1.
TWENTY NATIONAL ORGANIZATIONS SET RECORD STRAIGHT REGARDING
LONG-TERM VIABILITY AND STRENGTH OF STATE AND LOCAL GOVERNMENT
RETIREMENT SYSTEMS:
Twenty national organizations -- representing
state and local governments and officials, public employee
unions, public retirement systems and more than 20 million
working and retired state and local government workers
and their beneficiaries -- have written to Congressman
George Miller (Chairman, House Committee on Education
and Labor) to set the record straight with regard to long-term
viability and strength of state and local government
employee
retirement systems. The signatories include American
Federation of State, County and Municipal Employees (AFSCME),
American
Federation of Teachers (AFT), International Association
of Fire Fighters (IAFF), National Education Association
(NEA), Fraternal Order of Police (FOP), Government Finance
Officers Association (GFOA), National Association of
State Retirement Administrators (NASRA) and National Conference
on Public Employee Retirement Systems (NCPERS). The letter,
dated June 17, 2008, addresses recent press articles
using
inappropriate and incomplete information, and muddled
pension and healthcare liabilities, to distort the truth
of public
pension finance. Independent sources, such as the U.S.
Government Accountability Office (GAO) and Center for
Retirement Research at Boston College (CRR), have found
the vast majority
of public sector pension plans to be sound and on track
to meet their future obligations. The many existing safeguards
for public pension funding and benefits explain why the
case is so:
- Benefits for the public workforce are publicly adopted
by and subject ultimately to the oversight of popularly
elected governmental bodies (not the case in other
sectors).
- Separate public agencies governed by independent
boards of trustees are responsible for administration
and management
of the retirement system.
- Strict governmental requirements for transparency
and public accountability must be followed.
Just as financial reporting requirements for federal
agencies are set by the Federal Accounting Standards
Advisory Board
(FASAB), those for state and local governments are set
by the independent Governmental Accounting Standards
Board (GASB). Both FASAB and GASB were established because
of
the fundamental differences between governments and businesses.
State laws typically mandate public plans’ adherence
to GASB standards. Auditors generally require state and
local governments to comply with these requirements in
order to receive a “clean” audit opinion.
Recent articles have suggested governments should measure
and
account for their pension liabilities using corporate
sector requirements. However, distinctions between public
and
private sectors and structure and governance of their
pension plans are often unknown or misunderstood by the
authors
of these articles. State and local government employee
pensions are designed much like the federal pensions
provided to the U.S. military and civil service personnel,
and are
similarly backed by the full faith and credit of their
sponsoring governments. Accordingly, suggesting application
of corporate finance measures -- aimed at companies that
can be acquired or go out of business -- is simply inappropriate,
uninformed and irresponsible. Furthermore, unlike federal
plans, state and local pension systems collectively have
pre-funded nearly 90% of their future pension liabilities.
As the Census Bureau, GAO and CRR report, state and local
government retirement systems have accumulated roughly
$3 Trillion in financial assets to ensure retirement
security of more than 20 million working and retired
state and local
government workers and their beneficiaries. State and
local governments take seriously their responsibility
for paying
promised benefits to their employees and retirees:
- Comprehensive state and local laws and significant
public accountability and scrutiny provide rigorous and
transparent
regulation of public plans and have resulted in strong
funding rules and levels.
- Assets set aside for state and local employee pensions
are professionally managed and invested on a long-term
basis using sound investment policies.
- On the whole, public pension funding levels and investment
performance have been found to exceed those in the
private sector.
- Public plan participants’ accrued benefits
and future accruals are protected by state constitutions,
statutes
or case law that prohibit elimination or diminution
of a retirement benefit. These protections are stronger
than
those provided for corporate plans under ERISA and
PBGC.
A better understanding of the protections put in place
by governments ultimately responsible for funding these
plans may serve to build support for these arrangements
and address the erosion of confidence in retirement security
in general. In fact, the last place to be inciting “pension
panic” is with advance-funded, government-protected
pension plans that provide a modest, secure benefit to
those who spend a career in public service -- providing
for public safety, protecting the homeland, caring for
the sick and educating our children. Public pension plans
disburse more than $150 Billion in annual benefits to 7
million Americans. These distributions not only provide
financial security to retirees and their survivors, but
also provide economic stability and stimulus through a
consistent, inflation-protected revenue streams flowing
into communities throughout the nation. While the number
of corporate pension plans is seriously on the decline,
public pensions have continued to flourish -- solid evidence
that their existing regulatory structure is working. This
model should be emulated, not used to provoke taxpayer
resentment, or dismissed as outdated or obsolete, particularly,
when the growing number of workers who will have no income
security in retirement will ultimately place increased
strain on our public assistance programs and our economy.
The letter expresses the organizations’ shared desire
to correct widely-publicized information about state and
local government employee retirement systems. (Attached
to the letter is a chart setting forth “key facts
regarding state and local government defined benefit retirement
plans.) Right on!
2. CITY VIOLATED FOURTH AMENDMENT IN
VIEWING EMPLOYEES’ STORED
TEXT MESSAGES:
The City of Ontario, California, contracted
with a company to provide its police and other employees
with wireless text-messaging services and distributed two-way
pagers to them, but without articulating an official policy
as to their use. However, its e-mail and internet rules
limited use to city-related business. The city learned
that some employees had exceeded their character text-messaging
limit, requiring it to pay overage charges. So, the city
had the outside company deliver to the city stored messages,
including personal to-and-from messages. In delivering
those messages, the company violated the Stored Communications
Act. And, in reviewing them, the city violated the Fourth
Amendment. Users of text messaging have a reasonable expectation
of privacy in the text messages stored on the service provider’s
network. However, the police chief involved had qualified
immunity, as the Fourth Amendment’s application to
text messaging was not clearly established. Thus, the appellate
court reversed, in part, a United States District Court
holding that the outside company did not violate the Stored
Communications Act. Quon v. Arch Wireless Operating Company,
Incorporated, Case No. 07-55282 (U.S. 9th Cir., June 18,
2008).
3. IRS INCREASES MILEAGE RATES THROUGH
DECEMBER 31, 2008:
Internal Revenue Service has announced
an increase in the optional standard mileage rates for
the final six months
of 2008. Taxpayers may use the optional standard rates
to calculate deductible cost of operating an automobile
for business, charitable, medical or moving expenses.
The rate will increase to 58.5 cents a mile for all business
miles driven from July 1, 2008 through December 31, 2008.
The increase is 8 cents, from 50.5 cent rate in effect
for the first six months of 2008. In recognition of recent
gasoline price increases, IRS has made this special adjustment
for the final months of 2008. IRS normally updates mileage
rates once a year, in the fall for the next calendar
year.
The optional business standard mileage rate is used to
compute deductible costs of operating an automobile for
business use in lieu of tracking actual cost. The rate
is used as a benchmark by the federal government and
many businesses to reimburse employees for mileage. The
new
six-month rate for computing deductible medical or moving
expenses will also increase by 8 cents, to 27 cents a
mile, up from the 19 cents for the first six months of
2008.
The rate for providing services for charitable organizations
is set by statute, not by IRS, and remains at 14 cents
a mile. IR-2008-082 (June 23, 2008)
4. FLORIDA EXPANDS GROUNDS FOR PENSION
FORFEITURE:
A new Florida law expands the grounds
for forfeiture of public
pensions. Previously, Section 112.3173, Florida Statutes,
defined “specified offense” as embezzlement
of public funds; theft by public officer or employee from
his employer; bribery in connection with employment of
a public officer or employee; certain felonies specified
in Chapter 838, Florida Statutes (unlawful compensation,
official misconduct); committing an impeachable offense;
or committing of any felony by a public officer or employee
with intent to defraud the public of the right to receive
faithful performance of his duties. Now, a new ground has
been added:
The committing on or after October 1, 2008, of any felony
defined in s. 800.04 against a victim younger than 16 years
of age, or any felony defined in chapter 794 against a
victim younger than 18 years of age, by a public officer
or employee through the use or attempted use of power,
rights, privileges, duties, or position of his or her public
office or employment position.
Section 800.04, Florida Statutes, deals with lewd and
lascivious offenses committed upon or in presence of persons
less than 16 years of age. Chapter 794, Florida Statutes,
deals with sexual battery. The new law also similarly amends
forfeiture provisions of the Florida Retirement System.
CS for CS for CS for SB 1712 (effective July 1, 2008).
5. FLORIDA RETIREMENT SYSTEM WILL LOOK
AT IN-STATE TECHNOLOGY AND GROWTH INVESTMENTS:
The Florida
Legislature has found
that financially prudent technology and growth investments
by the State Board of Administration with funds from the
Florida Retirement System Trust Fund have potential for
high-growth, high-wage jobs that will provide significant
benefits to state residents and a variety of business sectors.
The Legislature further found that such investments will
create jobs and housing, improve the state’s general
infrastructure and serve broad interests of beneficiaries
of the trust fund. The legislature also found that technology
and growth investments help promote employer contributions
to the system by strengthening the economy and the well-being
of employers. Therefore, the Florida Legislature has declared
that it is the policy that the State Board of Administration
identify and invest in technology and growth investments
if such investments are consistent with and do not compromise
or conflict with the fiduciary duties of the State Board
of Administration to the participants, members and beneficiaries
of the Florida Retirement System. Thus, the Florida Legislature
amended Section 215.47, Florida Statutes, by adding a new
subsection (7), providing that the State Board of Administration,
consistent with its fiduciary duties, may invest up to
1.5% of net assets of the system trust fund in technology
and growth investments with businesses domiciled in this
state or businesses whose principal address is in this
state. The new law also amends subsection (15), increasing
from 5% to 10% alternative investments, and specifically
including therein securities and investments that are not
publicly traded and are not otherwise authorized by Section
215.47, Florida Statutes. CS for SB 2310 (effective July
1, 2008).
6. “OFFICIAL REPRIMAND” CONSTITUTES
DISCIPLINARY ACTION:
Dawkins received an “Official
Reprimand” for
failing to notify his supervisor of absences. The Official
Reprimand provided that the absences would be considered
unauthorized leave without pay. Dawkins appealed the official
reprimand to the City of Miami Civil Service Board, which
found him not guilty of being on leave without notice.
Thereafter, the City Manager reversed the finding of the
Civil Service Board, and Dawkins sought certiorari review
in the circuit court. Primarily, the City of Miami denied
the Civil Service Board had jurisdiction to hear Dawkins’s
appeal. The City of Miami Charter sets forth the jurisdictional
basis for appeals to the Civil Service Board: any employee
who deems that he has been suspended, removed, fined, laid
off or demoted without cause may request a hearing before
the Civil Service Board. The Charter provision does not
depend upon whether an employee was actually suspended,
removed, fined, laid off or demoted without cause, but
whether the employee “deems” he has been suspended,
removed, fined, laid off or demoted without cause. Here,
Dawkins clearly deemed his Official Reprimand a suspension
or fine within the Charter. Besides, the Official Reprimand
itself stated that any further incidents of this nature
will result in further disciplinary action. Thus, the Civil
Service Board had jurisdiction to reverse Dawkins’s
Official Reprimand, which decision the reviewing court
found was based upon competent substantial evidence. Accordingly,
the Civil Service Board’s conclusions were binding
upon the City Manager. Dawkins v. City of Miami, 15 Fla.
L. Weekly Supp. 568 (Fla. 11th Cir., April 8, 2008).
7. COUNTY MANAGER NOT BOUND BY RECOMMENDED
DISCIPLINE:
Fredericq sought certiorari review in
the circuit court to reverse a decision of the Miami-Dade
County Manager
to modify the level of discipline recommended by a hearing
examiner. Fredericq was issued a Disciplinary Action Report
for violation of County Personnel Rules and the conclusion
that she was incompetent and inefficient in performance
of her duty. After termination by her immediate supervisor,
Fredericq appealed and an administrative hearing was conducted.
Although the hearing officer rejected her arguments as
to grounds for discipline, the hearing officer recommended
that Fredericq be given a written reprimand. The County
Manager accepted the hearing examiner’s conclusion
but rejected the recommendation to reduce the level of
discipline to a written reprimand. (Fredericq had an 18-year
unblemished career with the County prior to the incident
in question.) On review, Fredericq asserted only one ground
for reversal: that the County Manager exceeded his authority
when he rejected the hearing examiner’s recommendation
and sustained her termination. However, based on well-settled
case law, the County Manager is not bound by recommendation
of the hearing examiner concerning level of discipline
that should be administered. It is entirely within the
County Manager’s discretion to determine appropriate
discipline to meted out to employees. Fredericq v. Miami-Dade
County, 15 Fla. L. Weekly Supp. 569 (Fla. 11th Cir., April
9, 2008).
8. HOW TO “FURNISH” SPDS
TO MEMBERS:
Most of
our readers know that Section 112.66, Florida Statutes,
provides that provisions of each retirement
system or plan shall be contained in a written summary plan description, to
be published on a biennial basis, in a manner calculated to be understood by
the average plan participant and sufficiently accurate and comprehensive to
apprise participants of their rights and obligations under the plan and which
shall include a report of pertinent financial and actuarial information on
the solvency and actuarial soundness of the plan. Such SPD shall be furnished
to a member of the system or plan upon initial employment or participation
in such plan and, thereafter, with each new biennial publication by the administrator.
We are often asked whether an SPD can be furnished other than by delivery of
a hard copy. Well, mere posting on a website is clearly not sufficient. Gertjejansen
v. Kemper Insurance Companies, Inc., Case No. 06-56329 (U.S. 9th Cir., April
11, 2008) (unpublished). But what about e-mail? Electronic transmission of
documentation presents a closer question. For example, under ERISA, 29 C.F.R. § 2520.104b-1(c)(1)(i)
provides that a plan administrator satisfies disclosure requirements by furnishing
documents through electronic media as long as the administrator takes appropriate
and necessary measures reasonably calculated to ensure that the system for
furnishing documents results in actual receipt of transmitted information (for
example, using return-receipt or notice of undelivered electronic mail features).
However the regulation does not stop there: the regulations have many hoops
that need to be jumped through, including prior consent by the proposed recipient.
Besides, the recipient always has the right to request a paper version anyway.
Our conclusion is that, until we have some Florida rules on the subject, administrators
should continue to furnish SPDs the old fashioned way.
9. HOLLYWOOD DISCRIMINATED AGAINST COPS
BASED UPON AGE, BUT DAMAGES TO BE REDUCED:
The City of Hollywood
appealed
final judgments awarding damages for age discrimination
in favor of two police officers; the officers appealed
entry of a judgment notwithstanding the verdict on their
retaliation claims. The City argued that the officers did
not prove the case of age discrimination and, in the alternative,
the court erred in denying the City’s motion for
remittitur or a new trial. On cross appeal, the officers
contend that the court eliminated their claim for retaliation
when there was competent substantial evidence to support
it. The appellate court affirmed finding of liability for
age discrimination, but reversed denial of motion for remittitur
or new trial, as compensatory damages were grossly excessive.
The court also reversed final judgment in the City’s
favor on the retaliation claims, because the court erred
in granting the motion for judgment notwithstanding the
verdict on those claims. The jury had awarded each plaintiff
$1,183,544. Of that sum, $83,544 was awarded for lost wages,
and $1,100,000 was awarded for compensatory damages other
than lost wages. There was little if any evidence of emotional
injury as the result of the Chief’s failure to promote
and scant evidence to support any further injuries for
the retaliation. That it was impossible to separate the
claims only furthered the court’s resolution that
the $1,000,000 awards shocked the judicial conscience and
required a substantial remittitur. While one officer may
have proved more injury, depending upon the cause of connection
between the promotional decision and his high blood pressure,
the other proved little emotional injury. His case, in
particular, is more of the typical case with a range of
$5,000 to $30,000. The first officer’s case may be
worth more, but the highest award in any prior case was
$150,000. The court reversed the awards for non-economic
damages, and remanded for the trial court to determine
a remittitur amount consistent with the criteria set forth
in the opinion, and for a new trial should the plaintiffs
refuse the remitted amounts. Hogan v. City of Hollywood,
Florida, 33 Fla. L. Weekly D1449 (Fla. 4th DCA, June 4,
2008). [Editor’s note: Francis “Frank” Hogan
served as long-time Chairman of our client, Hollywood Police
Pension Fund.]
10. RACE DISCRIMINATION CHARGES BY FIREFIGHTER
APPLICANTS TIME-BARRED:
In 1995, the City of Chicago administered
a new written test to 26,000 applicants for jobs as firefighters.
After grading the tests, the city placed applicants in
three categories, based on their scores: “well qualified,” “qualified,” and “not
qualified.” Applicants were told test results within
days after January 26, 1996, when notices of results were
mailed to all applicants. The notices stated that applicants
in the “qualified” category were unlikely to
be hired because of the large number whose scores had placed
them in the “well qualified” category. However,
applicants rated “qualified” would remain on
the eligible list for as long as the list was used. Black
applicants in the “qualified” category brought
suit, alleging that basing hiring decisions on the test
violated Title VII of the Civil Rights Act of 1964. The
United States District judge ultimately ruled in favor
of plaintiffs, and the City appealed. In reversing, the
Court of Appeals determined that plaintiffs had missed
the 300-day deadline for filing with EEOC, which ran from
when the test results were sent to applicants. The continuing
violation doctrine is not applicable, in that merely allows
one to delay suing until a series of acts by a prospective
defendant blossoms into a wrongful injury on which a suit
can be based. At appellate oral argument, plaintiffs’ lawyer
admitted his reason for not filing the charge within 300
days was not that he needed more time to be able to file
such charge, but that he did not think it was necessary
because he thought the statute of limitations would not
begin to run until the City began hiring applicants from
the “well qualified” category on the list. “That
was a fatal mistake.” Lewis v. City of Chicago, Case
No. 07-2052 (U.S. 7th Cir., June 4, 2008).
11. HUMOR FOR LEXOPHILES:
When she saw
her first strands of gray hair, she thought she'd dye. 12. QUOTE OF THE WEEK:
“Win as if you were used to
it; lose as if you enjoyed it for a change.” Ralph
Waldo Emerson
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