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Cypen & Cypen
April 16, 2015

Stephen H. Cypen, Esq., Editor

1. CalPERS RESPONDS TO DB FOE: In a recent interview, a former San Diego City Council member referred to public sector pension plans as Ponzi schemes. As you can imagine, CalPERS took slight umbrage. CalPERS provides retirement and health benefits to 1.7 million members and their beneficiaries, with 575,000 retirees receiving monthly benefits totaling $13 billion annually, which help fuel the California economy. The average CalPERS pension is a modest $2,784 per month. CalPERS is a defined benefit pension plan, with benefits negotiated by employees and their employers or set by legislation, not by CalPERS. CalPERS’ job is to pay what has been negotiated, and does that with a diversified investment portfolio of nearly three hundred billion dollars. Defined benefit plans have proven time and again to be the cornerstone of retirement security, extraordinarily cost effective, delivering retirement income at 50% of the cost of defined contribution accounts like 401(k)s. For employees it means a predictable income and peace of mind in retirement. For employers, they are important for recruiting and retaining their workforces. Every benefit dollar paid to a CalPERS retiree comes from three sources. Sixty-five cents comes from CalPERS investment earnings. Employers contribute 22 cents. And CalPERS members contribute the remaining 13 cents. The CalPERS pension fund earned an 18.4% return on its investments for the 12 months that ended June 30, 2014, the fourth double digit return the fund has earned in the last five years. The retirement benefits CalPERS pays every month also have a significant impact on the California economy. They help drive new business activity, creating jobs for residents, and generating tax receipts for cities and counties. For the fiscal year ending June 30, 2012, the total economic revenue generated by the flow of CalPERS pension benefits in California was more than $30.4 billion. Every taxpayer dollar contributed to CalPERS generated $10.85 in economic activity, fueled the creation of 113,664 jobs throughout the state and generated $800 million in sales and property taxes. In the "scheme" of things the interviewee should be thanking CalPERS for its focus on long term sustainability and fiscal prudence. CalPERS will continue to do everything it can to ensure long term sustainability of the system.

2. EXCLUSION OF ATTENDEE FROM MEETINGS OF MUNICIPAL PENSION BOARD VIOLATED FLORIDA SUNSHINE LAW, THUS VOIDING ALL ACTIONS TAKEN AT SUCH MEETINGS: Ribaya appealed an order dismissing his second amended complaint with prejudice. In his complaint, he alleged a violation of subsection 286.011(1), Florida Statutes, often called the Sunshine Law, and also sought declaratory relief under Chapter 86, Florida Statutes, the Declaratory Judgment Act, concerning actions of the Board of Trustees of the City Pension Fund for Firefighters and Police Officers in the City of Tampa. Specifically, he sought a declaration that: (1) his conduct at a meeting in June 2012 did not violate the board’s Policy 109, which regulated conduct at the meeting (2) his exclusion from one or more public meetings based on the board's decision that he had violated the policy was a violation of the Sunshine Law and (3) the violation of the Sunshine Law voided all actions taken by the board at those meetings. The circuit court dismissed the action, not because it failed to state a cause of action, but because the circuit court determined that the issues alleged were moot and unworthy of declaratory relief. The Florida District Court of Appeal concluded that the trial court erred in dismissing the action without reaching the merits. In context of an action for declaratory relief that is filed to enforce the Sunshine Law, the fact that the conditions allegedly resulting in the violation have been resolved does not necessarily render the action moot where it is unclear from the pleadings whether a violation has occurred and whether a remedy would be required for such violation. It may be that the circuit court will ultimately rule against Ribaya on one or more of these three issues, but the matter could not be dismissed based on the pleadings alone. Accordingly, the Appellate Court reversed and remanded for further proceedings. Here are the facts. At an open meeting of the board, Ribaya, during a recess, made a single word of profanity in a low, soft voice. His conduct apparently offended some others in attendance.  At the time, the board's policy concerning disruptions at its meetings was Policy 109, which stated that disruption of a board meeting will not be tolerated. Anybody violating the policy will be issued a 90 day trespass warning, will be asked to leave the building, and upon failure to do so, will be subject to arrest for trespassing. Policy 109 in no way inhibits a person from the ability to conduct pension business by telephone, mail, fax or email. The board relied on this policy, and had a police officer deliver a trespass warning to Ribaya immediately before its next meeting. To avoid arrest, he did not attend that meeting. Despite written requests to the board, at least one of which was from his attorney, Ribaya was not allowed to attend public meetings until the ninety day period had expired. Thus, he was barred from three monthly meetings. Ribaya did not sue the board under any theory that might have allowed him to obtain monetary relief for a civil wrong. Instead, his complaint alleged a violation of the Sunshine Law, and sought declaratory relief. He claimed that his exclusion from the meetings was not warranted under Policy 109, and that under Section 286.011(1), Florida Statutes, his wrongful exclusion from the meetings violated Florida's Sunshine Law. Finally, he claimed that the only appropriate remedy for this violation required voiding all actions taken at those meetings. By the time the circuit court dismissed this action, the ninety day period had expired, and the board had adopted a new policy to address disruptions at its meetings. Thus, there can be no dispute that aspects of the overall controversy had become moot. The circuit court entered an order carefully explaining its reasons for dismissing the action with prejudice. The circuit court accurately noted that Ribaya was not challenging the facial validity of Policy 109. The court concluded that the real issue was whether Ribaya was wrongfully issued a trespass warning. Given the change in circumstances, as to this issue, the court concluded that there was no present dispute and that the mere possibility of a dispute in the future did not justify the full adjudication of an action for declaratory relief. It recognized that there was no precise Florida case on point on the question of whether use of the trespass statute can be a violation of the Sunshine Law. Nevertheless, concluding that a public body has authority to ensure orderly conduct at its meetings without violating the Sunshine Law, it saw no reason to reach the merits of the complaint. It relied, in part, on the appellate court's earlier case, in which it affirmed summary judgment for the defendant in an action to enjoin a public construction project despite defendant's technical violation of the Sunshine Law. Although there is no case law squarely resolving the issue of whether wrongful exclusion of Ribaya would void actions taken at the meetings, there is legal support for that proposition. If Ribaya's exclusion is indeed a violation that voids all actions taken at these meetings, then this remedy would be necessary even after Policy 109 was rewritten. Thus, it cannot be claimed that Ribaya's legal dispute with the board was moot when the case was dismissed. In the absence of established law or more developed facts, the trial court abused its discretion in dismissing what appears on the face of the complaint to be a bona fide dispute in need of resolution. Hard facts sometimes make bad law. Ribaya, v. The Board of Trustees of the City Pension Fund for Firefighters and Police Officers in the City of Tampa, 40 Fla. L. Weekly D820 (Fla. 2d DCA April 8, 2015).

3.  WHY IS 69½ THE IRA OWNER'S MOST IMPORTANT AGE?:Wait a minute, says MorningstarAdvisor, who cares about turning age 69½? Everybody knows the big year is when you reach age 70½ not 69½, right? Wrong, again, Retirement Breath. Age 69½ is a big deal, a major year in the life planning calendar. In the year you reach age 69½:

  • If you are still working, it is your final chance to make a traditional IRA regular contribution.
  • And it is your final year to roll your traditional IRA into your workplace plan (if you are still working) totally to avoid taking any required minimum distributions from the IRA.
  • Now is the time to consider other ways to reduce future RMDs too, such as Roth conversions and purchase of a QLAC.

If you are age 70½ or older at the end of a calendar year, you are not allowed to contribute to a traditional IRA for that year. So, the last year you can make a regular contribution to a traditional IRA is the year in which you turn 69½. Making that final contribution does not mean no contributions can be made ever again to your retirement plans. You can make rollover contributions to traditional IRAs (from workplace plans, for example) at any age. And if you are still working, you can continue to contribute to workplace retirement plans (including 401(k)s, pension and profit-sharing plans, Keogh plans, and even SEP IRAs) regardless of age. You can even contribute to a Roth IRA after age 70½ if you have compensation income and your total income is under the income ceiling for Roth contributions. Traditional IRAs are the only tax favored retirement plans that have an age restriction on contributions. How can you reduce future RMDs? Imagine you are approaching age 70½. You will have to start taking required minimum distributions from your traditional IRA very soon. You do not want or need to take that money out, and you do not want to have to pay income tax on it. What are the legal ways to delay, reduce, or eliminate those RMDs? There are three avenues to consider: rolling into a workplace qualified plan, converting to a Roth IRA, and buying a QLAC. The article goes into great detail on the first two approaches. The subject of QLACs will be dealt with in a future release.

4. THE SINGLE MOST OBNOXIOUS RETIREMENT FUND FEE…AND HOW TO DUMP IT: Obnoxious investment fees basically take money out of your pocket and enrich a broker or middleman, and eat into your returns. Forbes hates 12b-1 fees, which are hungry little gremlins that silently devour your retirement savings. Although you have probably never heard of these charges, they basically take money out of your account so that a broker or fund company can market the fund to others. It is like paying an extra dollar for a hamburger so a restaurant can advertise to another diner. It leaves a bad taste in your mouth. Unfortunately, these fees and perfectly legal, although they must be disclosed. They may even be lurking in your 401(k) or IRA. More specifically: the fees at issue are annual marketing or distribution fees on mutual funds. The 12b-1 fee is considered an operational expense and, as such, is included in a fund’s expense ratio, and is generally between 0.25% and 1% (maximum allowed) of a fund’s net assets. The Securities and Exchange Commission has been studying 12b-1 fees for years, but has yet to protect investors. (Surprise.) Another issue with 12b-1 fees is that they are just plain sneaky. They are often buried in with other fund expenses, and the fund company never really explains where to money goes. Hint: out of your pocket into someone else’s pocket. SEC is aware of this situation, but is still dragging its feet on this issue. While there is nothing inherently wrong with charging for services in incremental payments, the practice suffers from several important short-comings. Because 12b-1 fees are not considered commissions, they are not subject to Financial Industry Regulatory Authority commission limits. Because the fees are buried within the administrative fee charged by mutual funds and annuities, investors often fail to understand how much they are paying or what they are paying for through these fees. So, what is a person to do? The 12b-1 fee must be disclosed in an expense breakdown of a mutual fund or 401(k) plan. If you see it, flag it. If it is in a 401(k) plan, tell your employer he does not need to pay it. Find other funds that do not charge it. Even if you see a 12b-1 fee in an IRA, you do not have to pay it. There are literally thousands of funds that do not levy it and you can move your money. Keep in mind that every additional fee hurts your retirement kitty. It is money that you cannot save. The more investor friendly fund companies do not charge it. An even better way to avoid 12b-1 fees is to avoid broker-sold funds altogether. The largest mutual fund companies sell their funds directly, so you will almost never see them charging you for this obnoxious fee. You do not have to wait for the SEC to act, which may be never. Take action today to boost your retirement income tomorrow. Right on!

5. NEW SURVEY CONFORMS OUTLIVING MONEY IS TOP RETIREMENT CONCERN: Americans are fearful of outliving their money in retirement and feeling stressed about healthcare costs, according to a new survey from the American Institute of CPAs. The AICPA PFP Trends Survey of CPA financial planners found that 57% of CPA financial planners cited running out of money as the top retirement concern of their clients. Next was uncertainty on how much to withdraw from retirement accounts (14%) and then healthcare costs (11%). When asked the top three sources of clients’ financial and emotional stress about outliving their money, planners cited healthcare costs (76%), market fluctuations (62%) and lifestyle expenses (52%) as the primary issues. Additional causes for financial stress were unexpected costs (47%), the possibility of being a financial burden on loved ones (24%) and desire to leave inheritance for children (22%). The survey results showed that unexpected events are not abstract concerns; they are having an impact on retirement planning for a large number of clients. These issues include long term healthcare concerns (42%), caring for aging relatives (28%), diminished capacity (26%), divorce (18%), job loss (18%) and adult children returning home (18%). CPA financial planners recognize that dealing with these concerns requires a combination of behavioral changes and technical advice. By understanding clients’ fears about running out of money in retirement, planners can provide a more realistic perspective on their financial situations, and help alleviate the associated stress. Following are some of the strategies planners are currently using with their high net worth clients:

  • Lifestyle – helping clients understand the impact of their lifestyle spending and implementing a plan that balances their current income level and asset base with their retirement goals.
  • Healthcare – working with clients to understand their Medicare and insurance options so they can better plan for potential healthcare costs they might need to cover.
  • Living situations – identifying strategies, such as the use of continuing care retirement communities, to both control costs and save on taxes.
  • Tax savings – coordinating Roth conversions with IRA required minimum distributions, investing in assets with a lower tax rate, and maximizing Social Security income.
  • Diversity – mitigating the effect of market fluctuations with proper asset allocation, bucket strategies, and use of single premium annuities.

See Item 15 below.

6. MORE SKIN = BETTER RESULTS: For fund managers, new research reported by suggests that an old platitude is true when it comes to investing: eating your own cooking helps ensure higher quality. A recent evaluation showed portfolio managers investing more than $1 million in their own funds had a significantly higher success rate than those who invested less, or even nothing at all. Manager levels from 2009 were evaluated, and tracked their respective funds' five-year performance. The success rate was determined by grouping funds by the top manager's investment range and identifying what percentage survived and outperformed their category peers. Index funds and funds of funds were excluded, and single share class per fund was used. When looking at the success rate, the study found that managers investing up to $50,000 in their own portfolio were in the 35% to 36% success range; while those with between $50,000 to $1 million had a success rate between 40% to 44%; and those with more than $1 million invested had a 47% rate. The risk adjusted success rate for managers with no investment was 28%, while fund managers with an investment of $1 million or more had a 39% success rate.

7. STOP LIVING PAYCHECK TO PAYCHECK: More than 12 million American households in lower income brackets are living paycheck to paycheck, according to But what may perhaps be more surprising is that over 25 million middle class households are doing the same! If you are one of these households, here are 5 ways you can start to break the cycle:

  • Track Your Spending. The first step to maximizing your money is figure out how much is coming in and going out each month. Look back over the past 3 months' bank account, credit card and debit card statements. Document how you much you are spending each month across all categories. You will then have a baseline for understanding where the money has been going in the past.
  • Create a Budget. The next step is to decide where you want your money to go in the future. The decision involves taking a long, hard look at how much you have been spending in each category and asking yourself if there are places you can cut back. The more you trim each category, the more money you will have left at the end of the month, so develop a budget that is realistic but also disciplined. If you can manage to live lean now, it can help you build your financial foothold and enjoy more security in the future.
  • Build an Emergency Fund. When money is tight, a sudden unexpected expense can be catastrophic. So make sure your new budget has a line in it for savings. You should ideally have 3-6 months' income saved up for emergencies, but to start, aim simply to save up $1,000.
  • Get Rid of Your Debt. Consumer debt is a handcuff on your financial freedom. Every dollar you carry in debt, you will wind up paying several times over with interest, so paying down any existing debt should be one of your highest priorities.
  • Boost Your Income. Until you have got an emergency fund in the bank and your debt paid down, you may need to take extra measures to bring in more income. Temporarily taking a second job, starting a side business from your home or working extra hours at your current job are possibilities. It will not be easy, but remember that the ultimate goal is to free yourself from the paycheck to paycheck cycle. In the end, this freedom will be more than worth it.

Then, of course, there is the old fashion way: win the lottery.

8. MANY OF RETIREES WISH THEY HAD RETIRED EARLIER:Hindsight is 20-20 for retirees, with 46% of retired respondents to a recent New York Life survey saying they wished they would have started their retirement earlier. The number jumps to 51% when looking at retirees who were 60 or older when they retired. Reported in, the survey reveals retirees between the ages of 62 and 70 with at least $100,000 of liquid assets would prefer to add four or five years to the front end of their retirement, could they go back and start again under the same late career circumstances. These individuals say they want to go back and retake the years when they were healthiest, most active and able to get the most out of their retirement savings. The survey reveals men and women share similar feelings about retiring earlier. Among men, 47% said they would have retired sooner, and 46% of women say they would do the same. In addition, men wish they had retired 4.53 years earlier on average, women would have preferred to retire 3.96 years earlier.

9. ID THEFT VICTIMS WAIT FOR TAX REFUNDS: Victims of identity theft are continuing to experience long delays and errors in receiving their tax refunds, according to a report in On average, IRS took 278 days to resolve tax accounts of identity theft victims due a refund. However, that wait is an improvement compared to the average 312 days in fiscal year 2012. The report estimates that of the 267,692 taxpayers whose accounts were resolved, 25,565 (less than 10%) may have been incorrectly resolved, resulting in delay of refunds or the victim receiving an incorrect refund amount.

10. 36TH ANNUAL POLICE OFFICERS' AND FIREFIGHTERS' PENSION TRUSTEES' SCHOOL: The 36th Annual Police Officers' & Firefighters' Pension Trustees' School will take place on June 2-4, 2015. You may access information and updates about the Conference, including area maps, a copy of the program when completed and links to register at the Residence Inn Tallahassee Universities at the Capitol. Please continue to check the FRS website for updates regarding the program at 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 unique, insightful and informative program.

11. APHORISMS: Money will buy a fine dog but only kindness will make him wag his tail.

12. TODAY IN HISTORY: In 1929, NY Yankees become 1st team to wear uniform numbers.

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



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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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