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Cypen & Cypen
June 14, 2012

Stephen H. Cypen, Esq., Editor

1.     NCPERS 2012 PUBLIC FUND STUDY:    The National Conference on Public Employee Retirement Systems undertook the most comprehensive study to date addressing retirement issues for this segment of the public sector.  NCPERS has collected and analyzed the most current data available on member funds’ fiscal condition and steps they are taking to ensure fiscal and operational integrity.  The 2012 NCPERS Public Fund Study includes responses from 147 state and local government pension funds with a total number of active and retired memberships surpassing 7.5 million and assets exceeding $1.2 Trillion.  The majority, 84 percent, were local pension funds, while 16 percent were state pension funds.  The study finds that public funds continue to respond to changes in the economic, political and social landscape by adopting substantial organizational and operational changes to ensure long-term sustainability for their stakeholders.  Efforts include increasing age and service requirements, increasing member contributions, stronger operational practices and more diligent oversight.  Here are some key findings: 

  • With the market declines in recent years, the market and actuarial value of fund assets has declined; however, both 1-year and 20-year returns reported by participating funds point to continuing long-term improvement in funded status.  While the 1-year returns were slightly lower than 2011, all longer-term returns are higher. 
  • Income used to fund pension programs generally comes from three sources:  member contributions, employer contributions and investment returns.  As usual, investment returns are the most significant source -- 73 percent.  Member contributions make up 10 percent of fund income.  Employer contributions equal about 17 percent. 
  • Overall, funds reported domestic equity exposure at 36 percent (down from 39 percent last year), and international equity exposure remaining steady at 17 percent.  In the next two years, funds plan to reduce domestic equity slightly and increase allocations to private equity/hedge funds, commodities and other investments.  Funds with the highest 10-year returns had significantly lower allocation to domestic equity, international fixed income and high-yield bonds, but they had higher allocations to international equity, domestic fixed income and other asset classes. 
  • The average funded level is a solid 74.9 percent, slightly below 76.1 percent in the 2011 study.  Plans that include members who are eligible for Social Security have an average funded level of 80.4 percent, down from 84.7 percent.  The most significant reason for this decline was market volatility. 
  • Pension funds are designed to pay off liabilities over a period of time (amortization period) to ensure long-term stability, and to make annual budgeting easier through more predictable contribution levels.  For responding funds, that period of time averages to 24.6 years, down from 25.8 years in 2011. 
  • The study asked “How satisfied are you with your readiness to address retirement trends and issues over the next two years?” Respondents provided an overall “confidence rating” of 7.7 on a 10-point scale (very satisfied =10), up from 7.4 in 2011.  Social Security eligible and non-eligible funds rated this question 7.8 and 7.4, respectively. 
  • The overall average expense for respondents to administer funds and to pay investment manager fees is 73.1 basis points, a slight increase from the 2011 level of 69.2 percent.  According to the 2011 Investment Company Fact Book, the average expenses and fees of most equity/hybrid mutual funds average 95 basis points.  The conclusion means funds with lower expenses provide a higher level of benefit to members and produce a higher economic impact for the communities those members live in than most mutual funds. 
  • Several areas that showed increased activity over 2011:  increased employee contributions, increased age/service requirements, reduced wage inflation assumption, tightened use of overtime in calculation of a benefit, made benefit enhancements more difficult, reduced the multiplier, shortened amortization period and closed plans to new hires. 
  • Other areas that showed increased activity include:  increased audit of actuarial practices, increased death audits, strengthened asset allocation studies, improved records management and scanning, destruction of old copier hard drives, and increased operational benchmarking. 

Some other findings are 

  • The average investment assumption is 7.7 percent, the same as in 2011.  The inflation assumption fell to 3.4 percent from 3.5 percent.   


  • The average investment smoothing period is 5.2 years, up slightly from 5.0 years in 2011.  For Social Security eligible funds, the smoothing period averages 5.3 years, up from 4.8 years. 


  • The average participant to staff ratio is 830:1, with ratios of 1001:1 and 653:1 for Social Security eligible and non Social Security eligible plans, respectively. 

The entire 37-page report is available at
:    Increasingly, public employee retirement systems are implementing leading edge governance and risk management practices to position their funds for improved performance, while addressing risks related to the financial markets and global economy.  As the largest trade association for public sector pension plans, representing more than 550 funds and nearly $3 Trillion in assets, the National Conference on Public Employee Retirement Systems supports these initiatives.  NCPERS believes that instituting best practices drives accountability, consistency and transparency, which enables improved performance and risk oversight for the benefit of public pension fund members, taxpayers and other stakeholders.  To further these outcomes, NCPERS has developed Best Governance Practices for Public Retirement Systems: 

  • Governance Manual.  Whether it is in electronic or paper form, a fund should adopt a governance manual that serves as a central repository for its primary governance documents, a well designed governance manual facilitates effective management and provides a tool to educate trustees and stakeholders on fund operations.  
  • Board Practices.  A pension fund should establish, document and adhere to a set of practices that have a proven impact on performance and risk oversight.  Some of these practices are mandatory (for example, actuarial valuations), while others may be optional.  
  • Board Policies.  A fund should adopt and adhere to a set of policies designed to guide system operations toward the achievement of stated goals within established risk tolerances.  
  • Risk Oversight.  A fund should adopt a risk management framework and document it in a risk policy or within other documents (for instance, investment policy, privacy policy).  The board should delegate accountability for management of market, credit, operational, asset/liability, liquidity and other risks through job descriptions, contracts and charters.  
  • Strategic Planning.  A fund should adopt a strategic planning approach either in the form of a multi-year plan or within other documents.  Strategic planning is a hallmark of successful organizations.  It provides the board with a mechanism to map out long-term goals along with implementation steps necessary to achieve them.  
  • Reporting:  Key Performance and Risk Measures.  Reports to the board should include a set of key performance and risk measures to help the board assess the fund’s progress toward goals across actuarial, administrative, audit, compliance and investment functions.  Given their expansive duties, boards rely on efficient reporting to provide effective oversight.  
  • Stakeholder Communications.  A fund should communicate regularly with members and other stakeholders through multiple media, including web site notifications, publications and letters, as well as required reports.  Communications provide transparency into fund operations, and may increase member satisfaction, while strengthening the fund’s reputation.  

Public pension funds have played a leadership role in delivering high quality, cost-effective benefits to their members through effective oversight, accountability and transparency.  However, the need for continuous improvement and for communicating how these practices work to benefit stakeholders has never been greater.  The practices NCPERS recommends are intended to provide a means for ongoing improvement and for maximizing long-range organizational performance through market cycles and management changes.  Read a complete copy of the Practices at  
3.      WHY THE 401(K) FLOPPED
:     The recent big stock market slide has been bad news for the over 50 million Americans with 401(k) plans.  Many of these investors have yet to recover from the 2008 crash, and have been counting on a market upswing to make up for lost ground.  Yet, posits, even if stocks do rebound, the truth is that most 401(k) holders will never accumulate enough money for a secure retirement.  Few workers and their employers contribute at the level needed to build up a serious nest egg, and the median balance in a 401(k) for people approaching 65 is under $100,000.  On top of that, 401(k)s have been battered by two major stock market crashes in the past 12 years, and, further, many Americans have withdrawn money from their 401(k)s to cover emergency expenses.  Experts on retirement forecast that millions of middle class baby boomers will fall into poverty, or near poverty, in old age -- thanks to failure of the 401(k) experiment.  Five reasons stand out as to why the 401(k) has been such a disaster: 

  • First, the 401(k) system of individualized accounts is inherently inefficient.  While traditional pension funds invest worker contributions in large pools, keeping administrative costs low, each 401(k) holder pays a fees to the firms that manage their individual accounts.  Those fees can add up big time and chisel away at savings.  According a recent Demos report, 401(k) nest eggs end up nearly 30 percent lower over a lifetime of saving thanks to fees (see C&C Newsletter for June 7, 2012, Item 2). 
  • Second, the 401(k) system has never covered all workers. Some 40 percent of employees do not have access to a 401(k) plan, and many workers with the option choose not to participate or contribute negligible amounts.  Given such huge gaps in who is covered by 401(k)s, it is wrong to see this system as the primary private supplement to Social Security. 
  • Third, 401(k)s expose individuals to too much risk.  While investment firms always tout long-term historical returns of the stock market, real-life individuals can be in big trouble if they need to retire during a prolonged slump in stocks.  Pooled pension funds, in contrast, can better manage such downturns, and buffer individuals.  Such funds are also managed professionally, while the 401(k) lets ordinary Americans decide how their money is invested.  Yet, many workers are clueless about how to allocate their savings among the menu of investment options that most 401(k) plans offer, and do not often revisit their choices even as market conditions change. 
  • Fourth, the 401(k) system depends on the financial industry acting in the best interests of investors -- which, too often, it does not do.  Research has found that fees charged by 401(k) plans and mutual funds are often excessive, far beyond actual costs of managing investments.  Firms have historically not had a legal fiduciary responsibility to act in the best interests of 401(k) holders.  And while the Dodd-Frank Wall Street reform empowered the Securities and Exchange Commission to write rules that could impose such a responsibility, it has yet to do so.
  • Fifth, consumer choice does not offset failures of the 401(k) system.  In a truly competitive marketplace, educated consumers would shop for 401(k) plans with the lowest fees and switch to those plans.  But surveys have found that most Americans do not have a clue about the fees associated with their 401(k)s.  Switching plans can be difficult for individuals, since employers choose the plans.  

It is easy to forget that 401(k) plans have only been around for three decades.  A lot has been learned in that period, and the jury is now in:  the 401(k) experiment has failed.  The system does a better job of enriching the financial sector than in providing retirement security to Americans. 
:     Here is another retirement security update from Phyllis Borzi, Assistant Secretary for Employee Benefits Security Administration, U.S. Department of Labor.  Although it may come as a surprise to some, your employer-sponsored retirement plan is not free -- even though it may appear that way.  A recent AARP study found that 71% of respondents reported that they did not pay any fees for their 401(k) plan, while 23% said that they do pay fees.  Only 6% stated they did not know whether or not they pay any fees.  And it is not just individuals who are confused.  A recently released GAO Report, 401(K) Plans: Increased Educational Outreach and Broader Oversight May Help Reduce Plan Fees (see item 5 below), found that some plan sponsors faced challenges in understanding the fees they and their participants were charged.  There may be many reasons for this level of misunderstanding, but as a consumer, you are entitled to know what you are being charged for services you are getting.  Next month, under new Department of Labor rules, companies that service your employer-sponsored retirement plan will have to begin disclosing fees for your investments and the administrative costs associated with managing your savings plan.  Your employer will then have to show you the costs of your 401(k) investments, starting August 30, 2012 for most plans. 
5.      INCREASED EDUCATIONAL OUTREACH AND BROADER OVERSIGHT MAY HELP REDUCE 401(K) PLAN FEES:      The United States Government Accountability Office has issued its report entitled401(k) Plans:  Increased Educational Outreach and Broader Oversight May Help Reduce Plan Fees.  Plan sponsors and participants paid a range of fees for services, though smaller plans typically paid higher fees as a percentage of plan assets.  For example, the average amount sponsors of small plans reported paying for recordkeeping and administrative services was 1.33 percent of assets annually, compared with 0.15 percent paid by sponsors of large plans.  Larger plans were more likely to pass recordkeeping fees along to participants, but when fees were passed along to participants in small plans, those in large plans paid lower fees than those in small plans.  Participants also paid for investment and plan consulting fees -- through fees deducted from their plan assets -- in more instances than sponsors.  GAO’s survey and review of plan documents showed that some sponsors faced challenges in understanding the fees they and their participants were charged. Some sponsors did not know if their providers used complex fee arrangements, such as revenue sharing, or if their plans paid certain fees under an insurance contract, such as a group annuity contract. In addition, some sponsors reported knowing about arrangements, but did not fully understand how these fees were charged.  For example, one relatively large plan underestimated recordkeeping fees by more than $58,000, because the sponsor did not include the fees charged to participants’ accounts under its revenue sharing arrangement.  (Revenue sharing generally refers to indirect payments made from one service provider to another service provider in connection with services provided to the plan, rather than payments made directly by the plan sponsor for plan services.)  The Department of Labor has taken several actions to help sponsors understand and monitor fees charged by service providers.  For example, the Department disseminates a number of publications and resources, including a 401(k) fees checklist that is available to sponsors on its website to help them better understand plan fees. However, according to the survey, more than an estimated 90 percent of sponsors either did not know about or have not used the Department’s resources to compare and assess plan fees. In addition, sponsors have access to plan information of others, including some fees paid, through the Form 5500, but the survey also showed that the information is not being used by sponsors.  Finally, although the Department has recently taken on regulatory initiatives to enhance fee disclosures to sponsors, their effect remains to be seen.  For instance, the Department is in the process of revising a proposed change to the definition of the term “fiduciary,” which may allow the Department to oversee a broader range of plan investment advisers.  Nevertheless, the Department’s authority over other types of providers, which have considerable influence over sponsors and may charge sponsors and their plan participants excessive fees, is limited.  GAO-12-325 (April 2012) 
6.      CIVIL SERVICE REFORM ACT PROVIDES EXCLUSIVE AVENUE FOR JUDICIAL REVIEW FOR COVERED EMPLOYEES (EVEN WHEN THEY ARGUE UNCONSTITUTIONALITY OF A FEDERAL STATUTE):     The Civil Service Reform Act of 1978 established a comprehensive system for reviewing personnel action taken against federal employees.  A qualifying employee has the right to a hearing before the Merit Systems Protection Board, which is authorized to order reinstatement, backpay and attorney’s fees.  An employee who is dissatisfied with the MSPB’s decision is entitled to judicial review in the Federal Circuit.  Elgin was a federal employee discharged pursuant to a federal statute that bars from Executive agency employment anyone who has knowingly and willfully failed to register for the Selective Service as required by the Military Selective Service Act.  Elgin challenged his removal before MSPB, claiming that the statute was an unconstitutional bill of attainder, and unconstitutionally discriminated based on se.x when combined with the Military Selective Service Act’s male-only registration requirement.  MSPB referred the case to an Administrative Law Judge, who dismissed the appeal for lack of jurisdiction, concluding that an employee is not entitled to MSPB review of agency action that is based on an absolute statutory bar to employment.  The ALJ also concluded that the MSPB lacked authority to determine constitutionality of a federal statute.  Rather than seeking further MSPB review or appealing to the Federal Circuit, Elgin raised the same constitutional challenges in a suit in Federal District Court.  The District Court found that it had jurisdiction and denied Elgin’s constitutional claims on the merits.  The First Circuit Court of Appeals vacated, and remanded with instructions to dismiss for lack of jurisdiction.  The First Circuit held that Elgin was an employee entitled to MSPB review despite the statutory bar to his employment.  The court further concluded that challenges to removal are not exempt from the CSRA review scheme simply because an employee challenges constitutionality of the statute authorizing removal.  On review by the United States Supreme Court, the Supreme Court held that CSRA precludes district court jurisdiction over Elgin’s claims because it is fairly discernible that Congress intended the statute’s review scheme to provide the exclusive avenue to judicial review for covered employees who challenge covered adverse employment actions, even when those employees argue that a federal statute is unconstitutional.  The CSRA’s purpose supports the conclusion that the statutory review scheme is exclusive, even for constitutional challenges.  The CSRA’s objective of creating an integrated review scheme to replace inconsistent decisionmaking and duplicative judicial review would be seriously undermined if a covered employee could challenge a covered employment action first in a district court, and then again in a court of appeals, simply by challenging constitutionality of the statutory authorization for the action.  Elginv. Department of Treasury, Case No. 11-45 (U.S. June 11, 2012). 
7.      PUBLIC VS. PRIVATE SECTOR CUTS:  A STATE-BY-STATE BREAKDOWN:     Nearly all states coped with sizable private sector job losses during the recession along with now-sluggish growth.  How these private sector cuts have carried over to the public sector, though, has varied greatly across the country.  While public payrolls generally downsized in recent years, a Governing analysis of Labor Department data finds state and local government reductions being applied unevenly so far, with employment growing or remaining roughly unchanged in about half of states since start of the recession. Private sector employment, by contrast, increased in only five states.  The state-by-state data measure employment for all non-federal public employees, including those working in schools.  For the most part, public and private sector employment is positively correlated, particularly among states experiencing drastic cuts in the private sector.  It Is no surprise, then, that Nevada -- home to the nation’s highest unemployment rate -- has slashed public payrolls by 9 percent, the most of any state.  But Labor Department estimates also suggest numbers of public employees actually grew in some states, even those with notable drops in private employment.  The following are the data for Florida: 
State     State Gov….Local Gov.   State and Local   Private    State      Local      Private
                                                                                                 Total       Total      Total
Florida    -1.86%       -5.15%         -4.44%                 -8.13%    -4,000    -40,500   -552,000
A table state-by-state is available at  
8.      FAILURE TO ALLEGE PURPOSEFUL CAUSING OF HARM DOOMS CIVIL RIGHTS ACTION:      After Wilson, a new recruit for the Baltimore City Fire Department, tragically died during a “live burn” training exercise, her survivors and estate commenced an action against the City of Baltimore and its Fire Department, alleging that they had violated Wilson’s substantive due process rights by staging the exercise with deliberate indifference to her safety, so as to shock the conscience.  The federal district court granted defendants’ motion to dismiss, concluding that the deliberate indifference standard is normally applied only to those in the government’s custody, and that Wilson was not in custody and had an option of declining to participate in the exercise -- or even declining to be a firefighter.  The court instead applied a standard requiring the showing of intent to harm, and concluded that however reckless defendants may have been, their actions did not rise to the level of a constitutional violation. Applying U.S. Supreme Court and circuit precedent, the U.S. Fourth Circuit Court of Appeals affirmed.  The appellate court concluded that because the complaint did not purport to allege that the Fire Department staged the live burn training exercise with the purpose of causing harm to Wilson or to any other recruit, it fell short of alleging a substantive due process violation in context of the facts alleged, even though it might well allege causes of action under state law, as the complaint purported to do in other counts.  It is true that in this case the Fire Department created the danger, but this fact does not satisfy any elements of the standard the Supreme Court has articulated for showing a substantive due process violation with respect to a government employee.  Moreover, if we were to recognize that governmental liability could flow simply from its creation of a dangerous condition, the practical consequences would be immense.  Slaughter v. Mayor and City Council of Baltimore, Case No. 10-2436 (U.S. 4th Cir., June 7, 2012). 
9.      WHY IS IT HARDER FOR WOMEN TO SAVE FOR RETIREMENT?:      Ladies, have you thought about your retirement plan?  If you have not put any effort into saving for retirement, it is something worth considering -- and soon – according to  While few Americans are superstar retirement savers, women in particular tend to fall short compared to men, saving less than 70% of what men typically save.  So, why is saving such an uphill battle for women?  Here are five key factors: 

  • They Live Longer.  Retiring comfortably means setting up a steady stream of income that will last for life.  The additional burden on women here stems from the fact that they tend to live about five years longer than men, which means their savings have to stretch farther, and perhaps cover increasing healthcare expenses that come with old age.  
  • They Earn Less.  Whether because of the glass ceiling on women’s wages or the time many women spend raising children, women earn less than men over their working lives -- a lot less.  In fact, women make $434,000 less than men over their lifetime.  
  • They Avoid Risk.  There are two sides to saving for retirement: what you put in and how you invest that money to make it grow. And one of the fundamental factors in investment returns is risk, which is why few advisors recommend a risk-free portfolio, especially for younger investors.  For women, however, biting the bullet often is not a strong suit.  Only 26% of them feel confident in their investing ability, compared to 44% of men.  As a result, women trade less frequently, hold less volatile portfolios and expect lower returns than men do.  (Studies about women investors tend to show that their cautious nature can help them outshine men, but those results are generally calculated on a risk-adjusted basis.)
  • They are Less Confident.  In survey after survey, women rate themselves as less confident, less knowledgeable and generally less capable in finance than men do.  This feeling can often leave women sitting on the sidelines or choosing investments that put safety above growth.  Estimates are that 80-90% of women will be solely responsible for their finances at some point in their lives.  Fewer than 20% feel prepared to make wise financial decisions. 
  • They are Often Overlooked.    The financial industry has a poor track record when it comes to serving women.  More than 70% of women are dissatisfied with the financial services industry, and feel that their gender affects not only the quality of advice they receive, but whether they are taken seriously. 

Saving for retirement is a challenge, but the situation is particularly complex for women, who face specific hurdles that threaten their ability to save.  Nevertheless, these additional challenges are no excuse for post-work pennilessness.  When it comes to preparing for retirement, the process is the same for both men and women:  Plan carefully, save diligently and invest intelligently – all things being equal, there is nothing else anyone can do.  
:     Bank of America Merrill Lynch announced findings from its 2012 Workplace Benefits Report, an annual study of the increasingly significant role financial benefit plans play in employers’ talent management strategies and in the overall financial wellness of their employees.  Key findings include:

  • Financial benefits are more important to new hires today than five years ago.
  • Employer concern for employees’ long-term financial security drives benefit decisions.  
  • Workers are largely on their own when it comes to transitioning into retirement.  
  • Demand for personalized financial advice in the workplace is on the rise.  
  • Greater understanding of their benefits increases employee engagement with and appreciation for these plans and improves outcomes. 

Ninety percent of employers believe that financial benefits are equally or more important to potential hires today than five years ago -- with 50 percent believing such benefits to be more important than ever. Confirmation, nearly 80 percent of employees view these benefits as a key factor when considering and accepting a new position.  Companies of all sizes also recognize the need to offer competitive financial benefits to retain talented people and stem employee turnover costs (84 percent), from losses in productivity and sales to the high cost of recruitment and training.  Encouragingly, 81 percent of employers make financial benefit plans available to employees as part of their company’s core values.  When selecting financial benefit plans and designing wellness programs, employers place the greatest importance on a plan’s usefulness to employees (88 percent), quality of service their employees will receive (86 percent) and a plan’s cost (80 percent).  Flexibility of the plan to support a demographically diverse workforce is also an important consideration (72 percent).  Ninety-one percent of employers felt an increased sense of responsibility for the financial future of their employees.  Nearly 70 percent of employers feel some sense of responsibility for helping employees secure assets needed to sustain them later in life. However, workers nearing or in late stages of their career often find themselves on their own when it comes to transitioning into retirement.  For example, just 39 percent of employers offer their retiring employees guidance on what to do with their 401(k) assets, while only 20 percent help educate employees on such issues as preparing for future health care costs or understanding when to take Social Security as they approach traditional retirement age.  The foregoing statistics may be part of the reason why only 42 percent of employees surveyed feel they are on track financially to support their desired lifestyle in retirement, and another 22 percent have no idea whether they are on track to do so or not.  This lack of confidence may be one reason why 73 percent of all employees surveyed see themselves working into their 70s.  When asked about the desire for a guaranteed source of income during retirement, 82 percent of employees would be willing to give up 5 percent or more of their salary if it meant having reliable income to help them live comfortably during their later years; 42 percent would be willing to give up 10 percent or more of their salary. 
  In news that ought to relieve parents, The New York Times reports the death rate of teenage drivers has fallen steadily and dramatically in the United States since 1996, when states began enacting graduated driver licensing laws.  Many deadly crashes involving teenage drivers between 1996 and 2010, the last year for which complete data were available, were attributed to those drivers’ inexperience behind the wheel.  Graduated driver licensing programs introduce driving privileges little by little, with intention of minimizing potential distractions to new drivers, and to shield them from high-risk situations like driving at night and with passengers from their age group.  Earlier research indicated that states with the strongest laws experienced the biggest reductions in fatal crashes among drivers aged 15 to 17 years old compared to states with weak laws.  Five principal components of these laws are the age at which a teenager can obtain a permit; the number of practice driving hours required; the age at which a teenager can test for and receive a license; restrictions on night driving; and limits on the number of teenage passengers allowed in the car.  The new analysis was performed to encourage states to improve their graduated licensing laws.  There is no national system, so laws vary by state.  The death rate, which was based on 15-to-17-year-old drivers involved in fatal crashes per 100,000 teenagers, fell 68 percent for 16-year-old drivers.  The downward trend continued for other teenagers, with a decline of 59 percent for 17-year-olds, 52 percent for 18-year-olds and 47 percent for 19-year-olds.  And for the first time since 1996, the death rate among 16-year-old drivers fell below that of drivers age 30 to 59.  Come on, states, get with the program. 
12.    IMPROVEMENTS NEEDED TO ENSURE ONLY QUALIFIED VETERANS AND SURVIVORS RECEIVE BENEFITS:     The Department of Veterans Affairs’ pension program design and management do not adequately ensure that only veterans with financial need receive pension benefits.  While the pension program is means tested, there is no prohibition on transferring assets prior to applying for benefits.  Other means-tested programs, such as Medicaid, conduct a look-back review to determine if an individual has transferred assets at less than fair market value, and if so, may deny benefits for a period of time, known as the penalty period.  This control helps ensure that only those in financial need receive benefits. In contrast, VA pension claimants can transfer assets for less than fair market value immediately prior to applying and be approved for benefits.  For example, GAO identified a case where a claimant transferred over a million dollars less than 3 months prior to applying, and was granted benefits.  Also, VA’s process for assessing initial eligibility is inadequate in several key respects.  The application form does not ask for some sources of income and assets such as private retirement income, annuities and trusts.  As a result, VA lacks complete information on a claimant’s financial situation.  Also, the form does not ask about asset transfers -- information VA needs to determine whether these assets should be included when assessing eligibility.  In addition, VA does not verify all the information it does request on the form.  For example, VA does not routinely request supporting documents, such as bank statements or tax records, unless questions are raised.  VA’s fiduciary program, which appoints individuals to manage the financial affairs of beneficiaries who are unable to do so themselves, collects financial information that may affect some pension recipients’ eligibility, but VA pension claims processors do not have access to all this information.  Further, guidance on when assets should be included as part of a claimant’s net worth is unclear; and VA claims processors must use their own discretion when assessing eligibility for benefits, which can lead to inconsistent decisions.  GAO identified over 200 organizations that market financial and estate planning services to help pension claimants with excess assets meet financial eligibility requirements for these benefits.  These organizations consist primarily of financial planners and attorneys who offer products such as annuities and trusts.  GAO judgmentally selected a nongeneralizable sample of 25 organizations and GAO investigative staff successfully contacted 19 while posing as a veteran’s son seeking information on these services.  All 19 said a claimant can qualify for pension benefits by transferring assets before applying, which is permitted under the program.  Two organization representatives said they helped pension claimants with substantial assets, including millionaires, obtain VA’s approval for benefits.  About half of the organizations advised repositioning assets into a trust, with a family member as the trustee to direct the funds to pay for the veteran’s expenses.  About half also advised placing assets into some type of annuity.  Some products and services provided, such as deferred annuities, may not be suitable for the elderly because they may not have access to all their funds for their care within their expected lifetime without facing high withdrawal fees.  Also, these products and services may result in ineligibility for Medicaid for a period of time.  Among the 19 organizations contacted, the majority charged fees, ranging from a few hundred dollars for benefits counseling to $10,000 for establishment of a trust.  GAO-12-540 (May 2012). 
13.    MOM WHO CHEERED TOO LOUD AT GRADUATION IS ARRESTED:     According to blogger Jennifer Halford, Esq., you should celebrate when your child graduates from high school, but do not celebrate too much if it is from South Florence High School in South Carolina.  Mom Shannon Cooper was arrested for cheering too loud at her daughter’s graduation ceremony.  Cooper did not think she acted any differently than other families did when their graduates' names were announced.  But the police said it was disorderly conduct, which occurs when a person is behaving in a disruptive manner, but presents no serious public danger.  The school district had previously announced to all parents to be as orderly as they could during the ceremony.  A misdemeanor, disorderly conduct can result in a fine of up to one hundred dollars or imprisonment up to thirty days.  Cooper was escorted by police from the ceremony, and booked, spending the rest of the ceremony and several more hours there until posting bond.  Cooper’s daughter did not even know her mother was being arrested for cheering until her friends told her. What a scream. 
14.    WHAT CITIES HAVE LONGEST PUBLIC STARIWAYS?:     The answer to that burning question has been answered by, which says outdoor stairways have long crisscrossed city landscapes, serving as links between neighborhoods and providing shortcuts for locals.  Some areas are home to scores of stairways that are often not maintained by city parks departments, making them difficult to track.  But small groups of advocates have formed in select communities with the intent of preserving the infrastructure, which typically erodes after years of neglect.  Pittsburgh, with its rolling hills along the Allegheny River, offers 117 stairways with at least 100 steps, the most of any city.  Los Angeles, Seattle and San Francisco boast similarly high numbers of documented stairways.  Although stairways cost less to maintain than roadways, they do require landscaping and occasional repairs as needed.  Stairways along steep hillsides are particularly vulnerable to erosion and cracking of pavement over many years.  Here are the public stairways with the highest recorded number of stairs: 
Murphy Ranch East Stairway (Los Angeles) -- 512 stairs
Gil’s Stairs (Hood River, Oregon) -- 413 stairs
56th Street Steps (Pittsburgh) --  394 stairs
Howe Stairway (Seattle) -- 388 stairs
Filbert East Stairway (San Francisco) --  383 stairs
Although this piece is not particularly scholarly, it is a step in the right direction. 
15.    FPPTA 28TH ANNUAL CONFERENCE:   The Florida Public Pension Trustees Association’s 28th Annual Conference will take place on June 24-27, 2012 at the Hilton Walt Disney in Lake Buena Vista.  The hotel is located across the street from Downtown Disney and has complimentary transportation to Disney parks.  There are a variety of restaurants within the hotel including a Disney character breakfast Sundays at Covington Mill.  A link on FPPTA’s web site,, will take you to the Hilton Walt Disney site to make your room reservations.  Sunday, June 24th the Associates Advisory Board is sponsoring the 24th Annual Associates Charitable Golf Classic held on Disney’s beautiful Magnolia Golf Course. 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.    GOLF WISDOMS:     It always takes at least five holes to notice that a club is missing.        
17.    PUNOGRAPHICS:     I stayed up all night to see where the sun went.  Then it dawned on me.            
18.    QUOTE OF THE WEEK:   “If you don’t like something, change it; if you can’t change it, change the way you think about it.”  Mary Engelbreit 
19.    ON THIS DAY IN HISTORY:  In 1954, President Eisenhower signs order adding words “under God” to the Pledge.     
20.    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. 
21.    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  Thank you.

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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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