LAKE
PARK FIRE TRUSTEES SCORE BIG VICTORY:
In
a unanimous decision dated October 3, 2007, the Florida
Fourth District Court
of Appeal reversed a summary judgment in favor of the Town
of Lake Park against the Board of Trustees of the Town
of Lake Park Firefighters’ Pension Plan. In short,
the trial court ruled that the Town had no obligation to
make any further payment to Town of Lake Park Firefighters’ Pension
Plan. The decision is of such significance that we feel
compelled to deal with it at length here. The Town sought declaratory judgment of its rights and
responsibilities upon termination of the Town’s defined
benefit pension plan for firefighters. The Plan was established
by municipal ordinance in compliance with Chapter 175,
Florida Statutes. Upon employment, all firefighters became
mandatory members of the Plan and were required to make
contributions to the Plan.
The Town entered into an Agreement with Palm Beach County
for the latter to provide the Town with fire and emergency
medical services. As a result, the Town terminated its
firefighting staff and Palm Beach County simultaneously
hired the same staff, as County employees. Upon such hiring,
the firefighters became mandatory members of the Florida
Retirement System.
Inasmuch as all Plan members had terminated employment
with the Town, the Plan was officially terminated and all
contributions ceased. Upon Plan termination, the Board
had sole authority to determine how Plan assets were to
be distributed. As a result, the Board decided that accrued
benefits should be paid out to Plan members in the form
of lump sum distributions. The Board thereupon directed
its actuary to determine the value of all accrued benefits.
Not unexpectedly, the Plan’s asset value was less
than the accrued benefits as of termination date. The Board
asserted that the Town was obligated to pay the difference
between the Plan’s asset value and accrued benefits
as of date of termination. Because the Town disagreed,
it filed a complaint for declaratory relief. The Board
subsequently approved the following distribution of Plan
assets: (1) one Plan member, who was eligible for retirement,
received full value of his accrued benefit; (2) three Plan
members, who had 10 or more years of service, but who were
not yet eligible for retirement, received a portion of
their accrued benefit; and (3) the remaining nine Plan
members, each with less than 10 years of service, received
no distribution from the Plan.
Section 175.091, Florida Statutes, governs creation and
maintenance of firefighter pension funds. The main funding
sources for firefighter pension funds are (1) a mandatory
contribution by each firefighter; (2) an excise tax on
certain fire insurance premium payments; and (3) a mandatory
payment by the municipality of “a sum equal to the
normal cost of and the amount required to fund any actuarial
deficiency shown by an actuarial valuation as provided
in part VII of chapter 112.” Undisputably, prior
to termination of the Plan, mandatory contributions were
made to the Plan by the Town, on an annual basis, in accordance
with contribution amounts determined by the Plan’s
actuary required to fund actuarial deficiencies.
Section 175.361, Florida Statutes, specifically
pertains to termination of pension plans, and provides,
in pertinent
part:
Upon termination of the plan by the
municipality or special fire control district for any
reason or because
of a transfer,
merger, or consolidation of governmental units, services,
or functions as provided in chapter 121, or upon written
notice by the municipality or special fire control
district to the board of trustees that contributions
under the plan
are being permanently discontinued, the rights of all
employees to benefits accrued to the date of such termination
and
the amounts credited to the employees’ accounts
are nonforfeitable. [emphasis supplied]
Section 175.361(3), Florida Statutes, also sets forth
a methodology to be followed for apportionment and distribution
of the Plan’s “asset value” as of date
of Plan termination.
Section 112.0515, Florida Statutes, also applies to the
case at bar:
It is hereby declared to be the policy of this state that
in any consolidation or merger of governments or the transfer
of functions between units of governments either at the
state or local level or between state and local units,
the rights of all public employees in any retirement or
pension fund shall be fully protected. No consolidation
or merger of governments or governmental services, either
state or local, accomplished in this state shall diminish
or impair the rights of any public employee in any retirement
or pension fund or plan which existed at the date of such
consolidation or merger and in which the employee was participating,
nor shall such consolidation or merger result in any impairment
or reduction in benefits or other pension rights accruing
to such employee.
In other words, the Legislature has specifically declared
that consolidations, mergers or transfers of government
or governmental functions may not diminish or impair employees’ rights
or benefits in a retirement or pension plan or fund in
which the employee was participating at time of such consolidation,
merger or transfer.
The lower court found that the Board appropriately followed
the method of distribution of the Plan’s assets in
accordance with Section 175.361, Florida Statutes, upon
termination of the Plan. However, the trial court also
found that the statutorily-mandated distribution methodology
required by that section provided for less than full payment
to certain Plan members, if Plan assets were inadequate
to pay every firefighter member in full. As such, the trial
court concluded that “[i]f all assets are exhausted
by payments to higher-ranking categories, then members
of any lower category receive nothing. The Statute contains
no provision for the municipality to make up for a deficit
so that all members receive all their benefits in full.” Inexplicably,
the trial court did not apply the “nonforfeitable” clause
in Section 175.361, Florida Statutes. The lower court’s
ruling resulted in nine Plan members receiving absolutely
no distribution from the Plan upon termination, despite
such members having made mandatory contributions to the
Plan out of their earnings! Such ruling further resulted
in other Plan members receiving payments less than their
accrued benefits at time of termination.
The appellate court concluded that the trial court erred
when it found, as a matter of law, that the Town had no
obligation to fund the Plan’s actuarial shortfall
present at the time the Town’s actions resulted in
termination of the Plan. It is undisputed that prior to
termination of the Plan, the Town funded, on a yearly basis,
actuarial deficiencies of the Plan determined by its actuary,
as required by the Plan and by Section 175.091(1)(d), Florida
Statutes. Certainly, if the Town had not entered into the
Agreement with the County, the Town would have had a continuing
obligation to fund actuarial deficiencies in the Plan.
Once the Board, in accordance with its authority, elected
the asset distribution method to be employed, the Plan’s
actuary calculated an actuarial deficiency. Hence, Section
175.091(1)(d), Florida Statutes, required the Town to make
a mandatory payment equal to that actuarial deficiency.
The Town’s argument that it had no obligation to
fund the actuarial deficiency because the Board elected
to distribute the Plan assets in a way more costly than
other available alternatives does not have basis in law.
The Board had sole authority to choose the method of distribution
of Plan assets at termination, and once it did, the Board
appropriately followed the statutory procedure for distribution.
As stated, benefits accrued to date of termination were “nonforfeitable.” Additionally,
inasmuch as the Town’s decision to enter into the
Agreement with the County resulted in termination of the
Plan, there could be no impairment or reduction in benefits
or other pension rights accruing to any firefighter Plan
member. The district court thereupon reversed the trial
court’s entry of final summary judgment in favor
of the Town and against the Board, and remanded for further
proceedings consistent with the opinion. In light of the
opinion, it would seem that the higher court could have
directed summary judgment in favor of the Board, but has
left that seemingly-ministerial task to the lower court.
Board of Trustees of the Town of Lake Park Firefighters’ Pension
Plan v. Town of Lake Park, Florida, Case No. 4D06-4179
(Fla. 4th DCA October 3, 2007).
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