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Will Your Social Security be Reduced by the Windfall Elimination Provision?

As many of you may already know, the majority of Police Officers and other public employees in Ohio do not pay into Social Security.  However, you may have had previous work in the private sector or continue to work part time jobs where you are paying into Social Security.  If you are going to receive a pension from a job not covered by Social Security, but have paid enough Social Security to qualify for a retirement benefit, your benefit will likely be reduced by the Windfall Elimination Provision (WEP).

How does Social Security work?

Social Security benefits were created to replace only a percentage of a worker’s pre-retirement earnings. It is set up so lower-paid workers would get a higher return than highly paid workers. For example, lower-paid workers could get a Social Security benefit that equals about 55% of their pre-retirement earnings. The average replacement rate for highly paid workers is only about 25%. 

To understand why this is, you need to know how your Social Security benefit is calculated.  Your benefits are based on your average monthly earnings adjusted for inflation.  Then, they separate your average earnings into three amounts and multiply the amounts using three separate factors.  In the case of a worker who turns 62 in 2012, the first $767 of average monthly earnings is multiplied by 90%; the next $3,857 by 32%; and the remainder by 15%. The sum of the three amounts equals the total monthly payment amount.  The 90% factor is the most important and is what can be reduced by the WEP.

How does the Windfall Elimination Provision affect my benefit?

First, we need to verify that you are eligible for Social Security benefits.  The government no longer mails statements to those under the age of 60 as a cost cutting measure.  However, you can access your benefit calculation on the www.ssa.gov website by creating a user name and password.

Generally, you need 40 “credits” to be eligible for benefits.  In 2012, you receive one credit for each $1,130 of earnings covered under Social Security, up to the maximum of four credits per year. Each year the amount of earnings needed for credits goes up slightly as average earnings levels increase.  We here at Lineweaver Financial can calculate your earned credits for you.  

The WEP reduces the “90% factor” discussed above.  In the example in the previous section, instead of multiplying your first $767 of earnings by 90%, you would multiply it by only 40%, thus reducing your benefit by $383.50.  In 2012, if you retired at age 62, $383.50 per month is the maximum your Social Security benefit could be reduced by the WEP.

Exceptions to the WEP

There are exceptions, however.  If you are receiving a relatively low pension, the WEP cannot reduce your Social Security benefit by more than 50% of your pension.  So if you were to receive a $500 per month pension, the maximum reduction to your Social Security benefit would be $250 per month.  WEP does also not affect survivor’s benefits.

There is also the “Substantial Earnings” test.  If you have 30 or more years of Substantial Earnings under Social Security, you won’t be faced with the WEP at all!  Unfortunately, this isn’t an easy task for public employees to accomplish.  To pass the “Substantial Earnings” test in 2012, you need $20,475 of earnings under Social Security; however, in 1990 you only needed $9,525 in covered earnings. Also, if you have between 20-29 years of substantial earnings, you will face less of a reduction from the WEP, with each year of substantial earnings having a different reduction percentage.  Lineweaver Financial will be glad to help you calculate your “substantial earnings.”

Start planning now

Everyone can be affected differently by the WEP and other provisions regarding your Social Security.  The key is to plan ahead and seek advice from a professional if you want help.  We try to educate individuals of all ages, and these provisions can affect many people in the public sector.  With all the changes you are experiencing with your public pensions and work environment, it is important to be well educated and well versed on how you can proactively plan a comfortable retirement, regardless of how old you are now.  If you’d like more information or a complimentary analysis, feel free to give us a call.


Source: ssa.gov
Lineweaver Financial Group
9035 Sweet Valley Drive
Valley View, OH 44125
216.520.1711
www.OhioRetire.com
Securities Offered Through Sigma Financial Corporation. Member FINRA/SIPC

 

What is Felony Vandalism?

By:  Prosecutor Sherri Bevan Walsh

We recently had a case in which the defendant caused damage to a jail after being arrested on misdemeanor charges. While in custody, the defendant urinated throughout the cell and broke the smoke detector and fire alarm, causing the entire jail to be evacuated.

Certainly that sort of damage to government property would warrant a felony charge, right?

The answer depends on two factors: necessity to conducting business and monetary value. First, is the damaged property so crucial that the agency would be forced to shut down without it? And second, is the cost to repair the damage at least $1,000? If the answer to either of those questions is yes, then the perpetrator can be charged with felony vandalism.

According to Ohio law, vandalism is serious physical harm to an occupied structure or its contents. The property must be owned by either a business or a government, and the damage must be reasonably expected based on the actions of the person doing the vandalizing. For example, one can reasonably expect damage from hitting a window with a sledgehammer. One would not expect damage, however, from slamming a door with a glass window in it.

Vandalism can only be charged as a felony if the damaged property is necessary for the operation of a business or government agency or the cost to repair the damage is at least $1,000. If the damage does not meet either of these requirements, the suspect would face misdemeanor charges of criminal damaging (a misdemeanor of the second degree) and/or criminal mischief (a misdemeanor of the third degree). Criminal mischief is a misdemeanor of the first degree if the damage creates personal harm.

Necessity can be a point of contention between the victim and the legal system. In the eyes of the law, not every object used in the course of business falls into the necessary category. Necessary means the business or agency could not operate without it. For example, a dentist cannot conduct his business without his drill. If one of his windows is broken, on the other hand, he can still see his patients.

Because one of the criteria for felony vandalism is the cost to replace, repair and/or clean the damaged property, it is important to be able to calculate the monetary value of the damage. This is also important for determining the level of the felony. Vandalism is a felony of the fifth degree when the cost of repairs is less than $7,500. It becomes a felony of the fourth degree when the cost of repairs is $7,500 to $150,000. And vandalism is a felony of the third degree if the cost of repairs is more than $150,000.

Damage to an individual’s property that is not used in business or to an unoccupied structure does not constitute vandalism. Both of these would fall under criminal damaging. Depending on the surrounding circumstances and how the property was damaged, there could also be felony charges. For example, setting fire to an abandoned house would result in arson charges. Destroying someone’s flat-screen TV and living room furniture, although likely to cause more than $1,000 in damage, would result in burglary charges. Breaking the engine in a motorboat sitting in someone’s driveway, though, would only result in criminal damaging charges.

Simply being government property is not enough to elevate a vandalism charge from a misdemeanor to a felony. However, some courts have ruled that law enforcement property is necessary for doing business. Therefore, there is an argument that damage to jail cells, breathalyzers, cruisers and other items used by law enforcement do not need to meet the $1,000 threshold in order to warrant a felony charge. Damage to government property not valued over $1,000 is handled on a case by case basis, so you should consult your county prosecutor’s office.

The defendant mentioned at the beginning of this article was charged with and eventually pleaded guilty to Vandalism (F5), since the total cost to clean up the jail and repair all the damage was more than $1,000. However, by breaking the smoke detector and fire alarm, which caused the entire jail to be evacuated, the defendant effectively shut down the “business” of the jail. Arguably, this would also elevate his crime to a felony, regardless of cost.

This article is not to be considered legal advice. Please consult your police legal advisor regarding any legal issue.

Sherri Bevan Walsh

Summit County Prosecuting Attorney

 

Changes in Pension

By now you have hopefully been familiarized with the changes that will occur to your pension in the coming years.  If you haven’t you can familiarize yourself by logging onto www.op-f.org and reviewing the recently approved legislation and changes.  While over the last few weeks and frankly last few years the board and myself have been getting a little grief over these changes.  It is important to keep in mind the reasoning.  First, while change is unpopular it is needed to sustain the overall health of the fund.  Simply stating, we were paying out more than we were taking in, cost and life expectancies were continuing to rise and we could not simply sustain this trend.  While I cannot speak on the proposed changes first being presented to the ORSC and legislature I can speak on the fact that something needed to be done.  

I can also assure you at the time, the board that was in place was working with the best interest of the members in mind and that the changes that they chose would impact majority of the members least.  Those board members wanted to make changes that would have little or no impact on current retirees, minor impact on those about to retire with the ability for those to make certain adjustments and the most impact to those entering the profession or having ample time to make major adjustments.  The bottom line is whether supported or not change definitely had to occur to sustain the overall health of the Ohio Police & Fire Pension Fund.  Only time will tell whether these changes will work for a long and healthy retirement fund.

On another note, we have finally hired a replacement for our retiring Executive Director, William Estabrook.  John Gallagher was hired and comes to us as the Executive Director of the Chicago Police Pension Fund.  He has been with the Chicago Police Pension Fund since 1980 and has been the Executive Director since 2006.  He comes to us with a wealth of knowledge and the board is confident he will be an excellent predecessor to Mr. Estabrook.

Moving forward, the next task and issue that should be coming our way is disability pension reform.  We believe that the ORSC will make this a pressing issue in the years to come and ultimately look at addressing this growing debate.  To date we have one of the highest disability rates in the country with some 30% plus members retiring on disability retirements.  While our process is not in question and actually is one of the best in the country, the fact that our members become disabled according to our administrative policy at a high rate needs to be addressed.  I am not sure what the solution may be but I believe the board and staff will work with the ORSC to help refine this issue.  The reform itself may help the funding of the Ohio Police & Fire Pension Fund for future years.

Thanks for your support and should you have any concerns, comments or needs feel free to email me anytime.
Scott Huff
Trustee/Ohio Police & Fire Pension Fund
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When is a Dispute a Greivance? When is a Grievance Arbitrable?

As students, we all learned about the rights guaranteed by the First Amendment of the United States Constitution.  Everyone remembers the subject matter of the first four rights:  religion, speech, press, and assembly.  The fifth right guaranteed by the Constitution is the oft times forgotten one, to “petition the Government for a redress of grievances.”  As a public sector employee covered by a collective bargaining agreement, your ability to seek “redress of grievances” does not flow from the Federal Constitution, rather it is an animal of contract law which is governed by the laws of the State of Ohio.  However, the concept is the same.  The Founding Fathers implemented the notion of citizens being able to legally check the actions of the Government when it oversteps its prescribed bounds.  Likewise, your collective bargaining agreement grants the ability to check the actions (or inactions) of your employer when it runs afoul of the agreed-upon labor contract.

Assessing “Grievability”

An OPBA member has a dispute with his or her employer.  That member wants to grieve the issue.  That member wants to arbitrate the issue and generally be made whole. This is an understandable and frequent reaction to the day-to-day employment disputes that affect the OPBA membership.  Often, the member has a legitimate argument for why he or she should be entitled to some sort of remedy.  At the very least he wants to have the ability to “petition” for the redress of the alleged grievance.  Sometime, that argument and ability is not so clear cut. Experienced OPBA Directors and representatives know that the first level of inquiry in any dispute with the employer is to determine whether something is actually a grievance.  A grievance is typically defined by the collective bargaining agreement under which the parties operate.  A grievance is essentially a breach of that labor contract.   There is a saying that every act of unfairness in the workplace is not necessarily an unfair labor practice; at least not an unfair labor practice charge that the State Employment Relations Board would be willing to take action upon.  Likewise, every dispute is not necessarily a grievance.  Quite often, a member will go to his OPBA representative alleging that a supervisor has treated him unfairly, or that a supervisor makes snide remarks, or that a supervisor is otherwise offensive.  The problem with many of these types of disputes is that collective bargaining agreements rarely contain any language which would be actionable to address such negative treatment.  Quite simply, it is difficult, if not impossible to succeed in obtaining contract language which would address the personality defects and egotistical tendencies of these supervisors at issue. 

Substantive Challenge to Arbitrability

While we sometimes see grievances alleging violations of the Family and Medical Leave Act or violations of the Fair Labor Standards Act, those allegations may not be grievable because they may not have anything to do with what is contained within the four corners of the particular collective bargaining agreement at issue. In order for a dispute to be substantively arbitrable, the parties (i.e., the employer and the union) must have agreed at some time in the past to arbitrate it through the terms of the collective bargaining agreement.  Binding contractual arbitration exists because the parties have either agreed to its existence or a conciliator has imposed it in some previous conciliation award. In AT&T Technologies v. Communications Workers, the Supreme Court held:
The first principle gleaned from the [Steelworkers] Trilogy [of cases] is that ‘arbitration is a matter of contract and a party cannot be required to submit to arbitrate any dispute which he has not agreed so to submit.’  (citation omitted)  This axiom recognizes the fact that arbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration….

Unless the parties, through the existing contract language, agreed to submit a dispute to binding arbitration, there is a chance that it is in fact, not arbitrable.  If certain subject matter is not specifically referred to or dealt with in the labor contract, then the employer may attempt to refuse to arbitrate and could be justified in doing so.

Who Decides What Is Substantively “Arbitrable?”

Generally speaking, it should be the arbitrator who decides what is within the jurisdiction of the arbitration provisions of a collective bargaining agreement.  Unfortunately, some employers take it upon themselves to “determine” that a matter is not arbitrable, thus forcing the union to file a law suit to compel the employer to arbitrate.  As a practical matter, these procedures are particularly prevalent when dealing with employers who are difficult in the first place; i.e., those employers who are offended by the mere concept of having to do business with their employees in a collective manner.
Luckily, substantial amounts of case law exist which place the question of arbitrability squarely in the hands of the arbitrator when there is mention of the subject matter in the collective bargaining agreement.  In Steelworkers v. American Manufacturing Co., the U.S. Supreme Court stated:

The function of the court is very limited when the parties have agreed to submit all questions of contract interpretation to the arbitrator.  It is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract.  Whether the moving party is right or wrong is a question of contract interpretation for the arbitrator.  In these circumstances the moving party should not be deprived of the arbitrator’s judgment, when it was his judgment and all that it connotes that was bargained for.

The Court continued:

The courts, therefore, have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim.  The agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.  The processing of even frivolous claims may have therapeutic value of which those who are not a part of the plant environment may be quite unaware.

When there is not language in the collective bargaining agreement related to a particular matter in dispute, the parties may be forced to litigate the subject matter arbitrability in court.  A court may determine that a grievance is appropriate for arbitration, or a court may determine that the matter in dispute has nothing whatsoever to do with the terms of the collective bargaining agreement and may decline to order an arbitration hearing.

Procedural Challenge to Arbitrability

Aside from the subject matter challenge to arbitrability, an employer may also raise the idea that a matter is not procedurally able to be arbitrated.  These challenges may include failure to timely raise or process a dispute.  There may also be an allegation that a matter is not ripe to be arbitrated, meaning that no harm has occurred, even if there may be harm in the future.  The essence of a procedural challenge is to determine whether the rules of the road have been followed.  If they have, then the matter is arbitrable, if they have not, then the matter may not be subject to arbitration.
Unlike substantive challenges which sometimes require the intervention of a court to determine whether a dispute should be arbitrated, procedural challenges are generally left to the arbitrator and only the arbitrator to decide. A work published under the authority of the American Bar Association’s Section of Labor and Employment Law explains:

In respect to the determination of procedural arbitrability, the Supreme Court has ruled that questions of procedural arbitrability are for arbitrators to decide and not for the courts.  When a court has determined that the subject matter of a dispute is arbitrable (substantive arbitrability), the arbitrator is to decide all procedural questions that grow out of the dispute and bear on its final disposition.

There is good reason for this principle.  First, having an arbitrator decide whether a grievance is procedurally arbitrable saves considerable time and expense as compared to the court system making that determination.  Second, arbitrators can be expected to exercise the type of industrial relations experience that the parties contemplated when they provided for arbitration in the first place.   The ABA’s publication continued:

An American Bar Association committee has stated that ‘the function of the arbitrator to decide whether or not an allegation of nonarbitrability is sound could be compared to that of a trial judge who is asked to dismiss a complaint on motion for a directed verdict or for failure to state a cause of action.  This analogy indicates that a preliminary decision relating to arbitrability by the arbitrator is an inherent part of his duty.’  That arbitrators are capable of self-restraint is evidenced by the committee’s conclusion, based on examination of many awards, that ‘arbitrators generally are well aware of the limitations of their authority and scrupulously try to avoid any transgression of those limitations.’

What Does All Of This Mean?

Overcoming both a subject matter challenge and a procedural challenge to arbitration gets one’s foot in the door to allow for a determination on the merits of the case.  Most arbitration matters are not challenged in the manner described in this article, but some are.  It is important for the OPBA’s membership to understand that getting from the point of dispute into the arbitrator’s hearing room may not be a given and it may not necessarily be a smooth ride. As with any dispute or grievance, first check with your OPBA Director and your OPBA staff representative to help assess the best way to handle the matter.