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Cypen & Cypen
NEWSLETTER
for
SEPTEMBER 26, 2003

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. FLORIDA ADMINISTRATIVE LAW JUDGE UPHOLDS DIVISION OF RETIREMENT’S PROPOSED “EXTRA BENEFIT” RULES:
By Final Order dated September 23, 2003, Administrative Law Judge Don W. Davis has dismissed a challenge to the Florida Division of Retirement’s proposed Rules 60Z-1.026 and 60Z-2.017 filed by Florida League of Cities and five member cities. Florida Professional Firefighters, Inc. and Florida Police Benevolent Association, Inc. had intervened in support of the rules. Chapter 99-1, Laws of Florida, became effective March 12, 1999. “However, local law plans in effect on October 1, 1998, shall be required to comply with the minimum benefit provisions of this chapter only to the extent that additional premium tax revenues become available to incrementally fund the cost of such compliance... .” The rules seek to carry out Chapter 99-1's prospective application, by requiring that “extra benefits” enacted prior to the effective date of Chapter 99-1 be funded from premium tax dollars received prior to that date. In other words, “extra benefits” means benefits greater than those afforded general employees and in addition to or greater than those benefits enacted prior to the effective date of Chapter 99-1. No evidence was presented by the challengers of legislative intent that additional premium tax revenues should or could be used to fund existing extra benefits enacted prior to Chapter 99-1. Hopefully, this issue, which has caused many cities to balk at their clear responsibilities, is now put to rest. The Final Order can be viewed at http://www.doah.state.fl.us/ros/2003/03-1117.PDF. An adversely-affected party is entitled to judicial review in the District Court of Appeal within thirty days.

2. ACTION BY TRUSTEES TO DETERMINE WORKERS’ COMP OFFSET IS QUASI-JUDICIAL:
Terry was a Pembroke Pines Firefighter who was awarded a service-incurred disability pension by the Board of Trustees. Because Terry had received workers’ compensation benefits, the Board sought to recover its plan-required offset. Terry disputed the methodology used by the Board, and sought review thereof by certiorari in the circuit court. However, on its own motion, the circuit court determined that the Board’s action was “legislative,” and thus unreviewable. So, without reaching propriety of the Board’s calculation of the offset, the court dismissed the case for lack of jurisdiction. Terry sought further review, by certiorari, in the district court of appeal, which held that the circuit court had jurisdiction and should have reached the merits of the substantive issues. Because the Board did not adopt a rule or ordinance of general application, but applied and interpreted existing rules in order to decide the modified amount of benefits, its actions were quasi-judicial. Interestingly, the appellate court also granted both parties’ motions for attorneys fees -- each contingent on that party ultimately prevailing. Finally a court understands when a party is actually entitled to fees. Terry v. Board of Trustees of the City Pension Fund for Police Officers and Firefighters in the City of Pembroke Pines, 28 Fla. L. Weekly D2184 (Fla. 4th DCA, September 17, 2003).

3. AMENDMENT TO POST-RETIREMENT BENEFIT PLAN NOT IN VIOLATION OF ADEA:
Prior to March 1, 2002, Ecolab’s post-retirement benefit plan provided that Ecolab would pay a premium subsidy for retiree medical coverage based on a retiree’s years of active service with the company. Effective March 1, 2002, Ecolab enacted a new post-retirement benefit plan, eliminating the retiree medical coverage premium subsidy for all employees except for two “grandfathered” groups. One such group consisted of employees who, as of February 28, 2002, were at least 50 years of age and had completed five or more years of eligibility service. Plaintiffs, who were over the age of 40 but under the age of 50 as of March 1, 2002, filed suit, alleging discrimination in violation of the Age Discrimination in Employment Act of 1967. In dismissing the complaint with prejudice, the federal trial judge found that binding precedent in the circuit holds that ADEA does not provide a claim of age discrimination where an employer treats older workers more favorably than younger workers. In other words, ADEA is limited to discrimination cases in which the comparator is younger than plaintiff. In addition, the court denied a stay pending a decision by the United States Supreme Court in the decision of another federal circuit court holding the exact opposite. Feigl v. Ecolab, Inc., Case No. 03 C 2290 (N.D. Ill. September 9, 2003).

4. FLORIDA OWES FEDS MORE THAN A QUARTER-BILLION DOLLARS:
Although the final audit is not as bad as the draft audit showing a debt of $500 Million (see C&C Newsletter for March 20, 2003, Item 3), federal auditors have determined that the Florida Retirement System owes the U.S. Department of Health and Human Services $267 Million. The Inspector General’s office says the State, which receives federal funds to pay employees working in federally-funded programs such as Medicaid, charged HHS too much for those employees’ pension benefits between 1999 and 2002. The auditor has suggested that the State pay the money all at once or over time by reducing future pension costs for the federal agency. By all accounts, State officials will fight the findings, arguing that HHS’s assumptions about what rates the State should charge would undermine FRS’s long-term strategy for meeting its financial obligation to pensioners.

5. START WORRYING ABOUT PENSION OBLIGATION BONDS -- BLOOMBERG:
According to Bloomberg.com, it’s time to worry about pension obligation bonds, especially if you are a taxpayer. States and municipalities are going to sell billions of dollars in bonds to help fill holes in their pension plans caused by the stock market bubble bursting. Those market losses only started showing up last year because of the way public pension plans smooth performance. Using bond money to pay for future pension liabilities is not at all like refinancing a debt you owe, says a report entitled “Pension Obligation Bonds or Bombs?” from Sage Advisory Services. Since Los Angeles County sold the first pension obligation bonds in 1986, a whopping $31 Billion of such bonds have been issued. Even Fitch Investors Service, one of the big three bond raters, observes that “using pension obligation bond proceeds to pay current and subsequent year pension contributions is considered to be a type of deficit financing -- the use of borrowing funds to pay for an annually recurring expense.” A top-rated municipality can borrow money for thirty years at 5.85% taxable (the equivalent of 4.70% tax-exempt). Issuers who sell POBs are betting that their investments will earn at least what they are paying on the bonds -- say, 6%. However, if the bonds are to have any kind of positive impact, the real number they have to hit is usually north of 8%. Four years ago, when some public pension plans were earning over 20%, 8% was a pretty safe bet; today, it is decidedly ambitious. Most municipalities that sold bonds are worse off than they were: they lost the money they raised through the bond sales and then some. They have to make more contributions to their pension plans plus pay debt service.

6. A SUGGESTED DISCLAIMER FOR SPDs:
One of our more industrious trustees was browsing the internet and came across FRS’s on-line brochure, which contains a pretty comprehensive disclaimer. The following is an adaptation thereof, which trustees should consider adding to their own summary plan descriptions: “As much as possible, this summary plan description has been written in nontechnical terms, avoiding the formal language of the pension plan. If questions of interpretation arise as a result of the attempt to make such retirement provisions easy to understand, the pension plan remains, as it must, the final authority. The information provided in this summary plan description is based on the pension plan in existence on , and is subject to modification based upon changes in the plan, subsequent interpretations of the plan and changes in other laws that affect the plan. Individual trustees are not agents of the plan. The board of trustees is not responsible for erroneous information provided by an individual trustee or provided by any other person purportedly representing the plan, except as specifically set forth in a writing executed by the Chairman or Administrator.”

7. HOW’S BAYOU?:
This just in from Court TV: two fake cops were arrested for trying to profit from another couple’s restroom tryst. Tyson James Farkas and Tina Marie Robichaux were charged with extortion and impersonating an officer after threatening to jail a couple they caught having sex in the women’s bathroom of Boudreau and Thibodeau’s Cajun Cookin’ Restaurant. (Please note that all people in Louisiana -- and Texas -- are required by law to use two first names.) The two allegedly told the ladies’ room love birds that they would be jailbirds unless they handed over $100.00. According to the real law, a customer at the restaurant discovered the entwined couple and told the manager, who asked them to leave the premises and called the sheriff. Farkas and Robichaux, also customers, then allegedly identified themselves as police officers and demanded $100.00 from the couple. The man actually gave the phonies $20.00 cash and a check for $80.00 before the law arrived. (Question of the Day: To whom was that check made payable?) In any event, the two Bayou bimbos will be arraigned on October 28.

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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