The Issue The issue in this case is whether Buford M. Arthur's rights and benefits under the City of Ocala Employees' Retirement Plan and the City of Ocala Police Officers' Supplemental Pension Fund should be forfeited pursuant to Section 112.3173(3), Florida Statutes(1995).
Findings Of Fact Respondent, Buford M. Arthur, began employment with the City of Ocala Police Department (hereinafter referred to as the "Police Department") in late 1965 or 1966. Mr. Arthur terminated his employment with the Police Department in the early 1970s. Mr. Arthur was re-employed by the Police Department on January 2, 1975, and remained employed by the Police Department until his retirement. While employed by the Police Department, Mr. Arthur reached the rank of Corporal. After being re-employed by the Police Department in 1975, Mr. Arthur served as the Police Department's Forfeiture Officer. As part of his duties as Forfeiture Officer, Mr. Arthur was responsible for depositing certain funds into a Police Department Trust Fund or a trust fund of a joint task force of the Police Department and the Marion County Sheriff's Office (hereinafter referred to as the "Sheriff's Office"). Funds provided to Mr. Arthur for deposit in the Police Department Trust Fund included funds seized as evidence by, and in the custody of the Police Department. Funds provided to Mr. Arthur for deposit in the joint task force trust fund included funds seized as evidence by, and in the custody of the task force. The task force was formed by the Sheriff's Office and the Police Department pursuant to a Special Voluntary Cooperation Agreement (hereinafter referred to as the "Cooperation Agreement") between the Police Department and the Sheriff's Office. The Police Department and Sheriff's Office entered into the Cooperation Agreement pursuant to the Florida Mutual Aid Act, Chapter 23, Florida Statutes. Pursuant to the Cooperation Agreement, the Police Department and Sheriff's Office established the "Ocala-Marion County Narcotics and Vice Task Force" (hereinafter referred to as the "Task Force"). The Cooperation Agreement specified how operations of the Task Force were to be funded by the Police Department and the Sheriff's Office. The Cooperation Agreement also provided that forfeited cash and the proceeds from the sale of forfeited property, after expenses, were to be distributed 60% to the Sheriff's Office and 40% to the Police Department. All cash and forfeited property seized by the Police Department or the Task Force was held for at least sixty days. If not claimed within sixty days after the conclusion of the criminal proceedings against the individual from whom the property was seized, the seized property was sold. Cash from sales of forfeited property and seized cash held at least sixty days by the Task Force was distributed by the Fiscal Manager of the Sheriff's Office 60% to the Sheriff's Office and 40% to the Police Department. At times Mr. Arthur was responsible for such funds and cash considered forfeited to the Police Department as Forfeiture Officer. Forfeited funds received by Mr. Arthur were to be deposited into the Law Enforcement Trust Fund or the Task Force Trust Fund. On or about June 15, 1994, Mr. Arthur received $1,204.00 for deposit into the Task Force Trust Fund. Mr. Arthur admits that he took these funds. Included in the total funds Mr. Arthur received and kept were the following amounts involving the following cases and individuals: Case Number Defendant Amount 0-93-09-1974 Hanson Collins $ 20.00 S93-30856 Robert Ringold 250.00 Hanson Collins was charged with two felony counts. A Judgment was entered regarding Mr. Collins' case on January 31, 1994. Robert Ringold was charged with ten felony counts. A Judgment was entered regarding Mr. Ringold on March 14, 1994. On or about July 8, 1994, Mr. Arthur received $810.00 for deposit into the Task Force Trust Fund. Mr. Arthur admits that he took these funds. Included in the total funds Mr. Arthur received and kept were the following amounts involving the following case and individual: Case Number Defendant Amount S93-23897 Richard Bursey 50.00 Richard Bursey was charged with three felony counts. A Judgment was entered regarding Mr. Bursey on April 11, 1994. On or about January 20, 1995, Mr. Arthur received $1,267.00 for deposit into the Task Force Trust Fund. Mr. Arthur admitted that he took these funds. Included in the total funds Mr. Arthur received and kept were the following amounts involving the following cases and individuals: Case Number Defendant Amount S94-18809 Teresa Martin $ 60.00 S94-18838 David Lane 20.00 Teresa Martin was charged with two felony counts. A Judgment was entered regarding Ms. Martin on September 13, 1994. David Lane was charged with four felony counts. A Judgment was entered regarding Mr. Lane on July 28, 1994. The funds seized from Hanson Collins, Robert Ringold, Richard Bursey, Teresa Martin, and David Lane were turned over to Mr. Arthur, an employee of the Police Department, more than sixty days after Judgments were entered in their cases. The Police Department was ultimately entitled to receive 40% of these funds. Mr. Arthur began taking funds meant for deposit into the Law Enforcement Trust Fund in June of 1994 and continued to do so through approximately January of 1995. Mr. Arthur admits that he took approximately $3,200.00 to $5,000.00. On February 29, 1996, Mr. Arthur retired from the Police Department. After his retirement, Mr. Arthur began receiving retirement benefits from the City of Ocala Employee's Retirement Plan and the City of Ocala Police Officers' Supplemental Pension Fund. Mr. Arthur continues to receives benefits from these public retirement plans. After retiring from the Police Department Mr. Arthur was charged with Grand Theft. This charge arose as the result of Mr. Arthur's theft of funds entrusted to him for deposit into the Task Force Trust Fund. By letter dated October 22, 1996, the Chairman of Board of the City of Ocala Police Officers' Supplemental Pension Fund provided Mr. Arthur with a copy of Section 112.3173, Florida Statutes. Mr. Arthur discussed the letter and the statute with his attorney, James Reich. The evidence failed to prove that any representative of the City or the Boards discussed Section 112.3173, Florida Statutes, with Mr. Arthur or gave him any assurances that he would not be subject to its provisions if he entered a plea of nolo contendere to the charges against him. On January 29, 1997, Mr. Arthur signed a Waiver of Rights and Agreement to Enter Plea. Mr. Arthur agreed to enter a plea of nolo contendere to the change of Grand Theft upon certain terms set out in the agreement. In particular, the agreement provided, in relevant part, that adjudication would be withheld; that Mr. Arthur would be sentenced to two years probation; that he would pay court costs; and that he would make restitution to the City of Ocala Employees' Retirement Plan and the City of Ocala Police Officers' Supplemental Pension Fund. On January 29, 1997, Mr. Arthur entered a plea of nolo contendere consistent with the Waiver of Rights and Agreement to Enter Plea. Mr. Arthur's plea and the terms of the agreement to enter plea were accepted by the Court. Petitioner's Exhibits 3 and 4. Mr. Arthur made restitution in the amount of $11,825.95, although Mr. Arthur asserts that he did not take more than $3,200.00 to $5,000.00. Mr. Arthur is married to Intervenor, Rosemary Arthur. They were married November 20, 1994.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Boards of Trustees of the City of Ocala Employees' Retirement Plan and the City of Ocala Police Officers' Supplemental Pension Fund finding that Buford M. Arthur has forfeited all rights and benefits under the City of Ocala Employees' Retirement Plan and the City of Ocala Police Officers' Supplemental Pension Fund and dismissing the petitions of Buford M. Arthur and Rosemary Arthur. DONE AND ENTERED this 30th day of October, 1997, in Tallahassee, Leon County, Florida. LARRY J. SARTIN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 30th day of October, 1997. COPIES FURNISHED: William H. Phelan, Jr., Esquire Bond, Arnett and Phelan, P.A. Post Office Box 2405 Ocala, Florida 34478-2405 Leonard H. Klatt, Esquire POE and KLATT 7753 Southwest State Road 200 Ocala, Florida 34476-7049 H. Lee Dehner, Esquire Christiansen and Dehner, P.A. 2975 Bee Ridge Road, Suite C Sarasota, Florida 34239
Findings Of Fact The petitioner Petitioner, Huey G. Manges, was employed as a fire fighter by the Port Everglades Authority (the Port) in September 1961, and over the years rose through the ranks until in 1975 or 1976 he became Chief of the department. Petitioner served as Chief until 1988 or 1989, and was then promoted to Public Safety Director. As an employee of the Port, petitioner was a member of the Florida Retirement System. The Port's deferred compensation plan In 1983, the Port adopted a deferred compensation plan for all employees. The plan provided that employees could "make contributions into the fund in an amount not to exceed 33.3 [percent] of base salary, with a maximum cap of $7500." Under the plan, the Port, as the employer, made no contribution to the plan. In September 1984, the plan was amended to create a special provision for "key management persons," as an incentive to motivate them to perform in an outstanding manner and to encourage their continued commitment to the Port. At the time, it was observed that such employees have "extensive responsibilities," and "are not compensated for the many hours they work beyond the normal '40- hour' work week." As amended, the Port matched the qualified "key management person['s]" contribution on a dollar for dollar basis, not to exceed a maximum of 5 [percent] of base salary." The combined employer/employee contribution was limited to $7,500, annually. Among the positions designated as "key management persons" was the position of Fire Chief. Subsequently, at a date not apparent from the record, but at least 5 years before petitioner's retirement, the plan was amended to its current format, and further refined the classes of participants. For employees, such as petitioner, who had attained senior management Grade 9 or higher under the Port's management pay plan, and who elected to participate in the plan by executing a participation agreement, the Port agreed to contribute, on behalf of the employee, "an annual amount equal to the lesser of (i) $7,500 or (ii) 10 [percent] of such Employee's Compensation," regardless of whether they contribute to the plan. For employees below senior management Grade 9, and who elected to participate in the plan, the Port agreed to make "a matching contribution equal to 100 [percent] of the amount of a Participant's annual Deferred Compensation, up to an annual maximum matching contribution of 5 [percent] of the Participant's Compensation." According to petitioner, he participated in the plan from its inception, and "maxed it" each year. [Transcript, page 56]. By such testimony, it is concluded that the annual contribution to his deferred compensation account was $7,500, and that the Port's contribution varied, over the years, from a "dollar for dollar" match under the September 1984 amendment, to a full $7,500 contribution during the period that included, at least, petitioner's last five years of employment with the Port. Petitioner's retirement and subsequent events In or about June 1994, petitioner applied with respondent, Division of Retirement, for retirement under the Florida Retirement System, and his request was approved effective July 1, 1994. Since that date, petitioner has duly received his monthly retirement benefits, as calculated from the Division's records at the time of his retirement. On March 8, 1995, petitioner, through counsel, wrote to the Division and requested that his retirement benefits be recalculated predicated on an error he felt was committed by the Port in its contributions to the Florida Retirement System on his behalf. Such error, petitioner contended, was the Port's failure to treat the contributions it made to his deferred compensation account as retirement creditable wages, and to make the necessary contributions to the State Retirement Account. Essentially, petitioner wanted the Division to collect the contributions from the Port, and then recalculate his average final compensation to include the $7,500 annual contribution by the Port, and adjust his pension payments accordingly. 2/ Regarding petitioner's contention, the proof demonstrates that from the inception of the plan until May 1989, the Port, unbeknownst to the Division, had included the contribution it made to an employee's deferred compensation plan in calculating an employee's retirement creditable wages and Florida Retirement System (FRS) contributions. In May 1989, Mary Meynarez, the new director of finance for the Port, wrote to the Division concerning the propriety of such treatment. That letter was in response to a conversation the Port's CPA had with the Division, wherein he was advised that employer contributions to a deferred compensation plan were not subject to FRS contributions because gross or retirement creditable wages do not include matching contributions or fringe benefits. Ms. Meynarez's letter sought written confirmation of the Division's position. By letter of May 19, 1989, the Division advised Ms. Meynarez, consistent with its long established interpretation of the retirement laws, that such was the Division's position. Thereafter, the Port made no further contributions to the FRS based on its contribution to an employee's deferred compensation plan, and it submitted and received from the Division a credit adjustment for the erroneous payments for prior periods. Given the Division's interpretation of the retirement laws, it concluded that the Port properly excluded the contributions it made to his deferred compensation account when calculating FRS contributions, and by letter of July 5, 1995, advised petitioner that his retirement benefits had been correctly calculated and no adjustment would be made. Such letter further advised petitioner of his right to a section 120.57 hearing if he disagreed with the Division's decision. Petitioner timely filed such a request, and this proceeding duly followed. Pertinent legislation and the Division's interpretation Section 121.021(24), Florida Statutes, defines "average final compensation," as that term is used in deriving a members retirement benefits under the Florida Retirement System, to mean: [T]he average of the 5 highest fiscal years of compensation for creditable service prior to retirement, termination, or death . . . The payment for . . . bonuses, whether paid as salary or otherwise, shall not be used in the calculation of the average final compensation. Prior to 1989, section 121.021(22) defined "compensation," as that term is used in the Florida Retirement System, as follows: (22) "Compensation" means the monthly salary paid a member, including overtime payments and bonuses paid from a salary fund, as reported by the employer on the wage and tax statement (Internal Revenue Service form W-2) or any similar form. When a member's compensation is derived from fees set by statute, compens- ation shall be the total cash remuneration received from such fees. Under no circum- stances shall compensation include fees paid professional persons for special or particular services. During the course of the 1989 Legislative session, proposals were made to amend the provisions of section 121.021(22). The reason for amendment was twofold. First, pursuant to subsection 121.021(22) and (24) bonuses were included in the definition of "compensation" but excluded when calculating "average final compensation." This resulted in a conflict because retirement contributions were due on bonuses, but bonuses could not be used in calculating a member's "average final compensation." Second, the definition of "compensation" was silent with regard to the treatment of salaries paid to employees who participated in a deferred compensation, salary reduction, or tax- sheltered annuity program. Consequently, although the Division had consistently interpreted the subsection to so provide, it was felt appropriate to amend the statute to clearly provide that an employee's election to defer a portion of his salary to a deferred compensation plan did not reduce his retirement creditable wages. As a consequence, pursuant to Chapter 89-126, Section 1, Laws of Florida (1989), subsection 121.021(22), effective June 26, 1989, was amended to read as follows: "Compensation" means the monthly salary paid a member by his or her employer for work per- formed arising from that employment, including overtime payments paid from a salary fund. Under no circumstances shall compensation in- clude fees paid professional persons for special or particular services or include salary payments made from a faculty practice plan operated by rule of the Board of Regents for eligible clinical faculty at the Univer- sity of Florida and the University of South Florida. [For all purposes under this chapter, the compensation or gross compensation of any member participating in any salary reduction, deferred compensation, or tax-sheltered annuity program authorized under the Internal Revenue Code shall be deemed to have been the compen- sation or gross compensation which the member would have received if he or she were not participating in such program] [Emphasis added]. Here, while recognizing that the contributions made by the Port to petitioner's deferred compensation plan may be part of a management package designed to encourage employment fidelity, the Division considers such payments fringe benefits, similar to employer paid health and life insurance, and not "compensation," as defined by subsection 121.021(22) for retirement purposes. In reaching such conclusion, the Division first points to the provision of subsection 121.021(22), as amended, which provides that "[f]or all purposes under this chapter, the compensation or gross compensation of any member participating in any salary reduction, deferred compensation, or tax- sheltered annuity program . . . shall be deemed to have been the compensation or gross compensation which the member would have received if he or she were not participating in such program." Since petitioner would not have received the $7,500 Port contribution had he not elected to participate in the Plan, the literal application of the statutory language would exclude such payments from the definition of "compensation or gross compensation" for retirement purposes. In contrast, petitioner points out that the amendment to subsection 121.021(22) relied upon by the Division was not occasioned to address the peculiarities of his situation, but was designed to clarify that the portion of the employee's salary he elected to defer would not reduce his retirement benefits. Such issue is distinct, according to petitioner, from the issue of whether employer contributions to a deferred compensation plan are "compensation" for retirement purposes. While petitioner may be correct as to the purpose of the amendment to subsection 121.021(22), such does not compel the conclusion that the Division's literal application of that subsection, as excluding employer contributions from the calculation of retirement creditable wages, was not consistent with the Legislature's intent. In concluding that the Division's interpretation is reasonable and consistent with the purpose and intent of subsection 121.021(22), it is observed that under that subsection "compensation" is defined to mean "the monthly salary paid a member by his . . . employer for work performed." "Monthly salary," as observed by the Division, is commonly understood and reasonably read to refer to the fixed compensation for services paid to the employee on a regular basis or, as in petitioner's case, his fixed monthly salary under the Port's management pay plan, and does not include fringe benefits, such as employer matching payments or contributions to a deferred compensation plan. 3/ Consequently, the Division's decision to exclude such benefits from the calculation of petitioner's retirement benefits under the Florida Retirement System was reasonable. 4/
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered dismissing petitioner's petition for formal hearing, and denying his request for additional retirement benefits. DONE AND ENTERED this 13th day of June, 1996, in Tallahassee, Leon County, Florida. WILLIAM J. KENDRICK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of June, 1996.
The Issue Whether Respondent is estopped from denying Petitioner's request to rescind her choice to change retirement plans (2nd Election) and requiring her to remain in the Florida Retirement System (FRS) Pension Plan; and, if so, what are Petitioner's options? Because of the complicated nature of FRS and Petitioner's unique circumstances, the issues and parties' positions are summarized herein. After being hired by the University of Florida, Petitioner had three retirement plan options: (1) State University System Optional Retirement Program (SUSORP), (2) FRS Investment Plan (Investment Plan), or (3) FRS Pension Plan (Pension Plan). Petitioner had been an FRS member in a previous job and switched from the Investment Plan to the Pension Plan solely because she was told she could only participate in SUSORP if she first became a Pension Plan member. The Division now admits there is no authority for this requirement, but argues it is not responsible for Petitioner's decision to switch from the Investment Plan to the Pension Plan. Rather, it blames another state agency and non-government agents for her belief that she could not participate in SUSORP unless she first bought into the Pension Plan. Ultimately, the issues in this proceeding are: (1) whether Petitioner was required to switch from the Investment Plan to the Pension Plan to participate in SUSORP; (2) whether the Division is responsible for Petitioner's belief that this was a requirement; and (3) if so, whether Petitioner's funds used to buy into the Pension Plan can be returned to the Investment Plan or transferred to her SUSORP account. PROCEDURAL HISTORY On May 30, 2018, Petitioner, Lee Hayes Byron, elected to switch her FRS plan from the Investment Plan to the Pension Plan. On November 1, 2019, Respondent, Department of Management Services, Division of Retirement (the Division), issued a letter to Petitioner denying her request to essentially rescind this election and/or have her "cost associated with buying into the FRS Pension Plan from the FRS Investment Plan transferred to SUSORP." On November 25, 2019, Ms. Byron submitted a request for an administrative hearing to the Division. Respondent forwarded Petitioner's request to DOAH on December 11, 2019. The matter was originally scheduled for hearing for February 5, 2020, but was continued three times: once at the Division's request and twice due to the state of emergency related to the COVID-19 health crisis. A final hearing was held on April 29, 2020, by Zoom. Petitioner testified on her own behalf and Petitioner's Exhibits P1 through P7 were admitted into evidence without objection.1 The Division offered the testimony of Joyce Morgan (Division Bureau Chief of Contributions), and Respondent's Exhibits R1 through R8 were admitted into evidence without objection. The final hearing was recorded by a court reporter, but neither party ordered a transcript. Petitioner requested 30 days to submit her proposed recommended order, and the Division had no objections to Petitioner's request. By requesting and agreeing to the extension of time, the parties waived the requirements in section 120.57(3)(e), Florida Statutes (2019), for the rendering of a recommended order within 30 days of the hearing. See Fla. Admin. Code. R. 28-106.216(2).2 1 Exhibit P7 is a disk with numerous audio files of telephone conversations between Petitioner and Division employees, other State employees, representatives, and agents. 2 All references to statutes and administrative rules are to the 2019 versions of the Florida Statutes and Florida Administrative Code unless otherwise noted. Accordingly, the proposed recommended orders were due no later than May 29, 2020. Both parties submitted timely Proposed Recommended Orders (PROs), which have been considered in the preparation of this Recommended Order.
Findings Of Fact Petitioner, Lee Hayes Byron, is currently employed by the University of Florida and eligible to participate in the Investment Plan, Pension Plan, or SUSORP. She is in an optional (not a mandatory) SUSORP position. Respondent, the Division, is a part of the Department of Management Services (DMS). The Division, as part of DMS, is the state entity responsible for oversight and administration of the Pension Plan and SUSORP. See §§ 121.125 and 121.035, Fla. Stat. The Division authorizes provider companies to assist SUSORP members with investments. See § 121.035, Fla. Stat.; Fla. Admin. Code R. 60U-1.011(4). The State Board of Administration of Florida (SBA) is the state agency responsible for oversight and administration of the Investment Plan.3 SBA is not a party to this proceeding. In coordination with DMS, SBA is responsible for dissemination of information regarding the FRS plans. See § 121.4501(10), Fla. Stat. SUSORP is a defined contribution plan authorized by section 121.35, Florida Statutes. The plan is an optional retirement plan in which 3 There was evidence that prior to attempting to undo her election with the Division, Petitioner requested an agency hearing with SBA, which was held on May 21, 2019. The SBA Hearing Officer recommended that SBA grant Petitioner relief by allowing her to rescind the 2nd election. On September 17, 2019, SBA issued a Final Order rejecting the SBA Hearing Officer’s recommendation. Petitioner has appealed the SBA’s Final Order, which is now pending at the Second District Court of Appeal in the matter of Lee Hayes Byron v. State Board of Administration, Case No. 2D19-3930. "eligible employees" of the State University System can elect to participate in lieu of the Pension Plan or Investment Plan. One of the benefits SUSORP offers over the FRS plans is the employer contribution rate is greater. SUSORP and the Investment Plan require an employee to contribute a minimum pretax contribution and allow additional funds to be contributed. Both the Investment Plan and SUSORP allow the employee to allocate the money in the plan account among approved investment funds.4 The ultimate benefit from the Investment Plan and SUSORP received by the employee upon retirement depends on both the amount contributed and the financial markets. The employee is responsible for managing his or her SUSORP or Investment Plan account through approved providers. In comparison, the Pension Plan requires a fixed pretax contribution by an employee. The Pension Plan is responsible for investing the contributions and accumulated funds in the member's pension account. Upon retirement, the employee receives a lifetime monthly benefit using a formula based on his or her length of service and salary. The employee has no control over how the money in the pension account is invested but is guaranteed a fixed, predictable benefit. PETITIONER'S FRS HISTORY Ms. Byron originally enrolled in FRS as an employee of Sarasota County on July 11, 2005. At that time she had the option to participate in either the Investment Plan or Pension Plan. On December 28, 2005, Ms. Byron made a timely election to participate in the FRS Investment Plan, effective January 1, 2006. As part of the FRS system, she had one more chance to switch to the Pension Plan. The subsequent decision to change FRS plans is referred to as the "2nd Election." On April 20, 2018, Petitioner began employment with the University of Florida in a SUSORP-eligible position. At this point, as explained in the 4 SBA recommends acceptable SUSORP investment products to the DMS; the DMS has final approval of such products. See § 121.035(6)(c), Fla. Stat. Conclusions of Law, Petitioner would begin participation in SUSORP unless she opted to remain in the FRS System (in either the Investment Plan or Pension Plan) or failed to enroll in a SUSORP-approved investment fund. See § 121.35(3), Fla. Stat. INFORMATION AND COMMUNICATIONS A handout distributed by the Division titled, "Florida Retirement System (FRS) Investment Plan • Members With a Remaining FRS Election Inquiring About State University System Optional Retirement Program (SUSORP) Membership" (SUSORP Handout) provides information for an Investment Plan member who wants to participate in SUSORP. The SUSORP handout states in relevant part: You will need to use your 2nd (and last) election to transfer from the Investment Plan to the Pension Plan before you will be eligible to elect participation in the SUSORP. * * * There is a cost associated with using your 2nd election to transfer to the Pension Plan. * * * The estimated transfer cost is calculated using your salary, service credit, membership class, and other actuarial assumptions used in the annual FRS actuarial valuation. The payment for the amount of the transfer cost is required to complete the transfer to establish your Pension Plan membership. The amount of money liquidated from your Investment Plan account to pay for your transfer cost will not transfer to the SUSORP. If the value of your Investment Plan account is less than the transfer cost, you may use personal resources including a direct transfer from a qualified plan … to make up the difference. Any personal resources paid will not transfer to the SUSORP. * * * Your membership in SUSORP will not begin until you have completed the transfer process and will be entirely funded by future (after the transfer) employer and employee contributions submitted on your behalf. * * * Your SUSORP account will begin with a zero balance and will be funded by future employer and employee contributions. The Division's witness, Ms. Morgan, confirmed the SUSORP Handout is a Division document. Ms. Morgan further stated that although this version of the SUSORP Handout was not provided to Petitioner, it was the Division's position at the time she was eligible for participation in SUSORP. Ms. Morgan also conceded that there is no statutory authority for the requirement that an employee would need to use his or her 2nd Election to transfer from the Investment Plan to the Pension Plan before becoming eligible to elect participation in SUSORP. As explained in the Conclusions of Law, this is an unpromulgated requirement that has no statutory authority, and therefore cannot be applied to determine Petitioner's substantial interests. The Division approves provider companies to provide information and investment products to SUSORP members. See Fla. Admin. Code R. 60U- 1.012(1)(a). AXA Advisors (AXA) is one of the provider companies listed on the SUSORP Enrollment Form. See Form ORP-ENROLL-1, available at https://www.flrules.org/Gateway/reference.asp?No=Ref-06117. On April 24, 2018, Petitioner received an email from Patrick Ashe with AXA. Mr. Ashe described AXA as a resource to help Petitioner select the best retirement plan: Pension, Investment, or SUSORP. Mr. Ashe eventually spoke to Ms. Byron on the phone and sent her FRS information. He also provided her with contact information for the Division and an FRS general phone number. On May 3, 2018, Mr. Ashe provided Petitioner with a document titled, "Welcome to the Florida Retirement System for State University System SUSORP-Eligible Employees" (Comparison Brochure), dated January 2018. The Division alleges the Comparison Brochure is published by SBA, not the Division. Although SBA is responsible for providing educational information about retirement options to eligible employees, it must do so in coordination with DMS. See § 121.4501(10)(a) and (10)(c)7., Fla. Stat. Regardless of who published the Comparison Brochure, it is clear that it is an official document used to advise SUSORP members, and AXA was authorized to advise Ms. Byron regarding her FRS retirement options and SUSORP. The Comparison Brochure explains the differences between SUSORP, the Investment Plan, and the Pension Plan. The Comparison Brochure also provides deadlines for the election to participate in each plan. According to the Comparison Brochure, from the date of hire, a SUSORP-eligible employee has 90 days to choose to participate in SUSORP. If he or she does not elect to participate in SUSORP, the employee has until 4:00 p.m. (E.S.T.) on the last business day of the eighth month after the month of hire to choose between the Investment Plan and the Pension Plan. If the employee does not make an election, FRS automatically enrolls the employee in the Investment Plan. As explained in the Conclusions of Law, this is contrary to the SUSORP statute. Regarding changes made after an initial election, the Comparison Brochure provides: SUSORP Plan Investment Plan Pension Plan Can I change plans after I make my initial election? No. If you elect the SUSORP, you will remain in this plan for as long as you remain at this employer in a SUSORP-eligible position. You have a one-time 2nd Election that you can use during your FRS career to change to the other FRS retirement plan, provided you are actively employed by an FRS-participating employer at the time your 2nd Election is received.4 (Footnote in original, see ¶20 below). The Comparison Brochure explains that once an employee chooses to participate in SUSORP, the employee cannot change to a different plan, and will remain in SUSORP as long as the employee is in a SUSORP eligible position. Once an employee elects to participate in the Investment Plan or the Pension Plan, he or she has only one opportunity (the 2nd Election) during his or her entire FRS career to change between the Investment and Pension Plans. Regarding changing to SUSORP from the Investment Plan or Pension Plan, footnote 4 in the Comparison Brochure explains: If you are enrolled in the Investment Plan and move to a SUSORP-eligible position, you must use your 2nd Election (if available) to buy back into the Pension Plan in order to enroll in the SUSORP. You are not permitted to make a direct transfer from the Investment Plan to the SUSORP (unless in a mandatory SUSPORP position). Again, during the hearing, Ms. Morgan admitted there was no statutory authority for the requirement that Petitioner use her 2nd Election to buy into the Pension Plan before she could enroll in SUSORP. On May 4, 2018, Mr. Ashe sent Ms. Byron a follow-up email that explained the procedure to switch from the Investment Plan to the Pension Plan so she could enroll in SUSORP: It sounds like you are currently in the Investment Plan so if you decide to stay in that plan just verify with [FRS] that you want to make sure you automatically are re-enrolled in that plan. If you elect to switch to either the Pension or the SUSORP plan then we would just fill out the 1 page 2nd election form and fax that to FRS to utilize the switch. That would put you in the Pension Plan. From there if you would like to enroll in the SUSORP plan then I will get those forms to you and we will get that set up. … The main factor on whether the switch would be in your best interest would be based on the differential between the Pension and Investment Plans at your current number of years in the FRS system. * * * In the Investment Plan the university is contributing 3.3% to match your mandatory 3% contribution and in the SUSORP plan they would contribute 5.14% in addition to your 3% contribution. The differential involved in switching to the Pension Plan so that you could then enroll in the SUSORP plan would be the major factor in whether picking up the extra employer contribution would be beneficial in the long run. (emphasis added). Mr. Ashe's email erroneously indicated Ms. Byron must use her 2nd Election to go into the Pension Plan before she could enroll in SUSORP. He also acknowledged she should weigh whether the cost to buy into the Pension Plan was worth the extra contributions available if she ultimately decided to go into SUSORP. In this email, Mr. Ashe reiterated he had the authority to provide the SUSORP paperwork and "get that set up." Ms. Byron testified she believed Mr. Ashe was authorized by the Division to advise and enroll her into SUSORP. Although the Division argues other people who spoke with Ms. Byron were not Division employees, it does make this same assertion regarding Mr. Ashe. See Resp. PRO, ¶¶ 44-47 (claiming Ernst and Young's employee was an SBA agent, not a Division agent). Given that AXA was a approved by the Division as a provider company, the undersigned finds that AXA and Mr. Ashe were authorized by the Division to provide Ms. Byron with information about SUSORP and administer her SUSORP account. See § 121.35(6), Fla. Stat. On May 29, 2018, Ms. Byron called the FRS Financial Guidance Line and was put in contact with "Mike with Ernst & Young." During the call, Ms. Byron explained to Mike that she was in the Investment Plan, but wanted to "move to the SUSORP." Specifically, she called because she understood she would "have to maybe pay a fee to get into the pension plan and then move to the SUSORP." She had been told that she should call the FRS Financial Guidance Line to figure out what that fee might be. Mike confirmed Petitioner would need to be a member of the Pension Plan before getting into SUSORP. Again, this information is not accurate and contrary to the SUSORP statute and Division rules. He also stated there is a 90-day window for her to move to SUSORP. During the call, Mike could not give Petitioner a quote for the buy in cost of switching from the Investment Plan to the Pension Plan and indicated it could take up to six weeks to get that information. He also informed her it could take a full month to process the paperwork and payment amount to become a Pension Plan member. He urged her to submit the 2nd Election form to switch from the Investment Plan to the Pension Plan before the end of the month (May 31, 2018), and then not to pay the cost if she concluded it is was too much or did not want to go forward with the switch. Ms. Byron: Okay. So, what is the risk of submitting the [2nd Election] form? I know I only get one chance to make the change. If I submit the form and change my mind, does that count as my chance? Mr. Mike: I mean, you have the full month following to rescind. * * * Ms. Byron: And if I don't submit the form, then nothing happens. If I do submit the form, and I don't want to pay it, I have to not pay it and nothing happens … [i]f it automatically happens and I still don't want to do it, I have a month. Mr. Mike: Yeah. Based on the information she received from Mr. Ashe and her conversation with Mike, Ms. Byron understood she had 90 days, or until July 19, 2018, to buy into the Pension Plan and then elect to participate in SUSORP. Because she had been led to believe only Pension Plan participants could elect to participate in SUSORP, she reasonably concluded she would need to use her 2nd Election to change from the Investment Plan to the Pension Plan before she could participate in SUSORP. On May 31, 2018, Ms. Byron submitted a "2nd Election Retirement Plan Enrollment Form" (2nd Election form) by facsimile to the number designated on that form. Ms. Byron selected the following option: Option 1: Change from the FRS Investment Plan or Hybrid Option to the FRS Pension Plan. I want to transfer from the Investment Plan to the Pension Plan and use my existing Investment Plan account balance and possibly other personal resources to 'buy' into the Pension Plan. The 2nd Election form does not make any reference to SUSORP. On May 31, 2018, Petitioner called the FRS Financial Guidance Line to confirm that the 2nd Election form was received by FRS. During this call, Ms. Byron was transferred to Misty, who identified herself as an Investment Plan administrator. Ms. Byron indicated she wants to make sure the 2nd Election form had been received, but Misty could not confirm this. Misty explains it may take a few hours to show up "in her system." Ms. Byron was concerned she may not be talking to the right person. Ms. Byron: Okay. Now, am I –are you sure I'm with the right person? Because I'm switching from investment to the pension with the intention of eventually switching to SUSORP. Ms. Misty: You're switching from investment plan to pension with the intention of switching to the [sic] something entirely outside of the pension? Ms. Byron: To SUSORP. Ms. Misty: Okay. I don't know what that is, I apologize. Let's go ahead and get you over to pension just to be sure since they are a separate department. * * * Ms. Byron: Who's in charge of switching from the investment to the pension? Ms. Misty: We [SBA and the Division] would both be involved in it. (emphasis added). She then instructed Ms. Byron to press Option 4 for the Pension department when she returned back to the automated system. From this conversation and the other conversations Ms. Byron had with people on the FRS Financial Guidance Line, the undersigned finds both the Division (as the agency administering the Pension Plan) and SBA (as the agency administering the Investment Plan) were responsible for processing Ms. Byron's 2nd Election form. On June 4, 2018, FRS sent Ms. Byron a "Confirmation of 2nd Election – Pension Plan" (Confirmation). It indicated that her election to move from the Investment Plan to the Pension Plan was effective as of June 1, 2018, but that it was not finalized. The Confirmation informed Petitioner "you will need to buy into the FRS Pension Plan using the available balance in your FRS Investment Plan account. If your account is not sufficient to cover the cost of the buy in, you will need to submit personal funds." Although the Confirmation did not state whether it was sent from SBA or the Division, the second page indicated: If you feel this retirement Plan election was made in error, you may be able to cancel it. Please call the MyFRS Financial Guidance Line at 1-866-446- 937, Option 2. Failure to notify us no later than 4:00 PM EST on the last business day of the month following your election month will void your right to cancel this election. The Confirmation directed members to contact the Division (not SBA) at the same number, Option 3, for specific questions. Based on the date of the submittal of her 2nd Election form (May 31, 2018), Ms. Byron had until June 29, 2018, to rescind her 2nd Election form, and thereby reverse her decision to go from the Investment Plan to the Pension Plan. At this point, however, even though she had executed the 2nd Election form, Petitioner's election transfer from the Investment Plan to the Pension Plan was not final because she had not submitted the buy in payment. The Confirmation did not address what would happen if the buy in amount was not submitted, or if it was, what would happen if an employee canceled the 2nd Election and did not remain in the Pension Plan. The Confirmation did not make any reference to SUSORP. On June 18, 2018, Ms. Byron spoke with Leah at the Division. In this call, Ms. Byron explained she received the Confirmation, but she had not received a bill for the buy in amount. Leah replied that a letter with the amount was generated on June 14, 2018, but has not been mailed out. Ms. Byron was concerned about the last day she has to rescind the election. Ms. Byron: So what is my deadline for canceling? I'm just panicking about if it's – if it's not what I want to do because I don't have the bill yet, when can I cancel the second election? Ms. Leah: Typically they give you a 60-day period. Let me double check. One moment. Okay. So you'll have until no later than the last business day of the month following the election. During the call, Ms. Byron pressed Leah on the letter with the buy in figure, and questioned her as to why the Confirmation was sent if the election was not final. Leah determined the letter was issued by the Investment Plan (SBA), not by the Pension Plan (the Division), and transferred Ms. Byron to Rick with the Investment Plan. It is apparent from the audio recording that Ms. Byron was exasperated (justifiably), but remained patient. Once transferred to Rick, Ms. Byron was informed that any questions regarding the buy in had to go through the Pension Plan. Rick offered to transfer her back to the "pension department." On June 21, 2018, before the deadline to rescind her 2nd Election, Mr. Ashe sent Ms. Byron two documents: (1) a SUSORP enrollment form, and a risk tolerance questionnaire to identify Ms. Byron's investment strategy for SUSORP. There was no discussion of the buy in payment to transfer into the Pension Plan. On July 3, 2018, Ms. Byron called the FRS Financial Guidance Line and was transferred to Durriya with Ernst & Young. During this call, Ms. Byron explained she received an invoice for the buy in amount to switch to the Pension Plan and needed a "letter of acceptance" for the financial firm handling her Investment Plan to release the funds. Durriya said could not help her and offered to transfer Ms. Byron to someone else. Durriya transferred Ms. Byron to Phyllis at the Division who was able to help her. Phyllis stated she would request for the letter and it would be mailed to Ms. Byron as soon as possible. Ms. Byron expressed concern that the letter might not get to her by July 19, 2018, the date she needed to elect to participate in SUSORP. Ms. Byron: So help me with the deadline. I was hired April 20th. I have made my intention known to go into the SUSORP, but I can't physically do that with the money until all of this happens. And I'm worried it won't happen by July 20th, July 19th, which is my deadline for selection. Am I going to be okay? Ms. Phyllis: Let's see. Okay. So you have until August 16th for us [the Division], but you need it by July 19th? Ms. Byron: That's when my selection of the – which plan I want to be in has to be in. And I submitted my, I want to be in SUSORP [ ], but I can't physically be in … SUSORP until all the money's there [Pension Plan]. Does that matter? * * * Ms. Phyllis: Okay. So, basically you are switching from investment to pension and then to SUSORP, right? Ms. Byron: Yeah. (emphasis added). Phyllis did not advise Petitioner she could start participation in SUSORP without first switching from the Investment Plan to the Pension Plan or buying into the Pension Plan. At this point, Petitioner's 2nd Election was not finalized because she had not submitted the buy in funds. Had she been informed that she did not have to be in the Pension Plan first, Petitioner could have simply not submitted the buy in funds, kept her existing funds in the Investment Plan, and started in SUSORP. Rather, Phyllis advised she would place a notation in the system that Ms. Byron was attempting to make an election to participate in SUSORP, and "asked them to rush it." Ms. Byron then asked Phyllis about the deadline for her to get into SUSORP. Phyllis could not help her, but offered to transfer her to the Optional Retirement Program department. What is clear from the call is that Ms. Byron is very concerned about getting the buy in funds to the Division to participate in the Pension Plan because she believed she had to be a Pension Plan member before the SUSORP election deadline. On August 3, 2018 (after both the deadline to rescind her 2nd Election form and the deadline to enroll in SUSORP had passed), Ms. Byron contacted the Division and spoke to Leah. At the outset of the call, Ms. Byron informed Leah that called to see if her 2nd Election status was final because she had submitted the funds to buy into the Pension Plan. Although it is unclear from the record how much Petitioner paid to buy into the Pension Plan, she used her entire savings from her Investment Plan plus additional monies. The Investment Plan was valued at approximately $138,000. Leah confirmed the switch from the Investment Plan to the Pension Plan had gone through, and advised Ms. Byron that she had 13 years of service under the Pension Plan. Ms. Byron was audibly upset and stated, "Well, I actually didn't want to end up in the pension, I wanted to end up in the SUSORP, so how do I make sure that that choice is recorded? We had to do the pension first and transfer it to SUSORP." From the audio recording, it is clear Leah was confused. Leah then placed Ms. Byron on hold and had a separate call with another Division employee, Phyllis. Leah relayed the conversation with Ms. Byron to Phyllis and Phyllis suggested Leah call another extension. Leah then checked back in with Ms. Byron to let her know she was still looking for someone who can help her. Ms. Byron agreed to stay on hold. On a separate line (which Ms. Byron could not hear), Leah received an automated recording announcing that she had reached the "Florida Division of Retirement Optional Program O-R-P unit." Leah then spoke with Jim at the Division. Leah explained to Jim that Ms. Byron did not want to remain in the Pension Plan, but rather wanted to transfer to SUSORP. Leah remained confused. [Mr. Jim]: You don't transfer to SUSORP. You're either in it or you're not in it. There is no way to buy into it … there's no way to get from investment by going through pension to get to SUSORP. You take a job that's eligible for SUSORP and you make the choice to be in it or not. * * * Ms. Leah: Well, she had questions about the forms that she would need to submit, but doesn't look like she's going to be – Mr. Jim: Just put up the wall. She's not going to be able to do it. What Jim told Leah is consistent with the SUSORP statute: it does not matter whether one is in the Investment Plan or Pension Plan; one is in SUSORP when he or she is eligible. Jim seemed to be telling Leah that what Ms. Byron wanted (to have her retirement funds in SUSORP) was not possible, but that Leah should not do anything about it. Jim agreed to speak with Ms. Bryon but joked with Leah that it was Friday, and he had one hour left on his shift. He also sarcastically told Leah she may want to stay on the line as it might be "entertaining or educational." Again, Ms. Byron did not hear this conversation between Leah and Jim. Leah then patched Ms. Bryon through to Jim. At this point, Ms. Byron, Jim, and Leah were all on the call. Ms. Byron: I submitted my second election form to go from investment to pension with the intention of going into SUSORP and I need to check if you have all my forms necessary to make that happen. Jim: So, you've just taken a job with one of the universities?Ms. Byron: Yes. Mr. Jim: Okay. It looks like everything's in place. Jim informed Ms. Byron a letter of acceptance to SUSORP was mailed to her on July 5, 2018, and that she could call back to make sure everything had been processed in a few days. He did not tell Ms. Byron what he had explained to Leah: "You don't transfer to SUSORP. You're either in it or you're not in it." After Ms. Byron ended the call, Jim and Leah continued to discuss Ms. Byron's situation. Mr. Jim: Great. Understand now, Ms. Byron just spent a whole bunch of money. That money's gone except that it purchased her some years of pension service. Ms. Leah: Right. Mr. Jim: Okay. Her new SUSORP account starts at zero. Oh, did I hear a great intake of breath? Ms. Leah: Are you serious? Mr. Jim: Absolutely serious. At no point during the conversation between Ms. Byron and Leah or Jim was Ms. Byron informed she did not have to use her 2nd Election and buy into the Pension Plan before she could participate in SUSORP. In fact, at no time during these numerous emails and telephone conversations did anyone affiliated with DMS, the Division, AXA, Ernst & Young, or SBA tell Ms. Byron that she was essentially enrolled in SUSORP (unless she choose to go with an FRS plan or failed to pick a provider) when she started the position at the University of Florida. No one told her that she did not need to exercise her 2nd Election or buy into the Pension Plan to participate in SUSORP.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of Retirement, enter a final order rescinding Petitioner's 2nd Election and either: (1) return the buy in monies to the Investment Plan, (2) transfer the buy in monies from her Pension Plan to SUSORP, or (3) refund these monies to Petitioner. DONE AND ENTERED this 26th day of June, 2020, in Tallahassee, Leon County, Florida. S HETAL DESAI Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of June, 2020. COPIES FURNISHED: Lee Hayes Byron 2414 River Ridge Drive Sarasota, Florida 34239 Thomas E. Wright, Esquire Office of the General Counsel Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399 (eServed) William Chorba, General Counsel Office of the General Counsel Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399 (eServed) David DiSalvo, Director Division of Retirement Department of Management Services Post Office Box 9000 Tallahassee, Florida 32315-9000 (eServed)
The Issue The issue to be determined is whether the Board of Trustees for the City of Coral Springs Police Officers' Pension Fund (Respondent or the Board) should issue final orders suspending payment of pension benefits to Douglas Williams and Sherry Williams (Petitioners or the Williamses) pending a later Board decision on forfeiture pursuant to section 112.3173, Florida Statutes (2016),1/ consistent with initial orders recommending such suspension of benefits issued on March 15, 2016.
Findings Of Fact The City of Coral Springs is a municipality in Broward County, Florida. It exercises broad power pursuant to Article VIII, section 2, Florida Constitution, and the Municipal Home Rule Powers Act, chapter 166, Florida Statutes. The City Commission of the City of Coral Springs (Commission) may create other offices, boards, or commissions to administer the affairs of the city and may grant them powers and duties. The Commission has adopted the Coral Springs Police Officers' Pension Plan (the Plan), which is amended from time to time by ordinance and is set forth in sections 13-5 through 13-17 of the Code of Ordinances of the City of Coral Springs. The Plan is administered by the Board, the powers of which are set forth in sections 13-13 through 13-15 of the Code of Ordinances of the City of Coral Springs. The Plan requires mandatory participation from all officers. Officers must provide continuous service to the department and contribute to the Plan to receive benefits. The Plan creates a 100-percent vested interest after ten years of continuous service and contribution. The Plan allows officers to enter the Deferred Retirement Option Plan ("DROP") on the first day of the month coincident with their normal retirement date. When an officer enters DROP, no additional contributions are made to the Plan, and the benefits are calculated as if the officer had actually retired. Those benefits are transferred to an investment account and cannot be distributed until the officer's actual separation from service. Officers who enter DROP must resign from their employment within five years of entry into the program. Once an officer enters DROP, any changes in the Plan's benefits do not apply to that officer. After entering DROP, changes in the Plan may only be applied to those officers if the changes are also applicable to retired members. The only provisions that mention revision of benefits after DROP are the cost-of-living adjustment provision and the repeal or termination of the entire system provision. The Plan does not provide for change in the vested interest in the Plan after the officer enters DROP. The Plan does not provide for the Board to suspend an officer's vested interest in the Plan after the officer enters DROP. Section 112.3173 provides for the forfeiture of pension benefits if a member is convicted of certain "specified offenses." This section of the statute applies, with some exceptions, to any employee pension benefit plan supported in whole or in part by public funds. Section 112.3173 applies to the Plan. Section 112.3173 does not contain a provision for suspending a member's benefits pending criminal charges. Douglas Williams was a full-time Coral Springs police officer from September 1981 through September 30, 2009. Douglas Williams's vested interest in his pension plan reached 100 percent in 1991, after ten continuous years of service and contributions. On December 1, 2004, Douglas Williams became eligible for retirement, and he entered into DROP. Effective October 1, 2009, Douglas Williams began receiving monthly pension payments after terminating his employment. From December 1, 2004, through February 1, 2016, Douglas Williams received $703,819.30 in pension payments. Douglas Williams's contributions to his pension plan totaled $80,302.74. On September 4, 2014, Douglas Williams was arrested and charged with multiple counts of grand theft related to his volunteer position with the Coral Springs Fraternal Order of Police Lodge No. 87, Inc. Sherry Williams was a full-time Coral Springs police officer from August 1995 through September 30, 2014. Sherry Williams's vested interest reached 100 percent in 2005, after ten continuous years of service. On February 1, 2012, Sherry Williams became eligible for retirement, and she entered DROP. Effective October 1, 2014, Sherry Williams terminated her employment and began receiving monthly pension payments. From February 1, 2012, through February 1, 2016, Sherry Williams received $363,901.65 in pension payments. Sherry Williams's contributions to her pension plan totaled $97,901.65. On September 5, 2014, Sherry Williams was arrested and charged with multiple counts of grand theft and fraud related to her position with the Coral Springs Fraternal Order of Police Lodge No. 87, Inc. The Williamses' positions with the Coral Springs Fraternal Order of Police Lodge No. 87, Inc., required them to be police officers with the City of Coral Springs. Sergeant Scott Myers, and possibly other members of the Board, became aware of the possibility of suspending the payment of benefits to individuals charged with certain crimes at a Florida Public Pension Trustees Association (FPPTA) conference in September 2015. No contract has been entered into between the City Commission and the Fraternal Order of Police allowing for the enactment of a statute or ordinance that amends the Plan to allow the Board to suspend a member's benefits after retirement before an adjudication of guilt of a specified offense under section 112.3173. On January 25, 2016, the Board adopted its "Policy Regarding Payment of Pension Benefits Pending Forfeiture Under Florida Statute §112.3173" (Board Policy). The Board Policy provides that when a member has commenced receipt of benefits, and evidence has been brought to the Board's attention that the member has been charged with what may be a specified offense, the Board shall vote at the next regularly scheduled meeting to allow the member to continue to receive the monthly pension up to an amount equal to their employee contributions. Thus, when monthly pension payments exceed the employee contribution, payments would be suspended pending the outcome of charges and held in the interim by the Board. The Board Policy further provides that while benefits are being held by the Board, the balance will accrue interest at the Plan's assumed rate of return. The Board provided notice to Douglas and Sherry Williams, both personally and through their attorney of record in the criminal cases, that the Board would consider the suspension of their benefits pursuant to the Board Policy at its February 24, 2016, meeting. Douglas Williams attended the meeting; Sherry Williams did not. On February 24, 2016, determining that the offenses with which Douglas and Sherry Williams had been charged may be specified offenses under section 112.3173, the Board decided to suspend Douglas and Sherry Williams's pension benefits, and the Board issued each of them an Order Recommending Suspension of Benefits (Board Orders) on March 15, 2016. The Board conducted no factual inquiry into the basis for the charges against Douglas and Sherry Williams. Each Board Order states that the Board reviewed the records, including charging documents from the Broward Clerk of Court; section 112.3173; and the case of Warshaw v. City of Miami Firefighters' and Police Officers' Retirement Trust, 885 So. 2d 892 (Fla. 3rd DCA 2004). The Board Orders stated that Doug and Sherry Williams were "charged with . . . felonies which may be specified offenses under Florida Statutes 112.3173." The Information against Douglas Williams charged, in part, that he committed the second-degree felony of engaging in an organized scheme to defraud, and: [U]tilizing his position on the Coral Springs Fraternal Order of Police Lodge No. 87, Inc. to defraud the Coral Springs Fraternal Order of Police Lodge No. 87, Inc. by systematically, and through an ongoing course of conduct with intent to defraud, did misappropriate funds to himself and did unlawfully convert to his use or the uses of others not entitled thereto property, to wit: United States Currency in an aggregate amount in excess of twenty thousand dollars ($20,000.00) but less than fifty thousand dollars ($50,000.00) or more belonging to Coral Springs Fraternal Order of Police Lodge No. 87. In addition, the Information contained seven related counts of the third-degree felony of grand theft. The Information against Sherry Williams similarly charged that she committed the first-degree felony of engaging in an organized scheme to defraud the Coral Springs Fraternal Order of Police Lodge No. 87, Inc., of property consisting of United States Currency in an aggregate amount in excess of $50,000.00. Her Information also contained one second-degree felony of grand theft in excess of $20,000.00 and five counts of the third-degree felony of grand theft. The crimes Douglas and Sherry Williams were charged with have not been determined by the Board to be specified offenses under section 112.3173. The Board Orders for Douglas Williams and Sherry Williams were served on Petitioners on March 16, 2016. The orders provided: The Claimant has thirty (30) days from receipt of this Administrative Order to request a full hearing on the suspension of benefits by sending a letter outlining the specific reasons for the appeal to Gina Orlando at the City of Coral Springs, Pension Office, 9551 West Sample Road, Coral Springs, FL 33065. The hearing process followed will be pursuant to Florida Statutes §120.569 and §120.57(1). The Williamses timely requested formal hearings pursuant to sections 120.569 and 120.57 on April 15, 2016. The Williamses have not been convicted of the crimes with which they have been charged.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Board of Trustees for the City of Coral Springs Police Officers' Pension Fund not issue final orders suspending payment of pension benefits to Douglas Williams and Sherry Williams in the absence of provisions in the Coral Springs Pension Plan providing for such action. DONE AND ENTERED this 18th day of November, 2016, in Tallahassee, Leon County, Florida. S F. SCOTT BOYD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 2016.
Findings Of Fact The following findings of fact are based upon stipulations entered into and adopted by the parties on December 15, 1986, January 9, 1987, and January 12, 1987, which were confirmed by all parties at the final hearing: The League is a wholly owned instrumentality of its member cities. The League is charged in its bylaws to work for the general improvement of municipal government and its effective administration in this state. Further, it is charged with representing its membership on statewide issues affecting municipal government. The City is a municipal corporation organized and existing under the laws of the State of Florida. The City has five (5) "local law" municipal retirement funds, including three (3) police plans and two (2) firefighter plans, all of which receive excise tax revenue from the tax fund established in Chapters 175 and 185, Florida Statutes. The Department has responsibility for administering Chapters 175 and 185, Florida Statutes (1986). On November 7, 1986, the Department published notice in the Florida Administrative Weekly of its intent to adopt rules to implement Chapters 175 and 185, Florida Statutes, pertaining to municipal firefighter and police pension funds and to provide for interpretations, standards, applications, enforcement and administration thereof. The published notice stated there would be a public hearing on December 2, 1986, and the public hearing was held on that date. On November 26, 1986, the League filed its petition for administrative determination of the invalidity of certain of the proposed rules. The League represents over 390 cities throughout the State of Florida. As part of their municipal administration, many of these cities maintain firefighter pension funds that receive premium tax pursuant to Chapter 175, Florida Statutes, and police officer pension funds that receive premium tax pursuant to Chapter 185. A number of these cities maintain "local law plans" as defined by proposed rules 4-14.028 and 4-54.019; a number of the League's member cities maintain "chapter plans" as defined by the same proposed rules. Such plans are required by the proposed rules to meet certain standards which affect the cities' responsibilities in relation to said plans. Thus, the League, which is required to work for the effective administration of municipal government, is substantially affected by the proposed rules. The City is a substantially affected party pursuant to Section 120.54(4)(a),(d), Florida Statutes. All cities operating pension plans which receive funds pursuant to Chapter 175 and Chapter 185 have a duty to adequately fund said plans annually to meet the normal costs of the plan as well as fund any actuarial deficiency over a 40 year period. A number of local law plans presently have procedures and provisions which vary from the procedures and provisions in those sections of Chapters 175 and 185 which are addressed by proposed rules 4-54.024, 4-54.035, 4-54.036, 4- 54.037, 4-54.039, 4-54.040, 4-54.041, 4-54.044 and 4-54.047. The Department has copies of all pension plans which receive funds pursuant to Chapters 175 and 185 in their possession. Case No. 86-4722RP involves a challenge to certain proposed rule amendments to Chapter 4-54, Florida Administrative Code. Case No. 86-4723RP involves a challenge to certain proposed rule amendments to Chapter 4-14, Florida Administrative Code. Many of the proposed rule amendments to Chapters 4-14 and 4-54, Florida Administrative Code, which are being challenged are substantially similar. The statutory authority relied on for corresponding, similar proposed rule amendments in Chapters 4-14 and 4-54 are substantially similar, and the legal issues involved in the challenge to those corresponding proposed rules are identical. As a result of the public hearing held by the Department on December 2, 1986, the Department has agreed and stipulated to modify and/or withdraw certain proposed amendments to Chapter 4-54 which follow, as well as corresponding proposed amendments to Chapter 4-14, and in consideration thereof the Petitioners have agreed to withdraw their objections thereto: 4-54.018 Scope. These rules apply to all municipal firefighters in this State who participate in a pension fund which receives money from the premium tax provided for in ss. 175.101-175.131, Florida Statutes, as well as all municipal firefighter pension boards and municipalities having a municipal fire- fighter pension fund or system which receives state excise tax revenue from the tax fund established in Chapter 175, Florida Statutes, except as otherwise provided herein. The Department shall withdraw subsections (2) and (3) and renumber subsection (4) of proposed rule 4-54.023. The Department shall withdraw subsection (8) and renumber subsections (9), (10) and (11) of proposed rule 4-54.048. The Department shall withdraw subsection (3) of proposed rule 4-54.031. The League agrees to withdraw its challenge to proposed rule 4-54.032, but said withdrawal shall not prejudice its right to later challenge said rule pursuant to Sec. 120.56, Florida Statutes. The City did not object to this proposed rule. The Department shall amend subsection (2)(a) of proposed rule 4-54.024, Florida Administrative Code, to read: 4-54.024(2) A "professionally qualified" consultant means a consultant who meets the following minimum criteria: (a) he must offer his services on a "hard dollar" or flat fee as opposed to or in addition to a commission type basis. The League shall withdraw its objections to proposed rule 4-54.038. The City did not object to this proposed rule. 4-54.020 Minimum Standards Except as otherwise provided herein and Chapter 175, Florida Statutes, Chapter 175, excluding Section 175.351, Florida Statutes, provides minimum standards for (a)(line through original) all chapter funds. and (b) for all local law funds established on or after October 1, 1986. (line through original) Except as otherwise herein and in Chapter 175, Florida Statutes, Section 175.351, Florida Statutes, provides minimum standards for all local law funds. (established prior to October 4, 1986.(line through original) 4-54.029(4) The Department of Insurance shall withhold distribution of Chapter 175 tax revenues as allocated to a Chapter Fund or Local Law Fund which is not in compliance with the applicable requirements of Chapter 175 or Section 175.351. (or these rules.(line through original) 17. The application of Sections 175.071(5), 175.121, 175.162, 175.171, 175.181, 175.191, 175.231, 175.251, 175.261 and 175.333, Florida Statutes, will have an economic impact as defined in Section 120.54, Florida Statutes, (actuarial or administrative costs) on a number of local law municipal pension funds and those municipalities (including the City) that are not presently complying with these sections. The impact of these applications is ascertainable within an identifiable range. The issue of whether these statutory sections, and resulting economic impact, are made applicable to these funds by the provisions of Chapter 175, Florida Statutes, or by the proposed changes to Chapter 4-54, Florida Administrative Code, is not resolved by stipulation or agreement of the parties. During the hearing and also subsequent thereto, the parties further stipulated that: There is a difference in benefits available under the City's pension plans for firefighters enacted by special act and ordinance, and benefits available under a Chapter 175, Florida Statutes, plan. In their respective proposed final orders, Petitioners have listed the proposed rules which remain at issue, following stipulations and voluntary dismissals. (See League proposed finding of fact 23 and City proposed conclusion of law 4.) Proposed rules at issue are: Rule Chapter 4-54 Rule Chapter 4-14 4-54.024(3) 4-14.033(3) 4-54.027 4-14.036 4-54.029(2) 4-14.037(2) 4-54.033(2) 4-14.040(2) 4-54.034 4-14.041 4-54.035 None 4-54.036 4-14.042 4-54.037 4-14.043 4-54.039 4-14.045 4-54.040 4-14.046 4-54.041 4-14.047 4-54.045 4-14.051 4-54.047 None 4-54.048(3)(5)(6)(7)(10) 4-14.053(3)(5)(6)(7)(10) 4-54.049 4-14.054 The following findings of fact are based upon the evidence presented at final hearing: Based on the testimony of Dr. John J. Fenstermaker, who was accepted as an expert in English grammar and sentence structure, the phrase "approved by a majority of the firefighters" found in Section 175.351(13), Florida Statutes, modifies the nouns "board of trustees of the pension fund" and "official pension committee", instead of the verb in the sentence. However, the phrase does not mean that a majority of firefighters must approve the membership of the board of trustees or official pension committee. Rather, it means that a majority must approve action by the board of trustees or committee relative to the placement or use of certain income. A reasonable construction of the statute is that majority approval is required for the board of trustees or committee to act, but not that the make-up or membership of these bodies must be approved each time they propose to place or use certain income from the premium tax referred to in said statute. Proposed rule 4-54.048(7), Florida Administrative Code, is therefore authorized by, consistent with, and implements Section 175.351(13), Florida Statutes. The City's firefighter and law enforcement pension plans have received distributions of state premium tax funds pursuant to Chapters 175 and 185, Florida Statutes, for the last five years. The provisions of the City's local plans are very similar. Actuarial valuations of the City's firefighter and law enforcement pension plans are performed by the City's actuary as required by Chapter 112, Part VII, Florida Statutes. The City's local pension plan for firefighters does not presently apply or conform to the requirements of: Section 175.071(5), Florida Statutes, which requires the board of trustees to retain an independent consultant professionally qualified to evaluate the performance of professional money managers at least once every three years; Section 175.171, Florida Statutes, which deals with optional forms of retirement income; Section 175.181, Florida Statutes, which concerns the designation of beneficiaries; Section 175.191, Florida Statutes, dealing with disability benefits; and Section 175.261, Florida Statutes, regarding reports to Respondent. The Department promulgated an Economic Impact Statement in connection with the proposed rules in Chapter 4-54 which states, in pertinent part, that: Pursuant to Section 120.54(2), Florida Statutes, the State of Florida, Department of Insurance has considered the economic impact associated with the implementation of proposed Rule Chapter 4-54 which relates to municipal firefighters' pension funds. Chapter 175, Florida Statutes, was amended by Chapter 86-41, Laws of Florida, generally effective on October 1, 1986 with some exceptions. The amendments of Chapter 175, Florida Statutes, contained in Chapter 86-41, Laws of Florida, had and will have an economic impact upon the Department, the municipalities receiving state excise tax funds provided for in Chapter 175, Florida Statutes, and the firefighters' pension boards of trustees and pension funds. That economic impact was addressed fully in the legislation and enactment of Chapter 86-41, Laws of Florida. These rules, which augment, interpret, and provide for definitions, application and enforcement of Chapter 175, Florida Statutes, as amended by Chapter 86-41, Laws of Florida, will have no additional impact or nominal additional impact on those entities affected by Chapter 86-41, Laws of Florida. * * * 2. An Estimate of the Cost or Economic Benefit to all Persons Directly Affected by the Proposed Action. Insurance Companies: None. Insurance Agents: None. General Public: None. Municipalities: None, except for minor interest cost if a violation of 175.131, Florida Statutes occurs. Firefighter Pension Boards: None. * * * 5. A statement of the Data and Methods Used in Making Each of the Above Estimates. METHODOLOGY Costs and benefits of the proposed rule are estimated on marginal basis, i.e., additional costs or benefits over and above those associated with normal operations of the affected entity. The relevant costs or benefits to any economic impact are the net additions associated with implementation of the action. DATA The data used in calculating costs and benefits are derived from Departmental experience and statistics. The estimated cost to the agency for implementing the proposed changes was made by responsible agency staff personnel. The Department's Economic Impact Statement for proposed rule Chapter 4-14 is substantially similar to the above. It is clear from the Notice published by the Department, as well as its Economic Impact Statement, that the proposed rules which are here at issue implement Chapters 175 and 185, as amended by Chapters 86-41 and 86-42, Laws of Florida, respectively.
The Issue Whether Respondent, Department of Management Services, Division of Retirement (“Respondent”), is entitled to a deduction of the retirement benefits to be paid to Aubrie-Elle Perez, and if Respondent is entitled to a deduction, whether the deduction should be in the amount of the gross disbursements of $19,833.21 or the net payments to Edward Perez (“Lt. Perez”) in the amount of $17,017.80.
Findings Of Fact The FRS is a public retirement system as defined by Florida law. There are approximately 400,000 active members within the FRS. Respondent is charged with managing, governing, and administering the FRS. In 1997, Lt. Perez began employment with the Miami-Dade County Fire Department. For over 16 years, Lt. Perez served as a fire fighter with the Miami-Dade County Fire Department, his last position being a Lieutenant. Lt. Perez was a vested member of the FRS. Upon his initial employment and enrollment with the FRS in 1997, Lt. Perez entered the Investment Plan and made a retirement benefits election designating that if he died before his retirement and chose not to designate a beneficiary, retirement benefits would be paid in accordance with section 121.091(8), Florida Statutes. Lt. Perez chose not to designate a beneficiary. Thus, according to this statute, retirement benefits would first be paid to Lt. Perez’s spouse, and if no spouse, then to his only child, the Petitioner. Tragically, on April 7, 2013, Lt. Perez collapsed at the fire station. Subsequently, Lt. Perez was diagnosed with a grade-four malignant brain tumor known as a glioblastoma multi-forming--a very aggressive and generally terminal form of brain cancer. There is no cure and the median survival rate for adults with this form of brain cancer is 9 to 14 months. Due to his terminal brain cancer and the treatments he had undergone and was undergoing, Lt. Perez was unable to continue his duties with the Miami-Dade County Fire Department. On February 19, 2014, a two-page FRS Investment Plan Application for Disability Retirement Form PR-13 (“application for disability retirement”), and an FRS Investment Option Selection Form PR-11o (“option selection form”), were submitted to Respondent for Lt. Perez. They were sent to Respondent by mail by Lt. Perez’s sister, Alecs Perez-Crespo. The effect of the application for disability retirement and the selection of Option 1 on the option selection form would be to transfer the monies from the Investment Plan into the Pension Plan, and convert Lt. Perez’s accumulated Investment Plan retirement benefits to monthly disability retirement benefits during his lifetime. Then, upon his death, the monthly benefit payments would stop, and the beneficiary would receive only a relatively small amount, if any--a refund of contributions Lt. Perez had paid into the Investment Plan retirement account, which are in excess of the amount he received in benefits, not including the transferred Investment Plan account balance.2/ The two-page application for disability retirement was not completed by the member, Lt. Perez, and was not signed by Lt. Perez in the presence of a notary public. The option selection form was not completed by the member, Lt. Perez, and was not signed by Lt. Perez in the presence of a notary public. Affirmative medical and factual evidence establishes, and rebuts any legal presumption to the contrary, that Lt. Perez was not mentally, physically, cognitively, or legally competent to execute the option selection form or the application for disability retirement in February 2014, or to understand their legal nature and effect. Nevertheless, Respondent processed the application for disability retirement and option selection form. As a result, Lt. Perez was deemed to have retired effective April 1, 2014, and he forfeited approximately $238,000, which was transferred from the Investment Plan to the Pension Plan. Subsequently, two disability retirement benefit warrants were issued by the State of Florida, Department of Financial Services, to Lt. Perez, via the Pension Plan, in care of Alecs Perez-Crespo, POA. The dates of these warrants are April 30, 2014, and May 30, 2014. Both warrants were endorsed by Ms. Perez-Crespo, “POA For Edward Perez.” Respondent made these disability retirement gross benefit disbursements resulting in net payments to Lt. Perez on the following dates and in the following amounts: April 30, 2014: gross disbursement of $4,950.63, less deducted taxes of $413.20, for a net payment to Lt. Perez of $4,537.43; May 30, 2014: gross disbursement of $4,950.63, less taxes of $413.20 and less a medical insurance deduction of $386.00, for a net payment to Lt. Perez of $4,151.43.3/ A direct deposit authorization for electronic transfer of future retirement benefit warrants into a checking account solely in the name of Lt. Perez was signed by Alecs Perez Crespo, “POA for Edward Perez,” on May 9, 2014. Two additional disability retirement gross benefit disbursements resulting in net payments to Lt. Perez were sent to the checking account of Lt. Perez on the following dates and in the following amounts: June 30, 2014: gross disbursement of $4,950.63, less taxes of $413.20 and less a medical deduction of $386.00, for a net payment to Lt. Perez of $4,151.43; July 31, 2014: gross disbursement of $4,981.32, less taxes of $417.81 and less a medical insurance deduction of $386.00, for a net payment to Lt. Perez of $4,177.51, bringing the total sum of the gross disbursements for the four payments made to Lt. Perez $19,833.21, and the total sum of the net disbursements for the four payments made to Lt. Perez $17,017.80. The net sum of $17,017.80 issued by the Pension Plan as disability retirement benefits to Lt. Perez was deposited into Lt. Perez’s checking account. Accordingly, $19,833.21 (gross)/ $17,017.80 (net), was received by Lt. Perez. Lt. Perez died on July 16, 2014, from the cancer. At the time of Lt. Perez’s death, Petitioner was, and remains, his sole surviving child (natural or adopted). Lt. Perez was not married at the time of his death and, thus, left no surviving spouse. Because of the receipt of the four payments during his lifetime, which are applied first to the personal contributions made by Lt. Perez into the Investment Plan during his lifetime, the amount of Lt. Perez’s small contributions into the plan were exhausted by the time of his death. Therefore, if the option selection form is valid, Petitioner, as the sole beneficiary and child of Lt. Perez, would receive nothing. Respondent concedes that notwithstanding the facial appearance of the option selection form and application for disability retirement, the documents are void and invalid because they failed to comply with the statutory, rule, and manual requirements applicable to properly effectuate the Option 1 selection, in that they were not completed by the member, Lt. Perez, and not signed by Lt. Perez in the presence of a notary public. Respondent concedes that due to Lt. Perez lacking the mental, cognitive, physical, and legal capacity to understand the nature and legal effect of executing the option selection form and application for disability retirement, the purported execution by Lt. Perez of the option selection form and of the application for disability retirement are void and invalid. Respondent concedes that the option selection form is invalid and void ab initio, and Lt. Perez’s earlier selection in 1997, pursuant to section 121.091(8), should be reinstated under the FRS Investment Plan. Respondent concedes that with Lt. Perez having died in 2014 with no surviving spouse, and with Petitioner being his sole surviving child at the time of his death, that the full retirement benefits of $234,035.81, to which Lt. Perez was entitled under his Investment Plan designation of beneficiary should be paid directly to Petitioner. Respondent asserts, however, that the payment of the retirement benefits to which Petitioner is entitled should be reduced by the amount of the four payments made by Respondent to Lt. Perez, which gross disbursements total $19,833.21, or net disbursements total $17,017.80, making the retirement benefits to which Petitioner is entitled to be $214,202.60 or $217,018.01, not $234,035.81. Respondent’s position is correct because the gross benefits in the amount of $19,833.21 were received by Lt. Perez when the four payments, after applicable required deductions, were deposited into his personal checking account. At hearing, no persuasive and credible evidence was presented indicating whatever happened, if anything, to the net payments of $17,017.80 deposited into Lt. Perez’s checking account. No persuasive or credible evidence was presented indicating whether any of the monies were withdrawn from the checking account before or after Lt. Perez’s death. No persuasive or credible evidence was presented indicating that Ms. Perez-Crespo used, diverted, or withdrew any of the funds from the checking account. No bank statements were offered into evidence. Petitioner, who is the personal representative of the estate, did not testify. No accounting of the assets of Lt. Perez’s estate was presented. Even if any of the $17,017.80 was used or diverted by Ms. Perez-Crespo after being deposited into Lt. Perez’s checking account, Petitioner, as personal representative of the estate of Lt. Perez, might have a remedy in another forum to recover such funds from Ms. Perez-Crespo. In any event, such a potential claim, not borne by the evidence presented in the instant proceeding, is beyond the scope of this administrative proceeding. Based on the evidence adduced at hearing and the stipulations of the parties, it is clear that $19,833.21 was received by Lt. Perez when $17,017.80 (after the required deductions) was deposited into his personal checking account. To require Respondent to pay the entire amount of $234,035.81 would result in overpayment of $19,833.21. Respondent is, therefore, entitled to a deduction in the amount of the gross disbursement of $19,833.21.4/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent, Department of Management Services, Division of Retirement, enter a Final Order requiring that that the total sum of $214,202.60 be returned by Respondent to the FRS Investment Plan for the benefit of Lt. Perez, deceased, and that pursuant to section 121.091(8)(a), Florida Statutes, that Petitioner, Aubrie-Elle Perez, as the sole surviving child of and the sole beneficiary of Lt. Perez, immediately receive the amount of $214,202.60. The undersigned reserves jurisdiction to address issues regarding Petitioner’s entitlement to, and the amount of, attorneys’ fees, costs, and interest. DONE AND ENTERED this 23rd day of January, 2017, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 2017.
Findings Of Fact The parties entered into a stipulation, which is attached hereto and made a part hereof, but is quoted for the sake of clarity: Stipulated Facts Petitioner is Charles E. Kellum whose address is 10420 SW 119th Street, Miami, Florida. Petitioner is a forty-two (42) year-old male whose education consists of a graduate equivalency degree received while serving in the Air Force from 1954 through 1958. His Air Force work and training was as a fire fighter in the Crash Rescue and Fire Department of the United States Air Force. In 1959, Petitioner became employed with the Sheriff's Department of Dade County, Florida, as a motorcycle officer and first joined the Florida retirement system then in effect for county employees. Later, Petitioner changed to what is now known as the Florida Retirement System. While employed by Dade County, while on duty, and while a member of the Florida Retirement System or its predecessor, Petitioner was involved in four (4) accidents. The accidents and injuries sustained are as follows: In 1964, Petitioner was in a motorcycle accident for which he first received treatment from Dr. Samartino for abrasions and contusions; In a separate motorcycle accident, on February 16, 1965, Petitioner sustained a fractured radial head of the right elbow. In surgery that month the radial head was removed. In April, 1965, the end of the ulna was removed. In November, 1965, certain reconstructive surgery was attempted to increase the motion in his right arm. Subsequent reconstructive surgery was attempted in February, 1966. (Deposition of Dr. Samartino, pages 8 - 11); In an on-duty accident in March, 1970, Petitioner fell and injured his knee and underwent surgery on the knee in April of 1970. In May, 1974, Petitioner was involved in an accident wherein, while making an arrest, he fell on a rocky terrain and suffered re- injury to his arm and knee and injury to his back. (Deposition of Kellum, pages 4 - 5). That Petitioner was retired from Dade County for medical reasons in May, 1974. He has not been employed since, except for approximately one year he was operating a small lawn maintenance business with the help of his son and another helper. His activities are limited to driving a truck and soliciting business. Stipulated Evidence Exhibit 1 - The deposition of Charles Kellum, Petitioner Exhibit 2 - The application for retirement benefits filed December 9, 1974, and the employer's statement of disability dated December 6, 1974. Exhibit 3 - The reports of Dr. Toth dated December 9, 1974, and August 6, 1974. Exhibit 4 - The reports of Dr. Gilbert dated December 9, 1974, and October 30, 1974. Exhibit 5 - The reports and deposition of Dr. Samartino. Exhibit 6 - The reports and deposition of Dr. Jacobson. Exhibit 7 - The deposition of Harry Windler, pages 8 - 14 and pages 19 - 36. Exhibit 8 - The letter from the Director of Retirement dated April 10, 1975. Upon a consideration of the evidence further findings of fact are: The various in-line-of-duty injuries and back pain suffered by Petitioner caused his involuntary retirement from the Dade County Department of Public Safety in 1974, after an injury on May 4, 1974. Petitioner applied for work with the police department, and wants and has wanted to return to some kind of law enforcement or police work. Respondent through its administrator, as provided in Section 121.091(4), Florida Statutes, denied Petitioner Kellum's disability retirement benefits by letter dated April 10, 1975, a copy of which is marked Exhibit "A" and make a part hereof. Petitioner requested an administrative hearing in April of 1975. The Respondent denied the petition as being untimely but thereafter revoked the denial and requested the Division of Administrative Hearings to hold a hearing on the issues presented. The employer, Metropolitan Dade County Department of Public Safety, in its statement of disability stated that "physicians' statements indicate that this employee is unable to perform police duties." It also stated that no other jobs in the organization, suitable to the applicant's abilities, exist consistent with his classification. The departmental policy of the Metropolitan Dade County Department of Public Safety is to phase out employees who have become liabilities from an insurance risk management point of view. Because of the stringent minimum physical requirements imposed upon law enforcement officers in Dade County, Florida, Petitioner cannot perform his duties as a policeman or law enforcement officer and could not be re- employed in that position. There are no permanent sheltered positions for law enforcement personnel. Doctors Alex Toth and Robert G. Gilbert stated that Petitioner's condition is "prognosis guarded." They both stated that Petitioner was unable to perform regular duties. Dr. Toth stated Petitioner was "completely disabled," and Dr. Gilbert stated "for all intent and purposes, this patient is totally disabled." Dr. G. Thomas Samartino, in answer to the question, "At this time, in 1977, do you forecast any further degeneration in his health due to that particular diagnosis?" (degenerative arthrosis of the right elbow), answered "Yes." He further stated that he could not really forecast disability but that "it may stay pretty much the way it is or get a whole lot worse," and noted that there has been no improvement since 1966. He stated Petitioner suffered a 35 percent disability of the upper right extremity and a 30 percent disability of the body as a whole, which includes pain. All three physicians stated that they felt the Petitioner should not be employed as a policeman. Dr. Robert E. Jacobson, a neurologic surgeon, stated that from the functional standpoint the Petitioner would be unable to return to work as a combat policeman, although he could do other type of work. He also stated that the numerous injuries and back and neck complaints would add up to a more marked problem than any one would imply. Petitioner's training was as a fire fighter in the crash rescue fire department while in service of his country from 1954 to 1958. He joined the service immediately out of high school and, before his discharge, took the GED test to get a high school certificate. His employment and further training has been in police work, being employed by the Metropolitan Dade County Public Safety Department in October of 1959, a position he filled for fifteen, (15) years. His training after Air Force service consists of little more than on- the-job training for his employment as a motorcycle officer. Petitioner was self-employed, driving a truck and soliciting business together with two other persons in the yard maintenance work. He applied without success for at least two positions with private employers, but he has not applied for rehabilitative training. His remuneration from his self- employment was approximately $6,000.00 per year, substantially lower than he earned as a police officer, which pay classification is approximately $8,000.00 to $20,000.00. Petitioner is totally and permanently disabled from rendering useful and efficient service as an employee in police and law enforcement work, but he can perform a useful work service. Petitioner contends: That he is permanently and totally disabled from doing the police or law enforcement work for which he is trained and for which he had been employed for some fifteen (15) years, and that his disability arose from his work; That he is unable to perform materially or substantially all or any of the remunerative duties for which he is educated and trained, and which might permit him to be compensated at or near the compensable rate of a Dade County policeman; and That he is entitled to the disability benefits authorized by Section 121.091(4), inasmuch as he is totally and permanently disabled to perform duties as a police or law enforcement officer because of injuries he received while on such duty. Respondent contends: That Petitioner is not totally and permanently disabled hut only partially disabled, and can and does work and earn an income although he is disabled from performing the duties of his normal occupation; and That a showing that Petitioner is incapable of performing duties of his usual occupation is not sufficient to obtain disability retirement benefits under the statute.
Recommendation Grant Petitioner Charles E. Kellum disability retirement benefits. DONE and ORDERED this 24th day of May, 1979, in Tallahassee, Leon County, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Melvin R. Horne, Esquire Post Office Drawer 1140 Tallahassee, Florida 32302 Stephen S. Mathues, Esquire Division of Retirement 530 Carlton Building A Tallahassee, Florida 32301 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DIVISION OF RETIREMENT CHARLES E. KELLUM, Petitioner, vs. DOAH CASE NO. 77-465 DIVISION OF RETIREMENT, Respondent. /
The Issue The issues in these cases relate to the criteria required of municipal pension plans to qualify for state premium tax monies . Chapters 175 and 185, Florida Statutes, provide for pension plans for firefighters and police officers, and authorize two types of pension plans. "Chapter plans" are created by state law, and "local law plans" are created either by special act of the Legislature or by municipal ordinance. In a series of cases, various municipalities and the LEAGUE OF CITIES have challenged the DIVISION OF RETIREMENT's application of statutory criteria to local law plans. On April 11, 1996, a Final Order was entered in Case No. 95-5089RU finding that the DIVISION's policies in this regard violated Section 120.535, Florida Statutes. The Final Order in case No. 96-5089RU is on appeal to the First District Court of Appeal. On August 6, 1996, a Final Order was entered in consolidated Cases Nos. 96-2724RX, 96-2725RX, 96-2871RU, and 96-2874RU, finding that the DIVISION's policies violated Section 120.56, Florida Statutes. Specifically, the issues in these cases now under consideration, are 1) whether the CITY OF ST. PETERSBURG is entitled to premium tax monies for the 1994 and 1995 calendar years; 2) whether the DIVISION OF RETIREMENT has met the requirements of Section 120.57(1)(b)15, Florida Statutes, and demonstrated that the application of the statutory criteria to local law plans is within the scope of delegated legislative authority; 3) whether the DIVISION's promulgation of proposed rules on July 12, 1996, justifies the DIVISION's withholding of the CITY OF ST. PETERSBURG's premium tax monies for calendar years 1994 and 1995; and, 4) whether the DIVISION has acted in bad faith, thereby entitling the CITY OF ST. PETERSBURG to an award of attorneys fees and costs in this case. The gist of the CITY OF ST. PETERSBURG's Petitions is that the DIVISION is attempting by non-rule policy to impose the same requirements relating to terms, conditions, and benefits on local law plans that the DIVISION requires of chapter plans. Specifically, the alleged non-rule policies of the DIVISION of which the CITY complains are: 1) the definition of "credited service"; 2) the definition of "average final compensation"; 3) the disallowance of a Social Security offset; 4) the interpretation of "disability retirement"; 5) the requirement that all of the CITY's pension plans be in compliance in order to receive state funds; 6) the release of funds to other municipalities not found in compliance; 7) the failure to enforce Rule 60Z-1.004, Florida Administrative Code, which defines "credited service;" and, 8) the application to other municipalities of a declaratory statement issued to the City of Boca Raton. As indicated above, and set forth more fully below, the requirements imposed by the DIVISION OF RETIREMENT for local law plans to receive premium tax monies have been the subject of extensive litigation. In rejecting a challenge to the constitutionality of Chapters 175 and 185, Florida Statutes, the court in City of Orlando v. State Department of Insurance, 528 So.2d 468 (Fla. 1st DCA 1988) stated: Chapters 175 and 185 create a purely voluntary program whereby municipalities may receive state- collected taxes, imposed on property and casualty insurance premiums, with which to fund retirement programs for local police and fire fighters. In exchange for receipt of these funds, the legislature has established certain criteria under which the funds must be operated and managed. Id. at 469. The dispute in these cases again focuses on determining what criteria the legislature has established for the operation and management of such local pension plans in order to establish whether a local plan complies with the statute for purposes of receiving premium tax monies. Petitioner, CITY OF ST. PETERSBURG, and Intervenor, CITIES, take the position that Respondent, DIVISION OF RETIREMENT, has made non-rule policy statements (which are now promulgated as proposed rules), and required compliance therewith, which go beyond the criteria established by the legislature for participation in the program. Petitioner contends that such statements are "rules" under Section 120.52(16), Florida Statutes, that these "rules" violate Section 120.56, Florida Statutes, as invalid exercises of delegated legislative authority, and that the DIVISION is prohibited from applying these policies as justification for withholding premium tax monies. Respondent, DIVISION OF RETIREMENT, takes the position that the policy statements have now been promulgated as proposed rules, that the DIVISION has complied with Section 120.535(5), Florida Statutes, and is authorized to apply the policies of the proposed rules to withhold premium tax monies. The DIVISION further contends that the policy statements (now proposed rules) merely apply the provisions of Chapters 175 and 185, Florida Statutes, as intended by the legislature, and therefore the DIVISION has demonstrated pursuant to Section 120.57(1)(b)15, Florida Statutes, that the policy statements are within delegated legislative authority.
Findings Of Fact To the extent relevant, the Findings of Fact in the Final Order in case No. 95-5089RU are adopted and incorporated by reference. Parties Petitioner, the CITY OF ST. PETERSBURG (CITY), is a municipality of the State of Florida which participates in the voluntary program to receive state- collected taxes imposed on property and casualty insurance (premium tax monies) with which to fund retirement programs for its municipal fire fighters and police under Chapters 175 and 185, Florida Statutes, respectively. Intervenors, CITY OF LARGO, CITY OF PALATKA and the TOWN OF LANTANA, also are State of Florida municipalities participating in such local plans for fire fighters and police. LARGO, PALATKA and LANTANA have had their premium tax monies withheld by the DIVISION for the 1995 calendar year. Intervenor, FLORIDA LEAGUE OF CITIES, represents municipalities voluntarily participating in distribution of Chapter 175 and 185 premium tax monies to fund retirement plans for firefighters and police officers. Respondent, DIVISION OF RETIREMENT (DIVISION), is the agency of the State of Florida charged with the statutory duty to administer the voluntary program by which municipalities receive state-collected taxes imposed on property and casualty insurance (premium tax monies) with which to fund local plans under Chapters 175 and 185, Florida Statutes. Prior to 1993, the Florida Department of Insurance was the responsible state agency to administer Chapters 175 and 185, Florida Statutes. Intervenors, MICHAEL MOORE and RICHARD FEINBERG are municipal fire fighters with the CITY and have standing to intervene in this proceeding. Intervenor, RUSSELL M. RIZZO, is a municipal police officer with the CITY and has standing to intervene in this proceeding. History Chapters 175 and 185, Florida Statutes, relating to pension plans for fire fighters and police, authorize two types of retirement or pension plans. One type is called "chapter plans" and the other is known as "local law plans." Chapter plans are created under state law, and the provisions of Chapters 175 and 185, Florida Statutes, control the plans' terms, conditions and benefits. Local law plans are purely voluntary and are created either by special act of the Legislature or by municipal ordinance. The special act or municipal ordinance contain the provisions relating to the terms, conditions, and benefits of the local law retirement plan. Both chapter plans and local law plans receive funds from the state-collected premium tax on property and casualty insurance. The CITY has operated local law retirement plans for fire fighters and police since 1951. The CITY's police and fire fighter plans were first chartered by special act of the Legislature. The fire fighter charter plan has been closed to new members since approximately 1970. The CITY in 1970 established a supplemental retirement plan for fire fighters which was enacted by CITY ordinance. The CITY's police and fire fighter pension plans are subject to union negotiation, and cannot be unilaterally amended. City of Tallahassee v. Public Employee Relations Commission, 393 So.2d 1147 (Fla. 1st DCA 1981). In this respect, the CITY may not have the authority to make unilateral changes to its local law plans in order to comply with directives of the DIVISION. The CITY has voluntarily participated on a continuing basis in the program created under Chapters 175 and 185, Florida Statutes, whereby the CITY has received state-collected taxes imposed on property and casualty insurance premiums with which to fund its local plans for fire fighters and police. The CITY has received such funds until calendar year 1994. In 1986 the Legislature significantly amended Chapters 175 and 185, Florida Statutes. See Chapters 86-41 and 86-42, Laws of Florida. Chapter 86-41 pertained to municipal fire fighters; Chapter 86-42 pertained to municipal police officers. As indicated above, the constitutionality of these statutes was upheld in City of Orlando v. State Department of Insurance, supra. In section 1. of each act, the Legislature added substantially the same legislative intent language: Therefore, the Legislature declares that it is a proper and legitimate state purpose to provide a uniform retirement system for the benefit of fire fighters as hereinafter defined, and intends, in implementing the provisions of s. 14, Art. X of the State Constitution as they relate to municipal fire fighters' pension trust fund systems and plans, that such retirement systems or plans to be managed, administered, operated, and funded in such manner as to maximize the protection of the fire fighters' pension trust funds. This chapter hereby establishes minimum standards for the operation and funding of municipal fire fighters' pension trust fund systems and plans. After the enactment of Chapters 86-41 and 86-42, Laws of Florida, the Department of Insurance undertook rulemaking to implement the provisions of the acts. The CITY and the LEAGUE challenged the proposed rules under Section 120.54, Florida Statutes. The Department's proposed rules were upheld by a DOAH Hearing Officer. On appeal, the First District Court of Appeal reversed the order of the Hearing Officer, and held that the majority of the department's proposed rules were invalid because statutory provisions governing chapter pension plans, which were not made expressly applicable by the Legislature to local fire fighter and police plans, did not preempt municipal power with respect to pension plans. Florida League of Cities, Inc. v. Department of Insurance, 540 So.2d 850 (Fla. 1st DCA 1989) review denied 545 So.2d 1367 (Fla. 1989), [hereinafter referred to as the "Rules Case"]. In 1988 the CITY and the Department of Insurance engaged in litigation regarding the compliance of the CITY's local law plans with the Department's construction of the statute. This litigation was ultimately settled by the Department's agreement not to withhold the CITY's premium tax funds. During 1990 and 1991, the Department of Insurance also engaged in litigation with numerous other municipalities regarding compliance of local law plans with the provisions of Chapters 175 and 185, Florida Statutes. The Department settled these cases and continued to distribute premium tax funds to these local law plans with the understanding that the disputed issues would be better resolved through rulemaking. The Department of Insurance conducted staff workshops to discuss rulemaking; however, the Department did not thereafter initiate formal rulemaking under Chapter 120, Florida Statutes, with regard to promulgation by rule of compliance requirements for local law plans under Chapters 175 and 185, Florida Statutes. In 1993, the Legislature transferred statutory responsibility for the administration of Chapters 175 and 185, Florida Statutes, from the Department of Insurance to the DIVISION. The legislative transfer effected a transfer of all programs as well as personnel. Since the legislative transfer in 1993, the DIVISION has made a continuous and good faith effort to present these issues to the Legislature for resolution. In this continuing effort to address these issue legislatively, during the 1996 Session, HB 1951 and SB 2484 were introduced. These bills specifically provided legislative clarification of the issues presented in these cases. Prior to the 1996 Session, the CITY filed its Petition in case No. 95- 5089RU. On April 11, 1996, the Final Order was entered in case. No. 95-5089RU holding that the DIVISION's non-rule policies violated Section 120.535, Florida Statutes. On May 10, 1996, the CITY filed its Notice of Appeal which is pending in the First District Court of Appeal, Case No. 96-1817. The DIVISION has made a continuing good faith effort to present these issues to the Legislature for resolution. As indicated above, HB 1951 and SB 2484, specifically addressing and clarifying the issues raised in these proceedings, were introduced during the 1996 Session. On April 30, 1996, HB 1951 was passed by the Florida House of Representatives; however, HB 1951 along with SB 2484 died in the Florida Senate on May 4, 1996. The 1996 Florida Legislature failed to enact any legislation addressing or otherwise clarifying the issues raised in these proceedings. On May 31, 1996, the DIVISION noticed a rules workshop addressing these issues in the Florida Administrative Weekly. On June 12, 1996, the DIVISION disseminated proposed rules. On June 21, 1996, the DIVISION conducted the rules workshop. On July 12, 1996, the DIVISION published proposed rules and amendments, 60Z-1.004, 60Z-1.006, 60Z-1.026, 60Z-1.027, 60Z-1.028, 60Z-2.017, 60Z-2.018, and 60Z-2.019, which address the issues raised in these proceedings. On July 30, 1996, the CITY and the LEAGUE OF CITIES, pursuant to Section 120.54 Florida Statutes, filed Petitions challenging the DIVISION's proposed rules. The Section 120.54 petitions, cases Nos.96-3560RP and 96-3561RP, are scheduled for hearing August 29, 1996. On August 6, 1996, the Final Order was entered in consolidated Cases Nos. 96-2724RX, 96-2725RX, 96-2871RU, and 96-2874RU holding that the DIVISION's policies violated Section 120.56, Florida Statutes. Stipulated Facts The following facts verbatim were set forth by the parties in the Prehearing Stipulation: The DIVISION admits to the authenticity of all documents contained within its files, including, but not limited to, interoffice memoranda, correspondence to and from the DIVISION and/or the Department of Insurance which are contained in the files of the Division, and any correspondence copied to the DIVISION and/or the Department of Insurance which are contained in the files of the DIVISION. The DIVISION takes the position that Sections 175.032 and 185.02, Florida Statutes, (Definitions), apply to local law plans. (The) Position of (the agency in) Declaratory Statement DMS-DR-94-18 was issued to the City of Boca Raton pursuant to Section 120.565, Florida Statutes. It is the position of the DIVISION that a plan containing a mandatory retirement age violates the Older Worker Benefits Protection Act; and that pension plans which violate this federal law are not eligible for distribution of premium tax funds under Sections 175.351 and 185.35, Florida Statutes. It is the position of the DIVISION that fire fighters disabled from duties of a fireman as defined in Section 175.032, Florida Statutes, are eligible for disability benefits. The CITY admits that the Social Security offset contained in its supplemental fire pension plans could possibly reduce a fire fighter's pension below two (2) percent for each year of credited service; however, the CITY specifically has no knowledge that this has or will occur. The CITY admits that Sergeant Rizzo has accrued in excess of thirty- two (32) years of service. The CITY admits that the police pension plan contains a maximum pension plan benefit of sixty (60) percent of the highest pay step of the lowest rank held during the previous three (3) years, which benefit Sgt. Rizzo became eligible for after twenty-five (25) years of active service. The CITY admits after thirty (30) years of service Sgt. Rizzo will retire with a pension benefit equal to less than two (2) percent for each year of active service. The CITY admits that Sgt. Rizzo was permitted to cease all employee contributions to his pension plan after twenty-five (25) years of service. The 1994 premium taxes are withheld from the CITY by the DIVISION. Prior to 1994 the DIVISION, or its predecessor agency, the Department of Insurance, have never withheld Chapter 175 or 185 insurance tax premium moneys from the CITY. The DIVISION has not initiated the rulemaking process with regard to definition of the term "average final compensation" in Section 175.351, Florida Statutes, and there are currently no existing promulgated rules that apply to local law plan definitions for "average final compensation" for the DIVISION. The DIVISION has not initiated the rulemaking process with regard to definition of the term "average final compensation" in Section 185.35, Florida Statutes, and there are currently no existing promulgated rules that apply to local law plan definitions for "average final compensation" for the DIVISION. It is the position of the DIVISION that Rule 60Z-1.004, Florida Administrative Code, defining "credited service" contradicts Chapter 185, Florida Statutes, and is not enforced. It is the position of the DIVISION that all municipal pension plans submitted for review must comply with the non-rule policy at issue in the present case in order to receive Chapter moneys pursuant to Sections 175.351 and 185.35, Florida Statutes. It is the position of the DIVISION that the pension plans of the City of St. Petersburg do not fulfill the requirements of Section 175.351, Florida Statutes, to qualify for release of state premium tax moneys. It is the position of the DIVISION that the pension plans of the City of St. Petersburg do not fulfill the requirements of Section 185.35, Florida Statutes, to qualify for release of state premium tax moneys. It is the position of the DIVISION that the term "credited years of service" as used in Sections 175.351(4) and 185.35(1)(d), Florida Statutes, is to be defined in accordance with the term "aggregate number of years of service" and "aggregate number of years of service with the municipality" under Sections 175.032(1)(a) and 185(1)(b), Florida Statutes, respectively. It is the position of the DIVISION that it has the authority under Chapters 175 and 185, Florida Statutes, and Chapter 60Z, Florida Administrative Code, to withhold Chapter 175 and 185 premium tax money to plans not in compliance with Sections 175.351 and 185.35. It is the position of the DIVISION that it has the authority to release payment of Chapter 175 and 185 premium tax moneys to plans not in compliance with Sections 175.351 and 185.35, Florida Statutes, provided the municipality is making good faith efforts to bring the violations into compliance.
Findings Of Fact The Alarm Association of Florida, Inc. ("Association") is a trade association that was incorporated on July 12, 1976, as a Florida not-for-profit corporation. The Association was organized to provide an opportunity for its members to exchange ideas and share information concerning trade practices, business conditions, technical developments, and related subjects concerning the electrical protection industry. The Association has two primary types of membership. Regular Membership is open to any individual, partnership, firm, or corporation engaged in the business of installing or providing alarm service in the electrical protection field for one year preceding the application. Associate Membership is open to any individual, partnership, firm, or corporation that is not engaged directly in the electrical protection business, but may supply goods or services to Regular Members. Officers and directors of the Association are selected by the voting members, which are limited to Regular Members. About 25 percent of the Association membership consists of nonvoting members. Sometime prior to November 1, 1985, a representative or representatives of the Association requested Dealers Association Plan ("DAP") to make a presentation concerning an employee benefit plan that the Association was considering establishing. The Association had previously formed a committee to investigate the feasibility of sponsoring such a plan, which its members could join. DAP is licensed in Florida to administer self-insured and insured health insurance programs, including the type in which the Association was interested. The Association thereafter decided to sponsor an employee benefit plan and use DAP as the plan administrator. DAP prepared or caused to be prepared the necessary documents. These documents included a trust agreement between Ronald D. LaFontaine, John Black, Robert Neely, Robert Adams, and Terry Akins, as trustees ("Trustees"), and the Association ("Trust," or "Trust Agreement"); the Alarm Association of Florida Health and Welfare Benefit Plan ("Plan"); and the Administrator Agreement between the Association and DAP. Each document was executed and delivered on November 1, 1985. The Trust Agreement states that the Trust was to be funded by the contributions made by the members of the Plan and the Trust funds would be maintained as a reserve against claims by Plan participants. The Trust Agreement provides that the Association may remove a Trustee at anytime and replace a Trustee who has resigned or been removed. The Trust Agreement states that the Plan Administrator, which was designated as DAP, shall administer the day-to-day operations of the Trust, including the payment of claims, providing of "consulting and actuarial services necessary for the continuing successful operation of the Plan," and establishment of procedures for "Employee Contributions." "Employees" are "all qualified members of the Association and their employees." The Administrator Agreement, which is authorized by the Trust Agreement, provides that DAP could use the Trust funds to review and pay claims and pay premiums on policies purchased by the Plan or Trustees. The Administrator Agreement authorizes DAP to negotiate and purchase reinsurance contracts to provide stop-loss coverage or avoid catastrophic losses, as well as spread the risk of excessive claims. The Administrator Agreement states that DAP is to receive 20 percent of the monthly contributions as its administrative fee. The Plan provides a detailed statement of the available benefits and various administrative matters, including claim procedures. In general, the Plan covers a wide range of medical, accident, and dental expenses. In capital letters on the first page, the Plan states: This is a self-funded, trade association member employee benefit plan established under Public Law 93-406 [Employee Retirement Income Security Act ("ERISA")], available only to qualified participating employers and their qualified employee participants. It is not available for individual coverage. The Trust Agreement likewise states that it "shall be interpreted in a manner consistent with its being ... a Welfare Benefit Plan pursuant to ... ERISA..." Each Association member enrolled in the Plan makes a monthly contribution, which is paid to DAP. The contribution is equal to the number of employees of the enrollee who have elected to participate in the Plan multiplied by the contribution rate. The Trustees set the contribution rate based upon the advice of DAP. On at least one occasion, the Trustees increased the rate upon the advice of DAP. At all times, the Trustees and DAP have intended to keep the Plan and Trust actuarially sound. DAP uses the contributions to pay claims that it has received. As long as DAP has determined that the claims are valid, the Trustees do not review the claims. The Trustees consider a claim only when a participant appeals a rejected claim. DAP uses the contributions to pay itself its 20 percent administrative fee. DAP pays any remaining funds to the Trustees, who hold such funds in the Trust as reserves against future claims. The Trust is liable for all claims. If the valid claims presented to DAP exceed the contributions received for that month, the Trust provides the difference. However, the Trustees have reinsurance under which third-party insurers are liable to pay any claim in excess of $25,000, but not more than $1,000,000. Since the Plan has been adopted, DAP and the Association have solicited enrollees. The most important source of solicitation has been by direct mail, for which DAP is responsible. In the case of new enrollees that are not already members of the Association, DAP may take a Plan application and Association membership application at the same time. In April, 1988, the Association comprised 425-450 members. A couple of years ago, the Association had only about 65 members. About 85 members have enrolled in the Plan. These enrollees are all employers. About 300 employees participate in the Plan. All of these employees are employed by enrolled employers. The record fails to disclose whether all of the enrollees are voting members of the Association. Petitioner's Exhibit Number 5 lists the names of the enrollees. It appears from the names of the businesses that all, or nearly all, of them qualify for voting membership in the Association. The Plan has never obtained a certificate of authority from Petitioner, pursuant to the Act, to operate the Plan. The Plan, the Association, and DAP have never attempted to comply with any provision of the Act, based on the position that ERISA preempts all or part of the Act. The Plan is not fully insured and has no exemption from the Secretary of Labor, as these terms are discussed below.
Recommendation Based on the foregoing, it is recommended that a Final Order be entered finding Respondent guilty of failing to hold a subsisting certificate of authority while operating or maintaining a multiple-employer welfare arrangement, ordering Respondent to cease and desist from writing any new or renewal business and accepting any contributions or premiums from current or prospective enrollees or participants, and imposing an administrative fine against Respondent in the amount of $5000. ENTERED this 1st day of June, 1988, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-3046 Treatment Accorded Petitioner's Proposed Findings 1-4. Adopted. Rejected as unsupported by the evidence. The exhibit discloses the names of about 85 employers. Rejected as unsupported by the greater weight of the evidence. The Plan documents limit enrollees to employers. Adopted. Rejected as irrelevant and not a proper finding. The proposed finding goes to the weight of other testimony. Adopted, except that the second to last sentence is rejected as unsupported by the greater weight of the evidence. Adopted. First two lines are rejected as unsupported by the greater weight of the evidence. The remainder is adopted. Adopted. Adopted in substance. 14-18. Adopted. 19. Rejected as irrelevant. 20 and 23. Adopted in substance. 21-22, 24-25. Rejected as irrelevant and, in the case of paragraph 22, legal argument. Treatment Accorded Respondent's Proposed Findings All of Respondent's proposed findings are rejected as legal argument, except that paragraph 1 and the first sentence of paragraph 2 are adopted. COPIES FURNISHED: R. Terry Butler, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32399-8300 Geoffrey B. Dobson, Esquire Meredith & Dobson 77 Bridge Street St. Augustine, Florida 32804-1957 Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue Whether the final agency action of the Department of Management Services, Division of Retirement, dated February 22, 2012, complied with section 175.361, Florida Statutes (2012),1/ concerning the dissolution and distribution of the City of Belleair Bluffs Firefighters' Pension Trust Fund.
Findings Of Fact The Pension Trust Fund is a defined benefit pension plan under chapter 175, Florida Statutes. The City participated in the chapter 175 premium tax program with the creation of the Pension Trust Fund. The legislature expressly declared that the purpose of chapter 175 was to establish "minimum standards for the operation and funding of such plans, hereinafter referred to as firefighters' pension trust funds." § 175.021(2), Fla. Stat. Further, the legislature directed that the firefighter pension plans be "managed, administered, operated, and funded in such manner as to maximize the protection of the firefighters' pension trust funds." § 175.021(1), Fla. Stat. Section 175.061 creates a board of trustees for a firefighters' pension trust fund as the legal entity empowered to bring and defend lawsuits, and is "solely responsible for administering the trust fund." § 175.061(1) and (4), Fla. Stat. The board of trustees is directed by statute to act as a fiduciary for the pension trust fund's beneficiaries and participants. §§ 175.071(1) and 112.656, Fla. Stat. The law is clear that a board of trustees is independent of a municipality. §§ 175.071 and 175.311, Fla. Stat. Further, a board of trustees comprises two trustees elected by the firefighters, two trustees who are residents of the municipality appointed by the City Commission, and a fifth member chosen by the majority of the four members. § 175.061(1)(a). Finally, a board of trustees derives its authority and fiduciary duties from chapters 175 and 112. The Board of Trustees in this case was created by and derived its authority under chapter 175. On September 1, 2009, the City’s residents voted to consolidate its fire services with City of Largo. As a result, the Largo Fire Department has provided the City with fire protection since September 30, 2009. Moreover, it was undisputed that the Pension Trust Fund closed as of September 30, 2009. Following the consolidation of the two fire services, City officials and the Board of Trustees began negotiations concerning how to proceed with the Pension Trust Fund. The record shows that the discussions evolved from the Pension Trust Fund being merged with the Largo Firefighters' Pension Fund to discussions concerning the Pension Trust Fund's dissolution and distribution. The negotiations between the City and the Board of Trustees regarding the dissolution and distribution of the Pension Trust Fund discussed a number of alternatives. The record shows that the City and Board of Trustees discussed options such as payment of accrued benefits, a substituted trust managed by the City, and payment of lump sum cash payments in conjunction with a share plan or service distribution payment. The share plan or service distribution plan would have paid a firefighter's accrued benefits plus additional money based on the number of years a firefighter served the City. However, as of early September 2011, the City and the Board of Trustees had not reached an agreement on the dissolution and distribution of the Pension Trust Fund. The key meeting for resolution of this case is the Board of Trustees' meeting on September 9, 2011. The Board of Trustees' meeting minutes and transcript from the September 9, 2011, meeting, show the Board of Trustees' intent to make a decision in strict compliance with section 175.361. Mr. Dehner, the Board of Trustees' attorney, clearly advised the Board that it take a final action in compliance with section 175.361. The record shows that the Board of Trustees voted to accept distribution of accrued benefits only, and voted to have its actuary provide the City with the information showing the amount of additional funds necessary to fund the Pension Trust Fund's distribution. Section 175.361(1) provides that a board of trustees inform a municipality if additional assets are required to fund distribution of the nonforfeitable benefits. The conclusion that the Board of Trustees took a final action in compliance with section 175.361 is confirmed by Mr. Langere's testimony. The record shows that the Board directed Mr. Patrick Donlan of Foster and Foster, its actuary, to provide the City with two options as to the costs for the distribution. The first option concerned the cost of a proposal by the City to dissolve the Pension Trust Fund. The City's proposal, as it was characterized by the Board, consisted of eight firefighters receiving lump sum cash payments of their accrued benefits with a share plan. The share plan would pay the eight firefighters additional money based on each firefighter's years of service. The remaining four firefighters in the Pension Trust Fund would receive insured annuities. The Board of Trustees also directed Mr. Donlan to determine the cost of Board's action in selecting dissolution and distribution of the Pension Trust Fund by purchasing eight annuities and four lump sum cash payments. The transcript for the Board of Trustees' meeting shows the following: SECRETARY WATERS: I make a motion that if the City does not act favorably to the City proposal, what we've been calling "City Proposal - Proposal Number One," then the Board requests that the City pay in accordance with the 9/9/11 letter from Foster & Foster updated as of 9/16/11. The motion received a second, and was unanimously approved by the Board of Trustees. The letter from Mr. Donlan, dated September 9, 2011, set out the Pension Trust Fund's current value and the amount of additional funds required from the City in order to fund the distribution of the accrued benefits with the purchase of eight insured annuities and four lump sum cash payments. Moreover, Mr. Donlan's letter determined the amount of funds required from the City to finance the distribution. Finally, the September 9, 2011, letter set out the costs of a "share plan" allocation. The Board of Trustees' action at the September 9, 2011, meeting, directed the actuary to update the distribution costs using a September 16, 2011, date. The reason for the changed date is that the cost of purchasing annuities varies based on the prevailing interest rates on a particular date. The Board of Trustees chose September 16, 2011, as the date for determining the cost of purchasing the annuities, because the date was the closest date to the City Commission's next scheduled meeting on September 19, 2011. On September 16, 2011, Mr. Donlan wrote Ms. Sullivan, and provided the City with the market value of the Pension Trust Fund on September 15, 2011, and the costs to fund the distribution of the Pension Trust Fund under two scenarios: 1) the City's "Share Plan or Service Distribution Plan"; and 2) the accrued benefit plan approved by the Board of Trustees. The letter shows that, at the time, the current value of the Pension Trust Fund was insufficient to distribute the accrued benefits. Consequently, under either option, the City would be required to pay additional funds in order to distribute the accrued benefits. Mr. Donlan outlined the City's costs under the City's proposed share plan or service distribution plan. Under the City's proposal, eight firefighters would receive lump sum cash payments of their accrued benefits and "service distributions" based on the years of service, and four firefighters would receive insured annuities. Mr. Donlan's letter noted that if the City adopted this proposal, the decision would allow the City to access additional state money to pay for the service distributions. Under the “share plan or service distribution plan,” the City would be required to provide $1,024,786.00 to fund the distribution. The second cost option outlined by Mr. Donlan detailed the cost of funding the Board of Trustees' decision that eight firefighters receive insured annuities, and four firefighters receive lump sum cash payouts. Unlike the “share plan or service distribution plan,” state money would not be available to pay for the accrued benefit plan.3/ The actuary's letter clearly states that under the accrued benefit plan, the City would be required to provide $1,265,330.00 to fund the distribution of the Pension Trust Fund. On September 19, 2011, Mr. Daniel Waters, the Board of Trustees' Secretary, informed the City Commission in writing that the Board of Trustees had met and "accepted a motion concerning the method of payout to the former Belleair Bluffs Firefighters' Pension Members." Further, Mr. Waters informed the City Commission about the costs of the Board's adopted annuity plan, and provided a copy of the actuary's September 16, 2011, letter. The record shows that on September 26, 2011, the City Commission held a special meeting concerning the Pension Trust Fund. The City Commission's minutes show that the City had its actuary prepare documentation showing the financial implications for the City under four different scenarios.4/ Further, the City Commission minutes show that the City Commission failed to take any action, other than to authorize Mayor Arbutine "to write a letter requesting a 90-day extension in order to keep the Share Plan alive while continuing to come to an agreement." Consequently, the City did not provide the additional funds of $1,265,330.00 necessary to distribute the Pension Trust Fund as determined by the Board. On September 29, 2011, Mayor Arbutine wrote the Department seeking its assistance with resolving a problem with the termination of the Pension Trust Fund. Mayor Arbutine's letter outlined the City's liability to fund the options presented by the Board of Trustees. Specifically, Mayor Arbutine lamented that the Board of Trustees' decision would harm the City financially, and that he did not accept that "the City's only option is to pay for whatever method the Board decides is best for the plan members." Consequently, the Mayor asked the Department to take no action pursuant to section 175.361 to effect the dissolution of the Pension Fund for 90 days. The Board did not distribute the Pension Trust Fund on or before September 30, 2011. The Department received information from the City and the Board of Trustees’ decision concerning the Pension Trust Fund's dissolution and distribution. The Department reviewed materials and interviewed the parties. Based on its review, the Department, on February 22, 2012, wrote the City that the Department "has determined that the method of distribution of the asset value as determined by the Board of Trustees is required under section 175.361, Florida Statutes." Further, the Department states the following: In conjunction with this letter, the Department is also corresponding with the Board of Trustees, copy enclosed, instructing them to have the plan actuary prepare an updated financial analysis of the City's required contribution, with a 30-day lock-in period price for the purchase of annuities. This will allow the City of Belleair Bluffs to secure the necessary resources to make the required cash contribution to the plan. The Department provided the City with notice that the February 22, 2012, letter, constituted final agency action, and set out the City's administrative hearing rights. On March 14, 2012, the City filed its Petition for Formal Administrative Hearing with the Department.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of Retirement, enter a final order finding that the Board of Trustees complied with section 175.361, Florida Statutes, and that the City be directed to comply with the Department's determination to effectuate the distribution of the Pension Trust Fund through the purchase of eight insured annuities and four lump sum cash payouts for the specific plan members. The undersigned retains jurisdiction to award reasonable attorneys' fees and costs pursuant to section 175.061(5), Florida Statutes, upon the entry of a final order. DONE AND ENTERED this 7th day of December, 2012, in Tallahassee, Leon County, Florida. S THOMAS P. CRAPPS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of December, 2012.
