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Cypen & Cypen
February 1, 2018

Stephen H. Cypen, Esq., Editor

A divided Florida Supreme Court decided to take up a challenge to Gov. Rick Scott's 2015 veto of pay raises for state firefighters. The International Association of Firefighters Local S-20 took the case to the Supreme Court last summer after the 1st District Court of Appeal ruled that Scott's veto of $2,000 pay raises did not violate collective-bargaining rights. The Supreme Court issued a brief order Thursday saying it will hear the case. But justices were divided on whether to take up the issue, with Chief Justice Jorge Labarga and Justices Barbara Pariente, R. Fred Lewis and Peggy Quince in favor and Justices Charles Canady, Ricky Polston and Alan Lawson opposed. The court did not immediately schedule oral arguments. The ruling last year by the 1st District Court of Appeal found that Scott acted within his authority to veto spending items in the state budget -- and that lawmakers could have overridden the veto but did not. The veto followed a series of events that included a bargaining impasse on a union request for $1,500 pay raises for the 2015-2016 fiscal year, according to the appellate court. The Legislature resolved the impasse by including $2,000 raises for firefighters in budget fine print known as “proviso” language, which Scott subsequently vetoed. News Service of Florida reported on this matter.
Rebecca Moore writes that according to Aon Hewitt, which tracks daily funded status movements for DB plans of S&P 500 companies, aggregate pension funded status decreased in the month of December from 82.4% to 81.7%. Pension asset returns remained positive during the month of December, ending with a 1.2% return. However, the month-end 10-yr Treasury rate increased by 1 basis point (bp) relative to the November month-end rate, while credit spreads narrowed by 15 bps. This combination resulted in a decrease in the interest rates used to value pension liabilities from 3.49% to 3.35%. Given a majority of the plans in the U.S. are still exposed to interest rate risk, the increase in pension liability caused by decreasing interest rates counteracted the positive effects from asset returns on the funded status of the sample plan. For the same reasons, P-Solve says DB plans’ pension funded status took a small hit in December. October Three notes that its traditional Plan A lost 1% in December, and the more conservative Plan B dropped a fraction of 1% last month. Plan A is a traditional plan (duration 12 at 5.5%) with a 60/40 asset allocation, while Plan B is a cash balance plan (duration 9 at 5.5%) with a 20/80 allocation with a greater emphasis on corporate and long-duration bonds. Legal & General Investment Management America’s (LGIMA) Pension Fiscal Fitness Monitor, a quarterly estimate of the change in health of a typical U.S. corporate DB plan, shows pension funding ratios remained flat over the fourth quarter of 2017. Global equity markets increased by 5.84% and the S&P 500 increased 6.64%. However, this was offset by plan discount rates falling 17 bps, as Treasury rates decreased by 7 bps and credit spreads tightened by 10 bps. Overall, liabilities for the average plan rose 3.47%, while plan assets with a traditional “60/40” asset allocation increased 3.39%, keeping funding ratios flat over the fourth quarter of 2017. According to Aon Hewitt, pension liabilities increased by 2.4% as rates fell. Ten-year Treasury rates were up by 10 bps over the quarter and credit spreads narrowed by 32 bps, resulting in a 22 bps decrease in the discount rate over the quarter. Return-seeking assets were positive during the fourth quarter, with the Russell 3000 Index returning 6.3%. Equities outperformed bonds during the quarter, with the Barclay’s Long Gov/Credit Index returning 2.8% over this timeframe. Overall pension assets returned 3.5% over the quarter. Barrow, Hanley, Mewhinney & Strauss, LLC (Barrow Hanley), a value-oriented investment manager, estimated that corporate pension plan funded ratio rose to 87.1% as of December 31, 2017, from 85.4% as of September 30. It estimates that pension assets had a 3.6% return for the fourth quarter of the year while liabilities were only up 1.5%. However, the firm notes that funded status varies significantly by industry. Barrow Hanley explains that solvency rules require banks to reduce their reported capital by the amount that pensions are underfunded. So, plans sponsored by banks were among the best-funded with an average funded status of 104.9%. By contrast, Airlines, have more lenient funding rules than other corporate pension sponsors, so they have the lowest average funded status with an average funded ratio of just 69.5%. Barrow Hanley has estimated the funded status of corporate pension plans sponsored by companies in the Russell 3000 using information disclosed in SEC Form 10-K and returns for asset class indices for each year-end since 2005. At December 31, 2017, the average funded status for these plans was 87.1%, up from 81.3% at year-end 2016, according to the firm. According to Aon Hewitt, during 2017, the aggregate funded ratio for U.S. pension plans in the S&P 500 improved from 80.9% to 81.7%. The funded status deficit increased by $9 billion. This change was driven by asset growth of $135 billion offset by a liability increase of $144 billion. DB plan funded status was up 4.5 percentage points over the trailing twelve months, according to Wilshire Consulting. October Three’s traditional Plan A ended the year more than 3% ahead, while Plan B ended 2017 up more than 1%. The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies as of December 31, 2017, increased to 84% from 82% as of December 31, 2016, according to Mercer. Over the course of 2017, increases in equity and fixed income markets more than offset decreases in interest rates used to calculate corporate pension plan liabilities to support the increase in funded status, the firm said. The estimated aggregate deficit of $375 billion as of December 31, 2017 is $33 billion less than the $408 billion deficit at the end of 2016. According to Northern Trust Asset Management, S&P 500 U.S. corporate pension plans’ average funded ratio increased from 80.0% at the end of 2016 to 82.9% at the end of 2017 as broadly positive asset returns more than compensated for a sharp decline in discount rates. The increase in funded ratio was driven by two primary factors: Asset returns were strong as global equity markets returned approximately 24% during the year; and the average discount rate decreased sharply from 4.00% to 3.53% during the month. During the year the liabilities increased by approximately 10.5% on average, primarily driven by lower discount rates. Northern Trust observed that the estimated deficit for pension plans of the S&P 500 corporations has declined from $407 billion at January 1, to $372 billion at December 31. Plan sponsors that adopted liability-driven investment (LDI) strategies experienced larger funded ratio gains relative to those in core fixed income. Buoyed by strong market returns and larger-than-expected employer contributions, the funded status of the nation’s largest corporate pension plans improved modestly at the end of 2017 compared with the end of 2016, according to an analysis by Willis Towers Watson. The analysis examined pension plan data for the 389 Fortune 1000 companies that sponsor U.S. defined benefit pension plans and have a December fiscal-year-end date. Results indicate that the aggregate pension funded status is estimated to be 83% at the end of 2017, compared with 81% at the end of 2016. The analysis also found that the pension deficit is projected to have decreased to $292 billion at the end of 2017, compared with a $317 billion deficit at the end of 2016. Strong stock market performance throughout the year and robust employer contributions to their pension plans helped to boost funded status to its highest level since 2013 after several stagnant years. Several plan sponsors contributed more to their plans last year than originally expected, most likely in response to rising Pension Benefit Guaranty Corporation premiums and growing interest in de-risking strategies, and potentially in anticipation of lower future corporate rates from tax reform. The improved funded position occurred even though pension discount rates finished the year down approximately 50 basis points from the beginning of the year.
According to Associated Press, former felons could have their Florida voting rights restored under a proposed constitutional amendment headed to voters in November, a measure that could have a significant impact on a state known for historically close elections. Floridians for a Fair Democracy has more than 799,000 certified petition signatures, or about 33,000 more than the group needed to get the measure on the ballot. The group estimates about 1.5 million ex-felons would have their voting rights restored if voters approve. The measure needs 60 percent voter approval for passage. Desmond Meade, the group's chairman, lauded those voters whose overwhelming support for the petition put the measure on the ballot. Voters took matters into their own hands to ensure that their fellow Floridians, family members, and friends who have made past mistakes, served their time and paid their debts to society are given a second chance and the opportunity to earn back their ability to vote. Democrats and voting rights groups have long pressed for the restoration of felon voting rights. Florida's ban on ex-felon voting — along with a voting list purge that took some non-felons off voting rolls — likely cost then-Vice President Al Gore the 2000 presidential election. Republican George W. Bush won Florida that year, and thus the White House, by 537 votes in an election that took five weeks to sort out. And without the ban, Florida's presidential election could have had a different outcome last year. President Donald Trump carried Florida with fewer than 50 percent of the vote, beating Hillary Rodham Clinton 49 percent to 47.8 percent. Before the 2000 election, then-Secretary of State Katherine Harris hired a company to purge felons from the state's voting lists. But the process was flawed, and many eligible voters were removed from rolls because of mistaken identity. Others were convicted of misdemeanors and not felonies. Florida's current process for restoring voting rights to felons who have completed their sentences is a slow one. It requires a hearing, and applicants are often denied. If voters approve the amendment, felons would have their voting rights restored once they have concluded their sentences. Felons convicted of murder or sex offenses would not be eligible. Shortly after taking office in 2007, then-Republican Gov. Charlie Crist convinced two of the state's three Cabinet members to approve rules that would allow the parole commission to restore voting rights for non-violent felons without a hearing. Within a year, more than 100,000 ex-felons were granted voting rights. But Gov. Rick Scott and the Cabinet ended automatic restoration of voting rights as one of Scott's first acts upon taking office in 2011. "The governor has been clear that the most important thing to him is that felons can show that they can lead a life free of crime and be accountable to their victims and our communities," Scott spokeswoman Kerri Wyland said in an email. Crist, now a Democratic U.S. representative, was joyful when told that the initiative will be on the ballot. "That's great! That's wonderful!" he told The Associated Press in a phone interview. Crist was one of the exceptions among Republicans in supporting felon voting rights restorations. Politically, felon voting rights restoration is seen as benefiting Democrats, largely because African-Americans are disproportionally affected by the ban, and they tend to overwhelmingly vote for Democrats. "I thought it was very important to make a statement about how Florida has progressed and come into the modern era. Who among us doesn't deserve a second chance," Crist said.
IRS is urging victims of last year’s hurricanes, especially those who lived in areas affected by Hurricanes Harvey, Irma and Maria, to see if they qualify for the Earned Income Tax Credit (EITC). According to IRS, many people whose incomes dropped in 2017 may be eligible to choose a special option for figuring the EITC, a credit for low- and moderate-income workers and families. A special computation method, available only to people who lived in one of the hurricane disaster areas during 2017, may enable them to claim the EITC or claim a larger than usual credit. Under this method, taxpayers whose incomes dropped in 2017 can choose to figure the credit using their 2016 earned income rather than their 2017 earned income. Eligible taxpayers should figure the credit both ways -- the regular way using 2017 earned income and this special way using 2016 earned income -- to see which yields the larger EITC. For more information and special instructions on how to report, see the instructions for Form 1040, Line 66, and Publication 976, available on The EITC helps working people who don't earn a lot ($53,930 or less for 2017) and meet other eligibility requirements. Because it’s a refundable credit, those who qualify and claim it could pay less federal tax, pay no tax or even get a refund. EITC can mean up to a $6,318 refund for working families with qualifying children. Actual credit amounts vary based on income, family size and other factors. Workers without a qualifying child with incomes below $20,600 could also be eligible for a smaller credit of up to $510. On average, EITC adds $2,445 to refunds. To qualify for EITC, an eligible taxpayer must meet basic rules and have earned income from working for someone, being self-employed or running a business or farm. This includes home-based businesses, the sharing economy and employment in the service, construction and agriculture industries. In addition, certain disability payments may qualify as earned income for EITC purposes. The EITC Assistant, available on, can help taxpayers determine eligibility and estimate the amount of their credit. To get the credit, people must file a tax return, even if they owe no tax and even if they normally are not required to file. The fastest and easiest way to do so is by filing electronically, whether through a qualified tax professional; using free community tax help sites; or self-preparing with IRS Free File. By law, IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). IRS must hold the entire refund — even the portion not associated with EITC or ACTC. This change helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud. IRS expects the earliest EITC/ACTC related refunds to be in taxpayer bank accounts or debit cards starting Feb. 27, 2018, if they chose direct deposit and there are no issues with the tax return. IRS and partners nationwide held the annual EITC Awareness Day on Friday, Jan. 26 to alert millions of workers who may be missing out on this and other refundable credits. One easy way to support this outreach effort is by participating on the IRS Thunderclap to help promote #EITCAwarenessDay through social media. For more information on EITC and other refundable credits visit the EITC page on IR-2018-10, Jan. 23, 2018.
Newly released Bureau of Labor Statistics data on union membership trends show that union membership as a share of overall employment held steady at 10.7 percent in 2017, with essentially stable membership rates in both the private (6.4 or 6.5 percent) and public (34.4 percent) sectors. Union membership gains among men offset continued losses among women last year. But, it is important to view these different trends by gender within historical context: union membership in 2017 was roughly equivalent among men (11.4 percent) as women (10.0 percent), compared to 1979 when men were more than twice as likely as women to be union members and comprised 69 percent of union members. It is difficult to use one year changes in union membership trends to assess underlying dynamics. For one, the small samples involved for particular subgroups produce year-to-year volatility that should not be mistaken for a trend. Second, any change in union density can result from many different factors including the pattern of overall employment growth (whether sectors or occupations that are more heavily union grow faster or slower than average), the success or failure of union organizing drives, the scale of union organizing, changes in workers’ desire for union membership (i.e., demand for collective bargaining), and other factors. An understanding of the dynamics of union membership and representation requires a long-term analysis of detailed trends. Nevertheless, it is worth squeezing out what is plausibly interesting in the most recent data:

  • Union membership (according to the BLS release) rose by 262,000 in 2017, more than the 173,000 additional workers covered by a collective bargaining agreement (“coverage”). The greater growth in union membership than coverage was driven by developments in the private sector where membership growth was triple (164,000) that of the growth of coverage (53,000), centered in professional and service occupations.
  • Union membership became more common among men: some 32 percent of the net increase in male employment in 2017 went to men who were union members, leading union membership to rise from 11.2 to 11.4 percent of all male employment. Growth of union membership for men was strong in both the public and private sectors and for Hispanic and for non-Hispanic white men. 
  • Correspondingly, union membership dipped slightly among women because women’s union membership did not rise in the private sector although employment overall did rise—private sector employment growth for women was concentrated in nonunion sectors. Union membership growth, however, was strong among Hispanic women. 
  • Union membership grew in manufacturing despite an overall decline in manufacturing employment. Union membership was also strong in the wholesale and retail sectors, in the public sector and in information sector (where union membership density rose 1.9 percentage points).
  • Union membership density was stable or grew in a number of Southern states: Arkansas, Florida, Georgia, Louisiana, and Virginia with especially strong growth in Texas. 

This piece is from Lawrence Mishel.

As taxpayers prepare for the start of filing season, they should consider a direct deposit of any refunds due. It is easy, safe, fast — and the best way to get a refund. That is why 80 percent of taxpayers choose it every year.
IRS Direct Deposit:

  • Is Fast. The quickest way for taxpayers to get their refund is electronically to filetheir federal tax return and use direct deposit. They can use IRS Free File to prepare and e-file federal returns for free. Taxpayers who file a paper return can also use direct deposit.
  • Is Secure. Since refunds go right into a bank account, there is no risk of having a paper check stolen or lost. This is the same electronic transfer system that deposits nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts.
  • Is Easy. Choosing direct deposit is easy. With e-file, just follow the instructions in the tax software. For paper returns, the tax form instructions serve as a guide. Make sure to enter the correct bank account and routing number.
  • Has Options. Taxpayers can split a refund into several financial accounts. These include checking, savings, health, education and certain retirement accounts. Use IRS Form 8888, Allocation of Refund (including Savings Bond Purchases), to deposit a refund in up to three accounts. Do not use the form to designate part of a refund to pay tax preparers.

Taxpayers should deposit refunds into accounts in their own name, their spouse’s name or both. Avoid making a deposit into accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Taxpayers should check with their bank for direct deposit rules. There is a limit of three electronic direct deposit refunds made into a single financial account or pre-paid debit card. IRS will send a notice and a refund check in the mail to taxpayers who exceed the limit. IRS Tax Tip 2018-04, January 9, 2018.
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. All other contact information remains the same.
Counterfeiters: Workers who put together kitchen cabinets.
I attribute my success to this: I never gave or took any excuse. – Florence Nightingale
A bicycle cannot stand alone; it is two tired.
On this day in 2003, Space Shuttle Columbia disintegrates during reentry into the Earth’s atmosphere, killing all seven astronauts aboard.
There are 293 ways to make change for a dollar.
All the way back in 2013, Florida Governor Rick Scott approved legislation to outlaw Internet cafes in an attempt to cut down on Internet gambling in the state. Unfortunately, oversights in the bill’s wording allowed the legislation temporarily to apply to all devices connected to the Internet. As a result, all computers and smartphones were temporarily (accidentally) banned.


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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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