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Cypen & Cypen
December 1, 2011

Stephen H. Cypen, Esq., Editor

1.      COMPANION BILL FILED TO CHANGE FLORIDA MUNICIPAL PLANS:   To date, there have been 8 bills filed relating to public sector retirement plans.  Of these, House Bill 365 (see C&C Newsletter for October 20, 2011, Item 1) by Representatives Costello and Julien and Senate Bill 910 by Senator Hays specifically relate to local pension plans.  Specifically, House Bill 365/Senate Bill 910

  • amends s. 112.18, F.S. relating to disability presumptions to revise the conditions and level of proof (preponderance of evidence rather than competent evidence) that is necessary to prove that a presumption is occupationally related (inclusive of pension disability and death benefits and those benefits provided pursuant to workers’ compensation claims), 
  • sets forth that the employee seeking the disability presumption must have been employed for at least 5 years and be less than 37 years of age, 
  • amends s. 175.061, F.S., requiring that a board of trustees provide a detailed accounting report of its expenses to the plan sponsor, the Department of Management Services and the members of the plan each fiscal year, 
  • requiring, but not limiting the report to, expenses relating to legal counsel, actuarial services, a plan administrator, and all other consultants, and including all travel and other expenses of the board members or anyone else on behalf of the plan, 
  • requiring that a board of trustees operate under an administrative expense budget and provide a copy of the budget to the plan sponsor and make available to the plan members a copy of the budget prior to the beginning of the fiscal year,
  • requires that an amendment to the expense budget by the board must be provided to the plan sponsor and an available copy to the plan members prior to the amendment taking effect, 
  • amends s. 175.101 (4), F.S, and provides that when a plan sponsor elects to discontinue participation in the local pension plan program (as authorized by Chapter 175, F.S.) the imposed excise premium tax shall not be imposed on the    property within the geographic boundaries of that plan sponsor, 
  • amends s. 175.231, F.S., and provides medical conditions or behaviors that are appropriate for consideration in denying or overcoming the presumption of accidental disabilities or death suffered in the line of duty for firefighters, 
  • additionally and consistent with the proposed changes to s. 112.18, F.S., changes the evidentiary standard from competent evidence to the preponderance of evidence, 
  • amends s. 175.351, F.S., and provides that the use of the income from the  premium tax must be implemented in accordance with the collective bargaining process or the provisions of the pension plan where applicable, 
  • provides that when a collective bargaining agreement ends and absent a new collective bargaining agreement having been agreed to, that the pension benefits shall revert to the minimum benefits as provided in 175.162(2) (a) and that the income from the premium tax may be used as unilaterally determined by the municipality or special fire control district, 
  • eliminates all statutory references to “extra benefits,” 
  • provides that premium tax revenues allocated to the supplemental plan shall be determined by collective bargaining or the provisions of the pension plan where applicable, 
  • when and if a new collective bargaining is not reached, the amount of the premium tax revenues allocated to the supplemental plan shall be determined unilaterally by the municipality or special fire control district until a new agreement is reached,
  • authorizes a municipality or special fire control district unilaterally to establish one or more new plans, or benefits levels based on a date of hire, if the new plan meets or exceeds the minimum benefits as prescribed by the chapter, 
  • authorizes a municipality or special fire control district unilaterally to elect to maintain an existing plan and join the FRS or establish a defined contribution plan for employees hired after a specified date; for those municipalities and special fire control districts using this election they are mandated to use the premium tax revenue for the current plan or benefit level, for any additional plan or benefit level, for contributions to the FRS, or for contributions to a defined contribution plan, 
  • amends s. 175,361, F.S. relating to plan termination and fund distribution, requires that the board of trustees in carrying out its responsibilities are subject to prior written approval of the municipality or special fire control district, 
  • additionally directs the Department of Management Services when effectuating a fund termination that it be in a manner having the least fiscal impact on the municipality or special fire control district, 
  • amends s. 185.02, F.S., and removes the statutory language which provides that overtime payments shall not be less than 300 hours, 
  • amends the remaining Chapter 185 provisions to be consistent with the changes to the Chapter 175 provisions within the proposed bills and 
  • provides that the Legislature determines and declares that this act fulfils an important state interest, provides an effective date of July 1, 2012.  

Thanks to Randy Touchton for the summary. 
2.      COUNTY BOUND BY IMPLIED CONTRACT IF NO LEGISLATIVE PROHIBITION AGAINST SUCH ARRANGEMENT:  The United States Court of Appeals for the Ninth Circuit recently addressed the following abstract question:  “Whether, as a matter ofCalifornia law, a California county and its employees can form an implied contract that confers vested rights to health benefits on retired county employees.”  The court concluded that a county may be bound by an implied contract under California law if there is no legislative prohibition against such arrangements, such as a statute or ordinance.  Although a California statute does require that compensation of county employees be addressed in an ordinance or resolution, the statute does not prohibit a county from forming a contract with implied terms, inasmuch as contractual rights may be implied from an ordinance or resolution when the language or circumstances accompanying its passage clearly evince a legislative intent to create private rights of a contractual nature enforceable against the county.  Whether an implied term creates vested rights, in the absence of a legislative bar, is a matter of the parties’ intent.  The dispute arose when Orange County changed its way of calculating group medical insurance premiums from a single unified pool to splitting the pool of active and retired employees.  Retired employees, as a group, are on average older and more expensive to insure than active employees; if pooled separately, retirees normally would pay higher premiums.  The single unified pool thus had the effect of subsidizing health insurance for retirees, in that it lowered retiree premiums below their actual costs, while raising active employee premiums above their actual costs.  The County paid a large portion of the premiums for active employees, but retired employees paid the majority of their own premiums.  (Of course, in Florida, Section 112.0801, Florida Statutes, mandates that premiums for retirees and active employees be equal.)  Retired Employees Association of Orange County, Inc. v. County of Orange, No. S184059 (Cal., November 21, 2011). 
3.      CITY COMMITTED UNFAIR LABOR PRACTICE WHEN IT UNILATERALLY ELIMINATED LEGAL FIREFIGHTER PENSION BENEFITS:  The Supreme Court ofPennsylvania recently decided that a public employer committed an unfair labor practice when it unilaterally eliminated firefighter pension benefits, which were found to be legal, without first collectively bargaining with the firefighters’ representative.  The Collective Bargaining by Policemen and Firemen Act, by its terms, requires negotiation over modification or elimination of pension benefits, and there is no applicable exception to the statutory mandate.  Thus, the court reversed an order of the Commonwealth Court to the contrary.  The City unilaterally repealed a Partial Lump Sum Distribution Option pension benefit, which, like a Deferred Retirement Option Plan, permitted firefighters to receive a lump sum payment for a reduced monthly pension benefit.  The Act plainly and unambiguously obligates parties to bargain over mandatory subjects of bargaining, expressly listing pension benefits.  An employer’s unilateral change to a mandatory subject of bargaining constitutes an unfair labor practice.  The purported exception to the statutory duty to bargain offered by the City is inapposite, as such exception requires as a predicate an illegal term or condition of employment, and here it is uncontested that the pension benefit at issue was legal and proper.  City of Erie v. Pennsylvania Labor Relations Board, No. 24 WAP 2010 (Pa. November 23, 2011). 
4.      ARE LAW ENFORCEMENT FEES COMING TO FLORIDA?:  In Naples, Florida, it costs more than $10.7 Million to run the police department.  On Marco Island, it is closer to $4.2 Million.  The departments are paid through both cities’ general funds or property tax supported operating budget, but rumblings throughout the state could someday give cities a chance to charge a special assessment to help pay for law enforcement issues.  However, Naples and Marco Island officials told they do not even know whether it is something they would pursue if given the opportunity.  The Florida League of Cities in a September finance and taxation committee briefing said it would support legislation that allows municipalities to impose special assessments or a similar funding method for provision of law enforcement services.  In the past, cities have sought guidance on ability to fund, at least in part, provision of law enforcement through a special assessment.  Special assessments traditionally have been used for improvements that have a more obvious direct effect for property, like availability of sidewalks.  In recent years, however, cities began using assessments to cover costs such as garbage collection and fire services.  That shift was logical, since the actual structure -- like a house or an office -- can directly benefit from fire protection or garbage collection.  When law enforcement comes into play, It gets a little tricky, though.  Courts have gone back and forth on whether the reasoning applied to fire can be applied to law enforcement.  Admittedly, many enforcement services stem from work that is traffic- or road-related.  By definition, special assessments have to provide a special benefit to properties.  Some cities have tried to impose the special assessment, but have been told by the courts that it is not proper.  For this reason, the Florida League of Cities says it is seeking clarification, but the issue is not a priority for the 2012 legislative session. 
5.      PBGC ANNOUNCES MAXIMUM BENEFITS FOR 2012:  The U.S. Pension Benefit Guaranty Corporation announced that the yearly maximum benefit a 65-year-old retiree can receive has increased to almost $56,000 from $54,000 in effect since 2009.  More than 85 percent of retirees who get their pensions from PBGC receive the full amount of their promised benefit.  The amount PBGC pays retirees is based on a formula prescribed by federal law.  Yearly amounts are higher for people older than age 65 and lower for those who retire earlier or choose survivor benefits.  If a pension plan ends in 2012, but a retiree does not begin collecting benefits until a future year, the 2012 rates still apply.  For plans that terminate as a result of bankruptcy, the maximum yearly rates are guided by limits in effect on the day the bankruptcy started, not the day the plan ended.  Beginning in 2012, the maximum yearly amount for a 65-year-old retiree is $55,840.92.  The increase is not retroactive.  The maximum amount is lower for retirees who begin getting benefits at ages below 65, reflecting the fact that younger retirees receive more monthly pension checks over a longer lifetime.  The maximum amount is higher for benefits starting at ages above 65, because older retirees receive fewer monthly pension checks over their expected lifetimes.  For example, at age 45, the maximum annual amount is $13,960.00; at age 75, $169,756.00.  For your information, PBGC protects pension benefits of 44 million Americans in 27,500 private-sector pension plans.  The agency is directly responsible for paying benefits of more than 1.5 million people in failed pension plans.  PBGC receives no taxpayer dollars and never has.  Its operations are financed by insurance premiums and with assets and recoveries from failed plans. 
6.      PREFERENTIAL TREATMENT IN PUBLIC EMPLOYMENT DECISIONS UNRELATED TO PROTECTED SPEECH DOES NOT INFRINGE FIRST AMENDMENT RIGHTS:  In a civil rights suit, Barry and other civilian employees of the Boston Fire Department alleged that a pattern of cronyism and nepotism in employment decisions of the Department rose to the level of actionable political discrimination in violation of the First Amendment.  They filed suit in Massachusetts state court, alleging that certain employment actions affecting their status with the Department were unconstitutional, tortious and retaliatory.  Specifically, they alleged that, because they chose not to associate politically with a powerful group of individuals at the Department and in the government of the City of Boston, they were passed over for promotions and other public benefits that they otherwise would have received.  After removing the case to federal court, the Department and the City moved for summary judgment, alleging that no evidence linked the challenged employment decisions to an identifiable political group, cause or belief.  Without elaboration, the district court granted the motion as to the federal claims, and remanded the state law claims to the Massachusetts state court.  On appeal, the United States Court of Appeals affirmed. The First Amendment’s prohibition of political discrimination is a component of its general protection of the rights of freedom of speech and association.  Yet not all speech and association fall within the ambit of the First Amendment.  A successful claim that a public employer violated First Amendment rights through adverse employment decisions motivated by a person’s associational choices requires some evidence that the association at issue is political or otherwise constitutionally protected.  The record in this case reveals insufficient evidence of this sort to create a triable issue of fact. However unsavory it may be, preferential treatment in public employment decisions unrelated to protected speech or association does not infringe upon freedoms secured by the First Amendment.  Barry v. Moran 50, Case No. 10-1607 (U.S. 1st Cir., November 22, 2011). 
7.      U.S. SUPREME COURT WILL DECIDE DRUG REP OVERTIME ISSUE:  The United States Supreme Court has agreed to decide whether pharmaceutical sales representatives are exempt from overtime pay requirements.  In a case filed by former sales representative for GlazoSmithKline, the Ninth U.S. Circuit Court of Appeals held the reps were not entitled to extra pay because of the outside-salesman exception to overtime pay requirements.  (For a ruling by the Second Circuit see C&C Newsletter forJuly 15, 2010, Item 6).  Christopher v. SmithKline Beecham Corp., Case No. 11-204 (U.S., November 28, 2011) (on petition for writ of certiorari granted). 
8.      OHIO, EMPLOYEES INK DEAL:  Ohiotaxpayers will pay around $21 Million for a new contract approved with the state’s largest public employees union, according to a report from  The proposed deal with the 34,000-member Ohio Civil Service Employees Association would freeze workers’ base pay, but restore employee step pay increases and longevity pay, eliminate 10 unpaid furlough days and retain health-care benefits, 85 percent of which are paid by the state.  It is the first time since the state’s collective bargaining law passed in 1983 that a state contract was extended.  The accord was reached as state and union negotiators sat down for their initial bargaining session -- a little more than one week after Ohio voters stomped collective bargaining cutbacks in state Issue 2 (see C&C Newsletter for November 3, 2011, Item 3).  In previous years, under four different governors, contract agreements were reached only after weeks or months of often-contentious negotiations, frequently, requiring third-party mediation. 
9.      IRS INTEREST RATES WILL STAY THE SAME FOR FIRST QUARTER OF 2012: Internal Revenue Service announced that interest rates will remain the same for the calendar quarter beginning January 1, 2012.  The rates will be 

  • three (3) percent for overpayments (two (2) percent in the case of a corporation); 
  • three (3) percent for underpayments; 
  • five (5) percent for large corporate underpayments; and 
  • one-half (0.5) percent for the portion of corporate overpayment exceeding $10,000.  

The 3 percent rate also applies to estimated tax underpayments for the first quarter in 2012 and for the first 15 days in April 2012.  IR-2011-112 (November 28, 2011). 
10.    DID MIAMI GOOF ON MARLINS STADIUM GARAGE TAXES?:  When the city of Miami agreed to build parking garages for the new Miami Marlins stadium, borrowing $100 Million in the bond market to do so, city officials assumed the structures, like most such municipal facilities, would be exempt from property taxes.  Not so fast, according to a Miami Herald report.  That assumption now looks like a serious miscalculation that could not just upend the city’s financing plan, but allow the Marlins to rake in profits from parking while city taxpayers eat a hefty, and unexpected, tax bill.  This realization hit officials only recently, as the four garages approach substantial completion, to the point at which they would go on the tax rolls.  Miami-Dade property appraiser and county attorneys recently told a flabbergasted Miami Mayor about the problem.  The gist is quite simple:  to be exempt from property taxes, municipal property must be used solely for public purposes.  The city, however, has leased all 5,700 parking spaces to the Marlins, at $10 a spot, for every home game and for any other events the team chooses to stage.  Of course, the team can charge whatever it wants for the parking spots.   Although they caution no final decision has been made, county officials say the garages will obviously not function exclusively as a public facility, thus making the structures completely subject to commercial property taxation.  And there is worse news:  the city, and not the Marlins, will have to foot the estimated $2 Million tax bill.  Why?  -- because the agreement between the city and the team contains a clause stating that the city is responsible for all taxes -- when most such agreements place responsibility on the profit-making user.  Under state law, county-owned property is automatically exempt from property taxes, which is why the new stadium itself, owned by the county, is not subject to property taxes.  
11.    GOLF WISDOMS:  No matter how badly you are playing, it's always possible to play worse.    
12.    PARAPROSDOKIAN:  (A paraprosdokian is a figure of speech in which the latter part of a sentence or phrase is surprising or unexpected in a way that causes the reader or listener to reframe or reinterpret the first part.  It is frequently used for humorous or dramatic effect.):   ”The saying ‘Getting there is half the fun’ became obsolete with the advent of commercial airlines.” -- Henry J. Tillman    
13.    QUOTE OF THE WEEK:  “Success isn’t permanent, and failure isn’t fatal.”  Mike Ditka 
14.    ON THIS DAY IN HISTORY:  In 1969, U.S. government holds its first draft lottery since World War II.   
15.    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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17.    OUR NEW LOOK:  We recently switched to a new list-serve, which accounts for a different look.  Tell us if you have any problems as work is still in progress.  Thanks for subscribing to our Newsletter.





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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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