Cypen & Cypen
JANUARY 17, 2008
Stephen H. Cypen, Esq., Editor
When we did the piece on the Florida Public Records Act amendment regarding Social Security numbers (see C&C Newsletter for December 13, 2007, Item 1), we should have told you that the same legislation amended the Public Records Act to modify the annual reporting requirements regarding requests by commercial entities for Social Security numbers. The amended law requires an agency now to file its annual report with the Executive Office of the Governor instead of the Secretary of State. However, the due date for the annual report has not changed and remains January 31st. In addition, the amended law does not repeal the prohibition against disclosing the Social Security numbers of current and former law enforcement personnel and their spouses and children. Each agency (like a pension board) in its annual report must identify all commercial entities that have requested Social Security numbers during the preceding calendar year, and the specific purpose or purposes stated by each commercial entity regarding its need for Social Security numbers. If no disclosure requests were made, the agency shall so indicate in the report. A “commercial entity” is defined as any corporation, partnership, limited partnership, proprietorship, sole proprietorship, firm, enterprise, franchise or association that performs a commercial activity. A “commercial activity” means the provision of a lawful product or service by a commercial entity. Such activity includes verification of accuracy of personal information received by a commercial entity in normal course of its business; use for insurance purposes; use in identifying and preventing fraud; use in matching, verifying, or retrieving information; and use in research activities. Commercial activity does not include display or bulk sale of Social Security numbers to the public or distribution of such numbers to any customer that is not identifiable by the commercial entity. Each commercial entity must submit a written request to the agency for the Social Security numbers and:
An agency may request any other information reasonably necessary to verify identity of the commercial entity and the specific purposes for which the Social Security numbers will be used. Any person who makes a false representation in order to obtain a Social Security number commits a third degree felony. For the convenience of readers, a sample letter follows.
The Executive Office of the Governor
The Honorable Ken Pruitt, President
The Honorable Marco Rubio, Speaker
RE: Annual Report Required by Section 119.071(5), Florida Statutes.
Dear Governor Crist, President Pruitt and Speaker Rubio:
Pursuant to the requirements of Section 119.071(5), Florida Statutes, the Board of Trustees hereby submits this letter as its report regarding requests made by commercial entities for social security numbers. According to our records, no such requests have been received during [insert relevant calendar year].
According to our records, the following requests have been made:
Name of Commercial Entity Purpose
Please do not hesitate to contact our office should you require additional information.
The U.S. Department of Labor has responded to a letter from head of the U.S. Chamber of Commerce expressing concern about use of pension plan assets by plan fiduciaries to further public policy debates and political activities through proxy resolutions that have no connection to enhancing value of the plan’s investment in a company. By way of background, the Employee Retirement Income Security Act of 1974 requires that plan fiduciaries act prudently, solely in the interest of plan participants and beneficiaries, and for the exclusive purpose of paying benefits and defraying reasonable administrative expenses. The Department’s view is that, in voting proxies, the responsible fiduciary must only consider those factors that affect value of the plan’s investments and may not subordinate interest of participants and beneficiaries in their retirement income to unrelated objectives. Fiduciary obligations of prudence and loyalty require responsible fiduciaries to vote proxies on issues that affect value of the plan’s investment. However, fiduciaries need to take into account costs involved when deciding whether to exercise their shareholder rights. Such costs include, but are not limited to, expenditures related to developing proxy resolutions, proxy voting services and analysis of the likely net effect of a particular issue on value of the plan’s investment. Fiduciaries must take all of these factors into account in determining whether the exercise of such rights (for example, voting of a proxy), independently or in conjunction with other shareholders, is expected to have an effect on value of the plan’s investment that will outweigh cost of exercising such rights. The same principle applies to fiduciary activities that involve monitoring or influencing management of a corporation. In this regard, an investment policy that contemplates activities intended to monitor or influence management of a corporation in which a plan owns shares is consistent with fiduciary obligations under ERISA only where the responsible fiduciary concludes that there is a reasonable expectation that such activities by the plan alone or in conjunction with other shareholders is likely to result in an enhancement of value of the plan’s investment in the corporation sufficient to outweigh the costs involved. The Advisory Opinion makes reference to the Department’s previously-expressed strong concern about use of plan assets to promote particular legislative, regulatory or public policy positions that have no connection to payment of benefits or plan expenses (see C&C Newsletter for May 26, 2005, Item 3). There, the Department indicated that the mere fact plans are important participants in the national economy, and are generally affected by legislation, regulations, actions and events that affect the economy as a whole, does not convert legislative, regulatory or policy proposals concerning the economy into a rationale for spending plan assets on policy debate. The Department rejects the construction of ERISA that would render its tight limits of ERISA plan assets illusory, and that would permit plan fiduciaries to expend ERISA trust assets to promote myriad public policy preferences, and believes that these principles apply with equal force to a plan fiduciary’s support or pursuit of a proxy proposal. In the Department’s view, fiduciaries risk violating the exclusive purpose rule when they exercise their fiduciary authority in an attempt to further legislative, regulatory or public policy issues through the proxy process when there is no clear economic benefit to the plan. In such cases, the Department would expect fiduciaries to be able to demonstrate in enforcement actions their compliance with requirements of ERISA. The mere fact that plans are shareholders in corporations in which they invest does not itself provide a rationale for a fiduciary spending plan assets to pursue, support or oppose a proxy proposal unless the fiduciary has a reasonable expectation that doing so will enhance the value of the plan’s investment. To the contrary, it is clear that plan fiduciaries, when considering whether to support or oppose a proxy proposal or to engage in activities intended to monitor or influence management of corporations, must first take into account the cost of such action and the role of the investment in the plan’s portfolio, and cannot act unless they conclude the action is reasonably likely to enhance value of the plan’s investments and will not subordinate interests of plan participants and beneficiaries to unrelated objectives. In other words, plan fiduciaries may not increase expenses, sacrifice investment returns or reduce security of plan assets to support or promote goals not directly related to the plan. Consistent with these pronouncements, use of pension plan assets by plan fiduciaries to further policy or political issues through proxy resolutions that have no connection to enhancing value of the plan’s investment in a corporation would violate the prudence and exclusive purpose requirements of ERISA. For example, the likelihood that adoption of a proxy resolution or proposal requiring corporate directors and officers to disclose their personal political contributions would enhance value of a plan’s investment in the corporation appears sufficiently remote that the expenditure of plan assets to further such a resolution or proposal clearly raises compliance issues under ERISA. What will the government take away next? Although this Department of Labor Advisory Opinion deals with ERISA (which does not apply to public plans), its logic -- or illogic -- may still apply to such plans. U.S. Department of Labor Advisory Opinion 2007-07A (December 21, 2007).
In an opinion piece in Pensions & Investments, a career firefighter/former 26-year trustee of the Los Angeles County Employees Retirement Association concludes that policy will not sway companies or help the oppressed. The current geopolitical institutional divesting discussion that is garnering national attention is predicated on a fallacy that, for the most part, has gone unchallenged. The commentary regarding divestment, dripping with emotion, urges investors either to avoid investing money in companies that do business in rogue or terrorist nations or, even more to the point, demands that investors take money away from said companies by way of strategic divestment. The fallacy is revealed by a simple review of the following facts:
There is, of course, also the issue of fiduciary responsibility and the dilemma faced by trustees who are directed arbitrarily to divest regardless of the financial consequences. Interestingly enough, that matter seems to be only of interest to those who are, in fact, fiduciaries. Proponents of divestment who have no responsibility or liability seem perfectly happy to see actual fiduciaries expose themselves to risk. This argument, however true, seems to be a non-starter when it comes to today's discussions. The writer’s conclusion: “Divest and the terrorists win.”
More and more, there is talk of “brain age,” but what is it and why should we care? Employee Benefit News has taken a look at one of the things that probably concerns you most: planning for your retirement. As you approach (and enter) retirement, you need to make investment and other choices that best suit your goals, both short and long term. You will also want to maintain your current standard of living, get the most from tax laws and have a good estate-planning strategy. Certainly there are complex concerns, but they are not too difficult for the average person to tackle, often with professional advice at some point. Serious deterioration of mental function is not an unavoidable part of aging and can be minimized by keeping the brain sharp. Research shows that individuals who lead mentally stimulating lives, through continued learning, interesting leisure activities and occupations (or volunteer work), have reduced risk of developing Alzheimer’s Disease. In fact, studies suggest they have 35% to 40% less risk of manifesting this disease! Neurology 101 teaches us that the brain works through activation of nerve cells, called neurons. When a nerve cell is activated, it emits an electrical current, which generates chemicals called neurotransmitters. These chemicals are passed through fibers of one neuron to the next. Nerve cell connections, or synapses, can be made more efficient by practice and stimulation, and they can be activated at any age. Here are some rules to an efficient, healthy and happy brain:
With a better, younger brain, you will be able to make wiser financial planning decisions. Just remember: if life isn’t fun, you’re doing it wrong. Point well taken.
Marriage: It's an agreement in which a man loses his bachelor degree and a woman gains her master.
“If you could kick the person in the pants responsible for most of your troubles, you wouldn’t sit for a month.” Teddy Roosevelt
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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.