CEO 87-77 -- June 9, 1988

CONFLICT OF INTEREST

RETIRED EMPLOYEE SERVING ON BOARD OF TRUSTEES

OF CITY EMPLOYEES' RETIREMENT TRUST FUND

To: Mr. T. W. Fair, Chairman, City of Miami General Employees' and Sanitation Employees' Retirement Trust

SUMMARY:

No prohibited conflict of interest is created under Section 112.313(7)(a), Florida Statutes, where a retired city employee serves on the board of trustees of the city general employees' and sanitation employees' retirement trust. The employee's vested right to receive a pension from the trust fund does not create a continuing or frequently recurring conflict with the performance of his duties as a member of the board of trustees. CEO 86-10 is referenced.

QUESTION:

Does a prohibited conflict of interest exist where a retired city employee serves on the board of trustees of the city general employees' and sanitation employees' retirement trust from which he receives a pension?

Your question is answered in the negative.

In your letter of inquiry you advise that Mr. Jack Rabun currently serves on the City of Miami General Employees' and Sanitation Employees' Retirement Trust Board of Trustees. The City ordinance which created the Retirement Trust provides for the general employees to select two trustees who are present or retired members of the bargaining unit represented by the American Federation of State, County, and Municipal Employees (AFSCME) Local 1907. See City of Miami Ordinance No. 1002. The subject trustee was elected as a retiree-member pursuant to this provision. He receives pension benefits from the trust, and is compensated for his service on the Board in the same manner as are members of the city's civil service board. You question whether a prohibited conflict of interest exists by virtue of his service on the Board.

The Code of Ethics for Public Officers and Employees provides in relevant part:

CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP. -- No public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he is an officer or employee . . . ; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), Florida Statutes (1985).]

Under this provision, a public officer is prohibited from having any employment or contractual relationship that would create a continuing or frequently recurring conflict between his private interests and the performance of his public duties.

In an earlier opinion, CEO 86-10, we found that a prohibited conflict of interest would be created were a retired chief of police to serve on the board of trustees of a municipal police officers' retirement trust fund. In our view the retired police chief's vested right in the retirement trust fund created a contractual relationship with the city, and his ongoing interest in the trust fund would present a continuing or frequently recurring conflict with the duties he would have as a member of the board of trustees, as the board's duties included determining qualified pensioners, pension amounts, and cost of living increases.

Here, the City ordinance which created the Retirement Trust provides that members of the Board are fiduciaries of the retirement plan. They serve as the plan administrator and are required to submit certain financial information to the City Commission. The Board also has the authority to appoint an administrator to assist them in the performance of their administrative duties, as well as a physician, legal counsel, accountants, actuaries, and other professional advisors.

The contributions to be made by each member of the retirement trust are set forth in the ordinance. The ordinance also describes the manner in which the City's contribution for normal costs is made. Basically, both the City's actuary and the trust's actuary make funding recommendations. If their calculations are the same, the City contributes that particular amount. If the two actuaries disagree, an independent third actuary is chosen. The City Commission then is required to fund the normal costs at either the amount recommended by the actuary for the trust or the amount recommended by the actuary for the City, depending on which recommendation is closer to the recommendation of the third actuary.

The ordinance describes the circumstances under which a member of the retirement plan receives benefits. While the Board performs certain ministerial functions, such as processing and certifying applications for retirement plan benefits, the Board does not determine who receives a pension or the amount of the pension. For example, a person with ten or more years of continuous, creditable service may retire as long as he has attained the specified normal retirement age. Under certain conditions a person may retire before he has ten years of service. The ordinance provides that a member's retirement allowance is equal to two percent of that member's average final compensation multiplied by years of creditable service, payable in monthly installments. While the ordinance grants the Board some discretion to determine whether to grant an ordinary, accidental, or service-incurred disability retirement, the Board has considered only one disability application since 1985.

The establishment of a cost-of-living allowance, the amount of contributions to be made by both the City and members into the allowance fund, and the priority of certain beneficiaries for the disbursement of funds are set forth in the ordinance. The Board is responsible for ratifying the actuarial soundness of the cost-of- living benefits that are agreed upon by a committee which is separate from the Board. The ordinance provides that all other matters regarding the cost-of living fund will be determined by negotiations between the City, the Board, AFSCME and the Sanitation Employees Association.

We are of the opinion that the subject Board member's private interests in the trust fund do not present a continuing or frequently recurring conflict of interest with his duties as a member of the Board. The Board members have little discretion in the determination of qualified pensions, pension amounts, and cost-of-living increases, and exercise whatever discretion they do have on infrequent occasions.

Section 112.312(6), Florida Statutes, defines "conflict of interest" as "a situation in which regard for a private interest tends to lead to disregard of a public duty or interest." It would appear that the Board member's interest in safeguarding the assets of the trust, considered with the fact that he would stand to benefit only remotely by any discretionary decision that he might make, would more than override any limited ability he might have to place his personal interests above those of the public.

Accordingly, we find that a prohibited conflict of interest is not created where a retired employee serves on the board of trustees of the City of Miami General Employees' and Sanitation Employees' Retirement Trust from which the retired employee receives a pension.