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Cypen & Cypen
April 23, 2015

Stephen H. Cypen, Esq., Editor

1. WHY FLORIDA LOCAL GOVERNMENTAL ENTITIES DESERVE A BLUE RIBBON: A Merin, California, County Civil Grand Jury has released its report entitled “Pension Enhancements: A Case of Government Code Violations and a Lack of Transparency.” Unfunded pension liabilities are a concern for county and city governments throughout California. Reviewing this problem in Marin County, the Grand Jury examined four public employers that participate in the Marin County Employees’ Retirement Association. The Grand Jury found that the employers granted no less than thirty-eight pension enhancements from 2001-2006, each of which appears to have violated disclosure requirements and fiscal responsibility requirements of the California Government Code. The Government Code contains specific requirements that must be met before local governments can increase the pension benefits for public employees. At the time of consideration of the enhancements at issue, the employers were required to: (a) provide notice to the public of any potential pension increases on the employer’s board meeting agenda for public discussion; (b) obtain an actuarial evaluation of the future costs of the enhancement; (c) present that actuarial analysis at a public meeting two weeks before approving the increase; and (d) explain the impact of the proposed increases on the pension’s financial health and funding. The Grand Jury found that the public employers appear to have violated these requirements in a variety of ways, providing little, if any, notice to the citizens of Marin County that they would be responsible in the future for hundreds of millions of dollars of pension costs. In each case, the public employers appear not to have provided proper public notice about the proposed pension enhancements. Not only were no public meetings noticed two weeks prior to approval, those meetings were never held. Most of the pension increases were approved through a consent agenda item at each employer’s board or council meeting. (Consent agendas are typically used for approving items that may not merit any discussion at the meeting and the consent items are approved together as a package through a single vote.) So, even if members of the public were in attendance at the board or council meeting, they might not realize that a pension increase was being approved or not realize the financial impact thereof. Public employers commissioned a single generalized actuarial study and then used that same study for a variety of different pension enhancements for multiple, diverse bargaining groups. The employers continued to use the same study to justify pension increases even when that study was up to four years old. This financial information was not provided to the public. Additionally, although the employers were required to disclose to the public the financial implications of each study two weeks prior to the public meeting at which the increases were approved, they appear not to have done so. The Grand Jury learned that, through a citizens Public Records Act request, this study was released in 2013. It is not known by the Grand Jury if a public request was made prior to this date. All of these actions appear to have violated the legal obligations of the public employers under the Government Code and the rights of the citizens of Marin County. One result of these pension enhancements is that they contributed to the increase of the unfunded pension liability of MCERA; this unfunded liability increased from a surplus of $26.5 million in 2000 to a deficit of $536.8 million in 2013. This increase may expose the citizens of Marin County to additional tax burdens to cover the unfunded costs, and may place the future financial viability of the pension plans at significant risk. Additionally, such an impact may impair the governments’ ability to provide the broad range of essential services that citizens are expecting, instead those funds may be used to pay for employee pensions. The Grand Jury recommends that the employers adopt policies and procedures to ensure further compliance with legal requirements, with legal counsel responsible for ensuring compliance with the Government Code, and to establish a Citizens Pension Oversight Committee. (Bad dog. Bad dog.) The report is limited to those employers who participate in MCERA. It is beyond the resources of the Grand Jury to investigate all other Marin public employers who participate in the California Public Employees’ Retirement System.

2. IMPORTANCE OF HAVING A RETIREMENT PLAN: American workers and retirees are expressing higher confidence about their ability to afford retirement this year, even though there is little sign they are taking the necessary steps to achieve that goal, according to Employee Benefit Research Institute. A key factor in Americans’ outlook on retirement is whether or not they have a retirement savings plan. The 2015 The survey finds that as the nation’s retirement confidence continues to rebound from the record lows experienced between 2009 and 2013, the increasing optimism is a result of those who indicate they or their spouse have a retirement plan, such as a defined contribution (401(k)-type) plan, defined benefit (pension) plan, or individual retirement account (IRA). Those without a retirement plan seem to understand they are likely to have difficulties accumulating adequate financial resources for retirement: 44% of workers without a retirement plan are not at all confident about having enough money for a comfortable retirement, compared with only 14% of those who have a plan. The percentage of workers confident about having enough money for a comfortable retirement -- at record lows between 2009 and 2013 -- increased in 2014 and again in 2015. Twenty-two percent are now very confident (up from 13% in 2013 and 18% in 2014), while 36% are somewhat confident. Overall, 24% are not at all confident (statistically unchanged from 28% in 2013 and 24% in 2014). However, this increased confidence is based on those indicating they or their spouse have a retirement plan. Worker confidence in the affordability of various aspects of retirement has also rebounded. In particular, the percentage of workers who are very confident in their ability to pay for basic expenses has increased (37%, up from 25% in 2013 and 29% in 2014). The percentages of workers who are very confident in their ability to pay for medical expenses (18%, up from 12% in 2011) and long-term care expenses (14%, up from 9% in 2011) are slowly inching upward. Confidence among retirees (which historically tends to exceed worker confidence levels) also increased in having a financially secure retirement, with 37% very confident (up from 18% in 2013 and 27% in 2014). The percentage not at all confident was 14% (statistically unchanged from 14% in 2013 and 17% in 2014). Among other major findings in this year’s survey:

  • Saving for retirement: sixty-seven percent of workers report they or their spouses have saved for retirement, although nearly 8 in 10 (78%) full time workers say that they or their spouse have done so.
  • Why not saving: cost of living and day-to-day expenses head the list of reasons why workers do not save (or save more) for retirement, with 50% of workers citing these factors. Nevertheless, many workers say they could save a small amount more. Seven in 10 (69%) state they could save $25 a week more than they are currently saving for retirement.
  • Debt worries dropping: both workers and retirees are less likely than in the 2014 to describe their level of debt as a problem. Fifty-one percent of workers and 31% of retirees indicate they have a problem with their level of debt.
  • Planning for retirement: almost two-thirds of workers (64%) say they feel they are behind schedule when it comes to planning and saving for retirement. However, this assessment may not be based on a careful analysis of their individual circumstances. Only 48% of workers report they or their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement, a level that has held relatively consistent over the past decade.

3. FIVE FRIGHTENING RETIREMENT STATISTICS THAT DEMONSTRATE BOOMERS ARE IN SERIOUS says the stock market may have staged an incredible rally since the lows of 2009, but for some skittish baby boomers (Americans born between 1946 and 1964) this move comes too little, too late. A number of factors have combined to shatter the dreams of a comfortable retirement for select boomers. A volatile stock market is just one of many factors that may not have worked in their favor in recent years. For example, historically low lending rates for the past six years have stymied any chance for boomers safely to outpace inflation with bank CDs and money market accounts. Additionally, three decade-long shift from pensions as a retirement driver to the 401(k) has moved the onus of retirement savings from employer to employee. What is left are a handful of boomers suddenly realizing the path to retirement is laid on their shoulders, not their employers’, and they are not prepared. A number of new reports have hit the newspapers recently chronicling the under-preparedness of baby boomers for retirement, and the figures they present are downright frightening. Here are five such statistics that demonstrate just how serious trouble the baby boomer generation could be in:

  • Approximately four-in-10 baby boomers have nothing saved for retirement. Just 69% of still working boomers have money socked away for their retirement, while just 50% of already retired boomers have money saved. In other words, half of all retired boomers are living off Social Security income, pensions and other forms of recurring income, rather than retirement savings accounts. For added context, in 2011, 84% of working boomers had put away money for retirement, and 69% of retired boomers had money saved for retirement.
  • Thirty-six percent of boomers plan to rely on Social Security as their primary source of income. The most commonly given answer from baby boomers as to where the majority of their income in retirement would come from was "Social Security," with 36%. Retirement accounts/savings at 34%, and company funded pensions a distant third with 12% followed. Trouble is brewing because Social Security income is only designed to replace about 40% of a worker’s salary, and not be a primary source of income.
  • Early boomer households are facing average shortfalls of $71,299 per individual in a family. Here is a minor ray of sunshine, pointing out that 56.7% of early boomers are on track to meet their financial retirement needs. However, in instances where early boomers are not prepared and a shortfall is expected, early boomers can expect an average shortfall of $71,299 per individual in a family, $93,576 for single males, and a whopping $104,821 for single females.
  • Nineteen percent of baby boomers who are offered a 401(k) or similar retirement plan do not participate. Another frightening statistic is that nearly one-in-five (19%) baby boomers who were offered the chance to participate in an employer-sponsored 401(k) retirement plan chose not to.
  • Full-time workers have a Retire Ready Index Score of just 4.1 out of 10, while retirees scored 5.5 out of 10. Lastly, a study last year of all workers (not just boomers) and retirees (not just boomers) rated respondents on a scale of 1-to-10 based on financial preparedness suggested that neither workers nor retirees have adequate knowledge, planning, or assets for retirement.

4. IRS DETERMINATION LETTER PROGRAM LETTER WILL CHANGE: BNA reports that Internal Revenue Service intends to make changes to its determination letter program within the next few years. It is not whether there will be change, only exactly how they will be contoured. Despite outward appearances, IRS and Treasury Department have several projects in the works. There is dysfunction in the determination letter program. IRS receives about 15,000 determination letter applications per year, but has fewer than 100 employees to review them. Thus, individually designed plan applications that receive attention only clock in at about three hours per application. IRS's Office of Employee Plans intends to have a dialogue with the private sector on how to makes changes to the program, but official changes will not come until at least 2017. As with many things at IRS, hurry up and wait.

5. BORROWING FROM THE FUTURE -- 401(K) PLAN LOANS AND LOAN DEFAULTS: The National Bureau of Economic Research has issued NBER Working Paper No. 21102 (April 2015). Tax qualified retirement plans seek to promote saving for retirement, yet most employers permit preretirement access by letting 401(k) participants borrow plan assets. The paper examines who borrows and why, and who defaults on their loans. NBER’s Administrative dataset tracks several hundred plans over 5 years, showing that 20% borrow at any given time, and almost 40% do at some point over five years. Employer policies influence borrowing behavior, in that workers are more likely to borrow and borrow more in aggregate, when a plan permits multiple loans. The authors estimate loan default “leakage” at $6 billion annually, much more than prior studies showed. Somebody ought to listen to us.
6. IS WALL STREET REALLY ROBBING NEW YORK CITY’S PENSION FUNDS?: Most any fee, even a fraction of one per cent, will come to look big if it is multiplied by tens of billions of dollars. So, when New York City Comptroller Scott Stringer wanted to make a point recently about fees the city’s public sector pension system had paid to asset managers between 2004 and 2014, he did not have to work very hard to find an outrageous number. Over the past ten years, New York City public employees have paid out two billion dollars in fees to managers of their “public market investments,” that is, their securities, mainly stocks and bonds. The comptroller called the fees “shocking,” and issued an analysis that spelled out the impact of fees on investment returns of the five pension funds at issue: those of New York’s police and fire departments, city employees, teachers and the board of education. Although the comptroller did not specify which firms had managed the funds, they were likely a familiar collection of financial industry villains. Heads or tails, Wall Street wins. The rhetoric tended to brush past the fact that the pension funds did not actually lose money. In the analysis, their performance was being measured relative to their benchmarks, essentially asking, for every different asset class, whether the funds performed better or worse than a corresponding index fund would have. The city’s pension funds have been recording their performance without subtracting fees paid to managers, but the math shows that New York City’s fund managers outperformed their benchmarks by $2.063 billion across the ten year period under review, and charged $2.023 billion in management fees. Compared with the average public pension fund’s experience on Wall Street, this performance is actually, frighteningly, pretty decent. All too often, when researchers investigate pension fund performance, they find that management fees have eaten up more than any outperformance the managers have generated. This opinion piece from Dan Davies appeared in The New Yorker.

7. DEVELOPMENTS IN HOUSEHOLD NET WORTH AND DOMESTIC NONFINANCIAL DEBT: Board of Governors of the Federal Reserve System has issued Financial Accounts showing flow of funds, balance sheets and integrated macroeconomic accounts. The net worth of households and nonprofits rose to $82.9 trillion during the fourth quarter of 2014. The value of directly and indirectly held corporate equities increased $742 billion, and the value of real estate rose $356 billion. Domestic nonfinancial debt outstanding was $41.4 trillion at the end of the fourth quarter of 2014, of which household debt was $13.5 trillion, nonfinancial business debt was $12 trillion, and total government debt was $15.9 trillion. Domestic nonfinancial debt growth was 4.7% at a seasonally adjusted annual rate in the fourth quarter of 2014. Household debt increased at an annual rate of 2.7% in the fourth quarter. Consumer credit grew 6%, while mortgage debt (excluding charge-offs) grew 0.7% at an annual rate. Nonfinancial business debt rose at an annual rate of 7.2% in the fourth quarter, a somewhat larger increase than in the previous quarter. As in recent years, corporate bonds accounted for most of the increase. State and local government debt increased at an annual rate of 1.1% in the fourth quarter, after decreasing at an annual rate of 2.8% in the previous quarter. Federal government debt rose 5.4% at an annual rate in the fourth quarter, down from a 7.2% annual rate in the previous quarter. Got that?

8. NATIONAL SENIOR INVESTOR INITIATIVE: One of the primary missions of the Securities and Exchange Commission and the Financial Industry Regulatory Authority is the protection of investors, of which senior investors are an important and growing subset. As part of a collaborative effort, staff of SEC’s Office of Compliance Inspections and Examinations and FINRA conducted 44 examinations of broker-dealers in 2013 that focused on how firms conduct business with senior investors as they prepare for and enter into retirement. These examinations focused on investors aged 65 years old or older. SEC and FINRA have released a National Senior Investor Initiative dealing with these senior investors. The report highlights recent industry trends that have impacted the investment landscape and prior regulatory initiatives that have concentrated on senior investors and industry practices related to senior investors. Additionally, the report discusses key observations and practices identified during the recent series of examinations. These examinations focused on a broad range of topics, including types of securities being sold to senior investors, training of firm representatives with regard to senior specific issues and how firms address issues relating to aging (such as, diminished capacity and elder financial abuse or exploitation) use of senior designations, firms’ marketing and communications to senior investors, types of customer account information required to open accounts for senior investors, suitability of securities sold to senior investors, disclosures provided to senior investors, complaints filed by senior investors and the ways firms tracked these complaints, and supervision of registered representatives as they interact with senior investors. SEC and FINRA staff are providing this information to broker-dealers to facilitate a thoughtful analysis with regard to their existing policies and procedures related to senior investors and senior-related topics and whether these policies and procedures need to be further developed or refined.

9. JOBS WITH WORST OUTLOOK FOR 2015: As the job market further diversifies and new vocations emerge (while old ones fade away), a common skill among CareerCast’s top rated jobs is math. Not everyone is so lucky to be in a growing field, however, CareerCast has also found what might be considered the least attractive jobs in 2015 -- many involving dangerous work conditions, or a murky job market. Here we go:

  • Mail carrier. With a median income of $41,068, the mail carrier joined this list after dropping seven spots since 2014. The profession has been on a steady decline with the proliferation of email and text messaging.
  • Firefighter. The firefighter stayed at the same spot from last year. A vital role in society, protecting property and lives, it is a career that takes a particularly steely individual to be jumping into burning buildings at a median annual salary of $45,264.
  • Taxi driver. The taxi driver has to deal with irate customers in a world of honking horns and fender benders. Low salaries, hovering around $23,118 and the increasingly popular use of ride-share programs like Uber, the taxi driver profession could start to see another decline as technology develops.
  • Corrections officer. With the many dangerous challenges of working in a corrections facility and a lackluster average $39,163 annual salary, it is no real surprise this career found its way to this list.
  • Photojournalist. As the newspaper continues to be shredded to a barebones industry, photo departments have been scrapped for syndicated services. Along with being thrust into occasionally hazardous situations, making a mere $29,267 a year, photographers, continue to decline, dropping nine spots on the list.
  • Broadcaster. Broadcasters remain in the same position as last year. The marketplace has become more competitive as media outlets are opting more for syndicated content. For those who can land a full time gig, expect some high stress levels, for salaries at around $29,347 a year.
  • Cook. Dropping down two spots, these culinary masterminds deal with, quite literally, some very hot situations, from stressed kitchens to demanding patrons. The old adage, “if you cannot stand the heat, get out of the kitchen" really comes into play. A median cook’s income is $42,208.
  • Enlisted military personnel. Remaining steady, enlisting in the military is not for everyone. Signing up for a branch of the U.S. Armed Forces requires resolve and dedication far beyond that asked in most careers. Becoming enlisted military personnel means facing danger and high stress, and bringing home roughly $44,283 a year.
  • Lumberjack. Making its way out of the top spot, the lumberjacks can face dangerous situations in relative isolation. Volatility in resource marketplaces completely beyond the logging industry's control could further impact the hiring of lumberjacks. Still, while no longer the worst job, and making $34,110, lumberjacks might not go the way of the dinosaur… just yet.
  • Newspaper reporter. Readership has steadily moved from print publications, whether they be newspapers or magazines, in favor of online outlets. The resulting decline in advertising revenue has left newspapers -- and thus, newspaper reporters -- feeling the pinch. Although median incomes equate to $36,367, the light at the end of the tunnel for a good write could be a move into more lucrative PR, advertising or marketing roles.

10. FIFTEEN UNBELIEVABLE THINGS JOB CANDIDATES HAVE DONE: When interviewing for a new job, tension can be high. Typical ways candidates show their nerves are through averted eye contact or fidgeting with jewelry. Careerbuilder recently surveyed close to 2,200 hiring managers and created this list of the most bizarre behavior they have seen during job interviews.

  • Writing utensils. Someone brought 50 pens to the interview and spread them out on the table.
  • Secret pooch. A candidate brought a duffel bag with him and kept fidgeting and repositioning it. There was a dog inside the bag.
  • Pet names. "You can call me Tigger!" a candidate said after offering his real name. "That is the nickname I gave myself."
  • Diversification. Asked about diversity, a candidate mentioned something about "off the boat."
  • Religious freedom. One hiring manager heard a candidate ask if he could offer religious advice to the employees.
  • Adultery. The husband of an employee was interviewing for a job at the same company. He asked if his wife was cheating on him.
  • Big money. Would you ask how much money everyone else made? One person did.
  • Knock your socks off. The reason one candidate gave for leaving a previous job was "kicking someone's butt that really needed it."
  • Strike a pose. A candidate sat in a yoga pose throughout the interview.
  • Doing your research. When asked a question, one person tried to Google the answer.
  • Unapproved. Apparently one candidate did not like the process, suddenly stood up, and walked out the door without saying anything.
  • Kid-friendly. A candidate asked if it was necessary to like children to work in a pediatrician's office.
  • To-go lunch. Interviewing is apparently hungry work as someone brought along a lunch and ate it during the conversation.
  • Sitting on the throne. One candidate needed a bathroom break -- a 45-minute one.
  • Bubbalicious. Having spit a wad of gum into his hand and not seeing a place to throw it away, this man returned the gum to his mouth and chewed it throughout the interview.

11. MOST INVESTORS WILL SAVE 2014 TAX REFUND: A recent survey found that 52% of investors who expect to receive a Federal tax refund will funnel their check into a savings account, while 25% plan to pay down debt. Seventeen percent plan to spend their refund. Only 2% will direct their refund toward work-related retirement plans. Half of investors surveyed said they expected to receive a 2014 Federal income tax refund, while 29% expect to owe taxes. Of the refund spenders, 38% plan to spend their tax refund on a vacation, a decrease from last year, when 56% were headed out on vacation. Twenty percent will devote their refund to basic household needs. Last year, 13% said they would treat themselves to a luxury item with their refund money, but this year only five percent plan to do so. The John Hancock Financial Survey was reported in

12. BANKRUPTCY RATES AMONG NFL PLAYERS SPIKES: One of the central predictions of the life cycle hypothesis is that individuals smooth consumption over their economic life cycle; thus, they save when income is high, in order to provide for when income is likely to be low, such as after retirement. National Bureau of Economic Research tested this prediction in a group of people -- players in the National Football League -- whose income profile does not just gradually rise then fall, as it does for most workers, but rather has a very large spike lasting only a few years. The authors collected data on all players drafted by NFL teams from 1996 to 2003. Given the difficulty of directly measuring consumption of NFL players, they tested whether the players had adequate savings by counting how many retired NFL players file for bankruptcy. Contrary to the life-cycle model predictions, they found that initial bankruptcy filings begin very soon after retirement and continued at a substantial rate through at least the first 12 years of retirement. Moreover, bankruptcy rates are not affected by a player’s total earnings or career length. Having played for a long time and been well paid does not provide much protection against the risk of going bankrupt. Hike…not. NBER Working Paper No. 21085 (April 2015).

13. SUREFIRE WAYS TO ANNOY YOUR BOSS: says it is an uphill battle to be successful if you do not have a good working relationship with your boss. While results are the most important measure of success, great results can often be overshadowed if you are always doing little things that annoy your boss. Here are ten things to avoid in order to stay in good standing with your boss:

  • Having to be reminded.
  • Not being able to prioritize.
  • Making excuses.
  • Not being a team player.
  • Bad mouthing your boss.
  • Challenging your boss in front of his boss.
  • Blatantly sucking up.
  • Not keeping your boss informed.
  • A lack of common sense.
  • Passing the monkey. This saying is from the classic H.R. article “Manage Time: Who’s Got the Monkey?,” In which the boss’s employees keep passing their problems (monkeys) to the boss to solve.  In other words, upward delegation.

Avoiding these 10 annoying behaviors may give you a better chance of having a positive relationship with your boss, and allow your great work to shine on its own.

14. 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.

15. FPPTA 31ST ANNUAL CONFERENCE: The Florida Public Pension Trustees Association’s 31st Annual Conference will take place on June 28 through July 1, 2015 at the Boca Raton Resort & Club, Boca Raton. A link on FPPTA’s web site,, will take you to the Boca Raton Resort & Club 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.

16. APHORISMS: Seat belts are not as confining as wheelchairs.

17. TODAY IN HISTORY: In 1969, Sirhan Sirhan sentenced to death for killing Bobby Kennedy.

18. 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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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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