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Cypen & Cypen
MAY 26, 2011

Stephen H. Cypen, Esq., Editor

1.      THE NEW RETIREMENT: WORKING!: The 12th Annual Transamerica Retirement Survey found that for many Americans, the foundation of their retirement strategy is simply not to retire or to work considerably longer than the traditional retirement age of 65. Overall, American workers’ confidence in their ability to achieve a financially secure retirement is low. The research underscores how American workers are largely unprepared for retirement, and, further, how relatively few have a backup plan in the event they are forced into retirement earlier than planned. While working longer is an important opportunity to help bridge a retirement savings gap, planning not to retire is not a viable retirement strategy. Setting a goal, making a strategy and preparing for the unexpected are necessary to ensure a financially secure retirement. Specifically, the survey found

  • 39 percent of workers plan to work past age 70 or do not plan to retire; 54 percent of workers expect to plan to continue working when they retire; and 40 percent now expect to work longer and retire at an older age since the recession. 
  • Workers’ greatest fears about retirement include “outliving my savings and investments” and “not being able to meet the financial needs of my family.” 
  • Most workers will continue working out of financial necessity. Workers estimate their retirement savings needs at $600,000, but fewer than one-third have currently saved more than $100,000 in all household retirement accounts. Almost one-third of workers anticipate that they will need to provide financial support to family members. 
  • Over half of workers indicate that they have a retirement strategy; however, only 10 percent said they have a written plan, compared to 46 percent who said that they have a plan but it is not written down.  
  • Of all workers, fewer than one-in-five have a backup plan for retirement income in the event they are unable to work before their planned retirement. 
  • Relatively few workers have a good understanding of the government retirement-related benefits such as Social Security, Medicare and Medicaid. 

2.      TREASURY DEPARTMENT LOOKS TO PENSIONS FOR FUNDING: The Obama administration will begin to tap federal retiree programs to help fund operations after the government lost its ability on May 16, 2011 to borrow more money from the public, adding urgency to efforts in Washington to fashion a compromise over the debt. reports that Treasury Secretary Geithner has warned for months that the government would soon hit the $14.3 Trillion debt ceiling -- the legal limit on how much it can borrow.  With that limit having been reached, Geithner is undertaking special measures in an effort to postpone the day when he will no longer have enough funds to pay all of the government’s bills. Geithner, who has already suspended a program that helps state and local government manage their finances, will begin to borrow from retirement funds for federal workers.  The measure will not have an impact on retirees because the Treasury is legally required to reimburse the program. (Ha.) The maneuver will buy Geithner only a few months time.  If Congress does not vote by August 2 to raise the debt limit, Geithner says the government is likely to default on some of its obligations, which he says would cause enormous economic harm and suspension of government services, including disbursal of Social Security funds.  Many congressional Republicans, however, have been skeptical that breaching the August 2 deadline would be as catastrophic as Geithner suggests.  What is more, Republican leaders are insisting that Congress cut spending by as much as the Obama administration wants to raise the debt limit, without any new taxes.  Obama is proposing spending cuts and tax increases to rein in the debt. The Obama administration has warned that it is dangerous to make a vote on raising the debt limit contingent on other proposals. But House Speaker John Boehner is demanding that Congress use the debt vote as a way to bring down government spending. Geithner’s plan to tap federal retiree programs as a temporary means to avoid a government default comes as the Obama administration has shown growing interest in altering those programs to curb the debt in the long run. Administration officials have expressed interest in raising the amount that federal employees contribute to their pensions.  Treasury secretaries have tapped special programs to avoid default six times since 1985.  The most protracted delay in raising the debt limit came in 1995 after congressional Republicans swept to power during the Clinton administration.  But today, the government needs far more money to cover its obligations than in the past, making the special measures less effective than they used to be.  The government needs about $125 Billion more a month than it takes in each month.  Isn’t that special. 

3.      CalPERS’ OUTLOOK SLIGHTLY BRIGHTENS: California Public Employees’ Retirement System, the nation’s largest pension fund, is on target to notch one of its strongest annual returns in the past 20 years, performance that is helping the fund to regain its health and its confidence.  Nevertheless, The Wall Street Journal reports that residents are still stung by the CalPERS funding gap, showing the deep hole in which many pension funds have found themselves. CalPERS reported earning 18.6% for the first three quarters of its fiscal year.  And like many pension funds, CalPERS is riding the overall market’s rebound.  Its recent gains are in line with those at other large funds, according to industry data. Nevertheless, CalPERS will be playing catchup for years: Although with $236 Billion in assets, CalPERS has recovered from a low of $160 Billion and is nearing its precrisis high of $260 Billion, its long-term obligations are about $300 Billion. CalPERS officials say the results show resilience of public retirement systems that rely largely on investment gains to cover guaranteed payouts to retirees. The financial crisis was an anomaly; CalPERS learned from its mistakes, made some changes to its risk management and is moving forward with stronger convictions than ever. CalPERS officials now see the fund playing a leadership role in the national debate over whether to overhaul public pensions and replace them with 401(k)-style plans popular in the private sector, a change CalPERS opposes.  In a series of news releases, the fund has rebutted recent studies critical of CalPERS specifically and pensions generally.  However, here is the scariest part: critics of pension costs say CalPERS’s investment gains may undercut efforts to overhaul the retirement system! Hey, it ain’t paranoia if they really are out to get you. 

4.      STARBUCKS COMES UP SHORT IN LAWSUIT: Equal Employment Opportunity Commission has commenced an action against Starbucks Coffee Co. under Title I of the Americans with Disabilities Act of 1990 as amended by the ADA Amendments Act of 2008, to correct unlawful employment practices on the basis of disability, and to provide appropriate relief to Elsa Sallard, who was adversely affected by such practices.  The Commission alleges that Starbucks failed to provide Sallard with a reasonable accommodation, and subsequently terminated her from her position as a barista because of her disability, in violation of ADA and ADAAA. Sallard suffers from a physical impairment, dwarfism. Pursuant to ADA, as amended, Sallard is substantially limited in major life activities of, including but not limited to, reaching, lifting and performing manual tasks. She was hired by Starbucks as a barista, a customer service position. Job description for barista requires no prior experience. Three days after being hired, Sallard requested use of a stool or small step-ladder as a reasonable accommodation to enable her to perform the essential functions of her job.   With the reasonable accommodation, Sallard would have been able to perform the essential functions of her job:  to operate the cash register and prepare beverages. Starbucks failed or refused to engage in the interactive process, and failed or refused to provide her with a reasonable accommodation. On the same day, Starbucks terminated Sallard's employment, claiming that she would be a danger to customers and employees. The Commission alleges that the effect of the practices complained of has been to deprive Sallard of equal employment opportunities and otherwise adversely to affect her status as an applicant for employment because of her disability. The Commission requests the Court to enjoin Starbucks from engaging in disability discrimination against employees and engaging in any other employment practice that discriminates on the basis of disability. The Commission also seeks appropriate back pay, and rightful-place re-hiring (or front pay in lieu thereof); and ordering Defendant to make Sallard whole by providing compensation for past and future nonpecuniary losses resulting from the subject unlawful practice, including, but not limited to, emotional pain, suffering, inconvenience, loss of enjoyment of life and humiliation. Equal Employment Opportunity Commission v. Starbucks Coffee Co., Case No. cv-00195 (WD Tex., May 11, 2011). 

5.      ILLINOIS TRS ASSETS RISE 23 PERCENT SINCE 2009: The Teachers’ Retirement System of the State of Illinois Board of Trustees reported total assets of $37.3 Billion at the end of March 2011, a 23 percent increase from 2009. During the first nine months of fiscal year 2011, investment rate of return for TRS was 21.38 percent, besting the current target rate of 8.5 percent. (Over the last 30 years, the TRS investment rate of return is 8.8 percent, also exceeding the target rate.) The worldwide financial crisis during 2008 and 2009 caused TRS to lose 32 percent of its assets over those two years, ending six straight years of asset growth.  

6.      TOWN SEEKS TO REVERSE MADOFF SETBACK: Lawyers representing Fairfield, Connecticut, asked the state’s appellate court to reverse a lower court ruling that the town cannot make claims for losses due to disgraced financier Bernard Madoff’s fraud. The Associated Press reports that lawyers for the town argued that Walter M. Noel and Jeffrey H. Tucker should be included among those responsible for a $42 Million loss in Fairfield’s pension fund. The town accused an investment firm, Noel and Tucker of promising consistent annual returns of between 8 percent and 12 percent while also limiting losses.  In a rather unusual move (to say the least), a Fairfield attorney conceded that a colleague who argued the case in the trial court could have done a better job. 

7.      CUTS LEAVE CITY VULNERABLE TO DISASTER: Thanks to some federal spending cuts, metro fire departments are going to be losing millions of dollars in federal Homeland Security Grants, and Kansas City, Missouri, Fire Chief Smokey (yes, that is his name) Dyer says that could leave the region less prepared for future natural disasters or terrorist attacks. Dyer says there is about $14 Million in grant money left for the region, and that money will run out in about three years. Chief Dyer told that local fire departments have been removed from the program, losing out to bigger cities for the shrinking supply of funds.  The region will not receive future funding to deal with the war on terror, but the ability to perform daily operations should not be affected. (In an eerie coincidence, as your editor is dictating this piece, other parts of Missouri are dealing with the effects of major storm damages.) 

8.      RAMBLINGS: Israel News: A meeting between Justin Bieber and Israeli Prime Minister Netanyahu was canceled last week.  No word yet on how this will affect the meeting between the Jonas Brothers and Hezbollah. 

9.      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.):  Behind every successful man is his woman. Behind the fall of a successful man is usually another woman. 

10.    QUOTE OF THE WEEK:   “Each thought that is welcomed and recorded is like a nest egg, by the side of which more will be laid.” Henry David Thoreau

11.    ON THIS DAY IN HISTORY: In 1896, Dow Jones begins an index of 12 industrial stocks (closing at 40.94). 

12.    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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