1. APPELLATE FEDERAL COURT RULES THAT ONGOING DUTY TO MONITOR INVESTMENTS UNDER ERISA MADE FIDUCIARY BREACH CLAIM TIMELY: On remand from the United States Supreme Court, the en banc court vacated the district court’s judgment in favor of an employer and its benefits plan administrator on claims of breach of fiduciary duty in selection and retention of certain mutual funds for a benefit plan governed by ERISA. The court of appeals had previously affirmed the district court’s holding that the plan beneficiaries’ claims regarding selection of mutual funds in 1999 were time-barred under the six-year limit of 29 U.S.C. §9113(1). The Supreme Court vacated the court of appeals’ decision, observing that federal law imposed on fiduciaries an ongoing duty to monitor investments, even absent a change in circumstances. Rejecting defendants’ contention that the beneficiaries waived the ongoing-duty-to-monitor argument, the en banccourt held that the beneficiaries did not forfeit the argument either in the district court or on appeal. Rather, defendants themselves failed to raise the waiver argument in their initial appeal, and thus forfeited this argument. The en banc court distinguished a related case, which held that when a fiduciary violated a continuing duty over time, the three-year limitations period set forth in 29 U.S.C. §1113(2) began when the plaintiff had actual knowledge of a breach in a series of discrete but related breaches. The panel held the earlier case did not apply to the continuing duty claims at issue under §1113(1). Thus, only a “breach or violation,” such as a fiduciary’s failure to conduct its regular review of plan investments, need occur within the six-year statutory period of §1113(1); the initial investment need not be made within the statutory period. Looking to the law of trusts to determine the scope of defendants’ fiduciary duty to monitor investments, the en banc court held that the duty of prudence required defendants to reevaluate investments periodically, and to take into account their power to obtain favorable investment products, particularly when those products were substantially identical -- other than their lower cost -- to products they had already selected. The en banc court vacated the district court’s decisions concerning the funds added to the ERISA plan before 2001 and remanded on an open record for trial on the claim that, regardless of whether there was a significant change in circumstances, defendants should have switched from retail-class fund shares to institutional-class fund shares to fulfill their continuing duty to monitor appropriateness of the trust investments. The en banc court also directed the district court to reevaluate the award of costs and attorneys’ fees in light of the Supreme Court’s decision and the en banc court’s decision. Tibble v. Edison International, Case No. 10-56406 (9th Cir. December 16, 2016) (en banc).
2. TEN FIRMS VIOLATED PAY-TO-PLAY RULE BY ACCEPTING PENSION FUNDS FEES FOLLOWING CAMPAIGN CONTRIBUTIONS:A U.S. Securities and Exchange Commission press release reports that ten investment advisory firms will each pay penalties of $35,000 to $100,000 to settle charges that their compensation from public pension funds violated pay-to-play rules. The firms are Adams Capital Management ($45,000), Aisling Capital ($70,456), Alta Communications ($35,000), Commonwealth Venture Management Corp. ($75,000), Cypress Advisors ($35,000), FFL Partners ($75,000), Lime Rock Management ($75,000), NGN Capital ($100,000), Pershing Square Capital Management ($75,000) and The Banc Funds Co. ($75,000). None admitted or denied SEC's findings. The public pension funds involved are the Massachusetts Pension Reserves Investment Management Board; Pennsylvania State Employees' Retirement System; Illinois Teachers' Retirement System; Ohio State Teachers Retirement System; State of Wisconsin Investment Board; and four pension funds within the $163.1 billion New York City Retirement System. Contributions were made to a variety of campaigns, including mayor of New York City, Pennsylvania treasurer and governor races in Illinois, Massachusetts and Pennsylvania. 2017-15 (January 17, 2017).
3. FLORIDA DIVISION OF RETIREMENT ANNOUNCES AVAILABILITY OF ELECTRONIC REPORTING PORTAL: The Florida Division of Retirement is pleased to announce the activation of its online reporting portal for pension plans subject to the reporting and disclosure requirements of Chapters 175 and 185, and Part VII, Chapter 112, Florida Statutes. This will allow plan actuaries and administrators to submit actuarial valuations and police and fire annual reports electronically to the Division, which saves paper and printing costs, allows for a more efficient submission and review process, and improves the accuracy of data gathering for its annual report to the Florida Legislature. The link for the reporting portal can be found at: http://www.myfloridacfo.com/Division/AA/LocalGovernments/default.htm.
4. SHORT GUIDE TO SOCIAL SECURITY SPOUSAL BENEFITS: The Motley Fool has prepared a short piece on how Social Security spousal benefits pay those who are eligible up to 50% of their spouse's retirement benefit. If you do not have a work history, spousal benefits will make up your entire Social Security check. Otherwise, you will get the larger of either your own retirement benefit or the spousal benefit based on your spouse's work history. Before you can get Social Security benefits as a spouse, you have to meet some eligibility requirements. The most important is that for you to get spousal benefits, your spouse has to have filed for retirement benefits. Until recently, one spouse could file for benefits and then immediately suspend them, allowing the other spouse to claim spousal benefits. However, a law change in late 2015 took away that right for those who did not or were not able to use the file and suspend technique before May 2016. In addition, other requirements apply to spousal benefits. Generally, you must be 62 or older to claim, with the only exception being that spouses of any age can get benefits if they are caring for a child who gets Social Security benefits based on the working spouse's work history. Eligible children include minors, full-time high school students, and certain disabled children of any age. Finally, you need to meet the minimum time requirements for the length of your marriage. Typically, you must be married for at least one year before filing for spousal benefits. However, if you are both natural parents of a minor child, the one-year minimum does not apply. In some cases, you can get spousal benefits on your ex-spouse's work history if you are divorced. The key question here is whether you were married for at least 10 years. If not, then you are not entitled to spousal benefits. In addition, if you have remarried, you cannot claim spousal benefits based on an ex-spouse's work history. Divorced spouses can claim spousal benefits once they have been divorced for at least two years. Unlike spouses who are still married, the ex-spouse does not need to have filed for benefits and need only be eligible to file for them in order to trigger spousal benefit rights. One thing that trips up many Social Security recipients is that they think they will get both their retirement benefit and a spousal benefit. Technically, that can be true, but you will never get the two amounts added together. Rather, you always get the amount of any retirement benefit you are entitled to get based on your own work history. Then, if the spousal benefit amount would be higher, Social Security supplements your retirement benefit to bring you up to the larger amount. So as an example, if you are entitled to $800 per month under your own work history and $1,000 per month from spousal benefits, then you will get $1,000: $800 from your own benefit, and a $200 add-on from spousal benefits. Under current law, you are automatically deemed to have filed for spousal benefits at the same time that you file for retirement benefits. The only exception is that for those who turned 62 in 2015 or earlier, the right exists to restrict an application for Social Security benefits only to spousal benefits. Even then, those who qualify for that exception have to wait until full retirement age to claim their spousal benefits under a restricted application scenario. This short guide provides the basics of spousal benefits under Social Security, but there are a whole lot more information available. The Social Security Administration's spousal benefits retirement planner is an excellent resource, giving you more detailed information about how to qualify, how much you will receive, and how you can apply online for benefits, as well as information on benefits that the rest of your family might be eligible to get. A copy of that planner is available at: https://www.ssa.gov/planners/retire/applying6.html. Spousal benefits are an important resource for millions of Americans, make sure you understand how they work, and tap into them to make your retirement years more financially comfortable and secure.
5. SEC ANNOUNCES $7 MILLION WHISTLEBLOWER AWARD: The Securities and Exchange Commission has announced an award of more than $7 million split among three whistleblowers who helped the SEC prosecute an investment scheme. One whistleblower provided information that was a primary impetus for the start of the SEC’s investigation. That whistleblower will receive more than $4 million. Two other whistleblowers jointly provided new information during the SEC’s investigation that significantly contributed to the success of the SEC’s enforcement action. Those two whistleblowers will split more than $3 million. Whistleblowers played an important role in the success of this case as they helped our agency detect and prosecute a scheme preying on vulnerable investors. Whistleblowers not only helped open the investigation but provided critical information after the investigation was already underway. SEC enforcement actions from whistleblower tips have resulted in more than $935 million in financial remedies. Since the SEC’s whistleblower program began, approximately $149 million has been awarded to 41 whistleblowers who voluntarily provided the SEC with original and useful information that led to a successful enforcement action. By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions exceed $1 million. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. 2017-27 (January 23, 2017).
6. 2017 TAX FILING SEASON HAS OFFICIALLY BEGUN: The Internal Revenue Service said that it has successfully started accepting and processing 2016 federal individual income tax returns on schedule. More than 153 million returns are expected to be filed this year. People have until Tuesday, April 18, 2017 to file their 2016 returns, and pay any taxes due. The deadline is later this year due to several factors. The usual April 15 deadline falls on Saturday this year, which would normally give taxpayers until at least the following Monday. However, Emancipation Day, a D.C. holiday, is observed on Monday, April 17, giving taxpayers nationwide an additional day to file. By law, D.C. holidays impact tax deadlines for everyone in the same way federal holidays do. Taxpayers requesting an extension will have until Monday, Oct. 16, 2017 to file. The IRS expects more than 70% of taxpayers to get tax refunds this year. Last year, 111 million refunds were issued, with an average refund of $2,860. A law change now requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit until February 15. Under this change required by the Protecting Americans from Tax Hikes (PATH) Act, the IRS must hold the entire refund -- even the portion not associated with the EITC and ACTC. Even though the IRS will begin releasing EITC and ACTC refunds on February 15, many early filers will still not have actual access to their refunds until the week of February 27. The additional delay is due to several factors, including weekends, the Presidents Day holiday and the time banks often need to process direct deposits. This law change gives the IRS more time to detect and prevent fraud. Beyond the EITC and ACTC refunds and the additional security safeguards, the IRS anticipates issuing more than nine out of 10 refunds in less than 21 days. However, it is possible a particular return may require additional review and take longer. Taxpayers are reminded that state tax agencies have their own refund processing timeframes that vary, and some states may make additional reviews to ensure their refunds are being issued properly. Even so, taxpayers should file as usual, and tax return preparers should submit returns as they normally do. The IRS expects more than 80% of returns to be filed electronically. Choosing e-file and direct deposit remains the fastest and safest way to file an accurate income tax return, and receive a refund. The IRS Free File program, available at IRS.gov, gives eligible taxpayers a dozen options for brand-name products. Free File is a partnership with commercial partners offering free brand-name software to about 100 million individuals and families with incomes of $64,000 or less. Seventy percent of the nation’s taxpayers are eligible for IRS Free File. People who earned more than $64,000 may use Free File Fillable Forms, the electronic version of IRS paper forms. The IRS continues to work with state tax authorities and the tax industry to address tax-related identity theft and refund fraud. As part of the Security Summit effort, stronger protections for taxpayers and the nation’s tax system are in effect for the 2017 tax filing season. The new measures attack tax-related identity theft from multiple sides. Many changes will be invisible to taxpayers but will help the IRS, states and the tax industry provide new protections. New security requirements will better protect tax software accounts and personal information. Many Individual Taxpayer Identification Numbers expired on January 1, 2017. This includes any ITIN not used on a tax return at least once in the past three years. Also now expired is any ITIN with middle digits of either 78 or 79 (Example: 9NN-78-NNNN or 9NN-79-NNNN). Affected taxpayers should act soon to avoid refund delays and possible loss of eligibility for some key tax benefits until the ITIN is renewed. An ITIN is used by anyone who has tax-filing or payment obligations under U.S. tax law but is not eligible for a Social Security number. It can take up to 11 weeks to process a complete and accurate ITIN renewal application. For that reason, the IRS urges anyone with an expired ITIN needing to file a return this tax season to submit their ITIN renewal application soon. All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a tax filing software product for the first time may need their Adjusted Gross Income amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return. Low and moderate income taxpayers can get help filing their tax return for free. More than 90,000 volunteers around the country can help people correctly complete their return. To get this filing help, taxpayers can visit one of the more than 12,000 community-based tax help sites that participate in the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs. The IRS reminds taxpayers that a trusted tax professional can provide helpful information about the tax laws. A number of tips about selecting a preparer and information about national tax professional groups are available on IRS.gov. The IRS urges all taxpayers to make sure they have all their year-end statements in hand before filing. This includes Forms W-2 from employers and Forms 1099 from banks and other payers. Doing so will help avoid refund delays and the need to file an amended return. Many tax issues can now be resolved online or by phone from the convenience of a home or office. The IRS urges taxpayers to take advantage of the many tools and other resources available on IRS.gov. IRS phone lines will be busy again this year, so in order to save time, people should first visit the IRS website for tax assistance. IR-2017-06 (January 24, 2017).
7. NEW OFFICE ADDRESS: Please note that Cypen & Cypen has a new office address: Cypen & Cypen, 975 Arthur Godfrey Road, Suite 500, Miami Beach, Florida 33140.
8. FPPTA TRUSTEES SCHOOL: The Florida Public Pension Trustees Association’s Annual Trustees School Conference will take place on January 29, 2017 through February 1, 2017 at the Rosen Centre Hotel, Orlando. A link on FPPTA’s web site, www.fppta.org, will take you to the Rosen Centre Hotel site to make your room reservations. You may access information and updates about the Conference at FPPTA’s website. All police officer and firefighter plan participants, board of trustee members, plan sponsors and anyone interested in the administration and operation of the Chapters 175 and 185 pension plans should take advantage of this conference.
9. CRAZY STATE LAWS: Good Housekeeping reminds us that there are crazy laws in every state. In Alaska you cannot put an animal in the back of an open vehicle. To a dog, nothing sparks more joy than the cool breeze of the open road. However, in Alaska, the back of an open vehicle is off-limits unless the dog's tail wags 46 inches or higher. The law was put into effect after one pup was reported as a public nuisance. Ruff life!
10. ZEN PROVEN TEACHINGS TO LIVE BY: If you lend someone $20 and never see that person again, it was probably well worth it.
11. PONDERISMS: What disease did cured ham actually have?
12. TODAY IN HISTORY: In 1962, Jackie Robinson was inducted into the Baseball Hall of Fame, his first year of eligibility.
13. 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.
14. PLEASE SHARE OUR NEWSLETTER: Our newsletter readership is not limited to the number of people who choose to enter a free subscription. Many pension board administrators provide hard copies in their meeting agenda. Other administrators forward the newsletter electronically to trustees. In any event, please tell those you feel may be interested that they can subscribe to their own free copy of the newsletter at http://www.cypen.com/subscribe.htm.
15. REMEMBER, YOU CAN NEVER OUTLIVE YOUR DEFINED RETIREMENT BENEFIT.