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Cypen & Cypen
January 1, 2015

Stephen H. Cypen, Esq., Editor

1. IDEAS TO STOP PARTICIPANTS FROM WITHDRAWING MONEY EARLY: The goal of a workplace based retirement plan is to have plan participants accumulate enough assets for retirement. However, according to PlanSponsor, through loans or hardship withdrawal provisions, money can be taken out of the plan before participants reach retirement age. Most 401(k) plans include a provision for participants to take loans or hardship distributions from their accumulated assets. Overall, almost 80% of plans allow for a loan, and the percentage rises along with size of the plan, with over 23% of plans in the under-one million market and over 88% of plans in the over-one billion allowing loans. Similar percentages apply to provisions for a hardship withdrawal. In total, more than 14% of plan participants have at least one outstanding loan. Why even offer these provisions? For many plan sponsors, loans are seen as a way to attract participants to engage in the plan. The fear is that participants will not engage if they think they will be unable to access their money, so loan provisions are seen as a benefit, even though leakage is generally an obstacle to a successful retirement. Approximately half the participants who take out their first loan repay the amount within the agreed-upon time, then return to saving responsibly for retirement. The other half of loan-taking participants often go on to become serial borrowers. Some argue that the industry does not adequately convey the true cost of borrowing. Participants just do not seem to grasp the power of compounding. That $1,000 to $5,000 may not seem like much, but over a 20-year investment horizon, it can be a substantial loss. Loans and hardship withdrawals can be an avenue through which plan sponsors can educate participants about sound financial habits and wellness. Participants who take out loans miss time in the market, including all the market swings, low as well as high, that can significantly build on account balance over time. Some plans push the loan fee charged. Some providers charge start-up fees and annual costs adding several hundred dollars to the cost of a five-year loan. Some recommend a waiting period between loans, such as a six-month period before participants can get another. Such time requirement can help participants wait out the need for the money or decide to get it from another source. Others allow only one loan outstanding at a time, which eliminates the ability for participants to become serial loan-takers or borrow again to pay off their first loan. Another feature that can reduce plan leakage is allowing participants to borrow only the money they themselves have contributed, not funds from company match or profit sharing. Loans from a 401(k) should be a last resort. Remember, participants who leave the job will have to pay back the money immediately.

2. FLORIDA’S MINIMUM WAGE RISES: The 2015 Florida minimum wage is $8.05 per hour, effective January 1, 2015. Florida law requires the Florida Department of Economic Opportunity to calculate a minimum wage rate each year. The annual calculation is based on the percentage increase in the federal Consumer Price Index for Urban Wage Earners and Clerical Workers in the South Region for the 12-month period prior to September 1, 2014. On November 2, 2004, Florida voters approved a constitutional amendment which created Florida's minimum wage. The minimum wage applies to all employees in the state who are covered by the federal minimum wage. Employers must pay their employees the hourly state minimum wage for all hours worked in Florida. The definitions of employer, employee and wage for state purposes are the same as those established under the federal Fair Labor Standards Act and its implementing regulations. Employers of tipped employees who meet eligibility requirements for the tip credit under the FLSA, may credit towards satisfaction of the minimum wage tips up to the amount of the allowable FLSA tip credit in 2003. However, the employer must pay tipped employees a direct wage. The direct wage is calculated as equal to the minimum wage ($8.05) minus the 2003 tip credit ($3.02), or a direct hourly wage of $5.03 as of January 1, 2015. Employees who are not paid the minimum wage may bring a civil action against the employer or any person violating Florida's minimum wage law. The state attorney general may also bring an enforcement action to enforce the minimum wage. FLSA information and compliance assistance can be found at: Florida Statutes require employers who must pay their employees the Florida minimum wage to post a minimum wage notice in a conspicuous and accessible place in each establishment where these employees work. This poster requirement is in addition to the federal requirement to post a notice of the federal minimum wage. Florida's minimum wage poster is available for downloading in English and Spanish from the Florida Department of Economic Opportunity’s website at: The federal poster can be downloaded from the U.S. Department of Labor's website at:

3. ELECTED CALIFORNIA JUDGES SUE OVER PENSIONS: Six judges elected to California superior courts in 2012 were lumped with newer judges and a newer, stingier pension plan, the judges claim in court. According to, lead plaintiff Matthew McGlynn claims the Public Employees Pension Reform Act was unfairly and retroactively applied to him and others who were elected to the bench before enactment of the law in 2013. McGlynn claims he ended up with a worse deal in a change-up that violated the new law and the state constitution. By the time the new pension scheme took effect on January 1, 2013, the judge says he was already a member of Judges Retirement System II, yet his term of membership was changed. The judge’s salary withholdings was increased, reductions to judge’s salary during terms of office was permitted in violation of the Constitution and pension benefits they were entitled to earn were diminished. The previous and the new judicial pension plans are both funded by a mix of contributions by the counties, the state and salary reductions. Under the Judicial Retirement System II, a judge becomes entitled to earn benefits under that system at time of election to judicial office, and final retirement benefits are computed with respect to the paid service performed by time of retirement. Membership in Judicial Retirement System II is self-executing; under Judicial Retirement System II an individual becomes a member upon election or appointment to judicial office. About 30 judges who gained their seats in 2012 by appointment rather than election were allowed to join Judicial Retirement System II. Many such judges are employed in the same courthouses as Judge McGlynn. Judge McGlynn said that judges spent considerable time and money in winning office, and wound down their law practices based in part on their understanding of the compensation of their courts. They started out in the older pension plan, but were informed in March 2014 that they would be moved to the newer, less generous plan. Instead of a salary withholding capped at 8%, the new judges would have to foot an additional 6% of the annual cost of funding their pensions. The judge claims the California Constitution forbids any reduction of salary of an elected official while in office. The lawsuit seeks declaratory judgment and writ of mandate ordering the state to allow the elected judges to participate in Judicial Retirement System II, and to a refund overpaid contributions.

4. BEST STOCKS FOR RETIREES: According to, the “Dividend Aristocrats,” which are stocks that have seen an increase in dividends for at least 25 straight years, are the best stocks for retirees who want stability and consistency in their investments. Another type of investment that is highly recommended for retirees is the real estate investment trust, which offers excellent dividends, and has a high stability level and potential for growth. After retirement, investment priorities change a little. Retirees do not care as much about growth as they do about income. And, retirees do not care as much about investments being exciting as much as they care about stability, consistency and keeping up with inflation. There are approximately 150 dividend stocks that have been increasing their annual dividends every year for at least the past 25 years. The following list shows the top ten, accurate as of year-end 2013:
Name                               No. of        Dividend     Current       Annual
                                          Years        Yield            Price           Dividend
Diebold, Inc.                            60      3.22%         $35.67        1.15
American States Water           59       2.27%         $37.53        0.85
Dover Corp.                             58      2.17%         $73.83        1.60
Northwest Natural Gas            58      3.66%         $50.81        1.86
Procter & Gamble                    57      2.75%         $93.46        2.57
Emerson Electric                     57      2.99%         $62.78        1.88
Genuine Parts                         57      2.13%         $107.86      2.30
3M                                           55      2.47%         $166.26      4.10
Parker Hannifin Corp.              54      1.93%         $130.79      2.52
Vectren Corporation                54      3.27%         $46.50        1.52

5.  MORE CHICAGO PENSION REFORM LITIGATION: Reuters reports that litigation seeking to derail changes to Chicago public worker pensions on constitutional grounds ensnared a second city retirement system. A lawsuit has been filed in Cook County Circuit Court on behalf of members of the city's pension fund for laborers. That lawsuit followed one filed earlier this month by a coalition of labor unions against Chicago's municipal pension fund. An Illinois law enacted earlier this year for the two funds requires higher worker contributions and limits cost-of-living increases for retirees. The lawsuits contend the law violates a prohibition in the Illinois Constitution against reducing public worker retirement benefits. The Illinois Supreme Court has slated next spring for oral arguments over challenges to a 2013 law that reduced state worker retirement benefits (see C & C Newsletter for November 26, 2014, Item 2). Like Illinois, Chicago is arguing that its so-called police powers to provide essential services to residents trump constitutional protections for pensions.

6. I WAS A POLICE OFFICER: The following piece was sent to us by a retired law enforcement officer. We do not know whether this retired officer is the author or not, but it really does not matter. The words speak for themselves:

  • Today I will not be able to answer the radio call that your boyfriend has come home drunk and is beating you again.
  • Today I will not be able to answer the radio call that your 16 year-old daughter, who is very responsible, is four hours late coming home from school. 
  • Today I will not be able to answer the radio call that your store has been robbed or your house has been burglarized.
  • Today I will not be able to stop a drunk driver from killing someone. I will not be able to catch a rapist or a murderer or a car thief.
  • Today I will not be able to answer the radio call that a man has a gun or tried to abduct a child or that someone has been stabbed or has been in a terrible accident.
  • Today I will not be able to save your child whom you accidentally locked in a car or the child you were too busy to watch who went outside and fell into the swimming pool, but whom I revived. No, today I will not be able to do those things.

Why?   Becauseā€¦

  • Today I was killed by a drunk driver while I was helping push a disabled car off the highway.
  • Today I was shot and killed during a routine traffic stop simply to tell someone he had a taillight out.
  • Today I was killed in a traffic accident rushing to help a citizen.
  • Today I was shot and killed serving a warrant on a known drug dealer.
  • Today I was killed by a man when I came back to do a welfare check because his family was too busy.
  • Today I was killed trying to stop a bank robbery or a grocery store robbery.
  • Today I was killed doing my job.

A chaplain and an officer will go to a house and tell a mother and father or a wife or husband or a child that their son or daughter or husband or wife or father or mother will not be coming home today. The flags at many police stations were flown at half-mast today but most people will not know why. There will be a funeral and my fellow officers will come, a 21 gun salute will be given and taps will be played as I am laid to rest. My name will be put on a plaque, on a wall, in a building, in a city somewhere. A folded flag will be placed on a mantel or a bookcase in a home somewhere and a family will mourn. There will be no cries for justice. There will be no riots in the streets. There will be no officers marching, screaming “no justice, no peace.” No citizens will scream that something must be done. No windows will be smashed, no cars burned, no stones thrown, no names called. Only someone crying herself to sleep tonight will be the only sign that I was cared about.  I was a police officer.

7. DILLERISMS: A bachelor is a guy who never made the same mistake once.  - Phyllis Diller

8. STUFF YOU DID NOT KNOW: 111,111,111 x 111,111,111 = 12,345,678,987,654,321. 

9. TODAY IN HISTORY: In 1899, Spanish rule ends in Cuba.

10. 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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