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April, 1999

Stephen H. Cypen, Esq., Editor

1. DB BENEFITS OUTGAIN DC BENEFITS: In 1998 private defined benefit plan assets grew almost fifty per cent faster than private defined contribution plan assets (20.3% vs. 13.8%), according to Federal Reserve Board data reported in Pensions & Investments. The surge in defined benefit plan asset growth is even more astonishing when one considers that such plans paid out $6.5 Billion more in benefits than they took in, while defined contribution plans took in $103 Billion more than they paid out! Meanwhile, total pension fund assets -- private, public, federal and life insurance companies -- increased 14.3% for the year, to $8.8 Trillion. For some reason, the Federal Reserve does not break down public plan data between defined benefit and defined contribution plan.

2. SO MAYBE "ALEC" ISN'T SO SMART: The American Legislative Exchange Council (ALEC) and other organizations have been introducing defined contribution legislation across the country and lobbying strongly on its behalf. ALEC, according to NCPERS' Monitor, is an association of individual state legislators across the country whose goal is to discuss issues, develop policies and write model legislation. Beware, in Florida, SB 356 would create an optional defined contribution program for members of the Florida Retirement System.

"Never underestimate the power of stupid people in large groups."

3. ACTIVE U.S. BOND MANAGERS ATTRACT NEW MONEY: According to Pensions & Investments, active institutional managers won twice as much domestic fixed-income business as equity business last year. This trend is a continuation of one established a couple of years ago. The top ten active fixed-income managers won a total of $68 Billion in new domestic business. The top ten active equity managers attracted a combined $32 Billion in new domestic assets.

4. BUT OVERSEAS BUSINESS LAGS: In the same issue, Pensions & Investments reports that U.S. institutional investors cut back on international and global allocations in 1998. The top ten winners of net new business have reported a total of $25.6 Billion under management last year, down 5.5% from 1997's total of $27.1 Billion. Net new assets to international and global accounts (equity/fixed and active/passive) totalled $36.6 Billion, down 3.2% from the year before's $37.8 Billion.

5. GETTING A PIECE OF THE PIE: The following "status report" appears in April 1999 Smart Money: (1) estimated amount of every 1999 federal tax dollar that goes to national defense - $.19; estimated amount that goes to education - $.05. (2) amount of money donated to the presidential election campaign fund from all 1997 tax returns - $66.9 Million; amount donated for reducing the public debt - $78,280. (3) How much more the federal government spent than what it received in federal taxes, per person, in Montana in 1997 - $1,925; in New York State - $785. (4) number of extra tax preparers hired by H & R Block during tax season in 1998 - 56,000; estimated number of extra employees hired by IRS in 1998 - 30,000.

"There's no government like no government."

6. COLUMBUS, OHIO REPEALS DOMESTIC PARTNERS ORDINANCE -- BEFORE EFFECTIVE DATE: Rather than face a referendum, the Columbus, Ohio City Council voted unanimously to repeal an ordinance providing health care coverage for domestic partners of unmarried city workers. The ordinance was passed unanimously in December, but the Columbus City Charter permits citizens to contest Council action by submitting a petition and allowing the voters to reject any ordinance adopted by the Council. BNA reports that opponents collected far more signatures than necessary within the required thirty-day period.

7. FEDERAL COURT HOLDS STATES IMMUNE FROM ADA LIABILITY: Bucking a trend, a United States District Court in New York has ruled that states are immune from liability under the Americans With Disabilities Act. The trial court ruling is at odds with most other federal district courts (including one in the same district) and all U.S. Courts of Appeals that have ruled on the issue. The Eighth Circuit of Appeal recently deadlocked on the issue (see C&C Newsletter for November, 1998, Item 26). The New York judge found ADA of dubious constitutionality because it imposes a duty to accommodate even where there is no evidence that the refusal to do so is discriminatory. Kilcullen v. New York State Dept. of Transportation, Case No. 96-CV-2023 (N.D.N.Y., January 19, 1999).

8. FICA DUE ON SEVERANCE PAY: Upon being laid off, an employee signed a severance agreement and received a severance payment from his employer. The agreement specifically provided that payment was primarily to recognize the value of his past contributions and to cushion any financial loss resulting from elimination of his job. In a case reported by BNA, a federal trial court judge ruled that the foregoing provision demonstrated that payment arose from and was based on the employment relationship (that is, from service performed by the employee), thus requiring withholding under the Federal Insurance Contributions Act. We recently reported a similar decision by a federal appeals court (see C&C Newsletter for March, 1999, Item 19).

9. FLORIDA SUPREME COURT MAY DECIDE CIVIL RIGHTS ACT QUESTION: A Florida District Court of Appeal has upheld dismissal of a complaint brought pursuant to Sections 760.01-760.11, the Florida Civil Rights Act of 1992. The court held the claim was time-barred because it was not brought within one year after the Florida Commission on Human Relations failed to determine in 180 days whether there was reasonable cause. However, the court did certify to the Supreme Court of Florida the following as a question of great public importance: Does Section 760.11(5), Florida Statutes (1995), one-year statute of limitations for filing civil actions "after the date of determination of reasonable cause by the commission" apply also upon the commission's failure to make any determination as to "reasonable clause" within 180 days as contemplated in Section 760.11(8), Florida Statutes (1995), so that an action filed beyond the one-year period is time-barred? Joshua v. City of Gainesville, 24 Fla. L. Weekly D550 (Fla. 1st DCA, February 17, 1999). A month later, another Florida District Court of Appeal certified the same question to the Florida Supreme Court. Adams v. Wellington Regional Medical Center, Inc., 24 Fla. L. Weekly D715 (Fla. 4th DCA, March 17, 1999).

You can't win them all, but you sure can lose them all."

10. BUT "UNTIMELY" VERIFIED FLORIDA CIVIL RIGHTS COMPLAINT RELATES BACK TO TIMELY UNVERIFIED COMPLAINT: Section 760.11, Florida Statutes, part of the Florida Civil Rights Act of 1992, provides that an aggrieved person may file a verified complaint with the Florida Commission on Human Relations within 365 days of the alleged violation. In this case, the complainant filed a timely FCHR complaint signed only by her attorney. Subsequently, after the statutory deadline, complainant filed a second, verified complaint. In reversing dismissal of the complaint ultimately filed in court against the former employer, a Florida District Court of Appeal referred to a regulation issued by the Equal Employment Opportunity Commission in implementing Title VII of the Civil Rights Act of 1964, the Federal counterpart: "A charge may be amended to cure technical defects or omissions, including failure to verify the charge, or to clarify and amplify allegations made therein." The court also made reference to the statutory provision that "the Florida Civil Rights Act of 1992 shall be ... liberally construed to further the general purposes stated in this section and the special purposes of the particular provision involved." Except for this one case, could've fooled us (see above item and C&C Newsletter for November, 1998, Item 24; C&C Newsletter for December, 1997, Page 1; and C&C Newsletter for August, 1997, Page 7). Green v. Burger King Corporation, 24 Fla. L. Weekly D778 (Fla. 3d DCA, March 24, 1999).

11. WORKERS' COMP CANNOT BE WAIVED: Section 440.09(1), Florida Statutes, provides that an employer shall pay compensation, except for situations specifically enumerated therein. Here, claimant was given the option to use her sick leave and vacation leave in lieu of payment of workers' compensation benefits, which she chose. Nevertheless, her agreement was improper under Section 440.21(2), Florida Statutes, which makes "an agreement by an employee to waiver her or his right to compensation under this chapter ... invalid." The court rejected the employer's argument that claimant was not compelled to use her leave benefits because she had a choice. The choice was illusory in that claimant could have received her regular compensation or an amount less than one-half of her regular pay in workers' compensation benefits. Nolan v. Delta Airlines, 24 Fla. L. Weekly D555 (Fla. 1st DCA, February 17, 1999).

12. PTD SUPPLEMENTAL BENEFITS MAY CONTINUE PAST AGE SIXTY-TWO: Section 440.15(1)(f)1, Florida Statutes, provides for an additional benefit in certain cases of permanent total disability. Those supplemental benefits cease at age sixty-two if the employee is eligible for both retirement and disability benefits under the Social Security Act. In this case the employer incorrectly ceased payment of supplemental benefits because, although the employee was entitled to Social Security retirement benefits, he was no longer eligible for Social Security disability benefits. Scott v. Mohawk Canoes, 24 Fla. L. Weekly D567 (Fla. 1st DCA, February 18, 1999).

13. FRS AMENDMENT NOT APPLICABLE TO MEMBER WHO HAD ALREADY REACHED NORMAL RETIREMENT DATE: George Bean retired from the Florida Retirement System on July 1, 1996, having reached his "normal retirement date" many years earlier. After a divorce in 1983, Mr. Bean obtained confirmation from the Division of Retirement that he could list both a former wife and a current wife as joint annuitants. However, in 1995, the Florida Legislature amended FRS to exclude an ex-spouse from the statutory definition of "joint annuitant." Chapter 95-338, Laws of Florida. Relying upon that amendment, the Division of Retirement denied Mr. Bean's ex-spouse's designation as joint annuitant. In reversing the Division's decision, the District Court of Appeal held that an employee who has reached normal retirement date prior to this statutory amendment and who has already indicated an intention to designate a former spouse as joint annuitant has a vested right to such designation. Bean v. State of Florida, Division of Retirement, 24 Fla. L. Weekly D730 (Fla. 2d DCA, March 17, 1999).

"Disinformation is not as good as datinformation."

14. MUNICIPAL GRIEVANCE RESOLUTION BOARD SATISFIES PUBLIC WHISTLE-BLOWER ACT REQUIREMENT: We have previously reported that the Florida Public Whistle-blower's Act requires any local public employee protected by the Act to file a complaint with the appropriate local governmental authority if that authority has established by ordinance an administrative procedure for handling such complaints (see C&C Newsletter for December, 1998, Item 13). A municipal grievance resolution board meets those requirements, even though it provides for multiple steps (employees can appeal decisions of the grievance resolution board to the administrative and personnel committee, which submits its recommendations to the town council for action). In addition, although Section 112.3187(8)(b), Florida Statutes, provides that the local governmental authority must make findings of fact and conclusions of law for a final decision by the local governmental authority, the statute does not mandate that the enabling ordinance specify said requirement. Dinehart v. Town of Palm Beach, 24 Fla. L. Weekly D791 (Fla. 4th DCA, March 24, 1999).

15. MAYOR MAY EXERCISE CHARTER POWER TO VETO RESOLUTION, EVEN IF MEASURE IS EXECUTIVE OR ADMINISTRATIVE: The City of West Palm Beach Charter provides that the Mayor shall have the power to veto legislation, which may be overridden by a two-thirds majority vote of the entire Commission. Thus, the Mayor could veto resolutions awarding a service contract, even if such resolutions traditionally are viewed as executive or administrative. The Charter is clear that either kind of Commission action in the form of an ordinance or resolution can be vetoed by the Mayor. Donmar Corporation II v. City of West Palm Beach, 24 Fla. L. Weekly D863 (Fla. 4th DCA, March 31, 1999).

16. LIVING IN THE LAP OF LUXURY AIN'T CHEAP: In our continuing effort to provide readers with truly useful information, we are again reporting the Moët & Chandon Luxury Index. Named for James Bond's favorite champagne, the Index is supposed to gauge the inflation rate for high-ticket goods and services. During 1998 the Index increased almost twice as fast as the General Consumer Price Index -- 3.9% vs. 1.6%. As in previous years, the largest increase was for the price of a round-trip ticket from New York to Paris on the Concorde, up 12% to almost $11,000 (see C&C Newsletter for April, 1997, Page 4). Fasten your (Gucci) seatbelts.

"Money can make you rich!"

17. CHANGES TO MILITARY RETIREMENT SYSTEM MAY NOT SOLVE RETENTION PROBLEM: The United States General Accounting Office sees no clear indication that proposed changes to the military's retirement system, which would cost $13 Billion in higher costs and unfunded liabilities, will address the retention problem. Although the recently reported downturn in retention rates is of concern, the nature of the problem is unclear. Understanding the nature of the retention problem is critical to crafting solutions. Although surveys of military personnel show increasing dissatisfaction with the retirement system, it is not clear what that really means. For example, some surveys do not differentiate between retirement pay and other retirement benefits. The link between retirement pay and retention is also unclear. And even if the retirement system is found to be linked to retention, it still may not be the most cost-effective way to address the problem. Read the entire congressional testimony of the Director of Military Operations and Capabilities Issues by going to http://www.gao.gov and selecting GAO/T-NSIAD-99-94 in the February 1999 Month in Review.

18. PLEASE SHARE OUR NEWSLETTER: As you know, our Newsletter is a free service provided to our clients, friends and those who ask to be put on our mailing list. However, writing the Newsletter, editing it, having it typed, proofreading it, duplicating it and mailing it all make for a rather expensive product. Therefore, we send only one copy per entity, usually to the board administrator. We were surprised to learn that many individual board members have never seen our Newsletter! So, if you are the "representative" who receives our Newsletter, please share it with board members -- and anyone else who you think might be interested. Several board administrators place a copy of the Newsletter in the agenda package, thus making it readily available to board members. Remember that all Newsletters are available on our website at http://www.cypen.com.

"Headline: Lawyers Give Poor Free Legal Advice."

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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