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Cypen & Cypen
JANUARY 13, 2011

Stephen H. Cypen, Esq., Editor

1.      CalPERS PENSION MYTH BUSTERS:   At, California Public Employees Retirement System debunks the myth that public pension benefits are excessive and a drain on the public: 

Fact: The average CalPERS pension is about $25,000 per year.  Half of CalPERS retirees receive $16,000 per year or less in benefits.  Unlike the private sector, many CalPERS members do not receive Social Security, making their CalPERS pension their sole source of pension income. 

Fact: Seventy-eight percent of CalPERS retirees receive $36,000 per year or less.  School pensioners in the CalPERS program receive on average $1,079.00 a month.  

Fact: Only 1 percent of the nearly half million CalPERS retirees receive annual pensions of $100,000 or more.  Many are retired non-unionized or specialized skilled employees or other high wage earners who worked 30 years or more.  Many served in high-level management positions.

Fact: CalPERS pensioners help stimulate the economy.  A study found that pension income to 674,000 CalPERS and CalSTRS retirees generated an economic impact of $21.1 Billion to the State’s cities and counties.  The economic footprint of retiree spending rivaled that of the hotel and accommodations industries of the State in 2006.  In all, California public retirees put back $2 into the economy for every $1 they receive in pensions.

One additional fact: people tend to misrepresent “facts” to back up their position.

2.      FINDLAY CONTINUES DEFENSE OF PBLIC DB PLANS…: Writing in, Gary Findlay, executive director of the Missouri State Employees' Retirement System, has followed up on some of his recent remarks (see C&C Newsletter for January 6, 2011, Item 3). Findlay quotes Mark Twain: “It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.”  Findlay also quotes a New York Times editorial by Paul Krugman: “…why does it matter what some politicians and think tanks say?  The answer is that there’s a well-developed right-wing media infrastructure in place to catapult the propaganda…to rapidly disseminate bogus analysis to a wide audience where it becomes part of what “everyone knows.” Findlay believes that Krugman’s statement explains what “everyone knows” about government employees in general, and public employee retirement plans in particular, that just ain’t so. Here is some of what “everyone knows” now, based on such propaganda and bogus analysis:  

  • Government employees are overpaid relative to private sector employees.
  • Government employees have retirement plans that are overly generous.
  • Governments continually expand the size of their workforce.
  • Government retirement plans are hiding the “true” cost of those plans.
  • Government retirement plans are being far too optimistic about future investment return.
  • Government employees should have nothing but defined contribution plans.

Findlay then goes on to address this disinformation dilemma.  Other than for those in the private sector who have direct financial motivations or whose greed in the 1990s cost them dearly in the last 10 years, are there others who would like to see public sector defined benefit plans just go away so the public sector would join the private sector in a race to the bottom, Findlay asks? Not surprisingly, Findlay finds out that there are others:   

  • It seems that these pesky public sector institutional investors who manage defined benefit plan assets actually vote their proxies and think they should have some “say on pay” at the corporations in which they invest. What better way to destroy that mindset than to encourage a mass migration to defined contribution plans?  Powerful lobbying groups, such as the U.S. Chamber of Commerce, were quick to endorse the concept, because participants in self-directed accounts do not vote their proxies. 
  • Another beneficiary of the defined benefit to defined contribution movement is the federal government – yes, good old Uncle Sam. The theory supporting defined contribution plans is that when employees move from one organization to another they will take their retirement accounts with them and continue to pursue accumulation of money that will be available to support them when they retire. In reality, a lot of these accounts are cashed out when employees move from one organization to another. Those amounts are then taxable income in the year of the distribution and, in many cases, are also subject to a 10% premature distribution penalty. The fact is that these distributions are producing billions of dollars in federal revenue, all without necessity of increasing taxes. Also, when these former plan participants come up short in retirement, several years will have passed and it will be someone else’s problem (likely a state or governmental unit). 

Now here is a guy who really thinks outside the box. 

3.      STRONG STOCK MARKET BOOSTS PENSION FUNDS:   Stock market gains late last year helped put U.S. pension funds on a sounder footing, according to Legal & General Investment Management America’s Pension Fiscal Fitness Monitor. Reported on, the report shows funding ratios of pension plans, on average, increased by 11 percent in the fourth quarter. The average U.S. corporate pension plan is now nearly 90 percent funded. Incidentally, the 11 percent increase in funding ratios marks the largest quarter-over-quarter change since inception of the Monitor series, dating back over 15 years. 

4.      BNY MELLON FINDS FUNDED STATUS OF U.S. PENSIONS RISES TO 84.3 PERCENT:   A strong December rally in equities drove the funded status of the typical U.S. corporate pension plan 3.8 percentage points higher, to 84.3 percent, the best position since March 2010, according to monthly statistics published by BNY Mellon Asset Management and reviewed by For December, U.S. equities rose 6.8 percent and international stocks went up 8.1 percent. Liabilities fell 0.9 percent in December, due to an increase in bond yields. The 13.1 percentage point improvement in the typical plan funded status since the end of August is the largest four-month positive change recorded since BNY Mellon began reporting monthly statistics in 2006. 

5.      HALF OF AMERICANS 45-70 HAVE NO PLANS TO PROTECT AGAINST OUTLIVING ASSETS:   A new Society of Actuaries survey uncovers Americans’ financial unpreparedness for living longer than expected. Nearly half of Americans ages 45-70 have no financial plans in place to protect themselves against outliving their assets and the rising cost of healthcare should they live longer than expected, according to the survey. Additional findings show more than one-third are worried about running out of money during retirement, but only 20 percent plan to purchase an annuity or other form of guaranteed lifetime income to protect their assets. The survey also found that nearly three quarters of respondents plan to claim Social Security before age of 70. However, actuaries emphasize importance of claiming Social Security as late in life as possible to help secure more guaranteed lifetime income in retirement, and help hedge against the risk of outliving assets.  Looking at other actions Americans take to protect themselves and hedge against potential risks, the SOA survey found that 75 percent of Americans ages 45-70 protect their tangible assets, such as housing, through home or renter's insurance; but, only 19 percent plan to insure the extra costs of disability and well-being by purchasing long-term care insurance. While living past one's expected age may mean more time with family and friends, it can also pose potential financial, physical and societal risks. The bread line forms to the right.

6.      HUSBAND DEFENDS READING WIFE’S E-MAILS:   Detroit computer technician Leon Walker faces a jury trial in February for allegedly hacking into his then-wife's e-mail account. In a CNN interview, Walker said his former wife gave him her password and asked him to read her e-mails. (Sure.) Apparently, the e-mails revealed that Clara Walker, who has been married three times, was having an affair with her second husband. Walker, the third husband, shared the documents with the first husband, who then used them to file an emergency motion to obtain custody of his son with Clara Walker.  Walker took action with the court to have his own daughter protected. Walker and husband number one were concerned because husband number two had previously been arrested on a domestic violence charge. County Prosecutors used a state anti-hacking law to charge Leon Walker with a felony. 

7.      IN DETERMINING LUMP SUM BENEFITS, CASH BALANCE PENSION PLAN MUST APPLY AN INTEREST CREDIT RATE OF 8.2 PERCENT AND NO PRE-RETIREMENT MORTALITY DISCOUNT:   The United States District Court for the Western District of Wisconsin has agreed with plaintiff that the Alliant Energy Cash Balance Pension Plan miscalculated participants’ benefits. The Court held that the Plan should have projected the notional accounts of participants taking pre-age 65 distributions before making calculations at the rate of 8.2% per annum instead of the rate the Plan used (the yield on the applicable 30-year Treasury bond during the relevant January 1, 1998 to August 17, 2006 time, which averaged around 5%).  This rate was much closer to the rate Plaintiffs proposed than the Plan had proposed.  The Court rejected a second alternative projection rate proposed by the Plan, involving use of a 5-year rolling average.  The Court also denied the Plan’s request to apply a pre-retirement mortality discount in recalculating lump sum benefits.  Ruppert v. Alliant Energy Cash Balance Pension Plan, Case No. 08-cv-127 (W.D. Wis., December 29, 2010). (The decision was reviewed on the Alliant pension class action website.)

8.      EEOC SUES MARRIOTT FOR SE.XUAL HARASSMENT:   JW Marriott is being sued for se.xual harassment by the Equal Employment Opportunity Commission over allegations that the company allowed a male supervisor physically and verbally to harass his female employees for years. The lawsuit, which seeks unspecified monetary damages, was filed in federal court in Las Vegas, claiming a local JW Marriott employee, who was later promoted to management, created a hostile and abusive work environment by forcing female employees to touch his crotch and by groping their breasts and buttocks. The accused harasser, who was not identified, was fired in December 2007, but had worked at the JW Marriott hotel since at least 2003. The complaint alleges that the resort failed to stop the manager's alleged harassment after two female employees complained about his behavior.  The commission also seeks a permanent injunction to prevent se.xual harassment and discrimination at the resort, according to a report from 

9.      POSTHUMOUSLY CONCEIVED CHILDREN OF DECEASED WAGE EARNER QUALIFY FOR SURVIVOR BENEFITS UNDER SOCIAL SECURITY ACT:   A United States Court of Appeals was presented with a case that involved rights of posthumously-conceived children of a deceased wage earner and his widow, requiring the court to consider the intersection of new reproductive technologies and what is required to qualify for child survivor benefits under the Social Security Act.  It goes without saying that these technologies were not within the imagination, much less contemplation, of Congress when relevant sections of the Act came to be, and that they present a host of difficult legal and even moral questions.  Although the court did not need to reach those difficult questions given the discrete factual circumstances of the case, the court, nonetheless, could not help but observe that “this is, indeed, a new world.” Karyn Capato, shortly after the death of her husband, began in vitro fertilization using frozen sperm of her husband.  Eighteen months after his death, Ms. Capato gave birth to twins. Shortly thereafter, Ms. Capato applied for surviving child's insurance benefits on behalf of the twins, based on her husband's earnings record.  The Social Security Administration denied her claim, and Ms. Capato requested a hearing before an Administrative Law Judge. The ALJ was sympathetic, but found that the twins were not for Social Security purposes children of the deceased wage earner under Florida law as required by the Social Security Act. The District Court affirmed, echoing the ALJ's interpretation and conclusion that the husband was domiciled in Florida on the date of his death, and, thus, Florida's law of intestacy should be applied.  “Child” is defined in different subsections of the Act. If the court were to determine that the definition of child depended upon the law of intestacy of Florida, the court would have affirmed.  But neither the Commissioner nor the District Court, who agreed with the Commissioner, explained why, in the factual circumstances of this case, where there is no family status to determine, the court should use that definition. To accept the argument of the Commissioner, one would have to ignore the plain language of another section of the Act (“the child or legally adopted child of an individual’), and find that the biological child of a married couple is not a child unless that child can inherit under intestacy laws of the domicile of decedent.  There is no reason apparent why that should be the case. Thus, the appellate court vacated the district court’s order in part, and remanded for a determination of whether, as of the date of the husband’s death, these children were dependent upon him, the final requisite of the Act remaining to be satisfied. Capato v. Commissioner of Social Security, Case No. 10-2027 (U.S. 3rd Cir., January 4, 2011). 

10.    TEXANS DO NOT WANT TO CUT SOCIAL SERVICES, PUBLIC EDUCATION:   The Texas Legislature convened this week in a session that could directly affect Texans’ pocketbook, the quality of their life, their children's health and education, as well as determine whether Texas can keep a grip on its claim to be a beacon of prosperity. Overshadowing everything, according to, is a state budget shortfall that could reach nearly $30 Billion -- an amount equal to more than a third of current state tax spending on schools, highways, prisons, environmental protection, social services and economic development -- through the next two years. The largest Republican freshman class in the Texas House since 1876 is claiming an election mandate to cut spending and avoid tax increases.  A majority of Texas voters told pollsters for the major state newspapers last year that they preferred budget cuts to tax increases. However, a new poll of Texas adults found a majority do not want to cut social services or public education for children, two of the most expensive budget items.  If more revenue is needed, they would prefer an increase in cigarette taxes or an expansion of gambling. The new survey found 70 percent of Texas adults opposed any cuts to public education and 62 percent opposed cutting health care programs for children. A majority did back some level of cuts in higher education.  If new revenue is needed, 60 percent favored an expansion of gambling to cover slot machines at horse tracks or casinos.  Given a choice of taxes to increase, 42 percent picked cigarette taxes; just 2 percent wanted to raise gasoline taxes. As is usually the case, people want it both ways.  They want to cut, but when it comes down to where, it is a much harder decision. 

11.    FLORDA WORKERS SUE STATE AGENCY OVER MINIMUM WAGE:   Apropos our recent item on the subject (see C&C Newsletter for January 6, 2011, Item 9), four Florida workers have sued the state’s Agency for Workforce Innovation, charging it with violating the Florida Constitution by failing to increase the minimum wage. At issue, according to, is a constitutional amendment, passed with 72 percent of the vote in 2004, that requires Florida's minimum wage to keep pace with the rising cost of living. Citing deflation that occurred in 2008-2009, AWI reduced the state-required minimum wage in 2010 to $7.06 per hour from the 2009 rate of $7.21. That decrease was not published and was not noticed because the federal minimum of $7.23 trumped the lower state wage. (According to the complaint, the Florida Supreme Court has held that the wage should never go down, even if there was deflation.) Because the agency used the previously-unpublished rate of $7.06 as a base, Florida's minimum wage remains lower than the $7.23 prescribed by federal law.  Had the agency not reduced its state-required minimum last year, the required minimum would be $7.31, or six cents above the federal minimum, as of January 1, 2011. Three organizations that represent low-income workers also joined the suit, which was filed by Florida Legal Services and the National Employment Law Project. 

12.    NEW YORK JUDGES SEEK $780 MILLION IN BACK PAY, PENSION BENEFITS: reports that several New York state judges have presented a bill to the Court of Claims for $780 Million, the amount, plus interest, they say the state's 1,300 judges are owed in raises and associated pension benefits for the period beginning April 1, 2005, when the judiciary first formally requested a salary hike. They also claim damages in the amount of $130 Million per annum continuing to judgment. The action is a follow-up to the February 2010 ruling by the New York state Court of Appeals in several judicial pay raise cases.  The Court found that the Legislature had violated the separation of powers doctrine under the state Constitution by continually linking judges' raises with unrelated issues, such as raises for state legislators or ethics-in-government reforms. The Court of Appeals ordered the Legislature to make an appropriate and expeditious consideration of a judicial pay raise independently of other issues.  However, it did not order lawmakers and the governor to approve a raise for the judiciary or say what a fair new salary would be. The six paragraph complaint in In The Matter Of Maron v. The State of New York is a model of brevity – perhaps too much so. 

13.    REMARKABLE QUOTES FROM REMARKABLE JEWS: The remarkable thing about my mother is that for thirty years she served us nothing but leftovers. The original meal has never been found. Calvin Trillin

14.    BLESSED ARE THE CRACKED, FOR THEY LET IN THE LIGHT:  Earth is the insane asylum for the universe. 

15.    AGING JOKES:   I've sure gotten old! I've had two bypass surgeries, a hip replacement, new knees, fought prostate cancer and diabetes. I'm half blind, can't hear anything quieter than a jet engine, take 40 different medications that make me dizzy, winded and subject to blackouts. Have bouts with dementia. Have poor circulation; hardly feel my hands and feet anymore. Can't remember if I'm 85 or 92. Have lost all my friends. But, thank God, I still have my driver's license. 

16.    QUOTE OF THE WEEK:    “Love is like an hourglass, with the heart filling up as the brain empties.” Jules Renard

17.    KEEP THOSE CARDS AND LETTERS COMING: Several readers regularly supply us with suggestions or tips for newsletter items? Please feel free to send us or point us to matters you think would be of interest to our readers. Subject to editorial discretion, we may print them. Rest assured that we will not publish any names as referring sources. 

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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.

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