Cypen & Cypen
JUNE 14, 2007
Stephen H. Cypen, Esq., Editor
Florida Governor Charlie Crist has signed into law the Protecting Florida’s Investments Act (SB 2142). The law requires the State Board of Administration, which is responsible for an investments of the Florida Retirement System, to identify all companies in which public monies are invested that are doing certain types of business in or with Sudan and Iran. The law requires SBA to create and maintain certain scrutinized companies lists that name all such companies, and requires SBA to divest of all publicly traded securities of scrutinized companies under certain conditions. A scrutinized company is defined as any company that meets any of the following criteria:
By its terms, the law does not purport to apply to any pension system other than the Florida Retirement System. (Chapter 2007-88).
Florida Governor Charlie Crist on May 22, 2007 signed into law the “Iris Roberts Act,” HB 99, Chapter 2007-43. Effective July 1, 2007, an organization that is qualified under Section 501(c)(3) of the Internal Revenue Code and registered under Chapter 496, Florida Statutes, or a person or organization acting on behalf of that organization, is exempt from local requirements for a permit for charitable solicitation activities on or along streets or roads that are not maintained by the state, under certain conditions. (Generally, permits for use of any street, road or right-of-way not maintained by the state are issued by the appropriate local government.) Some of those conditions are as follows: (1) at least fourteen prior calendar days notice must be given, (2) there must be proof of commercial general liability insurance, (3) organizations may not solicit for a period in excess of ten cumulative days within one calendar year, (4) all solicitation must occur in daylight hours, (5) solicitation activities shall not interfere with safe and efficient movement of traffic and (6) no person engaging in solicitation activities shall persist after solicitation has been denied, act in a demanding or harassing manner or use any sound or voice-amplifying apparatus or device. The local government may stop solicitation activities if any conditions or requirements of law are not met. We bet Jerry’s kids at Muscular Dystrophy Association are relieved.
The top 100 U.S. corporate pension plans in aggregate were fully funded at the end of 2006, a major reversal from past years, Pensions & Investments’ review of annual reports shows. In dollar terms, the largest 100 plans showed an aggregate $37.5 Billion surplus, based on projected benefit obligations, the first surplus since P&I began tracking annual reports in 2002. In 2005, the largest 100 were underfunded by a total of $50.6 Billion; in 2004, by $69.5 Billion. Significantly higher investment returns were the largest factor in improved funding. The Russell 3000 Index, for example, returned 15.72% last year, compared with 6.12% in 2005. Corporations also took steps to improve their funding to comply with requirements of the Pension Protection Act of 2006, signed into law by President Bush last August. Of the 100 plans, 45 reported funding surpluses. Only four of the largest 100 plans saw their funded ratios drop in 2006, compared with 45 in 2005. The average investment return among the 100 largest defined benefit plans was 11.5%, up from 9.7% in 2005. The average expected long-term return on plan assets decreased to 8.4% from 8.5%.
Pensions & Investments reports that review by the U.S. Securities and Exchange Commission of 12b-1 fees more likely will result in reform than in outright elimination. Christopher Cox, chairman of SEC, is chiefly concerned about mutual fund companies using the fees to pay brokerage commissions and underwrite fund marketing expenses. To the degree that 12b-1 fees are used for record-keeping and administrative services, they should be okay. And even if the fees are scrapped altogether, mutual funds are expected to find new ways to pay record keepers and other service providers to retirement plans. Originally authorized by SEC in 1980, 12b-1 fees were intended to help the then-struggling mutual fund industry underwrite distribution expenses -- essentially the costs associated with recruiting new investors. Under National Association of Securities Dealers regulations, 12b-1 assessment on assets of participant-directed plans and other investors, including 401(k) plans, are limited to 25 basis points of a client’s assets in the fund, if the fund wants to promote itself as “no load.” NASD regulations permit load funds to carry 12b-1 fees as high as 100 basis points. The mutual fund industry collected $11.8 Billion in 12b-1 fees in 2006, up from $10.3 Billion in 2004.
The world of corporate pensions may be shrinking, but it is still fairly robust at S&P 500 companies, according to cnnmoney.com. And that is true for no one more so than the current crop of the companies’ already highly paid chief executive officers, who have accrued retirement benefits worth over $2 Billion today. Two-thirds of S&P 500 companies still offer defined benefit pension plans for their employees, but an estimated 73% also offer their top executives an additional pension-like plan known as a Supplemental Executive Retirement Plan (SERP). An examination of proxy statements from 353 S&P 500 companies reveals that 258 CEOs had defined benefit pension plans and SERPs, in which they had accumulated $2.6 Billion in benefits to date. While both traditional pensions and SERPs are entirely funded by the employer, SERPs. are much more lightly regulated, and companies have a lot more flexibility in how they design them. Another big difference in the two is their retention potential. With a traditional plan, the longer an employee’s tenure, the greater his pension benefit because benefits accrue more quickly at the end of one’s career. So leaving the company after only a few years means a much smaller pension. That is not necessarily the case with a SERP. While SERPs may have restrictions based on years of service dictating when and how much a CEO will be paid, in reality, when a CEO leaves for another company, his new employer is likely to offer so-called “make whole” or “golden hello” provisions, which essentially duplicate the value of his old SERP in his new job. It’s good to be the king.
Speaking of chief executive officer retirement payouts, Reuters reports that CEOs of big U.S. companies are more likely than their smaller-company counterparts to get a company-funded pension plan, a benefit rapidly disappearing for the average American worker. While almost three-quarters of CEOs at S&P 500 companies are eligible for supplemental executive retirement benefits paid for by the corporation, only a quarter of small-company CEOs are eligible for such benefits. At the same time, over the last three decades corporate America has scaled back company-funded pensions for rank-and-file employees. U.S. investor activists have complained that the top executives have accumulated unreasonably large amounts of money in Supplemental Executive Retirement Plans, known as SERPs. One example is former UnitedHealth Group Inc.’s CEO William McGuire, who is potentially eligible for a lump sum of $91.3 Million in retirement benefits. (In the spirit of full disclosure, it is true that McGuire’s retirement pay is currently frozen and subject to an injunction by a Minnesota federal court amid a flurry of shareholder lawsuits over the company’s stock options award practices. A report from UnitedHealth Group Inc. last year concluded that many of McGuire’s option grants likely were backdated.) It’s really good to be the king.
The Florida Attorney General has reiterated that e-mail messages made or received by agency employees in connection with official business are public records and subject to disclosure in accordance with Section 119.07(1)(a), Florida Statutes, in the absence of an exemption. Such messages are also subject to the statutory restrictions on destruction of public records. The fact that information is electronically generated and transferred rather than contained on paper does not alter its character as a public record under the Public Records Act. Thus, e-mail communication of factual background information and position papers from one official to another is a public record and should be retained in accordance with the retention schedule for other records relating to performance of the agency’s functions and formulation of policy. However, private e-mail stored in government computers does not automatically become a public record by virtue of that storage. Inasmuch as the Attorney General’s position on this subject has been well documented by prior opinions, we often wonder why people ask the same questions over and over again. Florida Attorney General Advisory Legal Opinion (Informal) June 8, 2007.
The foregoing Informal Attorney General Opinion makes reference to Chapter 2007-39, Laws of Florida, effective July 1, 2007, which creates new subsections (1)(b) and (c) of Section 119.07, Florida Statutes:
The new language should streamline the process of public record inspection and avoid undue delay in that regard.
Police blame a woman for stealing toilet paper from a courthouse, and while they are chuckling, the theft charge could land her in jail. According to Associated Press, workers at the courthouse had noticed toilet paper rolls were disappearing much faster than usual. The woman was caught last week after an employee saw her taking three rolls of two-ply (is that twice as bad as one-ply?) tissue from a storage closet. The miscreant insisted it was the first time she had pilfered toilet paper, but declined to answer further questions on advice of counsel. The misdemeanor normally carries a sentence of less than a year in jail. However, the thief could face more time if convicted under the state’s habitual offender law, because she has prior theft convictions. The woman did not work at the courthouse, and it was unclear as to why she was there. Oh, by the way, the woman’s name is -- we are not making this up -- Suzanne Butts. (This item reminds us of the case where thieves broke into a police station and stole all the toilets. When questioned, the chief candidly admitted “We have nothing to go on.”)
“The obscure we see eventually; the completely apparent may take longer.” Edward R. Murrow
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