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Cypen & Cypen
JULY 10, 2003

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

Democratic Presidential hopeful John Kerry is touting a plan to give Americans access to the same health coverage that members of Congress enjoy. But what sort of health benefits do Congressmen receive? Members of Congress are eligible for coverage under the Federal Employees Health Benefits program, administered by the United States Office of Personnel Management. The program covers 8.3 million Americans from the lowliest bureaucrats to the most powerful Presidential appointees. (President Bush is also eligible for FEHB coverage, but it has not been reported whether he has opted for such insurance.) In addition, FEHB extends benefits to retirees, spouses and unmarried dependents under the age of 22; domestic partners are not eligible. FEHB is known for offering its subscribers an unparalleled range of healthcare options. In the District of Columbia, federal employees can choose from 19 different plans, ranging from fee-for-service options to health maintenance organizations. Those living outside the Beltway have at least a dozen plans from which to choose. The government’s share of FEHB contributions was fixed in the Balanced Budget Act of 1997. The rule-of-thumb for congressional staffers and cabinet members alike is that the government picks up 72% of the average premium cost -- on par with what a generous private-sector employer would offer. Employees pay the remainder via payroll deductions. This report is from Slate, on-line magazine.

We previously reported on the unsuccessful lawsuit brought by State Employees Association of North Carolina against the governor for illegally withholding hundreds of millions of dollars in required pension contributions in order to balance the state budget (see C&C Newsletters for June, 2001, Item 11, and September, 2001, Item 10). Now, the North Carolina Supreme Court has breathed life into the action, reversing a Court of Appeals ruling that affirmed dismissal on the ground that SEANC lacked standing to sue. The high court found there is no requirement that all association members face potential harm in order for the group to have standing. Incidentally, the governor has restored part of the money due to the $42 Billion North Carolina Teachers’ and State Employees’ Retirement System, but $130 Million remains outstanding.

An attorney for the Fraternal Order of Police asked the Coral Gables, Florida, City Attorney to authorize the Police Department to purge or expunge documents it generated during an internal affairs investigation of a police officer. The request was based on the contention that the investigation was improperly initiated against the officer based upon his activities as president of the FOP rather than upon his actions as a law enforcement officer. In an informal advisory legal opinion, the Florida Attorney General concluded that in the absence of a court order determining that the subject records are not public records within the meaning of Chapter 119, Florida Statutes, the documents may not be expunged. The investigation was ostensibly conducted under the law enforcement agency’s authority to conduct investigations into activities of its law enforcement officers. Thus, the records were generated while the agency was acting in its official capacity in performing what it considered to be its official duties. “I am not aware of, nor have you drawn my attention to, any decision of authority that would permit a public agency to purge or expunge documents which it created while carrying out what it perceived to be its official duty based on an accusation that the agency may have been mistaken in such an assessment.” The Attorney General did note that the retention schedule applicable to law enforcement for internal investigation records unfounded or not sustained is one year. Florida Attorney General Advisory Legal Opinion (Informal) dated July 1, 2003.

After more than four years of highly regarded service as an engineer on the night shift at Avon Products, Byrne started to read and sleep on the job. Although his sister told Avon that Byrne was “very sick,” Avon fired Byrne. As it turns out, Byrne was suffering from depression, which he surmounted with two months of treatment. When Avon would not take him back, Byrne filed suit under the Americans with Disabilities Act and the Family and Medical Leave Act. The trial court granted summary judgment in favor of Avon, holding that neither statute excuses misconduct on the job. The United States Court of Appeals for the Seventh Circuit held that (1) inability to work for a multi-month period removes a person from the class protected by ADA but (2) FMLA affords those who cannot work as a result of a “serious health condition” up to twelve weeks of leave in a year. Byrne’s condition was serious, and he was ready to work again before the twelve weeks ran out. Thus, Byrne was entitled to reinstatement, and the judgment was vacated. Byrne v. Avon Products, Inc., Case No. 02-2629 (U.S., 7th Cir., May 9, 2003).

Article XII, Section 7 of the Alaska Constitution protects retirement benefits of public employees from diminishment or impairment. But benefits may be changed if any detriments are offset by advantages. The Supreme Court of the State of Alaska recently faced the question of whether as to changes in health insurance plans the balance must be struck taking the perspective of each individual or the group. The court concluded that the group perspective must generally be used because individual evaluations are subjective and uncertain. In so ruling, the court rejected two other arguments raised by the State: (1) that the subject constitutional provision does not encompass health insurance benefits and (2) if it does encompass health insurance benefits, the constitutional provision only requires that premiums paid on behalf of retirees not be diminished. Duncan v. Retired Public Employees of Alaska, Inc., Case No. S-10377 (Alaska, June 13, 2003).

Nearly one-fifth of the Baltimore Police Department may retire after completing three-year participation in the Deferred Retirement Option Plan. The Baltimore DROP, which provides that accounts earn interest at 8¼% per annum, has an interesting provision: the balance can be “folded” into the pension payment to increase the size of regular retirement checks. (Maybe we missed something, but isn’t the main purpose of a DROP to provide a lump sum in addition to regular payments?) Although Baltimore firefighters also have a DROP, they do not seem to be as eager as police officers to take advantage of the program. Pension benefits are calculated on the average of the highest eighteen months. In the last three years, police received record raises, meaning that their pensions are approaching the highest average salaries upon which their pensions will be calculated. In contrast, firefighters did not receive raises and are not seeing the same increase in average annual compensation.

According to, Russell has completed the annual reconstitution of its twenty-one domestic stock indexes. The Russell 1000, 2000 and 3000 suffered an 11% decline in market capitalization. The last reaches from General Electric ($287 Billion) to Verso Technologies, Inc. ($117 Million). The largest stock in the Russell 3000 decreased 7% from last year and 40% from the year before! The median capitalization -- the mid-point not the average -- came down from $700 Million last year to $622 Million. Total market capitalization of the broad index stands at more than $10 Trillion. Complete lists can be found at

After two arrests in a pension fund theft case, Atlanta officials will examine hundreds of pension accounts to see whether benefits were improperly paid in the names of dead retirees. Police and fire pension board members recently received a report showing that 218 of the 1300 accounts reviewed had received $676,000.00 in questionable payments. Nineteen pensioners were sent at least ten checks after they died, and a dozen received over $10,000.00 each. One account received twenty-one checks after the retiree’s death, a total of $51,000.00. In June, a former city pension board employee and a postal service worker were charged with stealing $68,000.00 by diverting money to a fraudulent account in the name of a dead retiree. Atlanta’s police, fire and general employee pension boards administer $1 Billion, distributing $6 Million a month in benefits. The total cost of administration is $1.2 Million, including a 12-person staff. This item comes from a report.

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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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