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Miami

Cypen & Cypen
NEWSLETTER
for
DECEMBER 22, 2011

Stephen H. Cypen, Esq., Editor

1. NEW YORK STATE COMPTROLLER BLASTS 401(K)S AS DB REPLACEMENT: Laws governing state pension funds should not be changed to allow defined contribution plans to replace defined benefit plans because 401(k) plans are woefully inadequate for those who rely on them for their primary retirement income, said Thomas DiNapoli, New York state comptroller and sole trustee of the $134 Billion New York State Common Retirement Fund. The reality is that 401(k)s were never intended to take the place of pensions. Mr. DiNapoli noted that the state Legislature continues to explore areas of reform like the level of pension contributions and controlling overtime abuse. However, Mr. DiNapoli drew the line at 401(k) plans, which he said would represent a more extreme change to the pension system, and unacceptable to him. The financial crisis of 2008-2009 dramatically demonstrated how a collapse in equity prices can decimate 401(k) retirement savings. Recent market volatility is yet another reminder of the inherent instability of 401(k)s and how daunting it can be for individuals with 401(k)s to navigate their way to a secure retirement. DB plans offer advantages over 401(k) plans, including lower fees for investment options. In addition, 401(k) plan participants must save at a rate that ensures their funds will last well into their 90s. In contrast, large institutional plans have assets based on average mortality of their members.

2. READER RESPONDS TO MORTALITY STUDY ITEM: A reader, who happens to be an actuary, takes issue with our Florida Mortality Study item (see C&C Newsletter for December 15, 2011, Item 1). He says the subject report does not determine comparative mortality rates. Determining average age at death is not a study of mortality rates. Such information is not useful in measuring the value of a life annuity. Besides, older people moving to Florida skews the average age at death for the general population.

3. RECENT FLORIDA STATUTORY AMENDMENTS DO NOT APPLY TO "SUPPLEMENTAL PLAN MUNICIPALITIES": Chapter 2011-216, Laws of Florida (SB 1128), effective July 1, 2011, made amendments to the definitions of "compensation" or "salary" under Chapters 175 and 185, Florida Statutes. Said chapter also made amendments to the provision for boards of trustees. We and several other Florida pension attorneys requested that Patricia F. Shoemaker, Benefits Administrator, Municipal Police Officers' and Firefighters' Retirement Trust Funds, issue an opinion as to whether or not the amendments applied to supplemental plan municipalities or were exempt because of §175.351(4) and §185.35(4), Florida Statutes. Among other things, those sections provide that (1) the definitions of compensation or salary and (2) the board of trustees provisions do not apply to a supplemental plan municipality. (A supplemental plan municipality is any fire or police local law municipality in which there existed a supplemental fire or police plan as of December 1, 2000.) Ms. Shoemaker agreed with the unanimous opinion of the requesting attorneys:

The Division of Retirement agrees that it appears that Chapter 2011-216, Laws of Florida, did not remove the exemptions regarding "salary" and the "board of trustees" found in sections 175.351(4) and 185.35(4), Florida Statutes. Therefore, a supplemental plan municipality may continue to use the definition of compensation or salary in existence on March 12, 1999. Further, a supplemental plan municipality shall continue to be administered by a board or boards of trustees numbered, constituted, and selected as the board or boards were numbered, constituted, and selected on December 1, 2000.

We thank Trish for this important clarification.

4. U.S. INVESTIGATES SHERIFF JOE ARPAIO: U.S. Department of Justice, Civil Rights Division, has written to the Maricopa County (Phoenix, Arizona) County Attorney to report its findings of an investigation into Civil Rights violation by the Sheriff's Office. (Of course, the Sheriff of Maricopa County is famously-outspoken Joe Arpaio.) The Department finds reasonable cause to believe that the Sheriff's Office engages in a pattern or practice of unconstitutional policing. Specifically, the Sheriff's Office, through actions of its deputies, supervisory staff and command staff engages in racial profiling of Latinos; unlawfully stops, detains and arrests Latinos; and unlawfully retaliates against individuals who complain about or criticize the office's policies or practices, all in violation of the Violent Crime Control and Law Enforcement Act of 1994. The discriminatory police conduct additionally violates the Civil Rights Act of 1964. The Department also finds reasonable cause to believe that the office operates its jails in a manner that discriminates against its limited English proficient Latino inmates. Specifically, through actions of its deputies, detention officers, supervisory staff and command staff, the office routinely punishes Latino inmates for failing to understand commands given in English, and denies them critical services provided to other inmates, all in violation of the Civil Rights Act of 1964. Absent the Sheriff's Office taking clear steps toward reaching an agreement with the Division to correct these violations in the next sixty days, the United States will conclude that voluntary compliance is not possible and will initiate civil litigation to compel compliance with the Violent Crime Control and Law Enforcement Act of 1994 and the Civil Rights Act of 1964. Should the Sheriff's Office indicate within those sixty days that it does not intend to work with the Department, the Department may initiate suit in fewer than sixty days. The Sheriff's Office is further cautioned not to intimidate, threaten, coerce or engage in other discriminatory conduct against any one because he has either taken action or participated in an action to secure rights protected by the Civil Rights laws. Based upon preliminary comments to the press, Sheriff Arpaio, as expected, indicated there are no problems within his office. Gunfight at OK Corral. Postscript: According to press reports, the County Attorney plans no immediate action, saying that the U.S. Justice Department Report would not be taken at face value. Instead, he criticized Homeland Security Secretary Janet Napolitano's decision to stop Arpaio from checking inmates' immigration status and argued it would allow criminals to be released into the community. The County Attorney said he would ask President Obama to order restoration of previously-revoked access to federal systems. Now, just how did that letter work out for you, Justice Department?

5. RICK PERRY DRAWS SALARY AND PENSION: Texas Governor Rick Perry collects a salary and retirement benefits simultaneously (presumably through a D.R.O.P.). Perry's personal financial disclosure form shows that he is collecting his $7,700 monthly state pension, which is allowable under state law, while also receiving his annual governor's salary of $133,000. Collecting retirement benefits while drawing a state salary will likely expose Perry to criticism from those who complain that public sector employees are too generously compensated. HOWEVER, AS WE ALWAYS SAY, WHAT PERRY IS DOING IS NOT DOUBLE-DIPPING, WHICH IS THE INAPPROPRIATE COLLECTION OF BENEFITS MORE THAN ONCE FOR THE SAME SERVICE. Here, the governor earned his monthly state pension and presumably is earning his salary. Perry's financial disclosure form was made public by the Federal Election Commission, and published by governing.com.

6. FIRE DEPARTMENT REQUIREMENT THAT APPLICANTS BE RESIDENTS VIOLATES TITLE VII: NAACP states Title VII claim against fire department serving five heavily-Hispanic municipalities for hiring only residents as firefighters. Statistical evidence based on a counting of protective service occupations (like crossing guards and private detectives) in the three-County Area suggests that the department should employ 65 African-Americans firefighters, but employs only two. The full-time protective service positions are a sufficient proxy even though firefighting is a specialized job. Decisions of the United States Supreme Court do not support the department's assertion that removing its residency requirement to eliminate the disparate-impact on African-Americans would subject it to suit by Hispanics alleging disparate treatment. Fear of litigation alone does not suffice; a demonstrated potential for liability is required. National Association for the Advancement of Colored People "NAACP" v. North Hudson Regional Fire & Rescue, Case Nos. 10-3965 and 10-3983 (U.S. 3d Cir., December 12, 2011). This summary is courtesy of Chuck Carlson.

7. GOLF WISDOMS: The only sure way to get a par is to leave a four-foot birdie putt two inches short of the hole.

8. 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.): "If you're not part of the solution, you're part of the precipitate." — Henry J. Tillman

9. QUOTE OF THE WEEK: "Every man has his follies – and often they are the most interesting thing he has got." Josh Billings

10. ON THIS DAY IN HISTORY: In 2001, Richard Reid attempts to destroy a passenger airliner by igniting explosives hidden in his shoes aboard American Airlines Flight 63.

11. 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.

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.

13. 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. Thank you.

We wish you and yours a very Merry Christmas!!!!

Copyright, 1996-2011, 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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