Cypen & Cypen
DECEMBER 13, 2007
Stephen H. Cypen, Esq., Editor
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:
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.
The Honorable Ken Pruitt, President
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.
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.
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:
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.
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:
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.)
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.)
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.
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:
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).
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
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).
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.
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.
Committee: Individuals who can do nothing individually and sit to decide that nothing can be done together.
“The reason that crime doesn’t pay is that when it does, it is called by a more respectable name.” Laurence Peter
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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.