NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES
REPORT ON EXAMINATION
OF THE
SUFFOLK COUNTY POLICE BENEVOLENT ASSOCIATION
LEGAL SERVICES FUND
CONDITION: DECEMBER 31, 2011
DATE OF REPORT: APRIL 1, 2013
NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES
REPORT ON EXAMINATION
OF THE
SUFFOLK COUNTY POLICE BENEVOLENT ASSOCIATION
LEGAL SERVICES FUND
AS OF
DECEMBER 31, 2011
DATE OF REPORT: APRIL 1, 2013
EXAMINER: SHARON REYNOLDS
TABLE OF CONTENTS
ITEM PAGE NO.
1. Executive summary 2
2. Scope of examination 3
3. Description of Fund 4
A. Management 4
B. Investment powers of the trustees 6
C. Member benefits 6
D. Contributions 7
E. Information to members 7
4 Financial statements 8
A. Statement of assets, liabilities and reserve fund balance 8
B. Statement of changes in reserve fund balance 9
C. Reconciliation of reserve fund balance 10
5. Administrative expenses 11
6. Market conduct activities 12
7. Summary and conclusions 13
Andrew M. Cuomo Maria T. Vullo
Governor Superintendent
March 13, 2017
Honorable Maria T. Vullo
Superintendent of Financial Services
New York, New York 10004
Madam:
Pursuant to instructions contained in Appointment No. 30821, dated October 16, 2012
and annexed hereto, an examination has been made of the condition and affairs of the Suffolk
County Police Benevolent Association Legal Services Fund hereinafter referred to as “the
Fund,” at the principal office of the Fund, located at 868 Church Street, Bohemia, NY 11716.
Wherever “Department” appears in this report, it refers to the New York State
Department of Financial Services.
The report indicating the results of this examination is respectfully submitted.
(212) 480-4768 | One State Street, New York, NY 10004-1511 | www.dfs.ny.gov
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1. EXECUTIVE SUMMARY
The examiner’s review of a sample of transactions did not reveal any differences which
materially affected the Fund’s financial condition as presented in its financial statements
contained in the December 31, 2011 filed annual statement. (See item 4 of this report)
The Fund violated Section 201.1(a)(4) of Department Regulation No. 38 by failing to
give the Department written notice of changes to the board of trustees within 10 days after the
changes had occurred. (See item 3 of this report)
The Fund violated Section 201.1(a)(2)(i) of Department Regulation No. 38 by failing to
give the Department written notice within 10 days after amending plan benefits. (See item 3 of
this report)
The examiner’s review of the Fund’s market conduct activities did not reveal significant
instances which deviated from the New York Insurance Law, Department regulations and
circular letters or the operating rules of the Fund. (See item 6 of this report)
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2. SCOPE OF EXAMINATION
The prior examination was conducted as of December 31, 2006. This examination covers
the period from January 1, 2007 through December 31, 2011. As necessary, the examiner
reviewed transactions occurring subsequent to December 31, 2011 but prior to the date of this
report (i.e., the completion date of the examination).
This examination comprised a verification of the Fund’s assets and liabilities as of
December 31, 2011 to determine whether the Fund’s filed December 31, 2011 annual statement
fairly presents its financial condition. The examiner reviewed the Fund’s income and
disbursements necessary to accomplish such verification and utilized examination procedures, as
deemed appropriate, in such review and in the review or audit of the following matters:
Fund history
Management and control
Fund records
Member benefits and contributions
Market conduct activities
Growth of Fund
Accounts and records
Financial statements
The examiner reviewed the prior report on examination which did not contain any
violations, recommendations or comments.
This report on examination is confined to financial statements and comments on those
matters which involve departures from laws, regulations or rules or which require explanation or
description.
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3. DESCRIPTION OF FUND
The Fund was established on January 21, 1983, pursuant to a collective bargaining
agreement and a Declaration of Trust (“Trust Agreement”) between Suffolk County (“County”)
and the Suffolk County Police Benevolent Association (“Association”). The Trust Agreement
provides legal service benefits for eligible employees, their families and dependents.
The December 31, 2011 Annual Statement indicated that there were approximately 2,196
active participants.
A. Management
The Trust Agreement requires that the board of trustees shall be comprised of eight
trustees, four appointed by Union and four appointed by the County. The following is a list of
the trustees as well as their principal business affiliations, as of December 31, 2011.
Appointed by the County
Year First
Name Principal Business Affiliation Appointed
Frank Nardelli County Executive Assistant 2007
Edwin Perez Director of Community Affairs 2009
Jeff Tempera Director of Labor Relations 2007
Appointed by the Association
Year First
Name Principal Business Affiliation Appointed
Michael Applequist Police Officer – Suffolk County 2005
Ronald Ross Police Officer – Suffolk County 2008
Fred Sales Police Officer – Suffolk County 2000
Louis Tutone Police Officer – Suffolk County 2008
Appointed by the Fund
Phil Cater Fund Administrator 2002
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Section 201.1 of Department Regulation No. 38 states, in part:
“The trustees of every employee welfare fund shall give written notice to the
Insurance Department of:
(a) Any of the following changes, within 10 days after it shall have occurred . . .
(4) Any change in the membership of the board of trustees . . . or in its administrator . . .”
Subsequent to the examination date, in January 2012, Mr. Joseph Link replaced Mr. Fred
Sales and Mr. Damian Lee replaced Mr. Lou Tutone. Notification of the changes was sent to the
Department in May 2012. The Fund failed to notify the Department, in writing, of the changes
made to its board of trustees within 10 days after the changes had occurred.
The Fund violated Section 201.1(a)(4) of Department Regulation No. 38 by failing to
give the Department written notice of changes to the board of trustees within 10 days after the
changes had occurred.
The examiner’s review of the minutes of the trustees’ meetings indicated that the
majority of trustees attended the meetings regularly; however, Mr. Fred Sales attended only one
meeting in 2007 and no meetings in 2011.
The examiner recommends that all of the Fund’s trustees attend a majority of the
trustees’ meetings.
The Fund did not have, in accordance with the Trust Agreement, four trustees appointed
by the County at December 31, 2011.
The examiner recommends that the Fund maintain the requisite number of trustees
appointed by the County, as specified in the Trust Agreement.
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B. Investment Powers of the Trustees
The Trust Agreement empowers the trustees to invest in any investments that are legal
for investments of trust funds under the laws of the State of New York.
As of December 31, 2011, the Fund’s assets were mainly comprised of cash (100%).
C. Member Benefits
The following self-insured benefits, administered by the law firm of Davis and Hersh, are
provided to active members and their eligible dependents either at no cost or at reduced rates:
Benefit Cost Coverage
Services provided without
cost
Unlimited advice and consultation with an attorney, legal
letters written and telephone calls made on behalf of
members and dependents, limited document review, simple
wills, child adoption benefits, disability application, criminal
matter up to and through arraignment, and representation for
misdemeanors.
Services provided at a
reduced rate fee schedule
Representation in the following proceedings: divorce and
separation, misdemeanors, personal bankruptcy, juvenile
delinquency, name change, estate/probate proceedings, real
estate benefit and short sales.
Services provided at a
reduced rate contingency
fee
Personal injury cases fee rate of (25%) and social security
disability appeals fee rate of (25%).
In addition, a reimbursement of $500 is available for members when using divorce
mediation services provided by Divorce Mediation HQ.
Section 201.1 of Department Regulation No. 38 states, in part:
“The trustees of every employee welfare fund shall give written
notice to the Insurance Department of:
(a) Any of the following changes, within 10 days after it shall have
occurred . . .
(2) Any amendment to, substitute for, or other change in . . .
(i) the plan . . .”
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According to the Fund’s board minutes, the Fund amended its benefit plan by adding a
divorce mediation benefit in February 2008. The Fund failed to notify the Department, in
writing, of the aforementioned change made to its benefit plan.
The Fund violated Section 201.1(a)(2)(i) of Department Regulation No. 38 by failing to
give the Department written notice within 10 days after amending plan benefits.
D. Contributions
The Fund does not receive any direct contributions from the County. The money
necessary to operate the Fund is allocated from the Suffolk County Police Benevolent
Association Benefit Fund as follows:
Year Amount
2007 $302,207
2008 $301,047
2009 $309,441
2010 $313,545
2011 $287,889
E. Information to Members
The Fund’s records indicate that annual reports are distributed to all members through an
internet website. The website, www.suffolkpba.org, is accessible to all members and describes
the Fund’s benefits and procedures.
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4. FINANCIAL STATEMENTS
The following statements indicate the changes in assets, liabilities and reserve fund
balance between the years ended January 1, 2007 and December 31, 2011, changes in the reserve
fund balance for the period under examination, and a reconciliation of the reserve fund balance
for each of the years under examination as extracted from the Fund’s filed annual statements.
A. STATEMENT OF ASSETS, LIABILITIES AND RESERVE FUND BALANCE
The following table indicates the Fund’s financial growth/decline during the period under
review:
December 31, December 31, Increase
2006 2011
(Decrease)
Assets
Cash $ 2,991 $ 5,771 $ 2,780
Due from trustee 265 0 (265)
Prepaid expenses 9,255 4,910 (4,345)
Total assets $12,511 $ 10,681 $(1,830)
Liabilities and reserve fund balance
Unpaid claims $29,400 $ 37,600 $ 8,200
Accounts payable 3,000 3,000 0
Due to Suffolk County Police Benevolent
Association Benefit Fund 9,511 7,681 (1,830)
Total liabilities $ 41,911 $ 48,281 $ 6,370
Reserve fund balance $(29,400) $(37,600) $(8,200)
Total liabilities and reserve fund balance $ 12,511 $ 10,681 $(1,830)
B. STATEMENT OF CHANGES IN RESERVE FUND BALANCE
2007
2008 2009 2010 2011
Additions to fund balance:
Employer contributions $302,207 $301,047 $309,441 $313,545 $287,889
Decrease in plan benefit obligations
10,800
0 0
13,800
0
Total additions $313,007 $301,047 $309,441 $327,345 $287,889
Deductions from fund balance:
Benefits paid directly by the Fund $ 500 $ 1,750 $ 1,000 $ 250 $ 750
Premiums paid to service organizations 268,942 264,675 274,400 271,075 256,992
Administrative expenses 32,765 34,622 34,041 42,220 30,147
Increase in plan benefit obligations
0
7,200
15,000
0
10,600
Total deductions $302,207 $308,247 $324,441 $313,545 $298,489
Net increase (decrease) in fund balance $ 10,800 $ (7,200) $ (15,000) $ 13,800 $(10,600)
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C. RECONCILIATION OF RESERVE FUND BALANCE
2007
2008 2009 2010 2011
Reserve fund balance,
December 31, previous year $ (29,400) $ (18,600) $ (25,800) $ (40,800) $ (27,000)
Total additions during year $313,007 $301,047 $309,441 $327,345 $287,889
Total deductions during year 302,207 308,247 324,441 313,545 298,489
Change in fund balance $ 10,800 $ (7,200) $(15,000) $ 13,800 $ (10,600)
Reserve fund balance,
December 31, current year $(18,600) $(25,800) $(40,800) $ (27,000) $ (37,600)
10
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5. ADMINISTRATIVE EXPENSES
The following table shows a breakdown of the administrative expenses for the fiscal year
ending December 31, 2011:
Administrative Expenses
Allowances, expenses $ 150
Fees and commissions 21,000
Insurance premiums 6,365
Fidelity bond premium 232
Dues and subscriptions 290
Stationery, printing and office supplies 2,110
Total administrative expenses $30,147
The following schedule shows the number of members, contributions, administrative
expenses, the ratio of administrative expenses to contributions, and the administrative cost per
member for the period under review:
2007 2008 2009 2010 2011
Number of members 2,299 2,272 2,204 2,199 2,196
Contributions $302,207 $301,047 $309,441 $313,545 $287,889
Administrative expenses $32,765 $34,622 $34,041 $42,220 $30,147
Ratio of administrative
expenses to contributions 10.84% 11.50% 11.00% 13.47% 10.47%
Administrative cost per
member $14.25 $15.24 $15.45 $19.20 $13.73
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6. MARKET CONDUCT ACTIVITIES
The examiner reviewed various elements of the Fund’s market conduct activities
affecting claimants to determine compliance with applicable statutes and regulations and the
operating rules of the Fund.
The examiner reviewed a sample of self-insured legal claims to determine whether the
members were treated fairly and in accordance with plan benefits.
Based upon the sample reviewed, no significant findings were noted.
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7. SUMMARY AND CONCLUSIONS
Following are the violations and recommendations contained in this report:
Item Description Page No(s).
A The Fund violated Section 201.1(a)(4) of Department Regulation
No. 38 by failing to give the Department written notice of changes
to the board of trustees within 10 days after the changes had
occurred.
B The examiner recommends that all of the Fund’s trustees attend a 5
majority of the trustees’ meetings.
C The examiner recommends that the Fund maintain the requisite 5
number of trustees appointed by the County, as specified in the
Trust Agreement.
D The Fund violated Section 201.1(a)(2)(i) of Department Regulation 7
No. 38 by failing to give the Department written notice within 10
days after amending plan benefits.
Respectfully submitted,
/s/
Sharon Reynolds
Senior Examiner
STATE OF NEW YORK )
)SS:
COUNTY OF NEW YORK )
Sharon Reynolds, being duly sworn, deposes and says that the foregoing report, subscribed by
her, is true to the best of her knowledge and belief.
/s/
Sharon Reynolds
Subscribed and sworn to before me
this day of
