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Miami

Cypen & Cypen
NEWSLETTER
for
June 4, 2020

Stephen H. Cypen, Esq., Editor

1.  NEW JERSEY TO POSTPONE PENSION PAYMENTS:
New Jersey’s state government pension fund, projected to lose billions in revenue to the coronavirus crisis, is planning to defer some pension payments to the next fiscal year.  The state is planning to postpone a September pension payment of $950.9 million to October, the start of the next fiscal year, according to a grim budget report from the state treasury released last week. Its current fiscal year has already been extended to September from June. 
 
New Jersey, expecting a $10 billion shortfall through the end of fiscal year 2021, is looking to cut more than $5 billion in planned spending across nearly all sectors of government. That includes delaying more pension contributions, as well as school aid and municipal property tax relief.  “While there are many moving parts, what is clear is that a decline of this magnitude would be worse than the Great Recession,” state Treasurer Elizabeth Maher Muoio said in the budget report. “This means the sizable surplus and rainy day fund we have built together will easily be depleted.” 
 
Prior to the pandemic, New Jersey had been making strides to improve its economic situation, worsened by its large debt load and pension liabilities. Over the past two years, the state made record payments into its retirement system, and it made its first rainy day fund deposit in over a decade.   However, any surplus in the budget will soon be drained, as the coronavirus compounds the state’s financial problems. Even before the economic fallout, the state had budgeted just 70% of its annual actuarially determined contribution (ADC) for the pension fund. The state pension fund is roughly 40% funded. 
 
New Jersey is also losing tax revenues at a time when health care and unemployment costs are spiking as a result of the public health crisis. The state has reported about 11,200 deaths through the end of May, roughly one-tenth of the national death toll from the coronavirus. The state treasurer also noted that more “significant” budget cuts will be needed in fiscal year 2021 to stem the losses if the state is not allowed to borrow or if it does not get additional federal funding.   As it is, Gov. Phil Murphy has been appealing for additional federal aid for state governments over the past month. He argued the state may have to lay off front line workers, such as teachers, police officers, firefighters, emergency medical personnel and health care employees without it. Michael Katz, Chief Investment Officer, www.ai-cio.com, May 27, 2020.

2.    STATUS CHECK; CLOUDY DAYS FOR PENSIONS?:
Eric Petersen’s clients, by and large, don’t seem to be panicking. But these days, the small number among Petersen’s client base at Hicks Pension Services in Fremont who still offer defined-benefit pensions are calling him with questions related to the coronavirus pandemic. “I know for sure, many, many companies will be dropping this defined benefit,” says Petersen, who estimates 15 percent of employers he works with provide defined-benefit pensions, plans that guarantee a set payout to retirees rather than a set contribution. More and more private sector employers have switched to the latter in recent years, most commonly through 401(k) plans, according to CNN. Public pensions, on the other hand, primarily remain defined-benefit plans.
 
“The (clients) that are struggling, we’re freezing future accruals right now,” Petersen says.  It’s still early to fully gauge what effects the coronavirus economic shutdown will have on the pension landscape, which was battered by the Great Recession and has faced uncertainty since, as Comstock’s reported in November 2019 (“How Safe is Your Pension?”).  Still, the preliminary outlook for certain parts of the industry, particularly with defined-benefit plans, isn’t overly encouraging.
 
Part of the challenge with defined-benefit plans is that they have mandatory company contributions and protected accruals. Once these plans are agreed to, even if they are frozen, they can impose massive financial obligations down the road. Case in point: McClatchy Co., which froze its pension plan in March 2009, will have its pension and its $535 million shortfall taken over by the federal Pension Benefit Guaranty Corporation if a bankruptcy judge rules the company can’t survive otherwise, according to a McClatchy story.
 
Marc Roberts, president and an owner of Associated Pension Consultants in Sacramento, was in conversation with clients as financial markets began a steep descent in March.  “We were contacting clients saying, ‘OK, interest rates have declined. Market value of your assets has declined,’” Roberts tells Comstock’s. “And who knows, with everything that’s going on, you may not be having a real good year in 2020 as far as financially. Do you want to possibly freeze your defined-benefit plan … as a safeguard in case it doesn’t turn out very well and you don’t have the cashflow to put the monies into the plan as required? And we had a lot of clients that went with that.”
 
Other parts of the retirement landscape have been calmer. The Coronavirus Aid, Relief, and Economic Security, signed into law March 27, made it easier for people to access retirement income, particularly from 401(k) plans, for loans or distribution, says Jennifer Anders-Gable, managing attorney at the Western States Pension Assistance Project.
 
“There have been some people who are interested in those implications, but so far, we haven’t received an overwhelming amount of those calls,” Anders-Gable says. “Frankly, I’m hoping that we don’t. Because the key to retirement income is that it’s there when you need it in retirement.”  Meanwhile, Ted Toppin, chair of Californians for Retirement Security, which represents about 1.2 million employees, says that two major retirement organizations in the state, CalPERS and CalSTRS, were prepared for a crisis such as COVID-19. While each incurred paper losses in March, CalPERS and CalSTRS developed strategic plans after the Great Recession and can now take advantage of discount investment opportunities. “They have been a calm voice,” Toppin says.
 
Toppin is encouraged by the long-term prospects, saying that he noted in a recent op-ed for The Sacramento Bee that CalPERS has averaged an annual rate of return on its investments of 9.1 percent over the past decade and 8.1 percent over the past 30 years.  Toppin is irked that critics continue to attack public pensions as unsustainable. “Defined-benefit pensions really are sort of the only way to provide retirement security in a systemic way,” he says. “It’s unfortunate that the private sector has moved so far away from it.”
 
He adds, “If you have a reasonable system that looks out for its sustainability, it can work in the public and private sector. Folks should worry less about trying to take it away from public employees and spend a lot more time thinking about how to provide retirement security to public and private sector employees.  Graham Womack, Comstock’s Magazinewww.comstocksmag.com, May 25, 2020. 

3.  R.I. PENSION SYSTEM OUTPERFORMED 95% OF U.S. PENSION PLANS DURING COVID-19 MARKET CRISIS:
The Rhode Island pension system outperformed the vast majority of its peers in the first quarter of 2020 according to new data released by Investment Metrics, formerly MSCI InvestorForce, the leading source of investment performance analytics for institutional investors.
 
From January through March, Rhode Island's investment performance outperformed the median U.S. public pension plan by 4.2%, saving more than $365 million - relative to if the state had performed in line with the median plan. Overall, Rhode Island's performance for the period ranked 28th out of 546 public pension funds in the United States, according to Investment Metrics.
 
"The new data indicating that Rhode Island is performing better than most other pension plans during the COVID-19 crisis is welcome news," said Rhode Island Treasurer Seth Magaziner. "In these challenging times it is more important than ever that we deliver strong performance for the state's finances, and protect the retirement security for the many teachers, first responders, and other public employees serving our communities."
 
In 2016, Magaziner launched his "Back to Basics" investment strategy for the pension system, including nearly $800 million in a Crisis Protection allocation which is designed to outperform during times of market stress.
 
During the first quarter of 2020, as the markets reacted to the spread of the Coronavirus, the S&P 500 declined by 20% and the median public pension plan returned -13.8%. During the same period, the Rhode Island Crisis Protection allocation rose by 15.1%, helping to limit the system's overall decline to 9.6%.  RI Government Press Release, www.ri.gov, May 21, 2020.

4.     2020 DEFINED BENEFIT ADMINISTRATION SURVEY:
After a decade of change, defined benefit plans still are relevant to the retirement system.  Ten years ago, PLANSPONSOR fielded its first Defined Benefit (DB) Administration Survey. Their hope was that the research would become a one-of a-kind resource for the private-sector DB industry, offering insight both into the types of plans that composed the market and the administrative service providers that supported it. The survey came at a time when the role of DB plans as the third leg of the retirement stool-along with Social Security and personal savings-was quickly being replaced by that of defined contribution (DC) plans. However, the industry still presented an opportunity for administrators and asset managers to capitalize on decades of growth, even as the prominence of the industry itself continued to fade.
 
Nearly a decade later, the DB industry is still maturating. This year’s survey profiles 19 providers vs. the 28 listed in 2010. Of the 14 providers that reported data in both surveys, many have seen plan counts increase, suggesting that provider consolidation and natural plan migration have thinned the competitive landscape. Not surprisingly, the result of these market forces has been a consolidation of business, as our 2020 survey accounts for more plans and more participants than it did in 2010.
 
Still, even the most committed providers face substantial headwinds from the market’s continued evolution. A Lesson in Fine Tuning Most notably, the past decade saw an increase in the percentage of frozen plans, which jumped to 68% this year from 22% in 2010. Further, retired and separated participants now account for 63% of all DB participants versus 56% in 2010. Both factors can weigh on long-term revenue growth by limiting the potential for organic growth in participant counts.
 
Another threat comes in the form of the growing pension risk transfer (PRT) market. A LIMRA Secure Retirement Institute study last year found that eight in 10 private-sector DB plan sponsors that also offer a defined contribution plan are at least somewhat interested in a PRT transaction. LIMRA also reports that, annually, the number of PRT contracts had increased 76% from 2014 to 2018, and a record 501 U.S. single-premium pension buy-out contracts were sold last year, totaling $28 billion.
 
While the next decade will likely see the continuation of these trends, the news is not all bad. Interest in cash balance plans has grown in recent years thanks to legislative changes that made such plans easier to administer and fund. Perhaps most importantly, DB plans are having an impact on DC plan design, where professional asset-allocation solutions such as targetdate funds (TDFs) and managed accounts are working to maximize participant savings. Next up may be an increased level of dialog on how DC plans generate retirement income, something DB plans have achieved with mixed results. Fortunately, though, we have their legacy to learn from and improve on.  Click here to view the complete survey.  Plansponsorwww.plansponsor.com, May 18, 2020.
 
5.    THE CORONAVIRUS CRISIS WILL MAKE THE BIG PRIVATE CAPITAL MANAGERS BIGGER:
The largest managers will tighten their grip on private capital markets during the coronavirus pandemic, according to PitchBook, a data, research and technology company covering the private capital markets, including venture capital, private equity and M&A transactions.  “Covid-19’s impact on in-person due diligence is thwarting fundraising attempts by nearly every GP and further exacerbating the bifurcation between mega-fund managers and everybody else,” Wylie Fernyhough, a senior analyst for private equity at PitchBook, wrote in a new report analyzing fundraising trends. “Business travel and in-person due diligence will likely be inadvisable for LPs for several months, meaning mega-funds and more established firms will continue to assume the lion’s share of capital.” According to the report, private equity firms Thoma Bravo, Silver Lake Management, New Mountain Capital and Francisco Partners have either launched mega-buyout funds - defined by PitchBook as vehicles targeting $5 billion or more - or are nearing first closes in spite of the coronavirus pandemic. Smaller firms, meanwhile, “have had to push out fundraising efforts indefinitely,” according to Fernyhough.  “The largest GPs are in high demand and able to secure fresh capital from LPs at a time when many smaller firms are unable to do so,” he wrote.
 
This is true across private markets, according to the PitchBook report, which looked at fundraising for private equity, venture capital, private debt, real assets, funds of funds, and secondaries.  “We are hearing from both allocators and managers that re-ups with existing GPs are more likely to find success than new fund strategies,” wrote Hilary Wiek, a senior analyst for fund strategies and performance at PitchBook. “Across private market strategies, this will push the balance even further toward the mega-funds that have been garnering such a large proportion of LP commitment dollars.”
 
In the first quarter, PitchBook said 299 private capital funds closed with a total of $206.3 billion in commitments. This “healthy” fundraising total can be at least partially attributed to funds that completed the bulk of fundraising activities in 2019, according to PitchBook.  Investment pools larger than $5 billion accounted for about a third of the fund closures, PitchBook said.  “Big funds are continuing to close with impressive commitment totals, benefitting both from their established names and the fact that LPs had completed much of their due diligence in 2019,” Wiek wrote.
 
In private equity, four of the five largest funds closed in the first quarter finished their fundraising before the coronavirus outbreak was classified as a worldwide pandemic. But the fifth biggest fund -- the Carlyle Group’s fourth Japanese buyout fund -- closed with almost $2.4 billion on March 25, having raised more than twice money as much as its predecessor.  Other large funds that closed in March included the 17th fund from venture capital firm New Enterprise Associates, which raised $3.6 billion, and a $5 billion European debt fund from Blackstone’s credit arm, GSO Capital Partners.  Amy Whyte, Institutional Investor, www.institutionalinvestor.com, May 20, 2020.
 
6.    IMPLEMENTATION OF CORONAVIRUS-RELATED DISTRIBUTIONS IN DB PLANS:
Provisions in the Coronavirus Aid, Relief and Economic Security (CARES) Act don’t only apply to defined contribution (DC) plans; some apply to defined benefit (DB) plans as well. For example, DB plan sponsors may offer coronavirus-related distributions (CRDs) to participants, subject to certain plan and regulatory rules.  The provisions for CRDs contained in the relief bill apply to DB plans in the same way they do to DC plans, as long as pension plan sponsors had previously allowed for in-service distributions, says Brian Donohue, a partner at October Three in Chicago.
 
Participants in both types of plan qualify for a distribution if an individual was diagnosed with COVID-19, had a spouse or dependent who was, or experienced adverse financial consequences as a result of the COVID-19 crisis. Plan sponsors may rely on participant self-certification that the participant has been affected. “If employers are worried about employees claiming hardship, it’s not their responsibility to monitor that,” Donohue states.  Hitz Burton, partner for legal consulting and compliance at Aon, says DB plan sponsors can only provide coronavirus-related distributions to those otherwise eligible for a distribution under the Internal Revenue Code, such as a terminated, vested or retirement-eligible former employee, as long as the distribution is permitted by plan terms. Additionally, coronavirus-related distributions can be used in a DB plan that permits distributions at attainment at age 59 1/2 or older as a de-risking opportunity, he adds.
 
The CARES Act does not change when a distribution may be made to a DB participant, October Three explains in a post on its website. However, for other participants, including those “furloughed”--but not permanently “separated from employment”--active employees older than age 59 1/2 and retirees, the answer is more complicated. The firm recommends DB plan sponsors review these issues with counsel if they are interested in making 2020 lump-sum distributions to one or more of these groups. “We are going to need some guidance from the DOL [Department of Labor] in terms of model language, because that will need to be modified this year when it comes to these distributions,” Donohue says.
 
Since the CARES Act removed certain requirements, these new distributions are an attractive option for some, he adds. For example, while traditional in-service distributions are subject to a 10% early withdrawal tax, a CRD is not. Additionally, CRDs can be included in taxable income over a three-year period and may be recontributed to the plan during this period.  DB plan sponsors that consider adding a CRD option to their plans should be mindful about certain provisions. For example, the $100,000 limit on these distributions must be monitored and applied across qualified plans--both DB and DC--that are sponsored by the employer, Burton notes. “Because of the likely difficulty and associated compliance risk with monitoring the $100,000 limit across multiple plans, Aon generally recommends that a sponsor considering a CRD provision only do so for a single qualified plan within its controlled group,” he adds.
 
DB plan sponsors offering lump sums today, but not administering a CRD provision for 2020, also have an important disclosure point to consider, Burton warns. The information provided to participants in the current IRS safe harbor special tax notice has not been updated to describe important information regarding the tax-favored treatment available to qualified individuals affected by COVID-19. Under the CARES Act, for example, qualified individuals who receive an eligible rollover payment (e.g., lump sum) in 2020 can recognize the taxable income over a three-year period. “As a result, we believe that plan sponsors should consider providing all participants with additional information about how the CARES Act may impact the federal income taxes that they will owe,” he says.
 
Burton says Aon believes that CRDs in DB plans will be most prevalent in those plans that already offer lump-sum distributions--whether permanent or temporary--including cash balance and other hybrid pension plans. CRDs may also be offered as part of an early retirement or lump-sum window program in 2020.  Donohue notes that DB plan sponsors have long been crafting efforts to push participants to take lump sums instead of pension payments. Paying out lump sums reduces risk for the plan, and it reduces the overhead cost associated with Pension Benefit Guaranty Corporation (PBGC) premiums. Participants who may not have chosen a lump-sum distribution when the opportunity was offered to them before may do so now to reap the tax advantages of CRDs, he says.  However, in 2020, there’s a whole new set of reasons to move money out of pension plans, Donohue says. “Just how we’re seeing business loans and unemployment checks, everyone is just in this push to move money into the economy to continue the flow of things,” Donohue explains. “DB sponsors are looking at this opportunity to be a part of that, to try to provide lifelines to participants.”  Amanda Umpierrez, Plansponsorwww.plansponsor.com, May 22, 2020.
 
7.    FEDERAL JUDGE DECISIVELY RULES FLORIDA EX-FELONS CAN’T BE DENIED THE RIGHT TO VOTE:
A federal judge ruled that it is unconstitutional to prevent felons in Florida from voting because they can’t afford to pay back court fees, fines and restitution to victims, striking down parts of a law passed by Republican lawmakers and signed by Gov. Ron DeSantis last year.  Calling the law a “pay-to-vote system,” U.S. District Judge Robert Hinkle’s 125-page ruling declares that court fees are a tax, and it creates a new process for determining whether felons are eligible to vote. 

“This order holds that the State can condition voting on payment of fines and restitution that a person is able to pay but cannot condition voting on payment of amounts a person is unable to pay,” Hinkle wrote.  With one sentence, Hinkle also allowed two large groups of felons to register to vote: those who were appointed an attorney for their criminal case because they couldn’t afford one on their own, and anyone who had their financial obligations converted to civil liens.
 
Most felons are appointed attorneys, and nearly all have their court fees and fines converted to civil liens.  For all other felons who can’t afford to pay their financial obligations, Hinkle ordered state officials to adopt a new process for determining whether felons are too poor to vote: They can request an advisory opinion from Secretary of State Laurel Lee.  If Lee can’t issue the opinion within 21 days of receipt -- and tell the felon how much fines and restitution to victims they owe, and how the state came up with that amount -- they can’t stop the felon from registering to vote, Hinkle wrote.
 
Hinkle said that process would be simple and fast for most cases, since most convictions do not require felons pay back court fines -- such as $50,000 for a drug trafficking charge -- or restitution to victims.  “In most cases, the Division [of Elections] will need to do nothing more on [legal financial obligations] than review the judgment to confirm there is no fine or restitution,” he wrote. “In the remaining cases -- the cases with a fine or restitution -- the overwhelming majority of felons will be unable to pay.”
But for some cases, it will be an impossible burden for the state to meet. An eight-day trial showed that for many older convictions, it’s impossible to determine how much in restitution or fines someone owes.
 
“That the Director of the Division of Elections cannot say who is eligible makes clear that some voters also will not know,” Hinkle wrote.  Hinkle’s ruling is expected to be appealed. A spokeswoman for DeSantis said the state was reviewing the decision.
 
The decision could have important effects on the November presidential election in the nation’s most populous swing state. Florida has more than 1 million felons, although the state has not yet seen a dramatic rise in registrations from felons after Florida voters passed a constitutional amendment in 2018 that allowed most who had completed their sentences to register to vote.  Carl Tobias, a professor at the University of Richmond School of Law, called Hinkle’s Sunday ruling “perhaps the most important ruling in the U.S. now ahead of the November election.”
 
And it was praised by the American Civil Liberties Union and other groups that sued DeSantis and state elections officials last year.  “This ruling means hundreds of thousands of Floridians will be able to rejoin the electorate and participate in upcoming elections,” said Julie Ebenstein, senior staff attorney with the ACLU’s Voting Rights Project. “This is a tremendous victory for voting rights.”  Neil Volz, a spokesman for the Florida Rights Restoration Coalition, which created Amendment 4 but was not a party to the lawsuit, called it “a game-changer.”
 
In his ruling, Hinkle declared that it unconstitutional for the state to require felons pay court fees, which fund the criminal justice system and state coffers, before voting. He called them “a tax by any other name,” noting that in one county, defendants have to pay a minimum of $548 in court fees.  “The requirement to pay fees and costs as a condition of voting is unconstitutional because they are, in substance, taxes,” he wrote.
 
The state can require felons pay court fines -- such as a $50,000 fine for trafficking drugs -- and restitution to victims, he ruled. But it’s unconstitutional for the state to require felons pay amounts that are unknown.  Restitution, for example, is typically paid to the victim, and no entity in the state tracks it. It can be almost impossible for felons to determine how much they owe if the victim is dead or if the victim is a business that is no longer in business.
 
“Indeed, there may be nobody to pay, even if a felon is willing and able to make a payment. Insisting on payment of amounts long forgotten seems an especially poor basis for denying the franchise,” he wrote. “The requirement to pay, as a condition of voting, amounts that are unknown and cannot be determined with diligence is unconstitutional.”
 
Hinkle’s ruling is just the latest turn in the story of Amendment 4, which was approved by nearly two-thirds of voters in 2018. The amendment was intended to reverse the state’s Jim Crow-era law barring felons from voting and was the nation’s largest expansion of voting in decades.  The amendment restored the right to vote to nearly all felons who completed “all terms of their sentence including parole or probation.” But the definition of “all terms” was not defined in the amendment, and it was immediately contested by lawmakers and advocates.  With DeSantis’s encouragement, the Republican-controlled Legislature in 2019 drew a hard line. Lawmakers passed a bill defining “all terms” to include all court fees, fines and restitution associated with a case.
 
Those costs, at a minimum, are hundreds of dollars - amounts that many felons can’t, and don’t, pay.  Although the creators of Amendment 4 also said financial obligations were required, critics dubbed the bill a “poll tax.” More than a dozen felons, represented by lawyers from the American Civil Liberties Union and other groups, sued DeSantis as soon as he signed the bill into law, arguing that it was unconstitutional.
 
During a trial via teleconference trial that ended May 6, lawyers argued that lawmakers and DeSantis created a system that is almost hopelessly complicated for felons. Felons often can’t determine how much court fees and fines they owe, in part because state and county officials themselves sometimes don’t know.  In his ruling, Hinkle clearly sided with the plaintiffs that it was too difficult to pay, even for those who could afford to, because it was too hard to figure out how much was owed.  “Determining how much a person convicted of a felony in Florida was ordered to pay as part of a criminal sentence is not as easy as one might expect,” Hinkle wrote. “It is sometimes easy, sometimes hard, sometimes impossible. Determining how much a person has paid, especially given [Florida’s] byzantine approach to calculating that amount, is more difficult, but this, too, is sometimes easy, sometimes hard, sometimes impossible.”
 
He explained how difficult it was by illustrating one plaintiff’s difficulties.  “An extraordinarily competent and diligent financial manager in the office of the Hillsborough County Clerk of Court, with the assistance of several long-serving assistants, bulldogged [the plaintiff’s] case for perhaps 12 to 15 hours,” Hinkle wrote. “The group had combined experience of over 100 years. They came up with what they believed to be the amount owed. But even with all that work, they were unable to explain discrepancies in the records.”  Another plaintiff from Miami-Dade County had no hopes of paying what he owed.  The plaintiff “was unaware he owed any amount until he registered to vote and received a notice from his county’s Clerk of Court,” Hinkle wrote. “He now believes he owes $4,483 arising from convictions in Miami-Dade and Okeechobee Counties. The record does not show what amounts were included in his sentences. The Miami-Dade Clerk of Court’s website includes a docket entry indicating $754 was assessed as costs. One cannot know, from this record, what amount [Florida] asserts [the plaintiff] must pay to vote. But Mr. Mitchell works at a nonprofit without salary; even if the amount was only $754, Mr. Mitchell would be unable to pay it.”
 
Throughout his ruling, Hinkle spared little in criticizing state officials.  “Even with a team of attorneys and unlimited time, the State has been unable to show how much each plaintiff must pay to vote under the State’s view of the law,” Hinkle wrote.  He also slammed Florida’s clemency board, which has been the sole vehicle used to restore voting rights for felons who had completed their sentences.  “The Board moves at glacial speed and, for the eight years before Amendment 4 was adopted, re-enfranchised very few applicants,” Hinkle wrote. “For the overwhelming majority of felons who wished to vote, clemency Board was an illusory remedy.”  Lawrence Mower, Miami Herald, May 24, 2020.

8.  THREE THINGS NOTARIES SHOULD AVOID DURING COVID-19:
During COVID-19, Notaries need to take additional precautions to protect their health and the health of their signers. Here are 3 things Notaries should avoid when notarizing during the current health crisis: 

a.)  Don’t Perform In-Person Notarizations If You Or Your Signer Are Feeling Sick.
COVID-19 has hit our economy hard, and many businesses are struggling right now – especially Notaries. But it’s important you protect yourself and your customers by following appropriate health safety precautions. If you feel sick, don’t risk spreading illness to other people by meeting face-to-face with signers. If you learn that a signer is not feeling well, or you see warning signs of illness, it’s OK to decline the assignment if you believe the environment would put your health at risk.
 
If you have reason to believe you have been exposed to the coronavirus, even if you do not have symptoms, you should cancel any appointments you have scheduled until the period of self-isolation or quarantine is over. If you are performing a loan signing and need to stop an assignment due to health concerns, be sure to immediately notify the company or service that gave you the assignment.
 
To help Notaries and document signers, many states have issued emergency notarization rules temporarily allowing Notaries and signers to communicate and notarize documents remotely for the duration of the COVID-19 emergency.

b.)  Don’t Violate Local Health Safety Orders When Performing Notarizations.  
To ensure everyone’s health and well-being, it’s important that Notaries follow all local health safety orders when performing notarizations. For example, don’t meet a signer for a notarization at a local restaurant or coffee shop if local health officials prohibit customers from gathering at these places. Notaries should keep informed about any guidelines from city, state and local health officials regarding COVID-19, and only perform notarizations that comply with official health instructions.

c.)  Don’t Violate Basic Notarization Rules During COVID-19.
The coronavirus pandemic is an unprecedented situation that has left many Notaries and signers struggling with unexpected challenges. However, remember that even during a crisis such as COVID-19, Notaries cannot violate proper procedures when identifying signers and performing notarizations, even if a signer claims extenuating circumstances due to the coronavirus.
 
If you are asked to perform an illegal act such as ignoring identification requirements for a signer, backdating a document or other improper notarial acts, you must still refuse - the COVID-19 emergency is not an acceptable excuse to break the law.
 
If your state permits you to perform remote notarizations, be sure to follow all your state’s rules for doing so. The one exception to this rule is if your state has a temporary authorization to perform videoconference notarizations and you are performing the notarial act in conformance with the temporary authorization.  David Thun, National Notary Association, www.nationalnotary.org, May 21, 2020.

9.    MORTGAGE REFINANCINGS SET TO SURGE TO A 17-YEAR HIGH: 
If you’re in the mortgage business, fasten your seat-belts. Refinance volume is set to spike to a 17-year high this year as mortgage rates fall to the lowest levels ever recorded, Fannie Mae said.  Even as other parts of the economy tank, lenders will originate $1.5 trillion in refis in 2020, a 51% jump from 2019, according to the forecast. That would be the highest level since 2003 when $2.5 trillion of mortgages were refinanced, according to data from the Mortgage Bankers Association.
 
The lowest interest rates on record will bolster refis after the Federal Reserve began buying mortgage-backed securities to stimulate bond demand and grease the wheels of the credit markets. The average U.S. rate for a 30-year fixed mortgage fell to an all-time low of 3.23% at the end of April, according to Freddie Mac.
 
It’s probably heading even lower, according to the Fannie Mae forecast. The average rate probably will be 3.2% in the second quarter, down from 3.5% in the first quarter, and drop for the rest of the year. In the third quarter, it probably will be 3.1% and in the fourth quarter, it probably will average 3%. In 2021’s first quarter, the average probably will dip to 2.9%, Fannie Mae said. The share of originations that will be refinancings likely will jump to 58% this year from 44% in 2019, Fannie Mae said. That puts the market into “boom” territory – when more than 50% of originations are for refinancings.
 
The last time the refi share was that high was in 2012, when 71% of originations were for refinancings, according to MBA data.  Refi originations will be at “levels similar to 2012, when the last refinance boom occurred,” the forecast said. In dollar volume, refis in 2020 should surpass 2012 by about $74 billon, based on Fannie Mae’s projection and historical data from MBA. The rest of Fannie Mae’s forecast was grim. Existing home sales probably will drop 15% to 4.55 million in 2020, and single-family housing starts likely will drop 10% as builders take a pause to see what the economy will do, the forecast said.
 
GDP likely will fall 5.3% for the year, after a record-breaking 37% drop in the second quarter is followed by a rebound, the forecast said.  The unemployment rate probably will average 11% for the year, after coming back from a spike to 18% in the second quarter. The third quarter likely will average 13% and the fourth quarter likely will see a 9.5% unemployment rate, Fannie Mae said.  The average in the first quarter, before the pandemic forced states to close businesses in the final weeks of March to stem the spread of the virus, was 3.8%, Fannie Mae said.  Kathleen Howley, www.housingwire.com, May 18, 2020.

10.    IVY ENDOWMENTS WILL REVEAL PAY PACKAGES SOON; HERE’S WHAT TO LOOK FOR:
One Ivy League college spokesperson has May blocked off on the mental calendar as “that month I spend talking about how much the investment team gets paid. It’s the same every year - a rhythm of the job.”   In exchange for not paying taxes, U.S. universities (like all nonprofits) have to reveal what they pay their highest-earning staff members. This comes out in a public IRS filing called Form 990, which reports myriad financial data but is hallowed and sweated over for its juicy compensation section. 

Many elite universities are due to disclose their filings any day now, provided they follow their regular rhythm in this most irregular year. Here’s what to expect. 
 
a.)  Multimillion dollar pay packages for Ivy League investment executives. 
Basically all of them. “The investment chiefs at top-tier colleges and the Ivies are not that far off their commercial brethren in compensation,” says Paige Scott, a recruiter and head of asset management at Kingsley Gate Partners. 
 
Take, for example, Princeton University’s investment chief Andrew Golden. He made $4.26 million, all-in, leading the $26 billion endowment fund for the year ending June 30, 2018. Princeton delivered Ivy League-leading rolling ten-year returns. What might such an investor earn in the private sector?  “Maybe $6 million to $10 million,” Scott says, based on her experience placing asset management executives and tracking compensation. “Routinely we’re seeing that range for CIOs of significant businesses, but of course, it all depends on size and performance. At boutiques, comp is often less than $5 million” for CIOs and the like. 
 
b.)  A possible dip from 2018 -  but not much of one. 
The impending batch of 990s cover the fiscal year ending June 30, 2019, for most big-name schools. Covid-19 did not exist then. Markets were at all-time highs. And the median $1 billion-plus endowment returned 5.1 percent net of fees, according to the gold-standard benchmark from NACUBO-TIAA. Ivies averaged 6.7 percent - better, but still well south of their 10.3 percent collective average over the last decade. Any investor earning enough to show up on an Ivy 990 has a big portion of their pay riding on performance. 
 
Harvard Investment Management CEO Narv Narvekar’s 2018 salary, for example: $999,464. Narvekar’s bonus and incentive comp: $2.25 million. But a single year - especially a meh one such as FY2019 - won’t dramatically alter paychecks, experts say. 
 
“Most sophisticated compensation plans will not be based solely on a one-year return number; you really need to look at the three- and five-year numbers,” according to David Barrett, executive recruiter of choice for Harvard, Stanford, Cambridge University, and Mark Zuckerberg’s philanthropy, among many other elite institutions. “What are their benchmarks? What’s the risk profile? Depending on spending rates, they may have a very conservative portfolio and 5 percent in that environment is good.” 
 
c.)  Columbia University execs looking overpaid. And Brown University’s CEO and CIO looking underpaid. Columbia had a terrible year in fiscal 2019, gaining just 3.8 percent on its roughly $11 billion fund. The top two executives were new in their roles, and are no longer at Columbia
 
Brown, however, blew the doors off. The relatively small fund lapped Columbia three times over, returning 12.4 percent in a 5 - 6 percent year. Brown’s CIO Jane Dietze and CEO Joseph Dowling did not get paid triple what Columbia’s leaders did, one can assume. The year prior, Columbia CEO Peter Holland made $6.5 million in total. Dowling got $1.26 million. Another safe assumption: Brown still rewarded its endowment leaders for their exceptional showing, which will keep paying off via three- and five-year figures.
 
d.)  Outrage. The ritual airing of the 990s invites controversy. But this year - with legions of college staff furloughed, students suing for refunds, and hiring freezes almost universal - the revelation that some endowment bigshot made $8 million, out-earning the university president - it’ll rankle certain camps.
 
“In the not-for-profit world, the numbers look large,” Barrett says of investment team paychecks. “But for sophisticated board members and investment committee members, they understand the difference that a high-performing portfolio can make. Relative to what an outperforming endowment contributes to an institution, the team’s compensation is a rounding error. They are well worth it - and beyond.”
 
For fancy universities, there’s also no alternative. Public pay disclosures “are a lightning rod,” Scott readily admits. “Some say that they’re overpaid, and agitate that we shouldn’t pay investors this way. But so much rides on the endowment. You have to pay for commensurate talent, and you will do it ensure the future of the institution.” Leanna Orr, Institutional Investor, www.institutionalinvestor.com, May 20, 2020.
 
11.  REPLACE YOUR SOCIAL SECURITY CARD ONLINE IN 43 STATES AND THE DISTRICT OF COLUMBIA:
Social Security Administration has announced that they have added Connecticut, Ohio, and Utah to the growing list of states where you can go online to replace your Social Security card. In many cases, you may not need a replacement card. Most of the time, simply knowing your Social Security number is enough.
If you do need to replace your lost or misplaced Social Security card, our online application makes getting a replacement card easier than ever. Online card replacement is available if you live in the District of Columbia or one of the 43 states that can verify state ID information for us. If you’re only requesting a replacement card and you’re making no changes, you may be able to use our free online service.
All you need to do is create a my Social Security account and meet certain requirements. Opening a personal my Social Security account is easy, convenient, and secure. We protect your information by using strict identity verification and security features. Once you have a personal account, simply follow the instructions to request a replacement Social Security card.
You can apply for a replacement card online, if you:

  • Are a U. S. citizen age 18 or older with a U.S. mailing address (this includes APO, FPO, and DPO addresses);
  • Are not requesting any changes to your card (including a name change); and
  • Have a valid driver’s license or state-issued identification card.

Now is a great time to go online because Social Security offices are currently closed to the public due to the COVID-19 pandemic. If you need a replacement card, please visit their website to find out if you can take advantage of this convenient online replacement service. Mike Korbey, Deputy Commissioner for Communications, SSA, https://blog.ssa.gov, June 1, 2020.

12.  DID YOU KNOW ALBERT EINSTEIN SAID THIS?:
“Imagination is everything. It is the preview of life's coming attractions.”
13.  INSPIRATIONAL QUOTE:
 “Nurture your mind with great thoughts. To believe in the heroic makes heroes.” – Benjamin Disraeli
 
14. TODAY IN HISTORY:
 On this day in 1945, the US, Soviet Union, Britain and France agree to divide up occupied Germany
 
15. REMEMBER, YOU CAN NEVER OUTLIVE YOUR DEFINED RETIREMENT BENEFIT.

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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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