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Jim Conley’s Governmental Pension Caselaw Update–December 2016

OWEN & CONLEY LLC

JIM CONLEY’S GOVERNMENTAL PENSION

CASELAW UPDATE

December 2016

 Perroz v. Fox Chapel Borough, 143 A.3d 520 (Pa. Cmwlth. 2016)

The Borough’s Police Pension Plan defined disability for purposes of a disability pension as a condition which qualified the claimant for federal social security disability benefits (which is the inability to perform any gainful employment).  Perroz applied for a disability pension but the Borough denied his request on the basis that he did not demonstrate that he was incapable of performing any gainful employment.

On appeal to the Commonwealth Court, Perroz argued that the proper standard under Act 600’s disability pension provision as established by case law is the inability to perform the duties of a police officer.  In analyzing the issue, the Court noted that when parties bargain over an issue and come to an agreement a party cannot later avoid that agreement by arguing that it is contrary to law.  The Court concluded that because the parties clearly bargained the disability pension standard that was contained in the Police Pension Plan, it was applicable to Perroz and because he did not meet the pension plan’s definition of disability he was properly denied a disability pension.  The Court also distinguished cases allowing an illegal benefit to be challenged, noting that where the illegal or excess benefit challenged is the result of an interest arbitration award it can be challenged in certain circumstances.

This case reinforces the general notion that where parties agree to terms in a collective bargaining agreement, they will not be able to avoid those terms by arguing that they are contrary to law.

 

City of Wilkes-Barre v. Fire Fighters Local Union No. 104, 143 A.3d 1050 (Pa. Cmwlth. 2016).

A City of Wilkes-Barre firefighter was injured in the line of duty and began receiving Heart and Lung Act benefits.  (The Heart and Lung Act provides that a firefighter temporarily disabled from an in-service injury is entitled to his full salary).  The City’s third-party benefits administrator hired a case-manager to monitor the firefighter’s recuperation.  The case-manager requested access to the firefighter’s medical records and requested permission to attend the firefighter’s medical appointments.  The firefighter refused to consent to these requests.  The firefighter filed a grievance arguing that the City’s actions in attempting to monitor his recuperation was contrary to the bargaining agreement.   The firefighter argued that unlike the Workers’ Compensation Act, which allows an employer to monitor a claimant’s recuperation, the Heart and Lung Act does not provide an employer with that right.  The City argued that the right to monitor the firefighter’s recuperation was part of its inherent managerial rights.  The arbitrator, relying on the doctrine of past practice, concluded that because the City had a long history of never monitoring the recuperation of Heart and Lung Act benefit recipients, its actions violated the collective bargaining agreement

On appeal to the Commonwealth Court the City argued that the arbitrator lacked jurisdiction to hear the matter because the right to monitor the firefighter’s recuperation fell within the City’s inherent managerial rights and was not subject to bargaining.  The Court, in ruling against the City noted that while the collective bargaining agreement did specifically address Heart and Lung Act benefits, it did not provide for the monitoring of employees while receiving those benefits.  The Court upheld the arbitrator’s decision, concluding that if the City desired the right to monitor Heart and Lung Act benefit recipients it should have negotiated the right to do so.

 

Bortz v. Bortz, 2016 Pa Super.  Unpub. Lexis 1388.

This unpublished case, (meaning that it is not binding precedent), is worthy of attention because it highlights an issue that often comes up with domestic relations orders that apply to governmental defined benefit pension plans.

Thomas Bortz was a participant in the City of Williamsport Police Pension Plan, which is a defined benefit plan.  Thomas and his wife were divorcing and as part of the marital settlement agreement they agreed that his wife would receive 55% of the marital portion of his pension under current law.   The domestic relations order that was drafted provided that his wife would receive “55.0% of the marital portion of Husband’s accrued retirement benefit under the Plan as of the husband’s date of retirement.  The marital portion of Husband’s accrued retirement benefit equals the monthly retirement benefit, payable in the normal form of payment for Husband’s lifetime, multiplied by a fraction equal to 7.85 years (the period from December 18, 2004, date of marriage, until October 24, 2012, date of separation) divided by years of credited benefit service earned by Husband as of the date his benefit accruals cease.”  Thomas argued that as drafted, the domestic relations order was contrary to applicable case law because it allowed his wife to benefit from his post-separation efforts by calculating the benefit as of the date that his benefit accruals ceased, not as of the date of separation.

The Superior Court concluded that under current law, 23 Pa. C.S. §3501, promulgated in 2004, the coveture fraction is applied to the pension at the time the benefit accruals cease rather than at the date of separation.  The Court utilized an official comment to the legislation made by the legislature to support its conclusion.

Pension plan administrators should keep this case in mind when reviewing domestic relations orders applicable to defined benefit plans.

If you have any questions concerning these cases, please feel free to give me a call at (412) 765-0535.

 

The materials in this Update are for informational purposes only and may not reflect the most current legal developments.  These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances.   You should contact a lawyer licensed in your jurisdiction for advice on specific legal issues or problems.