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August, 1997

Stephen H. Cypen, Esq., Editor

CONGRESS GRANTS SIGNIFICANT SECTION 415 AND OTHER PENSION RELIEF: On August 5, 1997 President Clinton signed HR2014, the Taxpayer Relief Act of 1997. Because the Act grants important relief in two areas (and because we just received word prior to putting this issue to bed), we wanted to include this item without reference to any other pertinent changes. Effective December 31, 1996, the provisions of IRC §415 which imposed a dollar limitation on benefit payments from a defined benefit plan for Police and Fire Employees have been removed. Now, a Police or Fire Employee will suffer no reduction in defined benefit payments for retirement prior to age 62. The defined benefit limit is $125,000.00 (for 1997, indexed for inflation). This part of the law is a pleasant surprise, in that it resulted from a Senate amendment made only about six weeks ago. In what seems almost like a footnote (probably because we have expected it for years), the Act also makes permanent the moratorium on application of the nondiscrimination rules (IRC §401(m)) to governmental plans. We will report later on any other changes of interest to our readers.

UNDERSTANDING LEGISLATION NOT ALWAYS EASY: In our June, 1997 Newsletter we "suggested" that assets in a Florida municipal deferred comp plan may be required to be held in trust as of July 1, 1997. We based that statement on Chapter 97-8, which amended Section 112.215, Florida Statutes. Well, it looks like we may have goofed. Because of the way the Legislature set out the subsections, paragraphs and subparagraphs, its intent apparently was to mandate a trust only for state employees, the requirement therefor being part of creation of the State Treasury Deferred Compensation Trust Fund. However, don't despair -- just redouble efforts to have your city create a trust for your deferred comp plan earlier than the deadline of January 1, 1999. In this regard, we would like to hear one valid argument against a city's early establishment of a deferred comp plan trust. Sorry about that, Chief.

CONTINUED PUBLIC EMPLOYMENT RESULTS IN PENSION FORFEITURE: New York City's Charter disallows pensions to City retirees who obtain public employment. A federal judge has upheld the charter provision against constitutional attacks waged by two former police officers who became New York public school teachers. The court found no denial of equal protection in allowing pensions to retirees who obtain private sector employment but not to those who work for the government. The Court also held that the City has a legitimate fiscal concern in limiting the amount of public funds expended on an individual and in increasing the number of persons who can be paid from public funds. C'mon, give us a break. Slavsky v. New York City Police Department, Case No. 96CIV.6800 (S.D.N.Y., June 16, 1997), 1997 WL 345123.

EEOC FINALLY WINS ONE: The Equal Employment Opportunity Commission has been unsuccessful in several cases which held that an individual's eligibility for disability benefits under the Social Security Act bars him from proceeding with a claim of employment discrimination under the Americans With Disabilities Act. A recent United States Court of Appeals decision concluded that receipt of Social Security disability benefits did not preclude an employee from bringing an ADA claim. In so ruling, the Court found that the Social Security determination took no account of any reasonable accommodation -- the critical issue in any ADA claim. Swanks v. Washington Metropolitan Area Transit Authority, Case No. 96-7078 (CA DC June 20, 1997) 1997 WL 335143.

LOUISIANA MAY MANDATE INDEXING: Over cries that the Legislature was interfering with the fiduciary duties of trustees to select the asset allocation that best serves their participants, the State of Louisiana is considering a bill that would require its public pension funds to invest at least 10% of their stocks in passively managed portfolios pegged to an index. Currently, the three Louisiana state funds manage over $14 Billion, of which almost $8 Billion is invested in stocks. The Louisiana legislation also has a "carrot": the maximum equity exposure will be raised from 55% to 70%. However, we agree with those who feel anything that impedes a trustee in making an investment decision corrupts the system. When the pendulum swings the other way, and active management is back in vogue, Louisiana's funds may be hamstrung if the broad markets decline and active managers start outperforming them.

MISCELLANY:

  1. Of the 12.4 million state and local government employees, only 9% participate in a defined contribution plan of any kind.
  2. All fifty states offer Section 457 Plans, with several of them allowing local employee participation; yet fewer than 900,000 employees made any contributions in 1995.
  3. Just 159 people serve as fiduciaries for the fifteen largest public pension plans, which have $770 Billion in assets!

FEDERAL FIREFIGHTERS MAY GET PARITY: HR1166, the Firefighters Pay Fairness Act of 1997, has been introduced into the House of Representatives. The bill would amend certain provisions of Title V, United States Code, to ensure equality of Federal Firefighters and other civil service employees and public sector firefighters.

BIDDING ON TREASURY SECURITIES COULD GET MORE PRECISE: The Treasury Department has proposed for comment an amendment to 31 CFR Part 356, Uniform Offering Circular For The Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds. The proposed amendment makes changes necessary to accommodate three decimal billing, in .005 increments. Like the proposal to quote stocks in cents (see C&C Newsletter for May, 1997), any narrowing of price intervals would seem to benefit the "consumer."

1996 PREMIUM TAXES INCREASE: According to the Division of Retirement, gross premium tax collections were higher for 1996 than for 1995 (Fire - 13.8% and Police - 9.5%). Initial State Premium Tax Distributions for 1996 were made on June 13, 1997. The Firefighters' Pension Trust Fund received $24,812,944.15 (an increase of $2,170,930.23) and the Municipal Police Officers' Retirement Trust Fund received $39,672,118.51 (an increase of $2,779,756.56). If your plan has not received its premium tax monies for 1996, contact the Municipal Police Officers' & Firefighters' Retirement Trust Funds' Office at (850) 922-0667. Note the new area code.

TRISH'S TIPS (SUMMER RERUN): In our October, 1996 issue we published Patricia Shoemaker's suggestions for improving the accuracy of insurance company reporting. The Division of Retirement's July 1997 News Up-Date again sets forth these tips, which cannot be over-repeated: (1) Place a request in publications that are routinely distributed to residents, asking them to verify with their insurance companies that their property and/or casualty policies indicate that the insured property is located within the city or fire district limits, making sure they are not coded to a mailing address (which may be a nearby city). (2) Contact all local insurance agencies regarding your concerns and ask them to review all renewals and new policies to make sure that they correctly reflect the location of the insured property. (3) As new areas are incorporated or annexed into the city or fire district limits, provide a notice to residents, asking them to contact their insurance companies so that all policies reflect that the insurance property is now in the city or fire district limits. (4) Request a premium tax report from the Municipal Police Officers' and Firefighters' Retirement Trust Funds' Office, which can provide you with a list of all insurance companies and the amount of premiums they reported covering insured property within your city or fire district limits for the year. (5) Compile a list of suspect properties and provide it to the Municipal Police Officers' and Firefighters' Retirement Trust Funds' Office, which will ask the insurance companies to verify the coding.

EXACTLY HOW WELL DID EQUITY INDEXERS DO?: According to Pensions & Investments, for the year ended March 31, 1997, the first three spots were held by actively managed equity funds, although index funds, dominated most of the remaining top ten best-performing equity funds. However, for the five years ended March 31, 1997, every one of the top ten equity funds was actively managed.

MONEY MANAGER ASSETS SOAR: Also according to Pensions & Investments, domestic institutional tax-exempt assets under management rose almost 40% to $5.8 Trillion in 1996. Average allocation for surveyed managers was stocks - 52.3%, bonds - 31.1%, cash - 9.1%, mortgages - 5% and real estate - 2.5%. Barclays and State Street, with over $250 Billion each, topped the list.

HAVE YOU CONSIDERED YOUR FUND'S LONG-TERM STRATEGY?: Does your fund have a potential cash flow problem and if so how do you intend to deal with it? Has a long period of growth lulled you into believing that liquidity will never be a problem? First, assess future cash flow needs by having actuarial cash flow projections prepared under three basic scenarios: declining population of active participants relative to retirees, stable participant population and growing population of active participants relative to retirees. Next, determine whether, under your current investment strategy, sufficient assets will be available in time to meet the projected cash flow needs. This task requires a combination of investment consulting and pension funding expertise to coordinate investment strategy with actuarial requirements. If a potential cash flow problem exists, investment policy guidelines should be revised to emphasize liquidity so that cash is available to meet pension promises as they come due. This sound advice comes from Benefits Quarterly.

SOMETHING ELSE WE DIDN'T KNOW: And learned from BNA. In addition to the Family Medical and Leave Act (FMLA) passed in 1993, federal employees have benefits under the Federal Employees Family Friendly Leave Act of 1994 (FEFFLA), which allows them to use up to thirteen days of sick leave each year for reasons other than their own medical needs, including care of family members and bereavement purposes. The definition of family member under FMLA is not as broad as under FEFFLA, which allows time off for care to "any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship." One catch: FEFFLA, which became law on October 22, 1994, will expire on December 21, 1997 unless extended by Congress.

SOMETHING FOR CITIES TO THINK ABOUT: When a city needs temporary help, where does it usually go? If the city is like most employers, it probably uses one or more employment agencies. Well, where can a city find temporary employees who have valuable skills; who are tested, tried and true; and who are flexible -- all without paying the standard commission to a temporary employment agency? How about retirees, who know the ropes, know where everything is and know how to get things done (without the wasted time necessary to train temps before their work is of any value). One caveat: retirees must make sure that working on a temporary basis for city does not adversely affect their existing pensions and they must be aware of applicable Social Security earnings limitations. And the winner in our contest to name these returning employees: "Boomerang Workers." Put another shrimp on the barbie.

CONNECTICUT FUND BAILS: As we reported here, the State of Connecticut Pension Trust Fund was getting clobbered on its investment in the Fashion Mall at Plantation (see C&C Newsletter for August, 1996). As of April, 1995, the Fund had lost over $39 Million on the project. Initially asking $75 Million for the Mall, the Pension Fund has now taken $68 Million to unload it. Incidentally, the Mall, which is on University Drive north of Broward Boulevard, has over 650,000 square feet, of which more than one-third is empty.

MIAMI CONSENT DECREE DISSOLVED: In 1977 the City of Miami and the United States entered into a Consent Decree that implemented an affirmative action plan for hiring and promotion of blacks, Hispanics and women within the City of Miami Fire Department. The Miami Association of Firefighters, Local 587, International Association of Firefighters, AFL-CIO, moved to dissolve the decree. Although the United States District Court Judge refused to dissolve the decree based upon testimony of the City's Labor Economics expert, the United States Court of Appeals found the testimony insufficient as a matter of law and dissolved the Consent Decree provisions relating to promotions. The Court did not resolve the hiring provisions because Local 587 lacked standing to assert rights of potential hires, who are obviously not union members. United States v. City of Miami, Florida, 11 Fla. L. Weekly Fed. C56 (11th Cir., June 20, 1997)

SEC EXAMINES "PAY-TO-PLAY" ISSUE: According to The Wall Street Journal, the Securities and Exchange Commission is taking a hard look at the practice of "pay-to-play" in the public retirement area. Inquiries concern the practice of money managers giving campaign contributions to the elected politicians who run large public pension funds and have the power to deliver lucrative accounts to those same money managers. Although the SEC may not have direct control over the targeted practice, it is examining whether or not it can apply the antifraud provisions of the Investment Advisers Act of 1940, which regulates money managers and other financial advisers. If that Act can't be utilized, the SEC may just use its influence to pressure politicians to promote change. Some state officials, however, believe state laws already are restrictive enough and having the SEC involved will make the election process more complicated. Others believe donations from investment firms doing business with the state should not be treated differently than donations from construction firms doing the same. And still others point to the SEC's actions in municipal bond underwriting that created unrest among investors and increased the cost of raising money in the municipal market.

LIKE THE FIRST MILLION DOLLARS, THE FIRST THOUSAND POINTS ARE ALWAYS THE HARDEST: When the Dow Jones Industrial Average climbed 63.17 points on July 16, 1997 to close at 8,038.88, it marked the first closing above the 8,000 level. It took almost 45 years (to November 14, 1972) for the Dow to reach 1,000. The next milestones came much more quickly: 2,000 - January 8, 1987, 3,000 - April 17, 1991, 4,000 - February 23, 1995, 5,000 - November 20, 1995, 6,000 - October 14, 1996 and 7,000 - February 13, 1997. In other words, the second thousand points took over 14 years and the last six thousand about 10 years! A different perspective: When the Dow went from 1,000 to 2,000 the increase, of course, was 100%; a move to the next level of 9,000 will take only about a 12% increase!

CANADA MAY NOT EASE FOREIGN INVESTMENT RESTRICTION: Contrary to earlier thoughts, Canada may not ease the 20% limit on foreign assets held in a Registered Retirement Savings Plan (RRSP). An RRSP is something akin to an IRA. Many mutual fund managers have urged an easing of the limit to maximize RRSP investment returns. However, the Canadian government may not be willing to consider a change now because, as reported by BNA, a very high portion of Canadian government debt is held by foreign investors.

BUT CANADIAN PUBLIC FUND MIGHT EXPAND INVESTMENTS TO U.S.: The Ontario Teachers' Pension Plan Board, one of Canada's largest public pension plans at $37 Billion, is considering investments in the United States real estate market. Currently, all real estate holdings are Canadian but up to 10% in American REITs is now being considered. Incidentally, the Fund already has about 13% of its assets in U.S. equities, through use of derivatives.

THE FRENCH REALLY ARE UNPREDICTABLE: In what may be as surprising as their upset victory in June, new French leaders may not kill the previously-authorized private pension fund framework. Those in power now say that although the scheme is in need of revision it may not be totally discarded. Perhaps the new leaders realize how much additional tax revenues would help the cash-strapped government. Allowing some 14 Million private sector employees to participate in private sector funds would inject the equivalent of $5 Billion annually into French markets, according to BNA.

ILLINOIS GOVERNOR AGREES TO PENSION BENEFITS INCREASE: The Illinois pension benefits negotiated earlier this year (see C&C Newsletter for July, 1997) have now been signed into law by the Governor. Incredibly, this improvement is the first one in state employee benefits in 25 years! In addition to pay raises which employees gave up, the state will no longer pay entire health insurance premiums for all retirees; for new retirees, payment will only be made for those with 20 years of service, with others paying 5% of the premium for every year under 20. Again, the substance of this item was reported by BNA.

EXPANDED INVESTMENTS FOR CHICAGO EMPLOYEES FUND: In unrelated action, the Governor of Illinois also signed a bill permitting the Chicago Municipal Employees Annuity & Benefit Fund to operate under prudent person standards. The Executive Director of the $4.2 Billion fund said that the fund will definitely be changing its asset allocation.

HAWAII EXTENDS HEALTH AND PENSION BENEFITS TO DOMESTIC PARTNERS: In a move that might shock Jack Lord of Five-O fame, Hawaii has enacted a law which extends health and pension benefits to persons other than spouses. These nontraditional partners -- for example, a widow and her son -- will be registered as "reciprocal beneficiaries." Significantly, according to BNA, the legislation does not allow same-sex couples to marry. Book 'em Danno!

RETIREMENT CONTRACT DURING EMPLOYMENT NOT VIOLATIVE OF STATUTE: Section 215.425, Florida Statutes, generally provides that no extra compensation shall be made to any officer, agent, employee or contractor after the service has been rendered or the contract made. In this case, while the employee was still rendering services, the parties executed a retirement contract affording additional retirement income. In reversing a summary judgment against the employee, the appellate court held that the plain meaning of the statute does not preclude alteration of the current pension plan to current employees who are not receiving benefits under the plan. All that is well and good, but we wonder if both courts and both attorneys involved read the entire statute, which later reads: "the provisions of this section do not apply ... to extra compensation given to county or municipal employees pursuant to policies adopted by county or municipal ordinances." Brown v. City of Jacksonville Beach, 22 Fla. L. Weekly D1683 (Fla. 1st DCA, July 11, 1997).

AGE DISCRIMINATION CLAIMS TIME-BARRED: Appellants were among 25 present and former employees of the Tallahassee Police Department who sued the Department and the City of Tallahassee for age discrimination under the Age Discrimination in Employment Act of 1967, 29 U.S.C. §621 et seq. (ADEA), and the Florida Civil Rights Act of 1992, §760.01 et seq., Florida Statutes. In affirming the lower court's summary judgment, the appellate court held that to bring an action for age discrimination in Florida, a complainant must first file a charge with the Florida Commission on Human Relations (FCHR) and the Equal Employment Opportunity Commission (EEOC) within 300 days of the alleged discrimination. While administrative filing requirements are preconditions to maintaining an action under the ADEA, they are not jurisdictional prerequisites opposing an absolute bar to suit. Thus, the period for filing a charge may be equitably tolled or otherwise modified, which was not the case here. One potential trap for the unwary: Section §760.11, Florida Statutes, permits filing a complaint with FCHR within 365 days of the alleged violation. Dozier v. Coe, 22 Fla. L. Weekly D1684 (Fla. 1st DCA, July 11, 1997).

DETERMINATION OF "DISABILITY" IS NOT MEDICAL QUESTION: "Impairment" is related directly to the health and physical condition of a person and is a medical issue. On the other hand, "disability" is a legal question and is determined within the context of personal, social and occupational demands as the result of an impairment. Bishop v. Baldwin Acoustical & Drywall, 22 Fla. L. Weekly D1674 (Fla. 1st DCA, July 7, 1997). Even though this case was decided in the workers' compensation context, we continue to believe that the concepts are applicable to pension board determinations of disability pensions. In other words, a medical panel determines whether or not the applicant has an impairment and the board decides whether or not that impairment results in a disability (as defined in the plan).

VERMONT BUCKS TREND: A report in Pensions & Investments indicates that Trustees of the $700 Million Vermont State Employees' Retirement System will consider drastically cutting its domestic stock allocation. Among a consultant's recommendations are a decrease in domestic stocks to 33% from 50%, an increase in international stocks to 20% from 17% and an increase in domestic bonds to 32% from 15%. (Yes, folks, the entire Vermont State System only has $700 Million.)

SEC MAY CLOSE SHAREHOLDER LOOPHOLE: The Securities & Exchange Commission plans to recommend major changes to shareholders' relationships with company management. As a rule, shareholders views are heard through a company's proxy statement at annual meeting time. Some critics believe that groups with strong religious and social convictions have taken advantage of the right to make shareholder proposals by promoting their agenda without much support from other shareholders. Now, the SEC is expected to increase the threshold for resubmissions of resolutions at an annual meeting. If the SEC has its way, groups wanting to submit the same proposal year after year will be allowed to do so only if their proposal receives a certain percentage of shareholder approval. For example, if the proposal received 3% of the vote at an annual meeting, it would have to receive at least 6% the following year to be eligible for resubmission the year after that. The proposal would increase the required percentages every year.

BIG CHANGES AHEAD FOR CALSTRS?: The $75 Billion California State Teachers' Retirement System is considering an all-passive approach to investment in domestic equities (a la the Washington State Investment Board, see C&C Newsletter for September, 1996). Currently, the Fund has $27 Billion (36%) in domestic equities, of which over $23 Billion is already passively managed by outside managers. CALSTRS also has almost $16 Billion (21%) in international equities. Part of the plan is to increase all equities from the current 57% to 63% (38% domestic and 25% foreign). That allocation is almost identical to the aggregate asset mix of the corporate pension funds included in Pensions & Investments' ranking of the 1,000 largest pension funds. Incidentally, for the five years ended December 31, 1996, the median return for public funds over $1 Billion was 11.3%, with CALSTRS at 10.3% ranking in the 96th percentile. Note the difference between the middle and the bottom is only 100 basis points (1%)!

LEARN FROM THE BEST: Peter Lynch, lately of Fidelity Magellan fame, is marketing an interactive CD-Rom entitled "The Stock Shop With Peter Lynch." The CD contains a 15-step tutorial on stock-picking. The product is published by Houghton Mifflin Interactive Corp., Somerville, MA, and costs $69.95.

TIAA-CREF STILL LEADS DC MANAGERS: A report in Pensions & Investments shows that the Teachers Insurance and Annuity Association-College Retirement Equities Fund, with $185 Billion, still holds the top spot among defined contribution money managers. At $155 Billion, Fidelity Investments is second and well ahead of State Street Global, number three with over $58 Billion. Among the top twenty-five, defined contribution assets grew 23%. Incredibly, the top 25 managers were responsible for investing almost $1 Trillion -- more than 80% of the $1.2 Trillion internally managed defined contribution assets at the end of 1996.

CONTRA COSTA GETS JITTERS: An overweighted equity portfolio caused by an overheated stock market has pushed the Contra Costa County Employees Retirement Association to move $61 Million out of equities and into fixed income. Pensions & Investments reports the action as resulting from a recent asset allocation study. New asset allocation targets for the $2 Billion fund are 42% domestic equity, 10% international equity, 32% domestic fixed income, 3% international fixed income and 7% real estate. Other allocations are to alternative investments and cash.

THOSE VAGABOND SHOES ARE LONGING TO STRAY: The New York Common Retirement Fund - at $88 Billion second only to CALPERS - has completed the largest office property transaction in the Raleigh/Durham, North Carolina market. For $32 Million, the fund purchased the First Union Plaza, a 235,000-square-foot building, according to Pensions & Investments. Just because you can make it "there" doesn't mean you can make it "anywhere" go ask CALPERS about the Pompano Square Mall (see C&C Newsletter for December, 1996) and the State of Connecticut Pension Trust Fund about the Fashion Mall at Plantation (see C&C Newsletter for August, 1996).

HOUSTON FIREMEN TO STUDY ALLOCATION: : Pensions & Investments reports that the Houston Firemen's Relief & Retirement Fund will conduct an asset allocation study by the end of this year. A spokesman said the study will be conducted internally and probably will result in reallocation of some of the $1.4 Billion Fund's domestic equities. The target for such assets is 30% to 40%, but domestic equities are already at 42%. Don't just stand there, do something.

HUNGARIANS HUNGER FOR A NEW PENSION LAW: The Hungarian Parliament has passed a law creating a mandatory private system in addition to the state system. Effective January 1, 1998, people below 47 can elect to join the new system. The 6% employee contribution would be shifted to the privately-run defined contribution fund, while employers would continue to contribute 30.5% of pay into the state system. (Query: how could a pay-as-you-go system cost over 30% of pay?) Pensions & Investments tells us that workers 47 and above must remain in the state system and all new hires must join the new system starting in June of next year.

YOU ARE MY SUNSHINE, MY ONLY SUNSHINE: In 1976 the people of Florida proposed and adopted Article II, Section 8, of the Florida Constitution, known as the "Sunshine Amendment." The amendment provides that a public office is a public trust and any public officer or employee who breaches the public trust for private gain shall be liable to the state for all financial benefits obtained by such actions. However, the amendment also states that "the manner of recovery and additional damages may be provided by law." The Third District Court of Appeal seized upon the latter language in affirming dismissal of a complaint filed against State Senator Alberto Gutman, who allegedly misused his position by receiving an inappropriate $500,000.00 fee. Because the amendment is not self-executing and because the Legislature did not implement it by legislative enactment, no relief could be granted. However, the appellate court did certify the following question to the Florida Supreme Court as one of great importance: Does article II, section 8(c) of the Florida Constitution, by itself and without any legislative enactment, provide individual citizens of Florida with a cause of action for breach of the public trust for private gain against a public official or employee? St. John Medical Plans, Inc. v. Gutman, 22 Fla. L. Weekly D1717 (Fla. 3d DCA, July 16, 1997).

FIRING OF POLICE OFFICER NOT "EXECUTIVE DECISION": Police officers are not "at will" employees. They are entitled to a hearing at which it must be established that there are reasons for termination. Because there must be a hearing and because termination is proper only when the facts established at the hearing justify it, the decision to terminate is quasi-judicial and the opportunity for appropriate review is required. Therefore, terminated police officers were entitled to seek certiorari review of terminations (even where city manager had sustained chief's actions). Grice v. City of Kissimmee, 22 Fla. L. Weekly D1733 (Fla. 5th DCA, July 18, 1997).

ARE TWO DROPS BETTER THAN ONE?: Chapter 97-180 amends Chapter 121, Florida Statutes, the Florida Retirement System, to create a Deferred Retirement Option Program (DROP). The DROP becomes effective July 1, 1998 and is contingent upon the Division of Retirement receiving a favorable determination letter (that FRS continues to be a facially qualified plan) and a favorable private letter ruling (that FRS is not a defined contribution plan, a hybrid plan or a CODA, and that DROP benefits are not deemed to be constructive receipt of income). The new law also has a couple of other interesting provisions: (1) between July 1, 1997 and December 31, 1997 a municipality or special district may elect to designate all its elected positions for inclusion in FRS and (2) any beneficiary who is found guilty (or who has entered a plea of guilty or nolo contendere) of unlawfully and intentionally killing or procuring the death of a member forfeits all rights to the deceased member's benefits. Curiously, Chapter 97-154, which became law the same day, also amends FRS to create the identical DROP. We guess these changes are more than a DROP in the bucket.

THE VOICE OF EXPERIENCE: The following quote from the late William J. Brennan, Jr., retired Supreme Court Justice, may show why many believe him to be one of the most influential jurists of all time: "We current Justices read the Constitution in the only way that we can -- as 20th-Century Americans."

PERC ISSUES DECLARATORY STATEMENT TO MIAMI BEACH: On July 25, 1997 the Florida Public Employees Relations Commission issued a declaratory statement in response to a petition therefor filed by the City of Miami Beach. In Re The Petition for Declaratory Statement of the City of Miami Beach, Case No. DS-97-001 (Order Number: 97DS-190). In essence, PERC found that a collective bargaining agreement in conflict with an existing part of the municipal Charter (that is, a Special Act of the Florida Legislature) overrode the Charter even though the negotiated changes were not approved by referendum of the municipality's electors. In issuing the declaratory statement, PERC considered one of its own prior rulings and a Fourth District Court of Appeal case, despite Section 447.309(3), Florida Statutes, which on its face provides that a collective bargaining agreement in conflict with any law is not effective until an amendment of said law becomes effective. Because we feel the cited case is not on point, we would respectfully disagree with PERC until an appellate court takes the same position.

OH WHAT DID DELAWARE, BOYS?: BNA reports that the Governor of Delaware has approved legislation increasing pension benefits to state employees who retired before July 1, 1996. The new law is effective July 1, 1997 and grants pension increases of between 2% and 9%. Those who retired between January 1, 1979 and July 1, 1996 will receive the smallest increase. Those who retired in 1978 will receive a 4% increase. The percentage increases by one point each year prior to 1978 (up to the 9% maximum).

FEDERAL DISABILITY BENEFITS TAXABLE: A case reviewed by BNA demonstrates that federal disability benefits are treated differently than other disability benefits for income tax purposes. Federal workers are governed by the Federal Employees Retirement System or its predecessor, the Civil Service Retirement System. Federal disability benefits are not excludable from income under IRC §104(a)(1) because entitlement to FERS Disability Benefits does depend upon whether the injury or illness occurred on the job (that is, they are not in the nature of workers' compensation payments). Moreover, the benefits are not excludable under IRC §104(a)(2) because they are not considered "damages."

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.


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