1. MOODY’S PROPOSES MAKING PENSION LIABILITIES A BIGGER FACTOR IN BOND RATINGS: States and localities with big pension liabilities could see changes to their overall bond rating if new rules proposed this summer by Moody’s Investor Service are adopted according to governing.com. Moody’s is proposing giving more weight to pension liabilities and other long-term debts in its overall scorecards for rating general obligation bonds. The agency would increase the weight to 20% from 10% and decrease the weight for economic strength to 30% from 40%. Weights for governance and management (20%) and financial strength (30%) -- the other two factors in the way Moody’s scores its GO ratings -- would stay the same. It is possible that municipalities with a large unfunded liability may not necessarily see their rating automatically fall under the new rules, Moody’s said. “We recognize that funding levels naturally will rise and fall as retiree activity diverges from actuarial assumptions, as benefits change, or as investment returns fluctuate”. In the case of an unfunded pension liability, Moody’s will examine the reason that it has arisen and the entity’s ability and willingness to address it over a reasonable period of time, which is broadly defined to encompass the working life of the beneficiaries so that liabilities are not passed onto a succeeding generation." Moody’s maintains GO ratings or issuer ratings for approximately 8,200 local governments: 2,960 cities, 864 counties and 3,362 school districts. Interested parties and stakeholders have until Oct. 14 to submit comments to Moody’s.
2. THE SOCIAL SECURITY WINDFALL ELIMINATION AND GOVERNMENT PENSION OFFSET PROVISIONS FOR PUBLIC EMPLOYEES IN THE HEALTH AND RETIREMENT STUDY: About 3.5% of households are subject to either Social Security's Windfall Elimination Provision or to the Government Pension Offset provision on Social Security benefits received by individuals and households. WEP reduces the benefits of individuals who worked in jobs covered by Social Security and also worked in uncovered jobs where a pension was earned. WEP also reduces spouse benefits. GPO reduces spouse and survivor benefits for persons who worked in uncovered government employment where they also earned a pension. The new study by the Michigan Retirement Research Center takes account of pension earned on jobs not covered by Social Security, a key determinant of the size of WEP and GPO adjustments and also focuses on the household. This approach allowed the study to incorporate the full effects of WEP and GPO on spouse and survivor benefits, and to evaluate the effects of WEP and GPO on the assets accumulated by affected families. Among the study’s specific findings: Households affected by both WEP and GPO lose about one third of their benefit. Limiting the Social Security benefit to half the size of the pension from uncovered employment reduces the penalty from WEP for members of the original HRS cohort by about 60%. To read the entire study, follow this link:http://www.mrrc.isr.umich.edu/publications/papers/pdf/wp288.pdf.
3. NOT QUITE AS SIMPLE AS IT SEEMS: EXERCISE CAUTION WHEN USING A PRE-APPROVED “GOVERNMENTAL” RETIREMENT PLAN: Generally speaking, a governmental employer can complete, execute, adopt and utilize a pre-approved plan without the necessity of obtaining its own favorable determination letter regarding the plan’s tax-qualification from the IRS. Typically, these plans consist of a basic plan document, about 30 to 50 pages in length, that sets forth “boilerplate” plan language that cannot be modified, along with an adoption agreement containing a number of fill in the blanks and check the box options that are used by the adopting employer to select its plan’s features. However, as with so many things, life is not always that simple. Public agencies utilizing such plans should be aware of the following:
- Many pre-approved plans for governmental employers are sent out to public agencies for their completion and use with almost no guidance or instruction as to how they should be completed. Adopting employers need to get appropriate advice and help in filling out the various optional provisions of their plans – the failure to properly complete the proffered forms could lead to serious adverse tax consequences.
- Most public agency retirement plans are subject to laws particular to their state. If an agency amends its pre-approved plan to comply with state law it may take its plan out of pre-approved status. An agency using pre-approved plans should get advice on the application of state law to its plan and the advisability of getting its own IRS determination letters.
- Some pre-approved plans do not have sufficient flexibility to be used in some cases. If an agency changes the pre-approved plan to accommodate particular desires or needs, it will, most likely, take its plan out of pre-approved status. At that point, it would be advisable for the agency to obtain its own determination letter.
- Some pre-approved plan documents automatically appoint the sponsoring entity as the “trustee” for the plan which may violate applicable state laws.
- In some cases, the governmental pre-approved plan may be written in a way that confuses the adopting employer about its administrative and fiduciary duties under applicable state law.
- Many pre-approved plans are provided as part of a “bundled” retirement package that includes plan recordkeeping and plan investment services. While there is nothing inherently wrong with such bundled arrangements, it is important for public agencies to understand that they do not necessarily have to use a provider’s plan document in order to gain access to its recordkeeping services or investment options. Most providers will unbundle these services from the plan document at the agency’s request.
From Focus on Public Benefits, September 18, 2013.
4. ENCOURAGEMENT TO RETIRE WAS NOT AGE DISCRIMINATION: In the case of Woolsey v. Town of Hillsboro Beach, the 11th U.S. Circuit Court of Appeals agreed with an earlier ruling by the U.S. District Court for the Southern District of Florida that just because the plaintiff’s employer encouraged him to retire did not mean that the employer violated the Age Discrimination in Employment Act. Plaintiff James Woolsey filed the lawsuit claiming his employer and the defendant, the Town of Hillsboro Beach, was practicing age discrimination. In 2008, the town’s chief of police promoted Woolsey, who was 49 years old at the time, to captain, the second-in-command of the Town’s police. In 2010, the two men were having disagreements in the workplace and the chief encouraged him to retire. When Woolsey did not, he was demoted. According to the appellate court, although the plaintiff claimed the defendant had failed to articulate legitimate, specific and nondiscriminatory reasons for his demotion, “the record indicates that the chief demoted Woolsey because of his lack of loyalty, lack of supervisory skills, failure to perform at the level expected of Captain, failure to support the department’s accreditation process, and disagreements with him about how the department should have been run.” In support, the court found that the defendant had submitted multiple letters of counseling, reprimands, and negative performance evaluations issued to Woolsey. The court found that the Town had articulated a clear and reasonably specific factual basis upon which to base its opinion and that Woolsey had failed to carry his burden to show that the Town’s legitimate, non-discriminatory reasons were pretextual. The court found that this was particularly true in light of the fact that the chief of police has promoted Woolsey to captain at the age of 49. Woolsey v. Town of Hillsborough Beach, Case No. 12-16145, (U.S. 11th Cir. September 6, 2013).
5. BALLOT QUESTION ASKING MIAMI BEACH VOTERS TO APPROVE A NINETY-NINE YEAR LEASE REMOVED FROM BALLOT: Let Miami Beach Decide, a Florida Political Committee (“the Political Committee”), appealed a declaratory judgment entered in favor of the City of Miami Beach and SBACE, LLC. The dispute concerned two ballot questions relating to section 1.03(b)(2) of the Miami Beach Charter (“the Charter Provision”). The Charter Provision provided that the lease of certain properties in the vicinity of the Miami Beach Convention Center for ten years or longer must be approved by a majority vote of the voters in a City-wide referendum. The first ballot question at issue (“the Charter Amendment Question”) was the result of a citizen's initiative. It proposed an amendment to the Charter Provision to increase the required voter approval from fifty to sixty percent. The second ballot question at issue (“the Lease Approval Question”) was a referendum placed on the ballot by the City. It asked the voters to approve, pursuant to the Charter Provision, a lease of certain properties to SBACE for ninety-nine years even though the final terms of the SBACE lease had not been negotiated. On appeal, the court found the Lease Approval Question as written did not allow the voters to learn, much less approve, material terms necessary to form a lease of real estate, such as the amount of rent and an adequate description of the property being leased. Because the Lease Approval Question failed to give voters this necessary information, by including such information or referring voters to records providing such information, it did not qualify as a proper ballot question to obtain voter approval of a lease. Further, because its true effect was different from its apparent effect, the Lease Approval Question was confusing and violated the requirement of ballot clarity and accuracy established by Section 101.161, Florida Statutes (2013). Consequently, the Court ordered the Lease Approval Question removed from the ballot and in light of the removal of the Lease Approval Question from the ballot, the language added to the Charter Amendment Question by the City -- “(This charter change inapplicable to ‘convention center project' question below.)” – was removed also from the ballot. Let Miami Beach Decide v. City of Miami Beach, 38 FLW D2020 (Fla. 3rd DCA September 20, 2013.)
6. MUNICIPAL LIABILITY DID NOT ATTACH TO FIRST AMENDMENT RETALIATION CLAIMS BY TERMINATED UNION MEMBER: Francis Carter, served as an officer with the City of Melbourne's police department for 22 years before he was fired in 2010. Carter had always been active in the local chapter of the police union and in city politics. In addition to his union activities, Carter campaigned for City Council candidates and lobbied members of the City Council, focusing his efforts on issues affecting police officers and attempting to have the police chief removed from office. After an internal affairs investigation, Carter was fired for violating police department policies and he subsequently brought a § 1983 action in federal court against the city and its police chief and city manager. Carter alleged that his termination constituted First Amendment retaliation based on his political speech and union activities. He further claimed that the defendants caused him to be falsely arrested, imprisoned, and prosecuted. The United States District Court for the Middle District of Florida granted defendants' summary judgment motion and Carter appealed. On appeal, the United States Court of Appeals for the Eleventh Circuit affirmed. The Appeals Court held that municipal liability did not attach on First Amendment retaliation claims; Carter's speech activities did not play a substantial role in the disciplinary and personnel decisions; and Carter's false arrest, imprisonment, and malicious prosecution claims failed because he did not present any evidence that he had been arrested without probable cause. Carter v. City of Melbourne, Florida, Case No. 12–15337, (U.S. 11th Cir. Sept. 23, 2013).
7. U.S. CENSUS BUREAU RELEASES QUARTERLY SURVEY OF PUBLIC PENSIONS: The United States Census Bureau has released its Quarterly Survey of Public Pensions for the second quarter of 2013. The Quarterly Survey of Public Pensions is a quarterly survey that provides national summary data on the revenues, expenditures, and composition of assets of the largest defined benefit public employee retirement systems for state and local governments. This survey currently consists of a panel of 100 retirement systems, which comprise 89.4 percent of financial activity among such entities, based on the 2007 Census of Governments. To view the Quarterly Survey of Public Pensions, follow this link: http://www.census.gov/govs/qpr/.
8. FPPTA TRUSTEES SCHOOL: Florida Public Pension Trustees Association Trustees School will take place on September 29 - October 2, 2013 at the PGA National Resort & Spa at Palm Beach Gardens, Florida. To access information please log on towww.fppta.org. All board of trustee members, and anyone interested in the administration and operation of the Chapters 112, 175 and 185 pension plans should attend the Trustees School.
9. ALL PRO-QUARTERBACK AND NFL GREAT ARCHIE MANNING TO SPEAK AT "THE NUTS AND BOLTS OF SHAREHOLDER LITIGATION:" All Pro-Quarterback and NFL Great Archie Manning will be speaking at the educational seminar, entitled "The Nuts and Bolts of Shareholder Litigation." The seminar has been developed specifically for pension funds and other institutional investors. It will take place on October 16, 2013 at the Westin Diplomat Hotel in Hollywood, Florida. The seminar is free of charge and includes lunch and post-seminar cocktails and snacks. An application for CLE accreditation in Florida is currently pending. The invitation and registration form is available at the following linkhttp://goo.gl/Y3VPJ7. The seminar is sponsored by the law firm of Bernstein Litowitz Berger & Grossmann LLP ("BLB&G").
10. FLORIDA DIVISION OF RETIREMENT ANNUAL POLICE OFFICERS' AND FIREFIGHTERS' PENSION TRUSTEES' FALL CONFERENCE: The 43rd Annual Police Officers' and Firefighters' Pension Trustees Fall Conference will take place on October 22-24, 2013. You may access information and updates about the Fall Conference, including area maps, a copy of the program when completed, and links to register with at the Doubletree by Hilton Hotel Orlando at Seaworld. Please continue to check the FRS website for updates regarding the program at www.myflorida.com/frs/mpf. All police officer and firefighter plan participants, board of trustee members, plan sponsors, and anyone interested in the administration and operation of the Chapters 175 and 185 pension plans should take advantage of this unique, insightful and informative program.
11. JEWISH WISDOMS: A spoken contract is not worth the paper it is written on. Sam Goldwyn
12. DID I READ THAT SIGN CORRECTLY? Red Tape Holds Up New Bridges. You mean there is something stronger than duct tape?
13. TODAY IN HISTORY: In 1789, Thomas Jefferson was appointed 1st U.S. Secretary of State; John Jay became 1st U.S. Chief Justice.
14. KEEP THOSE CARDS AND LETTERS COMING: Several readers regularly supply us with suggestions or tips for newsletter items. Please feel free to send us or point us to matters you think would be of interest to our readers. Subject to editorial discretion, we may print them. Rest assured that we will not publish any names as referring sources.
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