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Miami

Cypen & Cypen
NEWSLETTER
for
October 3, 2013

Stephen H. Cypen, Esq., Editor

A FEW OF OUR FAVORITES WORTH REPEATING…

 
1. A LITTLE REFRESHER COURSE ON QDROS AND GOVERNMENTAL PLANS:  Hardly a week goes by now without a governmental pension plan being served with a Qualified Domestic Relations Order (QDRO).  As a rule, the QDRO purports to direct payment of a portion of the retiree's pension benefits to his or her spouse as part of a plan for equitable distribution of the parties' marital assets.  What to do? 

Simply put, do nothing -- other than advise the party for whose benefit the QDRO was obtained (or the attorney who obtained it) that the QDRO cannot be enforced against a governmental plan which contains an anti-alienation clause.]  Believe it or not, this whole rush-to-QDRO began because of misinterpretation of Federal law, which by its own terms, does not apply to governmental plans.  In 1974, Congress passed the Employee Retirement Income Security Act (ERISA), to protect the interests of participants in employee benefit plans.  ERISA expressly excludes from coverage governmental plans (including plans established or maintained by a political subdivision of a State).  Originally, ERISA required that all pension plans to which it applied provide that benefits could not be assigned or alienated in any circumstances.  However, by adoption of the Retirement Equity Act of 1984 (REA), Congress amended ERISA to permit assignment or alienation of benefits when (and only when) a QDRO has been entered.  So far so good. 

Maybe not, because after 1984, many people (including seasoned attorneys) argued that REA authorized QDROs as to governmental plans.  Clearly, there was a wholesale misreading of Federal law; Congress had, for the first time, merely permitted QDROs to be enforced against ERISA (private) plans. 

Another argument was advanced in favor of enforcement of QDROs against governmental plans in Florida:  that, irrespective of Federal law, re-existing anti-alienation clauses have been impliedly repealed by subsequent adoption of general law.[2]  
First, there is Section 222.21, Florida Statutes, adopted in 1987.  In relevant part the statute merely provides that, while sums payable to a debtor from an ERISA-qualified plan are generally exempt from creditors' claims, they are not exempt from the claims of an alternate payee[3]  under a QDRO. Nothing in Section 222.21, Florida Statutes, is so irreconcilable with an anti-alienation clause as to manifest a clear legislative intent to repeal same.[4]

Second, there is Section 61.075, Florida Statutes. But the statute merely provides that all interest in retirement or pension plans (whether vested or not) which accrue during the marriage are marital assets subject to equitable distribution.  The statute says nothing about whether a court may require that payment of any portion of such an interest equitably distributed to the non-participant spouse be made by the retirement or pension plan to the non-participant spouse. Again, the statute does not manifest a clear legislative intent to repeal an anti-alienation clause.[5]  

Finally, there is Section 61.1301, Florida Statutes, which addresses the use of Income Deduction Orders as a means of collecting sums due on account of orders entered in domestic relations litigation. At first blush, one might think that an Income Deduction Order could serve as a vehicle for enforcement of a QDRO.[6]  

However, Section 61.1301, Florida Statutes, is expressly limited in its application to collection of alimony and child support.  On the other hand, a QDRO is not for collection of either alimony or child support, but, rather, for the purpose of effectuating a plan for equitable distribution of marital assets. Thus, although a so-called QDRO might be enforceable as an Income Deduction Order under Section 61.1301, Florida Statutes, if it is for collection of either alimony or child support, it cannot be used to force direct payment to another of a retiree's pension benefits in order to achieve an equitable distribution of the parties' marital assets.

We have been berated by attorneys who represent spouses and who have either negotiated a marital settlement agreement, or tried a dissolution of marriage case, resulting in an unenforceable QDRO.  Regardless, we have consistently been advising our governmental pension clients not to honor QDROs which seek to force direct payment in order to achieve equitable distribution. There is clear Florida appellate authority to sustain this position.  In an extremely well reasoned opinion, the First District Court of Appeal discussed all of the above arguments and correctly rejected them, holding that a trial court lacked the power to order a governmental pension plan to pay to one former spouse a portion of the other former spouse's retirement pension benefits as part of a plan for equitable distribution of marital assets.  Board of Pension Trustees of the City General Employees Pension Plan, City of Jacksonville, Florida, Pension Plan Administrator v. Vizcaino, 635 So.2d 1012 (Fla. 1st DCA 1994).  TheVizcaino decision has been followed or cited with approval by the Second, Third and Fifth District Courts of Appeal.  See Board of Trustees of the Orlando Police Pension Plan v. Langford, 833 So.2d 230 (Fla. 5th DCA 2002); Edwards v. Edwards, 819 So.2d 837 (Fla. 2d DCA 2002); Motil v. Motil, 771 So. 2d 1251 (Fla. 2d DCA 2000); andSilversmith v. Silversmith, 797 So.2d 653 (Fla. 3d DCA 2001).

     [1]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 State law:  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. 
     [2]In Florida, a Special Act of the Legislature may be impliedly repealed by a subsequent General Act when the latter either is a complete revision of the entire subject or so irreconcilable with the Special Act as to manifest a clear legislative intent to do so.  Firefighter and Police Officer Plans can be created by Special Act of the Legislature or by ordinance.  Since an ordinance is inferior to any Act of the Legislature, those plans created by ordinance may only be protected by ''175.241 and 185.25, Florida Statutes, as referred to in note 1 above. 
     [3]Under REA, an "alternate payee" is the one for whose benefit a QDRO is entered and to whom direct payment is to be made. 
     [4]The Florida Retirement System (FRS) contains an anti-alienation clause virtually identical to the ones in Chapters 175 and 185, Florida Statutes.  See Section 121.131, Florida Statutes.  Nevertheless, the author has been advised that FRS routinely honors QDROs, under the theory that it is easier to pay than to fight.  In fact, we believe that the Florida Legislature adopted Section 222.21, Florida Statutes, at the behest of FRS in order to provide FRS with something to hang its hat on. 
     [5]Section 61.076, Florida Statutes, reiterates that all interest in retirement or pension plans (whether vested or not) which accrue during the marriage are marital assets subject to equitable distribution.  The statute then sets forth the procedure to be followed by the court when a military pension is involved.
     [6]Remember that Section 61.1301, Florida Statutes, was held by the Supreme Court of Florida to be irreconcilable with, and, therefore, to repeal, an anti-alienation clause contained in a municipal police officers' and firefighters' pension plan created by Special Act of the Legislature.  Alvarez v. Board of Trustees, 580 So.2d 151 (Fla. 1991). 
 
 2.  HOW RARE ARE MUNICIPAL BANKRUPTCIES, ANYWAY:? With all the talk surrounding municipal bankruptcy in recent years, governing.com says some might view Chapter 9 as an increasingly common path for cash-strapped local governments.  A few high-profile cases of cities seeking bankruptcy protection have garnered national attention, with some media reports suggesting an impeding wave of Chapter 9 filings. In actuality, though, Chapter 9 filings have been few and far between. In all, only 13 localities have sought bankruptcy protection since 2008.  A number of sanitation authorities and other lesser-known special districts also filed, but the totals remain low, given the number of municipalities across the country. In order to determine how rare the event is, it is necessary to determine how many local governments are eligible to file. The Census Bureau classifies local governments as either “general purpose,” including cities and counties, or special-purpose, which comprise school districts, water authorities and other narrowly-defined municipalities. For the purpose of this analysis, the authors looked at general-purpose local governments since laws pertaining to special districts are less uniform.  Federal law permits all local governments to file for Chapter 9, but only if a municipality’s state government allows for it.  (Florida is in the category of nine states that authorize filing upon conditions met and further action of state, officials another entity.)  The 2012 Census of Governments counted 38,917 general-purpose governments throughout the country, 21,683 of which were located in states with laws permitting Chapter 9 filings. Considering the handful that filed in the last five years, only one of every 1,700 eligible localities filed for bankruptcy protection.  If filings later dismissed are excluded, then only one of every 2,700 localities successfully filed.  To put these numbers in perspective, there were 390,000 commercial bankruptcy filings over the same time period.   Cities exploring bankruptcy protection can be dissuaded by a litany of potentially negative consequences accompanying a Chapter 9 filing. For one, credit ratings would likely take a hit. Second, municipal bankruptcy is a lengthy and costly process, with long-term implications impeding an area's future economic growth. Short-term benefits of bankruptcy protection, such as temporary cash flow relief, typically dissipate within a few years.  Filing a Chapter 9 petition -- no matter the reason -- sets in motion a process with damaging consequences to a municipality's fiscal and economic prospects.  Most would not argue that quite a few local governments are struggling to balance budgets and pay off debts. But, if recent years are any indication, very few of them will end up pursuing bankruptcy protection as a last resort.
 
3.  ALL PRO-QUARTERBACK AND NFL GREAT ARCHIE MANNING TO SPEAK AT "THE NUTS AND BOLTS OF SHAREHOLDER LITIGATION:" All Pro-Quarterback and NFL Great Archie Manning will be speaking at the educational seminar, entitled "The Nuts and Bolts of Shareholder Litigation." The seminar has been developed specifically for pension funds and other institutional investors. It will take place on October 16, 2013 at the Westin Diplomat Hotel in Hollywood, Florida. The seminar is free of charge and includes lunch and post-seminar cocktails and snacks. An application for CLE accreditation in Florida is currently pending. The invitation and registration form is available at the following linkhttp://goo.gl/Y3VPJ7. The seminar is sponsored by the law firm of Bernstein Litowitz Berger & Grossmann LLP ("BLB&G").
 
4.  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 www.myflorida.com/frs/mpf. 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.
 
5. JEWISH WISDOMS: It is so simple to be wise. Just think of something stupid to say and then do not say it. Sam Levenson

6. DID I READ THAT SIGN CORRECTLY? Notice in health food shop window:  CLOSED DUE TO ILLNESS.

7. TODAY IN HISTORY: In 1863, Lincoln designates the last Thursday in November as Thanksgiving Day. 
8. 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.

9. PLEASE SHARE OUR NEWSLETTER: Our newsletter readership is not  limited  to  the   number  of  people  who  choose  to  enter  a  free subscription. Many pension board administrators provide hard copies in their   meeting   agenda.   Other   administrators   forward   the   newsletter electronically to trustees. In any event, please tell those you feel may be interested that they can subscribe to their own free copy of the newsletter at http://www.cypen.com/subscribe.htm.

 

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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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