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Cypen & Cypen
FEBRUARY 7, 2008

Stephen H. Cypen, Esq., Editor


As expected (see C&C Newsletter for January 10, 2008, Item 7), President Bush has signed into law the first expansion of the Family and Medical Leave Act of 1993. On January 28, 2008, the President signed the National Defense Authorization Act of 2008 (HR 4986, PL 110-181). Employees eligible for FMLA will now be entitled to FMLA leave for call to active duty of a family member and FMLA caregiver leave for injured service members. Under the first new benefit, employees are entitled to 12 weeks of FMLA leave due to a spouse, child or parent being on active duty or having been called or ordered to active duty in the armed forces. Leave may be used for any qualifying emergency arising out of the family member’s active duty or call to duty. Under the second new benefit, employees are entitled to up to 26 weeks of FMLA leave in a 12-month period to care for an injured or ill service member who suffered the injury or illness while on active duty. Although the second new benefit is effective immediately, the first will not take effect until final regulations define “any qualifying emergency.” Meanwhile, separately, the Bush Administration is discussing new FMLA rules, which would require employees to call in to request FMLA leave before taking it, rather than the present situation where employees can take off two days before requesting leave.


The Employee Benefit Research Institute has published an Issue Brief on geographic differences and trends in employment-based retirement plan participation for 2006. The brief closely examines the level of participation by workers in public- and private-sector employment-based pension or retirement plans, based on the U.S. Census Bureau’s March 2007 Current Population Survey, the most recent data currently available. About 56% 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 connections to the work force), just over 60% worked for an employer or union that sponsors a plan. Among working age full-time, full-year wage and salary workers, 53% participated in a retirement plan. Furthermore:

  • Trend: The foregoing percentage is down from approximately 55% in 2004. Participation trends increased significantly when the labor market was tight in the late 1990s and decreased when unemployment went up in 2001 and 2002. With a more stable job market in 2003 and 2004, the participation trend flattened out. But even with the stable market in 2005 and 2006, the retirement plan participation level declined; therefore, it appears a much tighter job market may be needed to push participation trends upward.
  • Age: Participation increases with age (60.1% for wage and salary workers age 54-64, compared with 29.3% for those 21-24).
  • Gender: Among all workers, men had a higher participation level than women, but among full-time, full-year workers, women had a higher percentage participating than men (54.4% for women, compared with 51.4% for men). Female workers’ lower probability of participation in the aggregate results from their overall lower earnings or lower rates of full-time work in comparison with males.
  • Race: Hispanic wage and salary workers were significantly less likely than both black and white workers to participate in a retirement plan. The gap between percentages of black and white plan participants that exists overall narrows when compared across earnings levels; among workers earning $30,000-$39,999, black and white workers had a virtually identical level of participation. A key factor in Hispanic participation levels is whether the worker is native-born or nonnative-born; native-born Hispanics have participation levels closer to other minority groups.

Wage and salary workers in the South, West and Southwest had the lowest participation levels (Florida had the lowest percentage, at 40%), while the upper Midwest and Northeast had the highest levels (North Dakota had the highest participation level, at just over 64%). EBRI Issue Brief No. 311 (November 2007) is available at


C/NET News reports that bidding has reached $18.55 Billion in the Federal Communications Commission’s auction of government-owned wireless airways, but there is a problem with one important aspect. There was no new offer for the “D” block of the spectrum, which must be shared with public-safety agencies. The lone bid of $472 Million is far below the $1.3 Billion minimum price set by FCC. If bidding fails to reach the minimum, FCC will have to decide whether to re-auction the “D” block or possibly modify the network-sharing requirement. Considering all the instances in which lack of public-safety communication caused major problems, we suspect this project is quite important.

The Employee Benefits Security Administration of the U.S. Department of Labor has issued Field Assistance Bulletin No. 2008-01. The issue presented is “What are the responsibilities of named fiduciaries and trustees of ERISA-covered plans for the collection of delinquent employer and employee contributions?” A number of pension plan investigations have revealed agreements that purport to relieve financial institutions serving as plan trustees of any responsibility to monitor and collect delinquent contributions. Questions have been raised as to whether, and if so, to what extent, trust agreements and other instruments may define the scope of trustee undertakings and exclude responsibilities for monitoring the plan’s receipt of contributions, determining when they are delinquent and taking appropriate steps for collection. Employer contributions are delinquent when they are due and owing to the plan under the documents and instruments governing the plan, but have not been transmitted to the plan in a timely manner. The Department has taken the position that employer contributions become an asset of the plan only when the contribution has been made. However, when an employer fails to make a required contribution to a plan in accordance with plan documents, the plan has a claim against the employer for the contribution, and that claim is an asset of the plan. The duty to enforce valid claims held by a trust has long been considered a trustee responsibility under common law. To the extent the nature and scope of the trustee’s responsibilities are specifically limited in plan documents, it is generally the responsibility of the named fiduciary with authority to hire and monitor trustees to assure that all trustee responsibilities with respect to management and control of the plan’s assets (including collecting delinquent contributions) have been properly assigned to a trustee or investment manager. We believe this conclusion applies equally in the public sector.


The Callan Associates’ colorful chart showing annual returns for key indices over the last 20 years has been released. In 2007, for the third year in a row, MSCI EAFE leads the pack. Also, after an unprecedented 7 years near the bottom, S&P/500 Growth finished second. The following shows the relative performance of all eight styles:

MSCI EAFE 11.17%
S&P/CITI 500 GROWTH 9.13%
S&P 500 5.49%
S&P/CITI 500 VALUE 1.99%
RUSSELL 2000 -1.57%
RUSSELL 2000 VALUE -9.78%

Now, kiddies, what did we learn today? D-I-V-E-R-S-I-F-Y.


In her 2008 State of the State Address, Michigan Governor Jennifer Granholm called for the state pension plan to invest more money in Michigan businesses and schools to fire up a sputtering economy. The lady-Governor proposed investing up to $300 Million from state pension funds in growing Michigan-based companies. Funds would be available by diverting current spending or refinancing existing debt. The proposed $300 Million in pension fund money for business investment amounts to only 1% of the pension fund. An investment manager would be hired to oversee investments in Michigan companies. For seven straight years, Michigan has lost jobs and currently suffers the nation’s highest unemployment rate. So, what do we say about this species of socially responsible investing? -- the same thing we always say about SRI (see C&C Newsletter for November 29, 2007, Item 2): the investments had better be in the best interest of the pension fund... .


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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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