October, 1996Stephen H. Cypen, Esq., Editor
RECENT ATTORNEY GENERAL OPINIONS:
AGO 96-55:(1) A city police pension board should not hold its meetings in a facility where the public has limited access and where there may be a "chilling" effect on the public's willingness to attend by requiring the public to provide identification, to leave such identification while attending the meeting and to request permission before entering the room where the meeting is held. (2) A police pension board may not condition release of its records upon a vote of the board because such records are open to the public in the absence of a statute providing for confidentiality or exemption.
AGO 96-57: The exemption from examination of records provided by Section 119.07(3)(i), Florida Statutes, applies to personnel of local governments whose responsibilities include revenue collection and enforcement, but not either. (This exemption was added by Chapter 95-170, Laws of Florida.)
DELRAY P & F COLA SURVIVES CHALLENGE: Effective January 1, 1994, the City of Delray Beach enacted an ordinance providing for a cost of living adjustment to police officers and firefighters who retired after September 30, 1993 and who were hired at least twenty-five years prior to January 1, 1994. Former police officers and firefighters who had retired prior September 30, 1993 challenged the ordinance on several constitutional grounds. In dismissing the suit, a Federal Judge determined that plaintiffs did not state a cause of action. There was no due process violation because although retirees may have a protected property interest in payment of an annuity upon retirement, post-retirement increases are subject to the legislation from which such entitlement arises. There was no equal protection violation because there was a rational basis for the legislation. Brooks v. The City of Delray Beach, Florida, Case No. 96-8196-CIV-RYSKAMP (S.D. Fla., August 29, 1996).
CONFLICT NOT AMELIORATED BY "AUTHORIZING ORDINANCE": Not so fast. Certain individuals employed as firemedics or paramedics by the Brevard County Public Safety Department were also employed by private franchisees within the County. Upon request of the County the Commission on Ethics issued a formal opinion, finding a prohibited conflict of interest. The County appealed but did not challenge the conclusion; rather, the County urged that it could enact an ordinance under Section 112.313(7)(b), Florida Statutes, which reads: "This subsection shall not prohibit a public officer or employee from practicing any particular profession or occupation when such practice by persons holding such public office or employment is required or permitted by law or ordinance." The County expressed its intent to pass an ordinance to provide an "exemption" from the conflict. Of course, the Court found that the conflict did not prohibit the individuals from practicing their particular profession or occupation and that the would-be ordinance was beyond the scope of the statute. Indeed, under the County's construction, all conflicts of interest could be avoided simply by enactment of an ordinance. Brevard County v. State, Commission on Ethics, 21 Fla. L. Weekly D1948 (Fla. 1st DCA, August 28, 1996).
THE STATE OF FLORIDA HAS BIG PROBLEM WITH VACATION BENEFITS: As you probably read in the newspaper, the State of Florida may have to spend more than $100 Million to compensate State employees for accrued annual leave lost in 1988 when previously-negotiated benefits were cut. By order dated August 21, 1996, Circuit Judge Philip J. Padovano found that the State had not complied with his earlier order and directed that the State restore, within ninety days, the annual and sick leave credits to the levels required by the earlier order for all present career service employees of the State of Florida in the bargaining units represented by the plaintiff/unions for the period of July 1, 1988 through the present. Florida Police Benevolent Association, Inc. v. State of Florida, Case No. 88-2944 (Fla. 2d Cir. August 21, 1996).
TIPS FROM THE TOP: The Division of Retirement's October 1996 Newsletter contains some suggestions to improve reporting of premium tax money. In sum, try (a) placing a request in notices routinely distributed to your citizens, asking them to verify with their insurance companies that their property is reported as located within the boundaries of your city or special fire district; (b) contacting all local insurance agencies and asking them to review all renewals and new policies to make sure they correctly reflect the location of insured property; (c) providing a notice to residents of newly-incorporated areas asking them to contact their insurance companies so that all policies reflect that they are now within your city or district; and (d) compiling a list of "suspect" properties or risks and providing it to the Municipal Police Officers' & Firefighters' Retirement Trust Fund office for verification of coding. Thanks, Trish.
ADEA EXEMPTION REINSTATED: On September 30, 1996 President Clinton signed amendments to the Age Discrimination in Employment Act (HR849/S553), which were attached to the House Commerce Committee Appropriations portion of the Omnibus Continuing Resolution. The amendments reimpose the exemption for public safety personnel as it relates to age-based hiring and retirement standards. Reminder: because of Section 760.10, Florida Statutes, part of the Florida Civil Rights Act of 1992, reinstatement of the exemption should have no effect in Florida.
CORPORATIONS CHANGE DIRECTORS' PENSIONS: A recent William M. Mercer, Inc. survey shows that a large number of corporations have discontinued retirement plans for outside board members and others have determined not to provide coverage for directors elected after a certain date. Two methods were utilized: most simply froze their plans and will pay out accrued benefits when the director leaves the board; others terminated their plans and converted the accrued value to some other form (such as deferred stock).
PREGNANCY NOT AN IMPAIRMENT: A Federal District Judge has decided something that seems quite obvious to us: pregnancy is a physiological condition, not a disorder. Being the natural consequence of a properly functioning reproductive system, pregnancy cannot be called an impairment. Therefore, as a matter of law, a firefighter's ADA claim against a city was summarily dismissed. Richards v. City of Topeka (D. Kan., July 1, 1996).
CALPERS REPORTS RETURNS: As reported by BNA, California Public Employees Retirement System (CALPERS) earned a 15.4% investment return for its fiscal year ending June 30, 1996. The $100 Billion-plus fund, which is more than 60% invested in equities, has almost tripled in size in the last ten years.
ADA NARROWLY CONSTRUED: Disqualification from jobs involving routine exposure to extreme trauma -- such as firefighter -- does not constitute a substantial limitation on the major life activity of working. Because such jobs are merely a narrow range of jobs, one who is disqualified from holding such jobs is not disabled under the Americans With Disabilities Act. This issue was one of first impression in the circuit. Bridges v. City of Bossier, 92 F.3d 329 (5th Cir. 1996).
NEW ADDRESS FOR DETERMINATION LETTERS: Beginning September 1, 1996, employee plan and exempt organization letter requests, previously filed in the Key District Office in Atlanta, Georgia, must now be filed with the Internal Revenue Service Center in Covington, Kentucky. The full address is Internal Revenue Service, P. O. Box 192, Covington, KY 41012-0192.
SAN FRANCISCO MAY COME INTO LINE: BNA also reports that San Francisco voters will vote next month on whether to allow employees to negotiate retirement benefits. The $7.5 Billion system's 40,000 members, including 7,000 active and retired police and firefighters, have never had the ability to negotiate retirement benefits. You read that right.
ATLANTA APPROVES DOMESTIC PARTNER BENEFITS: Effective January 1, 1997, a domestic partner who is dependent and relies upon an Atlanta city employee for financial support for at least six months will have health and life insurance benefits. By defining domestic partners as dependents rather than family, the City Council believes that this provision will survive the expected judicial challenge that a 1995 version did not.
DENVER FOLLOWS SUIT: The City of Denver will extend health care benefits to same-sex partners of most city employees. Based upon an estimate that 1% of city employees are involved in a same-sex partner relationship, the provision is expected to cost between $80,000 and $150,000 per year. Because they have separate collective bargaining agreements, fire and police personnel are not affected.
CITY APPEALS TAX COURT DECISION: The City of Columbus, Ohio has appealed the United States Tax Court's ruling that its pension obligation bonds were not tax-exempt (see C&C Newsletter for July 1996). The United States Court of Appeals for the District of Columbia will issue a ruling after filing of briefs and, if granted, oral argument.
IRA CONTRIBUTIONS RISE: BNA reports that regular contributions to IRAs totalled $10.8 Billion for 1995. The number is a slight increase from the $10.6 Billion contributed to IRAs last year. However, 1994 itself saw the first increase in IRA contributions since 1986. It remains to be seen what effect, if any, the new SIMPLE program (effective January 1, 1997) will have on IRAs.
OREGON COURT HANGS TOUGH ON PENSION RIGHTS: Emphasizing that its Public Employees' Retirement System creates a contract with the State, the Oregon Supreme Court found that the State and its political subdivisions breached those contracts and are liable for damages for eliminating an exemption of employees' pension benefits from State income taxation. As reported by BNA, Oregon attempted to comply the 1989 U.S. Supreme Court decision that states must treat federal and state pension benefits alike, and either tax them both or exempt them both. Stovall v. Oregon.
CALIFORNIA CONTINUES TO BLAZE TRAILS: CALPERS' corporate governance program, in effect for more than a decade, will turn its attention to individual board performance and accountability of company management. By adding a new "good work place practices" program, the Fund will attempt to identify companies that have achieved long-term economic performance for shareholders without sacrificing their work forces.
BUT IS GOVERNOR WILSON IN STEP?: The Governor of California, according to BNA, vetoed a bill that would have provided monthly death benefits in lieu of lump sums for survivors of CALPERS local government employee members. Benefits would have been available to survivors of employees who had twenty or more years of service, had not reached retirement age and had died from a non-job-related cause. The bill also would have provided health care benefits to the survivor at no expense, which provision apparently prompted the veto.
OREGON ACCEPTS DECISION: The Oregon Attorney General has indicated he will not appeal the Oregon Supreme Court ruling that a proposed ballot measure violated the United States Constitution by abridging the contracts between public employees and the public employee retirement system (see C&C Newsletter for August, 1996). As we reported, however, another initiative will be on the November 5, 1996 ballot (see C&C Newsletter for September 1996).
MASSACHUSETTS STRUGGLES WITH MANDATORY POLICE RETIREMENT: In 1992 the State of Massachusetts passed a law setting fifty-five as the mandatory retirement age for state police officers. The law has not been enforced because a federal judge four years ago issued an injunction. Under an agreement with all affected parties, the injunction will continue in order to allow the 1997 Massachusetts Legislature to pass a bill permitting individual state police officers to remain employed beyond age fifty-five as long as they are able to pass regular re-enlistment fitness tests. The State Police Association of Massachusetts has indicated its support for such legislation.
PUBLIC PLAN SURVEYS ARE REVEALING: The International Foundation of Employee Benefit Plans has summarized recent public plan surveys. Some of the more interesting findings are 1) 23 states pay full cost of health insurance for individual employees (1996 State Employee Benefits Survey), 2) 51% of state public pension funds have a prudent person standard for legal investment authority (Knoll Survey of State Public Pension Funds Investment Policies and Practices-1995), 3) during 1994 the average cost of state employee health benefit indemnity plans increased less than the medical care component of the CPI (Report on the Segal Company's 1995 Survey of State Employee Health Benefit Plans) and 4) employee contributions to state retirement systems are required by 47 of the 50 states (Foster Higgins Report on State Pension Systems-1994).
ARE YOU CONSIDERING A CHANGE IN MONEY MANAGERS?: There is an interesting article in the September 1996 issue of Plan Sponsor, entitled "When plan assets are in motion: How to control the cost of changing money managers." In summary, the amount of money a plan can spend -- or save -- on manager transition varies greatly. The biggest factor is liquidity of the securities bought or sold. Find out which securities the new manager will take in-kind. If the portfolio closely matches an index, show it to the large banks that operate index funds. Plan sponsors in a hurry can take a shortcut by soliciting principal bids for the entire portfolio from Wall Street brokerage firms.
FASB HEALTH CARE STANDARD MAY BE EXTENDED TO GOVERNMENTS: The Governmental Accounting Standards Board (GASB) is the body which establishes accounting procedures and methods for governments' balance sheets and expense reports. The Financial Accounting Standards Board (FASB) is the private counterpart. FASB Standard 106 requires employers to expense their retiree health care promises. Thus far, GASB has not required governments to follow FASB Standard 106. However, GASB expects to issue an exposure draft on retiree health care and other post-employment benefits accounting in April, 1997 and a final statement the following Spring.
EQUITABLE RELEASES STUDY FINDINGS: The Equitable Life Assurance Society has issued its 1996 "Nest Egg Study." The study found that only 25% of retirees have a financial plan. Excluding retirement plans and IRAs, the average retiree's assets look like this: cash (33%), real estate (25%), stock mutual funds (11%), individual stocks (11%), life insurance cash surrender value (9%), bonds/bond mutual funds (5%) and annuities (5%). Alarmingly, 55% of retirees owning stocks and 48% owning stock mutual funds do not know what return they receive! And, although participants in defined contribution plans are generally satisfied with them, nearly one-third of retirees report the fear of outliving their assets as the single greatest financial concern.
ZWEIG COUNTS SENTIMENT ADS!: Martin Zweig, local boy who has done quite well for himself, reports an interesting "Sentiment" number. For the three weeks ending September 27, 1996, the number of bullish ads in Barron's vs. bearish ads was 86 to 1. In 25 years of counting such ads, he found a spread of over 80 only three times before, each time preceding a significant correction. So, Marty, what do we do now?
Copyright, 1996-2004, 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.