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Miami

Cypen & Cypen
NEWSLETTER
for
FEBRUARY 10, 2011

Stephen H. Cypen, Esq., Editor

1.      STATUS OF GOVERNMENTAL PLAN APPLICATIONS FOR IRS DETERMINATION LETTERS:  About 1,500 governmental plans have submitted applications to Internal Revenue Service for determination letters on their tax-exempt status, an IRS official said during an update on the agency's determination letter program.  Of 1,500 plans that submitted their applications during the program's Cycle C remedial amendment period, almost 700 have received determination letters from IRS. IRS is holding about 150 governmental plan applications in suspense until it can resolve issues related to definitions of “normal retirement age” and service-based definitions of retirement age.  IRS has governmental plans in suspense for other reasons, but normal retirement age issues are not holding up processing of all other governmental plan applications. IRS is paying closer attention to governmental plan compliance with tax qualification rules, partly because governmental plan trusts hold billions of dollars that must be safeguarded for participants and beneficiaries, the agency said when it announced in April 2008 a governmental plans compliance initiative. IRS is working on putting together a handbook that will explain various provisions dealing with governmental plans, and what participants' and employers' rights and obligations are.  Some municipalities are unaware that the federal government has any role in state and local pension and retirement plans. As public plans run into funding issues, IRS has no authority to deal with the funding of plans.  However, IRS can determine whether governmental plans are operating according to the terms of their plan documents, and help plans resolve issues through the IRS voluntary compliance program. IRS permitted governmental plans that needed more time to gather necessary documentation to apply for determination letters in a later cycle, Cycle E instead of Cycle C.  But IRS has drawn a line on further extensions for governmental plans to submit applications for determination letters. IRS had one or two requests to extend Cycle E for governmental plans, but those requests were denied.  IRS wants to get everybody back on cycle, it wants all the governmental plans coming in one cycle. The foregoing is from Daily Tax Report. 

2.      PENSION REFORM LEGISLATION VOTED DOWN IN VIRGINIA:   Months of coalition-building paid off for the Virginia Professional Fire Fighters. The Virginia Senate Finance Committee killed four bills that would have mandated or created a defined contribution plan for state and local employees in Virginia.  VPFF presented testimony that defined contribution plans do not provide any benefits other than what the employee contributes, plus whatever discretionary amount the employer wants to contribute.  If a public safety officer in Virginia were to be permanently disabled or killed in line of duty, a 401(k)-type plan offers no protection for family members.  As part of efforts to stop the bills from passing, VPFF was able to build a strong coalition with other employee groups, including teachers, police and Virginia governmental employees, all of whom came together to share ideas and plan a coordinated campaign to protect public employees from the attack on their pensions.  International Association of Fire Fighters and National Conference on Public Employee Retirement Systems provided data and studies that were crucial to the outcome. 

3.      CAMERA ENFORCEMENT IN LARGE CITIES REDUCES RATE OF FATAL RED LIGHT RUNNING CRASHES:   According to Insurance Institute for Highway Safety, red light cameras saved 159 lives in 2004-08 in 14 of the biggest U.S. cities.  Had cameras been operating during that period in all large cities, a total of 815 deaths would have been prevented. Cities that have the courage to use red light cameras despite political backlash are saving lives. Looking at the 99 U.S. cities with populations over 200,000, researchers compared those with red light camera programs to those without. Because they wanted to see how the rate of fatal crashes changed after introduction of cameras, they compared two periods, 2004-08 and 1992-96.  Cities that had cameras during 1992-96 were excluded from analysis, as were cities that had cameras for only part of the later study period. Researchers found that in the 14 cities that had cameras during 2004-08, the combined per capita rate of fatal red light running crashes fell 35 percent, compared with 1992-96.  The rate also fell in the 48 cities without camera programs in either period, but only by 14 percent. Based on that comparison, researchers concluded that the rate of fatal red light running crashes in cities with cameras in 2004-08 was 24 percent lower than it would have been without cameras.  That figure is 74 fewer fatal red light running crashes, or, given the average number of fatalities per red light running crash, approximately 83 lives saved. We do not know if red light cameras reduce red light running crashes, but one thing is for sure: they do increase revenues, which, in today’s world, is not necessarily bad. 

4.      DETROIT POLICE RELEASE STATION AMBUSH VIDEO:   The graphic surveillance video of Lamar Moore’s ambush on the Detroit Police Department’s Northwest District Station has been released, bringing into public view the attack that left four officers injured and Moore dead. He appears calm as he walks into the police station, as if he belongs there. He steps past vending machines, to the far side of the horseshoe-shaped front desk. Moore is just out of the frame when he fires his first shotgun blast. Officers hit the floor, and smoke curls into view. The video shows a sudden, gruesome attack on police by a gunman implicated in an alleged sex crime and kidnapping. It also shows the heroics of Commander Brian Davis, who engaged Moore in a point-blank-shoot-off. All four officers are recovering from their injuries. For those of you who want to view the video, go to
http://policelink.monster.com/news/articles/149979-detroit-police-release-video-of-station-ambush?utm_source=nlet&utm_content=pl_c1_20110201_detroitambush. So, you want to be a cop? You want to protect and serve? Sign right here, but remember: make sure that your affairs are in order and that every day you tell your wife and kids how much you love them. 

5.      ALLSTATE APOLOGIZES FOR ZODIAC CONFUSION:   In the category of “odd news,” UPI.com reports that Allstate Insurance is apologizing for a study ranking road safety on the basis of Zodiac signs. (What about stop signs?) The company says the study had been intended for entertainment purposes only (sure), but had unintentionally caused confusion about whether astrological signs are part of the underwriting process. The company says that Astrological signs have absolutely no role in how it bases coverage and sets rates; rating by astrology would not be actuarially sound, the company says. The Zodiac study found Virgos were involved in the most road accidents during 2010, while Scorpios were least likely to have been involved in accidents that year.  (And Geminis were most cited for double parking.) 

6.      WIFE BACKS HUSBAND WHO ALLEGEDLY PLOTTED TO KILL HER; WAS ARREST DELAYED FOR BAR MITZVAH?:   Yvonne Stern has dropped the divorce petition against her husband, a Houston personal injury lawyer, and says she doesn’t believe allegations that he tried to have her killed, even though she took a bullet in the stomach last May. The Houston Chronicle says that prosecutors think otherwise.  Jeffrey Stern has been indicted on charges that he solicited the murder of his wife. Yvonne Stern was shot in the abdomen last May, in what was at least the third shooting attempt.  In the others, someone drove by the Sterns’ home and started shooting, and then two months later someone rang the doorbell and began firing through the door. (Note to Yvonne Stern: maybe it is time to move.)   Yvonne Stern’s lawyer issued a statement that said Mrs. Stern and her family continue to believe in her husband’s innocence, and will stand beside him throughout this process. (Note to Yvonne Stern: better to stand beside him than in front of him.)   Jeffrey Stern’s mistress is one of five people arrested last year in the alleged plot.  Jeffrey Stern had asked to delay his arrest so he could attend his son’s Bar Mitzvah. Authorities refused to say whether that was the reason he was not immediately arrested when he was indicted. (Note to Yvonne Stern: watch out for exploding Torahs.)  

7.      ASSOCIATION COMMENTS ON LABOR’S PROPOSED DEFINITION OF FIDUCIARY REGULATION:   The Securities Industry and Financial Markets Association has provided comments regarding the Department of Labor’s proposed regulation under the Employee Retirement Income Security Act of 1974, as amended, that  would redefine the term "fiduciary" under ERISA and the Internal Revenue Code of 1986, as amended. SIFMA believes the regulation, as proposed, will have unintended consequences, including: 

  • The ability of millions of Americans to save for retirement will be adversely impacted. Financial institutions will not be able to deliver critical investment tools, information and services, or will only be willing to do so at an added cost to IRA account holders and retirement plan participants. 
  • More limited choices.   The proposed regulation will limit access to markets, investment products and service providers.  
  • Investment options will be curtailed.  Plans will be prohibited from engaging in swaps, restricted in their use of custody, lending, cash management and futures strategies, and limited in their access to alternatives. 
  • Creates significant uncertainty.  The proposed regulation replaces the clarity of the current regulation with vague and ambiguous definitions that do not permit service providers to know whether, in hindsight, they will be considered fiduciaries and who will be claiming to have "considered" their advice.  
  • Disrupts capital markets. Trading counterparties will be severely limited because dealers will not know whether their affiliates will be deemed fiduciaries. 
  • Turns ministerial custodial valuations or pricing services into fiduciary acts.  Custodians will prohibit plans and IRAs from holding assets that cannot be valued through a third party pricing service and such pricing services may be deemed fiduciaries even with respect to plans and IRAs to which they have no relationship.   
  • Adversely affects the economy.  At a time when the economy is making at best a fragile and halting recovery, the adverse effects on capital markets will be significant and capital currently invested by plans and IRAs in real estate and private equity will be reduced. 

SIFMA urges the Department of Labor to withdraw the proposal, conduct a comprehensive cost analysis, and, if necessary, repropose a regulation that is more targeted to the abuses it perceives. The Securities Industry and Financial Markets Association brings together the shared interests of hundreds of securities firms, banks and asset managers.  SIFMA’s mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets.  (Separately, ERISA Industry Committee raised similar concerns on the proposed definition of fiduciary. ERIC is a nonprofit association committed to advancement of employee retirement, health, incentive and welfare benefit plans of America’s largest employers.)

8.      PACKERS WIN THE SUPER BOWL; THEORY SAYS, GO LONG:   According to the Super Bowl theory, stocks will rise this year because both the Green Bay Packers and the Pittsburgh Steelers trace their roots to the original National Football league.  The theory postulates that when a team from the old NFL wins, the stock market tends to go up, according to marketwatch.com.   However, investors might be worse off because Green Bay won: the Dow Jones Industrial Average rose an average of 14% in the three years that the Packers won, while rising an average of 18.4% in the six years that the Steelers were victorious. The indicator has correctly predicted direction of the Dow in all but nine of the 44 years the game has been played, which works out to a success rate of about 80%.  Very few stock gurus or money managers can claim as good a track record.  

9.        A LITTLE PACKERS HISTORY: By the way, we just came across a copy of a Green Bay Packer contract from 1944, signed by the legendary Curly Lambeau. You can view Lambeau’s August 1, 1944 transmittal letter and the contract itself at http://bit.ly/hD5YgM. Think times have changed a little? 

10.    DOES SUPER BOWL REALLY SPUR SEX TRADE?:   According to law.com, the Pittsburgh Steelers and the Green Bay Packers were not the only ones who went to Texas in pursuit of high-paying, potentially dangerous physical activity last Sunday. Local police, state law enforcement officials and local women's organizations said the Dallas-Fort Worth area was awash in prostitutes and their would-be clients during the run-up to Super Bowl Sunday.  Some advocacy groups expressed particular concern that many of the sex workers at such high-profile sporting events are underage and are brought in against their will.  The Texas Attorney General called the Super Bowl "one of the biggest human trafficking events in the United States." The NFL may have to change MVP to “Most Voluptuous Prostitute.” 

11.    PARTS OF GOVERNMENT’S STANDARD EMPLOYMENT BACKGROUND INVESTIGATION DID NOT VIOLATE EMPLOYEES’ INTEREST IN AVOIDING DISCLOSURE OF PERSONAL MATTERS:   In two cases decided more than thirty years ago, the Supreme Court of the United States referred broadly to a constitutional privacy "interest in avoiding disclosure of personal matters."  The National Aeronautics and Space Administration has a workforce of both federal civil servants and government contract employees. Nelson, a federal contract employee at a government laboratory, claimed that two parts of standard employment background investigation violated his rights under those decisions. Nelson challenged a section of a form questionnaire that asked employees about treatment or counseling for recent illegal-drug use. He also objected to certain open-ended questions on a form sent to employees’ designated references. The Supreme Court assumed, without deciding, that the Constitution protected a privacy right of the sort mentioned in the two cases. (In other words, the Court ducked the core issue, and saved it for another day.) The Court held, however, that the challenged portions of the government’s background check did not violate such right in the present case. The government’s interests as employer and proprietor in managing its internal operations, combined with protections against public dissemination provided by the Privacy Act of 1974, satisfied any interest in avoiding disclosure that may arguably have its roots in the Constitution. (Nelson was not subject to government background checks at the time he was hired, but that situation changed when the President ordered adoption of uniform identification standards for both federal civil servants and contractor employees.) National Aeronautics and Space Administration v. Nelson, Case No. 09-530 (U.S., January 19, 2011). 

12.    REMARKABLE QUOTES FROM REMARKABLE JEWS: Humility is no substitute for a good personality.   Fran Lebowitz

13.    BLESSED ARE THE CRACKED, FOR THEY LET IN THE LIGHT:  Consciousness:  That annoying time between naps.

14.    PARAPROSDOKIAN: (A paraprosdokian is a figure of speech in which the latter part of a sentence or phrase is surprising or unexpected in a way that causes the reader or listener to reframe or reinterpret the first part. It is frequently used for humorous or dramatic effect.):   The last thing I want to do is hurt you. But it's still on the list. 

15.    QUOTE OF THE WEEK:    “Effort is only effort when it begins to hurt.” Jose Ortega y Gasset

16.    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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Copyright, 1996-2011, all rights reserved.

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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