Source: http://cypen.com/pubs/1997jan.htm
Timestamp: 2019-04-23 18:39:43+00:00

Document:
TITLE II OF ADA DOES NOT COVER EMPLOYMENT DISCRIMINATION CLAIMS AGAINST PUBLIC ENTITIES: United States District Judge Kenneth L. Ryskamp has ruled that Title II of the Americans With Disabilities Act (ADA), which bars discrimination in public services, programs and activities, does not afford protection against employment discrimination by public entities. In so ruling, Judge Ryskamp disagreed with a majority of courts that have considered the issue and overruled a Department of Justice regulation. The judge found significance in the fact that Title I explicitly covers employment, requires that the governmental entity have a minimum of fifteen employees and requires the employee to exhaust administrative remedies before filing suit. Bledsoe v. Palm Beach Soil and Water Conservation District, Case No. 94-8360-CIV-RYSKAMP (SD Fla., October 17, 1996).
MERRILL LYNCH ANALYST WOULD INCREASE CASH: Richard T. McCabe, Chief Market Analyst at Merrill Lynch, notes that the large-cap-oriented DJIA and S&P 500 have risen to levels about 10% above their temporary peaks of last May. Even so, only 46% of NYSE common stocks and 33% of NASDAQ stocks have been able to exceed their individual highs of this year, suggesting that the major averages have tended to overstate the strength of the majority of stocks. "In view of the market's increasingly extended condition, we would become somewhat more aggressive in raising cash reserves."
BUCK RELEASES REPORT ON AMERICA'S PENSION PLANS: In late November Buck Consultants, Inc. released its 1995 report entitled "The Health of America's Pension Plans." From 1994 to 1995, the average funding ratio for about half of the Fortune 1000 companies reporting fell slightly from 124% to 122%. Funding ratio is determined by dividing fair market value of plan assets by the accumulated benefit obligation. For the same periods, the average expected long-term rate of return on plan assets remained about the same (9.03% vs. 9.05%) while salary increase assumptions went down (from 5.03% to 4.77%).
STATES MOVE FORWARD ON SOCIAL-INVESTING ISSUES: NCPERS reports that four states currently have bills pending to prohibit or regulate investment of public pension funds in tobacco stocks. The states are Illinois, Massachusetts, Michigan and New Jersey, the last of which would also require divestiture of current public pension holdings in tobacco stocks.
THIRD STRIKE FOR FORT LAUDERDALE POLICE OFFICER: The City of Fort Lauderdale Police Officer who lost her Pregnancy Discrimination Act claim against the City (see C&C Newsletter for November, 1996) and her claim for a disability pension (see C&C Newsletter for September, 1996) has now been ordered to pay the Pension Board's attorneys' fees in the latter case. The Court found that under Section 185.40, Florida Statutes, the prevailing party is entitled to recover reasonable attorneys' fees from the other party. Christophers v. Police and Fire Retirement System of the City of Fort Lauderdale, Case No. 94-12621 (Fla. 17th Cir., November 14, 1996).
VALUE OF UNUSED VACATION DAYS CAN BE CONTRIBUTED TO 401(k) PLAN: The Internal Revenue Service has issued a Technical Advice Memorandum (TAM No. 9635002) concluding that contributions made by a company to its 401(k) Plan of an employee's vacation pay benefit are excludable from the employee's gross wages for purposes of FICA. The employee's only options with respect to excess vacation time entitlement were (1) to take the vacation time, (2) to have the company contribute the value of the time to the plan or (3) to forfeit the vacation time. Therefore, since the employee cannot receive the benefit in any other form during the year, the employee is not in constructive receipt of income and the vacation pay benefit is not includable in gross income until distributed from the plan. Note, in theory, a TAM cannot be used as precedent. IRC §6110(j)(3).
BANKS LAUNCH NEW INVESTMENT PRODUCT: In November banks began issuing a new investment vehicle known as a "Bank Trust Preferred" (BTP). These new securities became feasible after the Federal Reserve authorized BTPs to be considered equity capital of the bank. But because the Internal Revenue Service considers BTPs as bonds, the bank can deduct the interest, thus lowering the issue price. So before Congress eliminates the tax deduction, banks are expected to issue as much as $25 Billion in BTPs by the end of this month. Presently, BTPs have 30-year maturities and are non-callable for 10 years. To expedite issuance, underwriters use SEC Rule 144A for private placements, which allows a shorter period between filing and issuance and which also provides less information for buyers. For this reason, BTPs are generally available only to institutions.
A CHANGE IN COST-OF-LIVING MEASURE COULD HAVE WIDESPREAD EFFECT: If a Congressional Advisory Commission has its way, the current Consumer Price Index would be scrapped in favor of a proposed index that would "more accurately reflect the dynamic U.S. economy in which consumers are constantly changing their spending habits." The group estimates that the existing CPI overstates inflation by 1.1% per year. Obviously, a change in the yardstick would have a direct effect on Social Security increases and perhaps an indirect effect on pension cost-of-living adjustments. Believe it or not, a cut in the CPI might actually save more money than reform of the Social Security System!
ANNUAL WORKPLACE STUDY RELEASED: As reported by BNA, the Fifth Annual Workplace Pulse Survey on Retirement found that average annual retirement savings rose to $2,388.00 for 1996, up 11% from 1995 and 34% from 1994. However, even at the higher savings rate, retirement savings of workers in every age group will probably fall short of what they would need to retire at age 65 on an annual income of about $26,000.00 in 1996. Interestingly, when asked if they would put more in an IRA if the government increased the amount that could be deducted therefor, almost 80% responded in the affirmative.
FLORIDA ... HELLOOO!: The General Services Administration (GSA) has set new rates for federal employees on official travel effective January 1, 1997. The standard rate permits $30.00 per day for meals and incidental expenses. However, these rates do not apply outside the Continental United States and do not include individual rates for almost 500 "higher-cost" U.S. cities.
DALLAS FUND ON THE BRINK?: Pension & Benefits Update reports that an advisory task force has been created in Dallas to address the possibility of a future collapse in the City Employees' Retirement Fund. Projections show that there may be an annual gap of over $21 Million between benefits and contributions. If the projections are accurate, the fund could become insolvent within 25 years.
KEY TERMS AND CONDITIONS FOR PRIVATE EQUITY INVESTING: Study from William M. Mercer, 3400 Texas Commerce Tower, Dallas, Texas 75201 or call (214) 220-3500.
BE CAREFUL WHAT YOU ASK FOR: Section 119.07, Florida Statutes, part of the Florida Public Records Act, provides that if the nature or volume of public records requested to be inspected is such as to require extensive use of information technology resources or extensive clerical or supervisory assistance by personnel of the agency involved, the agency may charge, in addition to actual cost of duplication, a special service charge, which shall be reasonable and shall be based on the cost incurred for such extensive use, resources or the labor cost actually incurred. An action for mandamus was brought against the chief of police of the City of Clewiston, claiming that he had failed to comply with a public records request. The trial court denied the petition because the chief had in fact responded to the request. However, the chief incurred over $4,000.00 in special service charges. Because the special service charges must be reasonable and because an excessive charge could well inhibit the pursuit of rights conferred by the Public Records Act, the appellate court remanded so the chief could explain in more detail the reason for the magnitude of the assessment. Carden v. Chief of Police, City of Clewiston Police Department, 21 Fla. L. Weekly D2507 (2d DCA, November 20, 1996).
"VIETNAM ERA" BROADENED: On October 9, 1996 President Clinton signed into law S. 1711, the Veterans' Benefits Improvements Act of 1996, Public Law 104-275. Effective January 1, 1997, paragraph (29) of 38 USC §101 is amended to change the definition of "Vietnam era." Previously, "Vietnam era" meant the period beginning on August 5, 1964 and ending on May 7, 1975. Now, the definition depends on whether or not the veteran "served in the Republic of Vietnam during the period." For those who actually so served, the "Vietnam era" still ends on May 7, 1975, but it begins on February 28, 1961. This amendment could impact those pension plans which have provisions for military buybacks.
BACK TO THE DRAWING BOARD: As we previously reported, California Public Employees' Retirement System (CALPERS) filed suit to require tenants in its Pompano Square Mall to remain -- despite the fact that rent was being kept current (see C&C Newsletter for December, 1996). A Florida appellate court has now overturned the temporary injunction which CALPERS obtained against Mayor's Jewelers. In a case of first impression in Florida, the Fourth District Court of Appeal determined that it would follow almost every other court confronted with this issue, by denying injunctive relief to require a tenant specifically to perform a lease. The court found it unnecessary to decide whether there was an adequate remedy at law because it determined that injunctive relief would require supervision of future performance, thus putting the court "in the business of managing a shopping center." Mayor's Jewelers, Inc. v. State of California Public Employees' Retirement System, 21 Fla. L. Weekly D2608 (Fla. 4th DCA, December 11, 1996).
AND THE DRAWING BOARD IS...: CALPERS has approved a new strategic plan to help maximize returns on its $4.2 Billion real estate portfolio. The $100+ Billion fund will hire outside firms to oversee the existing portfolio and to make new investments in particular property types and regions (into which the portfolio will first be reorganized). Management companies must dedicate investment professionals exclusively for CALPERS and may be asked to co-invest or consider incentive fee structures.
DISABILITY APPLICANT NOT ENTITLED TO "NEW" HEARING ON REMAND: A disability applicant was successful in having an appellate court overturn a pension board order of denial that did not contain sufficient findings. The matter was remanded to the board, which proposed to reconsider the application upon the existing record. The applicant insisted that a new hearing be conducted, and filed a motion to compel the board to hold such hearing. The same appellate court denied the motion, thus approving the board's decision that a new hearing is not required. Mendelson v. City Supplemental Pension Fund for Firefighters and Police Officers in the City of Miami Beach, Case No. 94-385 AP (Fla. 11th Cir., December 23, 1996).
A LITTLE TWIST ON DISABILITY PENSION EXCLUDABILITY: BNA reports on an unusual case involving IRC §104(a)(4), which excludes from income tax pension income received because of personal injuries or sickness resulting from active military service. Here, the U.S. Tax Court held that the pension was not excludable, though the disability arose from military service, since the payments were based on a civilian pension received because the employee could not do the required work in any event.
GO TO FIRE INSPECTOR SCHOOL/COLLECT UNEMPLOYMENT: Do we have your attention? The Second District Court of Appeal recently had occasion to interpret Section 443.091(1)(c)2, Florida Statutes, which provides that "no otherwise-eligible individual shall be denied unemployment compensation benefits because he is in training with the approval of the Division of Unemployment Compensation." An individual who was collecting unemployment benefits became interested in attending school to become a fire inspector. Her counselor at the unemployment office assured her she would be able to continue receiving benefits while taking the course. However, her unemployment benefits were discontinued because another part of Section 443.091, Florida Statutes, requires one to be able to work and available for work. On appeal, the Court reversed the denial of benefits and remanded the case for a determination as to whether or not the quoted portion of the statute applies. Botto v. Florida Unemployment Appeals Commission, 21 Fla. L. Weekly D2661 (Fla. 2d DCA, December 13, 1996).
HMMM...KINDA MAKES YOU WONDER: Only one of America's ten biggest mutual funds outperformed the Standard & Poor's 500 Index for 1996. And that fund, Vanguard's Windsor Fund with almost $17 Billion in assets, has been closed to new investors since 1989. Windsor returned 25.8% compared to the S&P's 23.9%, mainly due to Windsor's reduction in cash from 18% to 10% and its decision to buy more growth stocks. In 1995, six of the ten biggest funds matched or beat the S&P.
BANK CUSTOMERS' LOYALTY AT LOW: According to the American Banker, the loyalty of bank customers has dropped to a 13-year low. Only 49% of surveyed participants identified a bank as their principal financial institution, down from 60% in 1994. Industry experts say they expect these results because post-merger centralization often moves key functions and services out of state and away from the local customer base, leading to a diminution of personal services.
CREDIT CARD WOES LINGER: Based on data released by the Federal Reserve last month, delinquent credit card debt accounted for 1.83% of all credit card debt as of September 30, up from 1.68% in the previous quarter. The data show that serious delinquency rates for credit card debt have been increasing steadily since year-end 1994.
(RELATIVELY) GOOD NEWS FOR LAW ENFORCEMENT OFFICERS: According to the National Association of Chiefs of Police, the number of law enforcement officers killed in the line of duty dropped to a 30-year low in 1996. Of the 118 fallen officers, nearly half (54) were shot to death and only slightly less (45) died in traffic accidents. Last year saw a near-record 176 law enforcement officers killed in the line of duty, 13 of whom died in the Oklahoma City Federal Building bombing.
FRS FORFEITURE PROVISION UPHELD: The First District Court of Appeal has upheld Section 121.091(5)(f), Florida Statutes, the forfeiture provision in the Florida Retirement System. A former board member of the Escambia County Utilities Authority pleaded guilty to accepting a bribe in connection with his ECUA service. As a result, the Florida Division of Retirement determined that he had forfeited his right to receive benefits under FRS. At the time the former director first opted into FRS, it contained the forfeiture provision. Against a slew of constitutional attacks (Double Jeopardy, Excessive Fines, Due Process, Equal Protection), the appellate court found that the case involved a straightforward question of contract law. The former director voluntarily opted into a pension system containing the forfeiture provision and thereby agreed to be treated the same way as any other member of FRS who accepts a bribe in connection with his or her employment. Busbee v. State of Florida, Division of Retirement, 22 Fla. L. Weekly D45 (Fla. 1st DCA, December 17, 1996).
RANDOM FACTS: At the beginning of 1996, there were almost 6,300 U.S. Equity stocks, valued at about $6.6 Trillion. The Standard & Poor's 500 Index accounted for 70% of the data base's capitalization. Note that the universe does not include ADR's, REIT's, limited partnerships, mutual funds, preferred shares and warrants.

References: v. 
 v. 
 §6110
 v. 
 §101
 v. 
 v. 
 §104
 v. 
 v.