising a full contribution to qualifying employees. To the extent that vesting was presumed, it was not the district court that shifted the burden of proof, but rather the language of the CBA and its linkage of health care benefits to pension benefits that led to the conclusion that retirees had a vested right to health care benefits, and, in absence of evidence to the contrary, a vested right to contribution-free health care benefits. Having reached the conclusion that benefits were vested, it was then reasonable for the district court to conclude that those benefits could not be bargained away without retiree permission. Tackett v. M&G Polymers USA, LLC., Case No. 12-3329/3407 (U.S. 6th Cir. August 12, 2013).
6. FOR FSLA AND FMLA PURPOSES, VOLUNTEER FIREFIGHTERS ARE “EMPLOYEES”: A federal appeals court was presented with the question of whether purportedly volunteer firefighters who receive a substantial hourly wage for responding to calls whenever they choose to do so are “employees” or “volunteers” for purposes of the Fair Labor Standards Act and Family Medical Leave Act. Mendel was employed by The City of Gibraltar, Michigan, as a dispatcher in its police department. After Mendel’s employment was terminated, he sued the City for allegedly violating his rights under FMLA. The City moved for summary judgment, arguing that it did not employ the requisite number of employees for application of the FMLA because its volunteer firefighters were not employees for purposes of FMLA. The district court agreed with the City, and granted its motion for summary judgment. The court of appeals concluded that the Gibraltar firefighters are in fact “employees” within the meaning of the FLSA and FMLA, and reversed. Under FMLA, the terms “employ” and “employee” have the same meaning as given in the definitions of FLSA. The root question is whether the wages paid to the firefighters constitute compensation or merely a nominal fee. If the hourly wages are compensation, then the firefighters are employees under FLSA. Conversely, if the wages are merely a nominal fee, then the firefighters are volunteers expressly excluded from FLSA’s definition of employee. The appellate court held that the hourly wages paid to Gibraltar firefighters are not are not nominal fees, but are compensation under the FLSA. Accordingly, the grant of summary judgment for the city was reversed.  Note that the Secretary of Labor filed an amicus brief in support of Mendel.  Mendel v. City of Gibraltar, Case No. 12-1231 (U.S. 6th Cir. August 15, 2013).
7. WHAT HAS CALPERS EVER DONE FOR CALIFORNIA?:California Public Employees’ Retirement System, the largest U.S. public pension, has detailed how it deployed $20 billion of its assets in its home state, aiCIO said. By the end of fiscal year 2012, CalPERS had invested 8.9% of its entire portfolio within the state, through various channels. By its calculations, these investments supported around 1.5 million jobs in the state -- almost as many as the 1.6 million members of the pension system itself. Some 20.5% of its entire real estate portfolio was invested in the state, making it the highest percentage allocation of any one asset class made to the region. CalPERS says it will continue to pursue California-based investment opportunities grounded in the historic strength of the state economy, seeking attractive risk-adjusted financial returns. 
8. FLORIDA DIVISION OF RETIREMENT ANNUAL POLICE OFFICERS’ AND FIREFIGHTERS’ PENSION TRUSTEES’ FALL CONFERENCE: The 43rd Annual Police Officers' and Firefighters' Pension Trustees Fall Conference will take place on October 22-24, 2013. You may access information and updates about the Fall Conference, including area maps, a copy of the program when completed, and links to register with at the Doubletree by Hilton Hotel Orlando at Seaworld. Please continue to check the FRS website for updates regarding the program at All police officer and firefighter plan participants, board of trustee members, plan sponsors, and anyone interested in the administration and operation of the Chapters 175 and 185 pension plans should take advantage of this unique, insightful and informative program.
9.  RETIRED HEALTH MESSAGE: I started out with nothing, and I still have most of it.
10.  PONDERISMS: Whenever I feel blue, I start breathing again.
11. TODAY IN HISTORY: In 1975, Assassination attempt on President Gerald Ford.
12. KEEP THOSE CARDS AND LETTERS COMING: Several readers regularly supply us with suggestions or tips for newsletter items. Please feel free to send us or point us to matters you think would be of interest to our readers.  Subject to editorial discretion, we may print them.  Rest assured that we will not publish any names as referring sources. 
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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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