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Cypen & Cypen
NEWSLETTER
for
DECEMBER 13, 2007

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. FLORIDA PUBLIC RECORDS ACT AMENDMENT REGARDING SOCIAL SECURITY NUMBERS:

During the 2007 legislative session, the Florida Legislature passed, and Governor Crist signed, an amendment to the Public Records Act found in Chapter 119, Florida Statutes. The amendment prohibits a public agency from collecting social security numbers unless the agency states in writing the purpose for its collection of social security numbers. The amendment further provides that the agency’s collection of social security numbers must be authorized by a specific law or imperative for the performance of entity’s duties and responsibilities as prescribed by law. An agency is prohibited from using social security numbers for any purpose other than the specific purpose set forth in the agency’s written statement. As a result of this new legislation, we suggest that the Board adopt the following policy statement and include it on all appropriate applications, forms, and documents requiring social security numbers:

SOCIAL SECURITY NUMBER COLLECTION DISCLOSURE STATEMENT

Pursuant to Section 119.071(5)(a)2., Florida Statutes, your social security number is requested for the purpose of determining eligibility for retirement benefits as a plan member, retiree or beneficiary; the processing of retirement benefits; verification of retirement benefits; income reporting; or other notice or disclosures related to retirement benefits. Your social security number will be used solely for one or more of these purposes.

To the extent that the Board is required to collect social security numbers pursuant to documents and forms prescribed by outside agencies, a copy of the above written disclosure statement should be provided to any individual completing a form that requests the individual’s social security number.

Finally, the amendment to Chapter 119 requires agencies to certify their compliance with the amendment in writing to both the President of the Senate and the Speaker of the House by no later than January 31, 2008. Accordingly, the above statement must be placed on all Board-promulgated forms prior to that date and correspondence should be sent to the President of the Senate and the Speaker of the House, confirming and certifying the Board’s compliance with the new statutory requirements. A sample letter follows for the convenience of readers.

SAMPLE LETTER

The Honorable Ken Pruitt, President
Florida Senate
Room 312, Senate Office Building
404 South Monroe Street
Tallahassee, FL 32399-1100
The Honorable Marco Rubio, Speaker
Florida House of Representatives
420 The Capitol
402 South Monroe Street
Tallahassee, FL 32399-1300

RE: Certificate of Compliance with Section 119.071(5)(a)4.a., Florida
Statutes – Collection of Social Security Numbers

Dear Senator Pruitt and Representative Rubio:

Pursuant to the requirements of Section 119.071(5)(a)4.b., Florida Statutes, the Board of Trustees of the ________________________________________________ certifies its compliance with Section 119.071(5)(a)4.a., Florida Statutes, with respect to the collection of social security numbers.

Sincerely,

2. WHY ARE COMPANIES FREEZING THEIR PENSION PLANS?:

Defined pension plans in the private sector are on a decline, according to a Working Paper from Center for Retirement Research at Boston College. The proportion of the workforce covered by these plans has dropped by more than half (from more than 40% to less than 20%) since 1980. The early 21st century produced an uptick in the pace of decline driven by the financially devastating impact of the “perfect storm” of plummeting stock prices and low interest rates, legislation that will require underfunded plans to increase their contributions and accounting changes that will force fluctuations in pension finance onto the earnings statement and will likely eliminate smoothing available under the current rules. These changes could introduce significant additional volatility in reported earnings. Such volatility is not acceptable to corporate managers and may, in large part, explain why large healthy companies have taken steps to end their defined benefit plans. The fact that these steps have taken the form of freezes rather than terminations simply reflects the fact that with underfunding caused by the perfect storm and very low interest rates, firms could not afford to pay off all their liabilities immediately. Freezing their plans provided the option to terminate gradually. In an attempt to identify factors that led specific companies to freeze their plans, the paper explores the relationship between probability that a plan was frozen and characteristics of the plan, the firm and the industry. The results imply that plans where credit balances are high relative to income, legacy costs are substantial and funding ratios are low have a higher probability of being frozen. The finding makes sense in that plans with these characteristics are likely to have the most impact on future earnings under the Financial Accounting Standards Board’s expected reporting requirements. It is reasonable to expect more plans with these characteristics to freeze in the future.

3. THE 2007 RISKS AND PROCESS OF RETIREMENT SURVEY:

The Society of Actuaries has released a report presenting results of a telephone study among Americans aged 45 to 80 conducted in its behalf by Matthew Greenwald & Associates, Inc. and the Employee Benefit Research Institute. The purpose of the study was to evaluate Americans’ awareness of potential financial risks in retirement, how this awareness impacts management of their finances with respect to retirement and how Americans are managing the process of leaving the workforce. Respondents were asked about their age at retirement, the retirement process, their needs at different stages of retirement, the expectations about changes in income over time, their concern about possible financial risks and their strategies for managing retirement finances. Some interesting factoids:

  • Of the various risks examined, both retirees and pre-retirees are most likely to express concern about health care needs and costs (together with inflation).
  • Most retirees and pre-retirees purchase products to help ensure they can pay for adequate health care.
  • In contrast, retirees and pre-retirees are more likely to try to save for long-term care costs than to purchase insurance against this type of risk.
  • Two-thirds of retirees think inflation will impact their retirement needs, but an even larger share of pre-retirees express this view.
  • More than half of pre-retirees also worry about possibility of depleting all their savings and being able to maintain a reasonable standard of living for the rest of their lives.
  • Retirees and pre-retirees are most likely to try to protect themselves against financial risks by increasing savings, decreasing debt and cutting back on spending.
  • Comparatively few ensure they have guaranteed income for life by purchasing an annuity or choosing the lifetime income option from an employer retirement plan.
  • Many retirees and pre-retirees may not be aware of how their income will change during retirement. Six in ten retirees and approximately one-third of pre-retirees state their income from Social Security will increase over time. At the same time, four in ten retirees and three in ten pre-retirees with a defined benefit plan expect their pension income to increase over time, despite the fact that inflation-adjusted pensions from employers are increasingly rare.
  • While similar proportions of retirees and pre-retirees received or expect to receive income or money from defined benefit plans, significantly more pre-retirees receive or expect to receive money from an employer’s retirement savings plan, such as a 401(k).
  • Roughly three-quarters of those with proceeds from a defined contribution plan say they have invested or saved (or plan to do so) it in funds they can manage and withdraw as they like.
  • Pre-retirees are more likely to feel that a three-year delay in retirement would make their retirement finances a lot more or a little more secure.
  • The most common reasons retirees and pre-retirees feel a delay in retirement would increase their financial security in retirement relate to increasing sources of income, rather than decreasing expenses.

The study included retirees and pre-retirees at all income levels. No effort was made to oversample individuals at high asset levels. The margin of error is plus or minus five percentage points. All one hundred twenty six pages are available at http://www.soa.org/files/pdf/research-2007-final-retire-risk.pdf.

4. EMPLOYEES NOT TRAINED AS FIREFIGHTERS UNDER FLORIDA LAW NOT EMPLOYEES “IN FIRE PROTECTION ACTIVITIES”:

Employees in city fire rescue division, employed as paramedics or emergency medical technicians, brought action against the City of Plantation, Florida, seeking to impose liability upon the city for overtime compensation pursuant to Fair Labor Standards Act. The City of Plantation Fire Department is made up of five divisions: suppression, rescue, fire prevention, maintenance and support. Plaintiffs were employed as paramedics or emergency medical technicians in the rescue division, which is a full-time advanced life support rescue service. The parties filed cross motions for summary judgment. On a matter of first impression, a United States District Court Judge for the Southern District of Florida held that:

(1) meaning of FLSA term “trained in fire suppression” was substantially the same as meaning given in Department of Labor regulations;
(2) employees who had not been trained as firefighters pursuant to Florida law were not employees “in fire protection activities;”

(3) employees who had been trained as firefighters, but who did not have legal authority to enter a structure fire were not employees “in fire protection activities;”

(4) employees were not an integral part of fire department’s fire protection activities; and

(5) city lacked good faith and reasonable grounds for believing it was not in violation of FLSA.

Thus, employees’ motion for summary judgment was granted and the city’s motion for summary judgment was denied. Diaz v. City of Plantation, Florida, Case No. 05-60757 (SD Fla., September 18, 2006). (Despite its date over one year ago, the decision was apparently just made public.)

5. REDUCTION IN WORKERS’ COMP BENEFITS BASED ON AGE IS DISCRIMINATORY:

While working as a receptionist, Vaira hurt her back. Her employer was covered by Workers’ Compensation. Vaira was 73 years old at time of the injury. A medical examiner concluded that Vaira had suffered a compression fracture, which had become permanent. He further concluded that Vaira’s age and preexisting osteoporosis of her spinal column contributed to her disability. The Workers’ Compensation Judge apportioned a percentage of Vaira’s disability to her age and preexisting osteoporosis, thus reducing her benefits. The Workers’ Compensation Appeals Board upheld the award. On Vaira’s petition for writ of review, a California Court of Appeal granted the petition and annulled the order of the WCAB. The court concluded that any apportionment to age, per se, runs afoul of state antidiscrimination law. Vaira v. Workers’ Compensation Appeals Board, Case No. C054948 (Cal. 3d App. Dist., December 3, 2007). (Note, the opinion indicates it is “not to be published,” which means, under California rules of court, courts and parties are prohibited from citing or relying on the opinion.)

6. HOUSTON PENSION BOARD DECISIONS NOT SUBJECT TO JUDICIAL REVIEW:

Police officers and former police officers sought declaratory judgment against Houston Municipal Employees Pension System as to whether or not they were entitled to certain credited service. The statute creating HMEPS provides that “the determination of any fact by the pension board and the pension board’s interpretation of this Act are final and binding on any interested party, including members, deferred participants, retirees, eligible survivors, beneficiaries, and the city.” On petition for review from the Court of Appeals, the Supreme Court of Texas has held the words “final and binding,” when used to describe an administrative decision, preclude judicial review. Because the legislature has not authorized the trial court to grant the relief sought, the trial court lacks jurisdiction over the case, and should have dismissed the original complaint for lack of jurisdiction. Houston Municipal Employees Pension System v. Ferrell, Case No. 05-0587 (Tex., November 30, 2007). Of course, in Florida, we have Section 112.66(5), Florida Statutes, which generally provides for review of pension board decisions.

7. IRS ANNOUNCES 2008 STANDARD MILEAGE RATES:

Internal Revenue Service has issued 2008 optional standard mileage rates used to calculate deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning January 1, 2008, the standard mileage rates for use of a car (including van, pickup or panel truck) will be:

  • 50.5 cents per mile for business miles driven;
  • 19 cents per mile driven for medical or moving purposes; and
  • 14 cents per mile driven in service of charitable organizations.

The new rate for business miles compares to a rate of 48.5 cents per mile for 2007. The new rate for medical and moving purposes compares to 20 cents in 2007 (huh?). The rate for miles driven in service of charitable organizations remains the same. The first two rates are based on an annual study by Runzheimer International, an independent contractor, of fixed and variable costs of operating an automobile. The rate for charitable miles is set by law. IR-2007-192 (November 27, 2007).

8. IRS INTEREST RATES DROP FOR FIRST QUARTER OF 2008:

Internal Revenue Service has announced that the interest rate for the calendar quarter beginning January 1, 2008, will drop by one percentage point. The new rates will be

  • seven percent for overpayments (six percent in case of a corporation);
  • seven percent for underpayments;
  • nine percent for large corporate underpayments; and
  • four and one-half percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis, computed from the federal short-term rate based on daily compounding determined during October 2007. IR-2007-193 (November 28, 2007).

9. ISSUES FOR SOCIAL SECURITY DISABILITY AND DEPENDENT BENEFITS:

Many recent Social Security reform proposals to improve program solvency include elements that would reduce benefits currently scheduled for future recipients. To date, debate has focused primarily on potential impact on retirees, with less attention to the effects on other Social Security recipients, such as disabled workers and dependents. As these beneficiaries may have fewer alternative sources of income than traditional retirees, there has been interest in considering various options to protect benefits of disabled workers and certain dependents. The United States Government Accountability Office considered several reform elements that could improve Social Security Trust Fund solvency by reducing the initial benefits received or growth of individual benefits over time. According to GAO simulations, these reform elements would reduce median lifetime benefits for disabled workers by up to 27% and dependents by up to 30% of currently scheduled levels. While the size of benefit reduction could vary across individuals, it could be substantial for the vast majority of these beneficiaries, depending upon the reform element. Options for protecting benefits of disabled workers and dependents from impact of reform elements include, among others, a partial exemption, whereby currently scheduled benefits are maintained until retirement age. For example, while simulation showed that one reform element could decrease median lifetime benefits of disabled workers to about 89% of currently scheduled levels, a partial exemption could restore them to about 96%. Further, these projections could be more targeted. For instance, a larger cost of living adjustment would result in more rapid benefit growth for those disabled workers who receive benefits for a prolonged period of time. Some projections for dependent benefits could be targeted to a single group of dependents, such as widows, while others could affect multiple groups. As an example, increasing the maximum benefit a family can receive could protect a wider group of beneficiaries, including children and spouses of disabled workers and disabled adult children. While it may be desirable to protect benefits of disabled workers and certain dependents, such protections would come at a cost to Social Security. Protecting benefits could lessen the impact that a reform element would have on solvency. In addition, such protections could create incentives to apply for Disability Insurance, if disability benefits remained stable while retirement benefits were reduced. GAO recommends that Congress should consider the potential implications of reform on disability and dependent beneficiaries. GAO-08-26 (October 2007), http://gao.gov/cgi-bin/getrpt?GAO-08-26.

10. WANNA BUY A BRIDGE?:

Picture the Sunshine Skyway under control of profit-driven investment bankers instead of state bureaucrats. That scenario, according to tampabay.com, could lead to soaring tolls on Tampa Bay’s iconic bridge, which has charged the same price for a quarter-century. But faced with a $2.5 Billion budget shortfall over the next two years, Florida state officials are considering selling 50-year leases on Florida toll roads such as the Skyway, the Pinellas Bayway and Alligator Alley -- in exchange for large sums of cash up front. There is no doubt that road privatization can be lucrative in the short term, with the cash-strapped state potentially raking in billions. Supporters argue that Florida will only end up with more gridlock if it does not come up with creative ways to make money for road construction. But over the long run, would drivers be getting a raw deal? It would mean handing over operation and maintenance of a toll road or bridge to a private company, which could raise prices at the toll booth and keep most of the revenue. Critics say the state would be letting investors make fat profits from aggressive toll hikes. Judging from public records obtained from the Governor’s office and Florida Department of Transportation, it is clear officials are running the numbers, trying to figure out what would be a fair deal.

11. DAFFY-NITIONS:

Committee: Individuals who can do nothing individually and sit to decide that nothing can be done together.

12. QUOTE OF THE WEEK:

“The reason that crime doesn’t pay is that when it does, it is called by a more respectable name.” Laurence Peter


Copyright, 1996-2007, 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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