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April, 1998

Stephen H. Cypen, Esq., Editor

STATE EMPLOYEES CONTINUE TO JOIN HMOs: The percentage of state employees in Health Maintenance Organizations and Point-of-Service Plans has reached at least 50% in seventeen states, reports BNA. In nine of those states, the percentage is as high as 75%. Specifically, 62% of state employees in the West and 55% in the Midwest were enrolled in HMOs or POS plans, compared with 36% in the Northeast and 31% in the South. We wonder if these employees are aware of the correlation between HMO membership and heart attack deaths (see C&C Newsletter for January, 1998).

FLORIDA CIVIL RIGHTS ACT SURVIVES CONSTITUTIONAL CHALLENGE: Overruling a circuit court order to the contrary, the District Court of Appeal held that the Florida Civil Rights Act of 1992 is not an unconstitutional denial of access to courts and does not violate the equal protection and due process clauses of the Florida and United States constitutions. The statute requires that those who receive a "no-cause finding" from the Florida Commission on Human Relations must go through a full administrative hearing at the Department of Administrative Hearings, prevail, successfully defend that recommended order before the Commission, and then be required to renounce the benefits won at the administrative level to have the right to go circuit court. On the other hand, those who receive a determination by the Commission of reasonable cause or those whose claims are not processed within 180 days (regardless of merit) have the right to proceed directly to circuit court without having to go through the administrative process. McElrath v. Burley, 23 Fla. L. Weekly D647 (Fla. 1st DCA, February 26, 1998).

BUT "GORT ACT" DOES NOT: Effective October 1, 1995, the Florida Legislature enacted Chapter 95-182, the "Officer Evelyn Gort and All Fallen Officers Career Criminal Act of 1995." Basically, the law allows a court to impose enhanced sentencing for violent career criminals. However, Article III, section 6, of the Florida Constitution provides that every law shall embrace but one subject and matter properly connected therewith, and the subject shall be briefly expressed in the title. The Gort Act contains sections dealing with sentencing of violent career criminals, civil aspects of domestic violence, civil causes of action for damages inflicted in violation of a domestic violence injunction, rules regulating private damages actions brought by victims of domestic abuse and procedural duties imposed on the court clerk/sheriff regarding domestic violence injunctions. In declaring the Gort Act unconstitutional, the court found that it embraced criminal and civil provisions that have no natural or logical connection. The court did note conflict with a Third District Court of Appeal opinion, which could mean that the Supreme Court of Florida ultimately will resolve the issue. One other point: "single-subject" challenges cannot be brought once a law is reenacted as part of the official Florida Statutes. Thus, anybody sentenced under the Gort Act after May 24, 1997 may not mount a constitutional on this basis. Bravo. Thompson v. State of Florida, 23 Fla. L. Weekly D713 (Fla. 2d DCA, March 13, 1998).

WHISTLE-BLOWER'S ACT MAY BE FLAWED: The Florida Whistle-blower's Act is intended to prevent agencies from taking retaliatory action against an employee who reports violations of law on the part of a public employer. Section 112.3187(9)(f), Florida Statutes, provides that in any action the relief must include temporary reinstatement to the employee's former position or to an equivalent position, pending the final outcome of the complaint, if an employee complains of being discharged in retaliation for a protected disclosure and if a court of competent jurisdiction determines that the disclosure was not made in bad faith or for a wrongful purpose or occurred after an agency's initiation of a personnel action against the employee which includes documentation of the employee's violation of a disciplinary standard or performance deficiency. (Note, that for some reason, this particular paragraph does not apply to municipal employees.) In any event, the employee here was demoted from division director to lieutenant in the Miami-Dade County Department of Corrections. The lower court granted her motion seeking temporary reinstatement to her former position. On appeal, however, the court read the statute literally as applying only to those employees who complain of being discharged, and reversed the lower court. Recognizing that the legislature acted commendably in enacting the Whistle-blower's Act but finding that an employee receiving a major demotion suffers grievously, the court commented that the limitation of the temporary reinstatement subsection does not fairly serve the whistle-blower. "We invite the legislature, in its wisdom, to address this deficiency." Metropolitan Dade County v. Milton, 23 Fla. L. Weekly D674 (Fla. 3d DCA, March 11, 1998).

WORKER NOT LIABLE FOR MEDICAL EXPENSES IN EXCESS OF WORKERS' COMPENSATION FEE SCHEDULE: A doctor treated an injured employee and was paid by the employee's workers' compensation carrier, per the workers' compensation fee schedule, less than one-third of the actual bill. The employee settled with another party for $300,000.00 but never paid the balance of the doctor's bill. The doctor filed suit against the employee, the trial court granted a summary judgment against the doctor and the appellate court affirmed. A health care provider may not recover a fee in excess of the fee schedule amount and may not recover directly from the worker. Interestingly, the employee's demand letter to the third-party tortfeasor included the entire amount of the doctor's bill and a letter from the employee's attorney to the doctor stated that if money were recovered the attorney would hold sufficient funds in order to satisfy the doctor's outstanding bill. M. Felix Freshwater, M.D., P.A. v. Baker, 23 Fla. L. Weekly D765 (Fla. 3d DCA, March 18, 1998).

FASB ISSUES STATEMENT NO. 132: In February of this year the Financial Accounting Standards Board issued Statement No. 132, changing the disclosure requirements of FASB Statements No. 87, No. 88 and No. 106. Statement No. 87 is entitled "Employers' Accounting for Pensions;" No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits;" and No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Statement No. 132 adds disclosure of information FASB believes useful and removes disclosure of information FASB no longer believes is necessary. The new Statement is effective for fiscal years beginning after December 15, 1997.

GOOD NEWS FOR DC PLANS MAY BE ON HORIZON: Iowa Senator Grassley has introduced the Enhanced Savings Opportunities Act, which would modify IRC Section 415(c) by repealing the current 25% compensation limit on employee and employer contributions to tax-qualified defined contribution plans. The bill, co-sponsored by Florida Senator Bob Graham, would retain the existing $30,000.00 cap. According to BNA, the American Society of Pension Actuaries and the Profit Sharing and 401(k) Council of America strongly support enactment. While we applaud any measure to liberalize retirement benefits -- particularly one which beneficially impacts lower and middle income workers -- we hope the expansion of defined contribution opportunities does not further erode membership in defined benefit plans.

GOVERNMENT WORKER SOCIAL SECURITY COVERAGE VERY EXPENSIVE: A study released by Public Retirement Institute, reported by BNA, concluded that the first-year cost of mandating Social Security for newly-hired state and local government employees would exceed $600 Million (double the Congressional Budget Office estimate). PRI estimates the cost at $12.8 Billion and $77.5 Billion, respectively, over five years and ten years. Ominously, because the cost of Social Security would be in addition to the cost of other benefits, several survey respondents noted that ancillary benefits, such as health, could be adversely affected.

HONG KONG FUNDS (NOT UNEXPECTEDLY) PERFORM BADLY: Following problems in Asia generally (see C&C Newsletter for February, 1998), Hong Kong retirement fund managers suffered one of their worst years in recent history. In 1997 Hong Kong pension funds registered an annual median return of -7.3%, a report in Pensions & Investments states. Returns for 1997 ranged from a high of 17% to a low of -34%. The year before, Hong Kong funds posted a 16% median return.

ILLINOIS RETIREES CANNOT ENFORCE STATE FUNDING OF BENEFITS: BNA recently reported an Illinois Supreme Court case dealing with a state constitutional provision protecting retirement benefits. Reversing an appeals court decision to the contrary, the Illinois Supreme Court held that the beneficiaries did not have a constitutional or contractual right to enforce legislative funding obligations. The constitutional protection extends only to the right to receive money due at time of retirement. The beneficiaries sought to enforce an Illinois law that requires the state to increase contributions to avoid funding shortfalls. Sklodowski v. State of Illinois, Case No. 82459 (Ill., March 19, 1998)

LACERA ANSWERS P&I: Responding to an article in Pensions & Investments (see C&C Newsletter for March, 1998) and a subsequent editorial, the Chief Executive Officer of the Los Angeles County Employees Retirement Association writes that LACERA does not have a funding problem. In a letter to the editor, the CEO says that LACERA remains more than 100% funded and that an existing reserve account will allow the county to offset its annual retirement contributions to the system for the next three years. The letter was written, among other reasons, to dispel any misleading statements because "our members and beneficiaries could read your article or hear about it and wonder whether their benefits are secure."

U.S. PENSION FUND ASSETS INCREASE: Largely due to stock market gains, assets of U.S. pension funds increased to $7.4 Trillion at the end of 1997 from $6.3 Trillion the year before -- an increase of more than 18%. Although all categories increased (private, state/local, U.S. government and life insurance companies), state and local government plans showed the highest gain, 22%, to over $2.1 Trillion from $1.7 Trillion. The figures were reported by Pensions & Investments.

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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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