Cypen & Cypen
JANUARY 22, 2009
Stephen H. Cypen, Esq., Editor
Thousands of retired state employees may have flinched when the Governor said South Carolina’s overly optimistic pension plan investment projections are “near criminal” and “heading toward a disaster.” But, according to the Associated Press, officials who run the program are bristling at his accusations. These officials are disturbed that the Governor would make a comment that is not backed up by truth. The state Treasurer believes the Governor owes an apology to everyone, and if he has proof of such problems, should “go investigate it.” Later, a spokesman for the Governor said that he was not suggesting there is anything criminal with the system. The Governor has previously made similar remarks involving the retirement system, but this one was his most public suggestion of wrongdoing involving the $19 Billion South Carolina Retirement Systems. The systems pay 115,000 people about $2 Billion each year. The state operates five separate retirement systems for state workers, police, legislators, National Guard members, judges and solicitors. The average pensioner gets $17,904 a year in the plan that covers most state employees. Perhaps the Guv should put up or shut up.
Money market fund Reserve Management Co.,
Inc. has accused Dechert and K&L Gates (two of the largest
law firms in the world) of failing to advise it four years
ago that two members of its board were not independent.
Allegedly, this oversight opened the fund to scrutiny from
the Securities and Exchange Commission, according to law.com.
Reserve says it spent $4 Million in professional and other
fees trying to avoid an SEC action over having an improperly
composed board. In addition, such misstep could have cost
Reserve hundreds of millions of dollars in disgorged profits
and fines, according to the complaint, which seeks compensatory
damages and repayment of fees. The malpractice suit appears
unrelated to recent controversies surrounding Reserve, which
has come under scrutiny since it broke-the-buck following
Lehman Brothers bankruptcy (see
C&C Newsletter for December 31, 2008, Item 6). Meanwhile,
SEC staff has, in fact, recommended suing Reserve. On the
same day that Reserve sued its former counsel, the State
of Massachusetts sued Reserve for fraud. It may be time
to bring in the reserves.
With the economy sliding ever deeper into recession, questions arise about how older workers are faring and how their fate relative to younger workers compares to the past. A new Issue in Brief from Center for Retirement Research at Boston College finds that the answers to these questions turn out to be a little complicated. Two forces are at work. On the one hand, labor force participation among older workers has been rising since the early 1990s, a reversal of the long-standing trend toward ever-earlier retirement. Participation rates among older workers have even continued to rise during both of the recessions in this decade -- a dramatic change from previous experience. On the other hand, the edge that older workers used to have relative to younger workers when it comes to layoffs seems to have disappeared, so the rise in the unemployment rate for older workers in recessions now looks similar to that for younger workers. Of the two forces, the trend growth in labor force participation appears to dominate, which has helped keep the employment rate of older workers from falling during the current recession. The pattern contrasts sharply with the far more typical decline in employment rates for workers under age 55. Here are a few specific findings:
Issue in Brief No. 9-2, January, 2009.
A very nice little piece in the Miami Herald deals with 26-year-old Carlos Lang, who recently joined the City of Miami Beach Fire Department. Lang says the chance to save someone’s life is the ultimate perk and getting thank-yous from the public is nice, too. So, Lang decided to pursue firefighting -- the closest thing to becoming a superhero. Lang used to be a lifeguard for the City before becoming a firefighter. He saved enough money to pay for EMT, firefighter certification and paramedic classes for his new profession. Although rewarding, work is mentally and physically demanding. On one of his first calls, he broke two vertebrae. “That bell goes off and you don’t know if you’re going to a big fire or a slip and fall. You feel that rush of adrenaline and your nerves start running.” Recently, his lieutenant told him to start an IV, but he was completely nervous, covered in sweat from head to toe. His lieutenant recognized the situation and had someone else insert the IV. Since then, everything has been pretty smooth. Way to go, kid.
The Florida Attorney General was asked whether payments for accrued annual or sick leave constitute “wages,” such that payments thereof may be made to relatives set forth in Section 222.15(1), Florida Statutes, upon the employee’s death. Section 222.15(1), Florida Statutes, provides that it is lawful for any employer, in case of death of an employee, to pay the surviving spouse any wages or travel expenses that may be due such employee at time of his death. If there is no spouse, then payment is made to children over the age of 18. If there are no such children, then payment is made to the parent or parents. (Although the statute has been in existence for over 90 years there is no interpretation by a Florida appellate court.) Because the term “wages” is not defined in the statute, words of common usage are construed in their plain and ordinary sense; that is, by reference to a dictionary. Thus, wages include every form of remuneration payable for a given period to an individual for personal services, including salaries, commissions, vacation pay and bonuses. The Attorney General concluded that payments for accrued annual or sick leave constitute “wages” for purposes of Section 222.15(1), Florida Statutes. In addition, although he was not so asked, the Attorney General said that a municipality is authorized to adopt a program for the payment of accrued annual and sick leave to beneficiaries of a municipal employee upon death of the employee, in exercising its home rule powers to establish compensation for municipal employees. AGO 2009-03 (January 14, 2009).
The miserable stock market has wreaked havoc not only on your personal portfolio but also on your company’s pension fund. Pension plans of the companies in the Standard and Poor’s 500-Stock Index were underfunded by about $362 Billion in 2008, according to the Washington Post. Of those 500 companies, 360 had plans that were underfunded. Are weakened pension plans one more reason to fret about your financial future? If the retirement experts who track the numbers are right, the answer is no. Your pension is most likely still better off than your 401(k) account. Both 401(k)s, which are managed by individual workers, and pensions, which are managed by plan administrators, have exposure to the stock market. But if your 401(k) loses value, which many have the past year, you have to take the loss and hope the market will recover over time. Here, it would be appropriate to assert our favorite quote on the subject: “You can never outlive your defined benefit.”
The Florida Attorney General was asked whether a forum hosted by a city council member in which the public will be invited to attend and which other council members may attend and discuss matters which may foreseeably come before the city commission for action should be publicly noticed, and if so, by whom. Section 286.011, Florida Statutes, the Florida Sunshine Law, provides a right of access to governmental proceedings at both state and local levels. There are three basic requirements of that section: (1) meetings of public boards or commissions must be open to the public; (2) reasonable notice of such meetings must be given; and (3) minutes of the meetings must be taken. The Sunshine Law extends to discussions and deliberations as well as formal action taken by a public board or commission. There is no requirement that a quorum be present for a meeting of members of the public board or commission to be subject to the Sunshine Law. Rather, the statute is applicable to any gathering, formal or casual, of two or more members of the same board or commission to discuss some matter on which foreseeable action will be taken by the public board or commission. The Attorney General has recognized that members of a public board or commission may attend private forums sponsored by private organizations and express their position about issues facing the entity without violating the Sunshine Law, as long as they do not discuss or debate issues among themselves. In the subject inquiry, however, the forum is not being hosted by a private entity, but by a city council member and other city council members will be invited to attend and participate in the discussion. Accordingly, such a meeting would be subject to the requirements of the Sunshine Law, including the notice requirement. In requiring that meetings of public boards or commissions be open to the public, the “board or commission” must provide reasonable notice of all such meetings. (In this case, we guess it means board/commission staff or administration.) Informal AGO dated January 9, 2009. (Note: there is a seemingly-identical opinion to the same requester, but dated January 12, 2009. We are at a loss to explain the apparent duplication.)
The United States appealed a final judgment of the United States Court of Federal Claims holding that subsequent death of an otherwise eligible beneficiary before the government issues payment does not relieve the government of its obligation to pay benefits under the Public Safety Officers’ Benefits Act. Presley, a county sheriff in Mississippi, was fatally shot by a suspect during a police chase. At time of his death, Presley was survived by his three adult children and his mother. His mother filed a claim for death benefits under PSOBA with the Bureau of Justice Assistance, who passed away a few months later. (Based on age, none of Presley’s three surviving children were eligible to collect benefits.) The Bureau determined that the mother had not filed a claim for benefits, because the statute and regulations precluded the estate of a beneficiary from executing a claim. The mother’s estate appealed to the Court of Federal Claims, which reversed the Bureau’s determination, and awarded the statutory amount of $250,000 to the PSOBA. On the government’s appeal to United States Court of Appeals, the final judgment was affirmed. The plain meaning of the word “surviving” in context of the statute and regulation means living beyond the public safety officer’s death. The mother’s rights vested at that time. When Congress says that a surviving beneficiary -- that is, a beneficiary who survived the officer’s death -- is entitled to the benefit, the agency may not disregard that language and further require the beneficiary to survive an additional length of time. White v. United States, 543 F.2d 1330 (U.S. Fed. Cir., 2008).
The President’s Working Group on Financial Markets announced release of final best practices reports for hedge fund managers and investors. PWG comprises two private-sector companies. The Asset Managers’ Committee report (67 pages) provides best practices for hedge funds to include disclosure issues, valuation of assets, risk management, business operations, compliance and conflicts of interest. The Investors’ Committee best practices report (68 pages) includes a fiduciary’s guide to help individuals evaluate appropriateness of hedge funds and an investor’s guide to help in hedge fund administration. PWG includes heads of the U.S. Treasury Department, the Federal Reserve Board, Securities and Exchange Commission and Commodity Futures Trading Commission. We are wondering if this effort is not too little, too late.
A Florida sheriff appealed a final judgment finding that his office violated the Florida Sunshine Law while conducting internal affairs investigations of deputies employed by his office. After a bench trial, the lower court found that circulation of memoranda from senior officials in the sheriff’s office to the sheriff constituted a “meeting” under the Sunshine Law, and therefore, failure of the sheriff’s office to make the memoranda public during the IA investigations was a violation of the Sunshine Law. (Readers know that Section 286.011, Florida Statutes, requires that all meetings of any public board or commission be open to the public at all times.) On appeal, the district court reversed, holding that the memoranda did not constitute a meeting of a “board” or “commission” and therefore, the sheriff’s office did not violate the Sunshine Law. Here, the memoranda were reviewed by senior officials in the sheriff’s office, who could write comments on the memoranda, and the sheriff then reviewed the memoranda. However, the sheriff alone made the final decision regarding appropriate disciplinary action. Thus, senior officials provided only a recommendation to the sheriff, but they did not deliberate with him nor did they have decision-making authority. Further, because the memoranda were related to an IA investigation, they were confidential by statute. McDougall v. Culver, 34 Fla. L. Weekly D173 (Fla. 2d DCA, January 16, 2009).
A new Issue Brief from Employee Benefit Research Institute closely examines the level of participation by workers in public-and private-sector employment-based pension or retirement plans, based on U.S. Census Bureau’s March 2008 Current Population Survey, the most recent data currently available. About 58% of all working-age (21-64) wage and salary employees work for an employer or union that sponsors a retirement plan. Among full-time, full-year wage and salary workers ages 21-64 (those with the strongest connection to the workforce), just over 63% worked for an employer or union that sponsors a plan. Among full-time, full-year wage and salary workers ages 21-64, 55% participated in a retirement plan (up from 53% in 2006). Wage and salary workers in the South, West and Southwest had the lowest participation levels, while the upper Midwest and Northeast had the highest levels. Wisconsin had the highest participation level (68%); Florida had the lowest percentage of participants (42%). White, higher-educated. higher-income and married workers were more likely to participate than their counterparts.
We could certainly slow the aging process down if it had to work its way through Congress.- Will Rogers
“The best way to appreciate your
job is to imagine yourself without one.” Oscar Wilde
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