1. WHO – OR WHAT – KILLED THE PRIVATE SECTOR DB PLAN?: The National Institute on Retirement Security has released an Issue Brief entitled “Who Killed the Private Sector DB Plan?” (The report was issued in March 2011, but, apparently, we must have missed it.) In recent decades, defined benefit pension plans have been in decline in the private sector. Since the early 1980s, the number of private sector DB plans has markedly decreased, as has the number of workers who are covered by a DB plan. For example, in 1975, 88% of private sector workers covered in a workplace retirement plan had DB coverage; by 2005 this number dropped to just 33%. Also, in 1985, there existed over 112,000 single-employer DB plans in the United States, but by 2009, there were just 27,650. Although much attention has been paid to the fact that the private sector has been trending out of traditional pensions, substantially less attention has been given to the specific reasons for such sharp declines in private sector DB sponsorship and coverage. The brief addresses the reasons behind the trend, and finds that:
- Traditional DB pension plans are good for both employees, in ensuring a certain modicum of income security in retirement, and for employers, as they remain a cost-efficient and highly effective recruitment and retention tool.
- Despite these positive attributes, private sector employers have been closing their DB plans, due to several factors, including:
- Increased regulation, which has had the unintended consequence of impacting both the cash flow of the firm and volatility of plan funding; (see C&C Newsletter for June 28, 2012, Item 5).
- Private-sector industry changes, which resulted in fewer unionized jobs, and fewer new industries establishing DB pension plans; and
- Imperfect knowledge of employee preferences for traditional DB plans.
- Because DB plans still make sense for both employees and employers, several solutions and policy changes could be made to reverse the trend, including:
- Creating an avenue for third-party sponsorship of the DB plan,
- Amending regulations so that funding is less volatile,
- Finding ways to make it easier for employees to contribute to plan funding, and
- Designing plans so that they are more portable as workers change jobs.
Research indicates that very specific characteristics make traditional DB pension plans extremely effective at supporting retirement security for the middle class. As we always say, you cannot outlive your defined benefit.
2. SWITCH TO DC REALLY ABOUT CUTTING RETIREMENT BENEFITS: Pensions & Investments recently published an item written by Gary Findlay, executive director of Missouri State Employees’ Retirement System. The following is what Mr. Findlay wrote. The mantra of advocates of the switch to defined contribution plans from defined benefit plans is loud and consistent: changes need to be made to cut the cost of retirement benefits. However, these initiatives are really not about cutting cost — they are about cutting benefits, with lower cost being a mere byproduct. Findlay asks us to consider the following basic retirement benefit financing formula: Benefits = Contributions + Investment Income – Expenses. This formula of B = C + I - E is equally applicable to defined benefit plans and defined contribution plans. Now assume that individually managed asset accounts in DC plans can consistently earn the same return and for the same fees as professionally managed large pools of DB assets. Next, assume the administrative expenses associated with individually-managed DC plan accounts are the same as the administrative expenses per person for large numbers of participants in DB plans. (While these assumptions are unrealistic, they will facilitate understanding what happens when the cost of the plan is reduced by switching to a DC plan from a DB plan.) Cost is represented by “contributions” in the above formula. If:
a)investment income net of fees (I) does not change,
b)administrative expenses (E) remain constant and
c)contributions (or costs) (C) decline,
d)the only remaining variable, benefits (B), has to be smaller.
In reality, net investment rates of return on individual DC accounts would logically be expected to be lower than the return on professionally managed DB plan large asset pools. Furthermore, administrative expenses for individual account plans would logically be expected to be higher per person than administrative expenses for DB plans. Even if the cost/contributions remained the same after the move to a DC plan, both of these realities would result in benefits being lower. If contributions/costs are also lowered in connection with the switch, benefits become just that much smaller. So, when you hear someone say he wants to reduce costs by switching to a DC plan from a DB plan, understand that what is really being said is he wants to reduce benefits and convert pooled risk to individual risk. If the goal were to keep benefits approximately the same, it would be necessary to increase cost in connection with a move to a DC plan from a DB plan. It really is this simple. Oh, by the way, it is worth noting that there are some who do stand to gain from a switch to DC plans:
Administrative service providers and asset managers will likely make more money;
Corporations will not have to put up with those pesky DB plans that vote their proxies; and
The federal government will collect much more in premature distribution taxes.
The law of intended consequences?
3. PENSIONS NOT CAUSE OF CALIFORNIA BANKRUPTCIES: A sharp spike in pension costs is not the reason an alarmed San Bernardino city council voted last week to authorize filing for bankruptcy, fearing the city may not have enough money to make a full payment to employees next month. According to calpensions.com, the city’s pension payments climbed steadily from a little over $5 Million in 2000 to about $23 Million in 2008. But the payments have remained at roughly $23 Million since then, and increases forecast in the next few years are gradual. A budget analysis posted on the city website said “retirement costs” were 9 percent of the general fund in fiscal 2006-7, grew to 13 percent last year and are expected to be 15 percent in fiscal 2015-16. (Retirement costs in Stockton, which filed for bankruptcy on June 28, are about 17.5 percent of the general fund.) The reasons for San Bernardino’s dilemma, according to the mayor, are multiple and long enduring. (The mayor is a Stanford law graduate and former judge.) The troubles began long before meltdown of the economy. San Bernardino has been living on the financial edge for a long, long time. But the city was unmasked by the meltdown in 2007 when it lost $16 Million in sales tax in one year, when it lost 60 percent of its land value and 9,000 homes went into foreclosure. The local economy took long-term hits from closure of the Kaiser steel plant and Norton Air Force Base, and the city is now a bedroom community with 15 percent unemployment and 43 percent on some form of public assistance. A long running political feud between the mayor and the current city attorney, a two-time loser to the mayor, is not helping, either.
4. MANAGER SELECTION MORE IMPORTANT THAN ALTERNATIVE ALLOCATION (FOR STATE PLANS): Pionline reports that U.S. state pension plans with higher allocations to alternative investments generally experienced better 10-year returns than those with less exposure. Contrary to common market wisdom, researchers also found that those decade-long returns owed more to manager and fund selection than to size of the alternatives allocation. In analyzing data from the 2011 comprehensive annual financial reports of 96 state pension plans, researchers took a big picture, 10-year point of view in analyzing the experience of state pension funds by digging beyond simple performance rankings to find out how these funds have achieved their results. (Congratulations go out to Gary Findlay – his Missouri State Employees’ Retirement System had the top annualized return of 7.1% for the 10-year period.) All but one of the top 10 had alternative allocations greater than 24%. (MOSERS had a 55.3% allocation to alternatives when leverage from the fund’s portable alpha program is included.) The report noted the 10-year pension fund returns were fairly tightly distributed, with less than a percentage-point difference between the first- and third-quartile returns, thereby dampening any return differences among funds as a result of variations in stock/bond allocations. By contrast, distribution of the 10-year annualized median returns of real estate portfolios (7.3%) and private equity portfolios (10.2%) was very wide, suggesting that differences in implementation -- manager selection -- proved to be very important for individual state fund returns in real estate and private equity.
5. INERTIA MAY BE A GOOD THING: In his regular Employee Benefit Research Institute column, Nevin Adams writes that by some accounts, inertia has long been the bane of the voluntary retirement system, and that a great deal of money and time have been spent overcoming reluctance of workers to become savers, and of savers to do so at levels sufficient to achieve their retirement goals. That same inertia likely accounts for the fact that, once set on a savings course, or better still, set on one that improves on that initial setting, participants in overwhelming numbers appear to stay the course -- and do so through good times and times that are not as good. So, what happens to those participants who stay the course, those steady, consistent participants? EBRI has long tracked changes in consistent participant accounts in a database that is the largest, most representative repository of information about individual 401(k) plan participants around the world. Drawing from that database, which includes demographic, contribution, asset allocation and loan/withdrawal activity information for millions of participants, EBRI has for years produced estimates of the cumulative changes in average account balances -- both as a result of contributions and investment returns -- for several combinations of participant age and tenure. And, for those millions of individual participant accounts in the database, EBRI is able to project changes in those average balances based on actual individual rates of contribution and the investment choices in place at a specific point in time. As a result, EBRI is able to estimate that the average account balance of an individual ages 25-34, with one to four years of tenure at his or her current employer, increased 4.6 percent in June 2012, while a participant ages 55-64 with 20-29 years of tenure had an average account increase of 2.5 percent. This capability is significant for several reasons. It provides a monthly update of a comprehensive perspective on 401(k) account movement. It has provided the ability quickly and accurately to estimate the impact of major market swings on a broad swathe of the 401(k) market. Finally, it serves to remind us that those 401(k) balances are affected not just by investment markets, but by the savings invested -- consistently.
6. REPORT ON SOCIAL SECURITY DISABILITY: The U.S. Social Security Administration has issued its Annual Statistical Report on the Social Security Disability Insurance Program, 2011. Since 1956, the Social Security program has provided cash benefits to people with disabilities. The annual report provides program and demographic information about the people who receive those benefits. The basic topics covered are
- beneficiaries in current-payment status;
- workers’ compensation and public disability benefits;
- benefits awarded, withheld, and terminated;
- disabled workers who have returned to work;
- outcomes of applications for disability benefits; and
- disabled beneficiaries receiving Social Security, Supplemental Security Income or both.
Here are some report highlights:
- Disability benefits were paid to just over 9.8 million people.
- Awards to disabled workers (998,980) accounted for over 89 percent of awards to all disabled beneficiaries (1,114,060). In December, payments to disabled beneficiaries totaled about $10.4 Billion.
- Benefits were terminated for 653,877 disabled workers.
- Supplemental Security Income payments were another source of income for about 1 out of 6 disabled beneficiaries.
The average age was 53; the percentage of men (53 percent) was greater than the percentage of women (47 percent); mental disorders accounted for about a third; average monthly benefit was $1,110.50; and Supplemental Security Income payments were another source of income for about 1 out of 8. SSA Publication No. 13-11827 (July 2012).
7. GLOBAL ALTERNATIVES SURVEY: The Global Alternatives Survey, produced by Towers Watson, follows trends in the investment of alternative assets by institutional investors around the world, and provides authoritative rankings of investment managers in the main alternative asset classes. In previous years, these categories included real estate; private equity fund of funds; fund of hedge funds; infrastructure and commodities; but, now, in its ninth year, also includes direct hedge fund and private equity managers. In the past the report focused exclusively on pension funds’ use of alternatives assets; however, it now includes data for Sovereign Wealth Funds, Insurers and Endowments and Foundations, in an attempt to gauge how various institutional investors are investing in alternative assets. From the Executive Summary:
- Alternative total assets managed on behalf of all clients by the Top 100 managers amounted to around USD $3,136 Billion in 2011.
- Of the alternative asset classes reported, Real Estate is the largest block (35%), followed by Private Equity, Hedge Funds, Private Equity Fund of Funds, Fund of Hedge Funds, Infrastructure and Commodities. (We thought that real estate had already morphed out of the alternative asset category.)
- Private Equity represents 22% of assets in the top 100 managers and Hedge Funds, 21%.
- Pension fund assets represent 33% of the total Assets under Management (including direct private equity and hedge funds), followed by Insurance firms, Sovereign wealth funds and Endowments and Foundations. The 55% of total Assets under Management managed by the top 100 asset managers were not disclosed by type of client.
- In terms of where assets are invested, North America accounts for the largest amount of alternative assets, followed by Europe and Asia Pacific.
8. DISCLOSING PUBLIC EMPLOYEE PAY TROUBLES SOME OFFICIALS: Many public officials are uncomfortable with subjecting their compensation to scrutiny as governments and transparency groups work to open the information to the public, a new Governingsurvey finds. Nearly 30 percent of state and local government officials say their pay should not be considered part of the public record, while half would react negatively to names and salaries posted online. Overall, the results show public employees generally favor disclosing basic compensation information, but many feel they should not be identified by name. Governing randomly surveyed more than 200 senior state and local officials across the country. Survey participants included only officials and administrators, who are not representative of all government workers. The findings come as state and local governments push transparency initiatives aimed at making public information more available. With the Internet, uncovering many public employees’ compensation is now only a few mouse-clicks away. AGoverning review of state government websites found about half now maintain searchable compensation databases. Newspapers and other groups have also contributed, launching their own public employee pay websites. About 57 percent of survey respondents reported their salary information was posted online. Up until about five years ago, few governments listed employee pay on websites. Compensation information was typically obtainable only by filing public records requests or perusing through annual government publications. About 41 percent said citizens should not be able to find specific compensation with names listed online. Even transparency advocates generally do not think home phone numbers, medical records and other personal information should be made public for all employees. (Gee, thanks.)
9. SEASONAL FIREFIGHTERS FACE MANY DANGERS, WITHOUT HEALTH INSURANCE: They work the front lines of the nation’s most explosive wild fires, navigating treacherous terrain, dense walls of smoke and tall curtains of flame. Yet, according to washingtonpost.com, thousands of the nation’s seasonal firefighters have no health insurance for themselves or their families. Many firefighters are now asking to buy into a federal government health plan, largely out of anger over a colleague who was left with a $70,000 hospital bill after his son was born prematurely. The request has been bolstered by more than 125,000 signatures gathered in an online petition during this year’s historic fire season in the west and the ongoing national debate over health care. Firefighters do get workers’ compensation if they are hurt on the job, but that does not cover them in the offseason. The national interagency fire center, which coordinates firefighting efforts nationwide, says 15,000 firefighters are on the federal payroll this year. Of that number, some 8,000 are classified as temporary seasonal employees, who work on a season-to-season basis with no guarantee of a job the following year and no access to federal benefits. Some seasonal firefighters say they put in a year’s work of hours in six months. True, in two years, the Affordable Care Act will allow seasonal firefighters the same opportunity to buy health insurance as other uninsured Americans. However, firefighters want to be able to choose among the plans offered by the federal government, like other federal employees. No one disputes the dangers of the job: lightning, falling trees, a dangerous landscape, as well as smoke and flames. Since 2003,157 people have died battling wildfires in the U.S. Injury statistics were not available.
10. A MANDATE FOR PENSIONS?: An interesting piece inPensions & Investments posits that, as strange as it may seem, the U.S. Supreme Court ruling upholding the Patient Protection and Affordable Care Act of 2010 (see C&C Newsletter for July 3, 2012, Item 1) could eventually affect pension plans. Because the ruling seems to expand the government’s power to levy indirect taxes, perhaps such taxes could be used to force companies and individuals to adopt and participate in pension plans. Previously, indirect taxes were taxes on activities and products, and were triggered by a transaction. Now, the court has upheld imposition of a tax on individuals who do not buy health insurance. In other words, the court upheld imposition of a tax on the failure to engage in a transaction. The ruling might embolden future congresses and administrations to take the same approach to transforming pension coverage and even corporate governance. Could Congress, for example, impose higher corporate income taxes or a specific pension levy on employers who do not provide pension plans for their employees, and also on employees who do not participate in such plans? Could Congress go further, and replace the current deductibility of pension contributions for companies and individuals with a tax penalty for not having a pension plan or not participating in a plan? That is, could Congress replace the carrot with a stick? The key issue in the health care case was whether failure to engage in economic activity (purchase of health insurance) was subject to regulation under the Commerce Clause. If the court had accepted that premise, the Commerce Clause could have been used to force companies to offer retirement plans, and individuals to participate in them. However, the court rejected use of the Commerce Clause to regulate commerce to mandate healthcare coverage. Many companies still do not offer even a defined contribution plan. But Congress could now go further and impose additional taxes on companies that offer no such plans, as long as the taxes were structured like the healthcare tax, and paid like a tax to Internal Revenue Service. For Congress to use such an approach to expanding pension coverage would be dangerous, especially in a weak economy in a highly-competitive global marketplace. That change in tactics could even send more jobs overseas. It might even increase the percentage of private-sector employees with some form of pension coverage, while reducing the number of workers with jobs. The best laid plans … .
11. EEOC LISTS SELECTED PENDING AND RESOLVED CASES INVOLVING RACIAL HARASSMENT: If you are like us, you probably have never witnessed racial harassment in the workplace. However, we recently stumbled upon a selected list of pending and resolved EEOC cases involving racial harassment since 2009. You would not believe what is still going on in the 21st Century. Here is just one example:
EEOC filed suit in March of 2012 against Sparx, a Wisconsin restaurant. EEOC alleges that Sparx managers posted racist imagery and then fired an African-American employee after he complained about a picture of African-American actor Gary Coleman and a dollar bill that had been defaced such that a noose was around the neck of George Washington, whose face had been blackened, taped to a cooler in the restaurant. EEOC also alleged that, on the dollar bill, were swastikas and the image of a man in a Ku Klux Klan hood. Sparx managers told the charging party that they had posted the images the evening before, but, when the charging party complained, insisted that it was a “joke.” The charging party was terminated within weeks of complaining about the racist imagery, for allegedly having a bad attitude. (We wonder why.)
The U.S. Equal Employment Opportunity Commission is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person’s race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information. It is also illegal to discriminate against a person because he complained about discrimination, filed a charge of discrimination or participated in an employment discrimination investigation or lawsuit. Most employers with at least 15 employees are covered by EEOC laws (20 employees in age discrimination cases). Many labor unions and employment agencies are also covered. The laws apply to all types of work situations, including hiring, firing, promotions, harassment, training, wages and benefits.
12. RETIREMENT FOR NBA PLAYERS NOW SLAM-DUNK: National Basketball Association players, who were paid an average of about $5 Million last season, will be forced for the first time to save money for retirement, according to Bloomberg. Players in the league this past season will receive $34 Million, or 1 percent of what the league and union call basketball-related income, to be invested in an annuity. The program is part of the 10-year collective bargaining agreement between the NBA and the players union that ended a lockout in November. Former NBA players Scottie Pippen, Latrell Sprewell and Antoine Walker are among retired professional athletes who have experienced financial difficulty after careers in which they earned tens of millions of dollars. Walker filed for bankruptcy after being paid more than $100 Million over 12 years in the NBA. Retired players will be able to access money before their pensions begin at age 50. Players can take an early pension at 45. Basketball-related income in the NBA will top $4 Billion next season, meaning the amount of forced savings will also rise. Beginning next season, players also will contribute 5 percent to 10 percent of their salary for retirement. They automatically will be enrolled in the program, and would have to opt-out to keep from participating in the plan.
13. SPONSOR ENTITLED TO RELY ON SAFE HARBOR PROVISIONS AS TO QDIA: Bidwell was an employee at University Medical Center, Inc., and participated in its retirement contribution plan. UMC administered the plan itself, although it sometimes solicited Lincoln Retirement Services Company LLC’s assistance for administrative tasks. UMC provided plan participants with a variety of investment vehicles to choose from, and Bidwell elected to locate one hundred percent of his investment in the Lincoln Stable Value Fund. At time of his election, the Lincoln Stable Value Fund was also used by UMC as the default investment vehicle for § 403(b) plan participants who failed to elect a preferred investment vehicle after enrollment. In February 2009, Bidwell filed a claim with UMC, seeking reimbursement for his loss in the amount of $85,000, resulting from transfer of his investments from the Lincoln Stable Value Fund to the Lincoln LifeSpan Fund, but his claim was denied. He appealed unsuccessfully to the Administrative Committee. Having exhausted administrative procedures, Bidwell filed suit in federal district court against UMC and Lincoln for breach of fiduciary duty under Employee Retirement Income Security Act. After filing answers, both Lincoln and UMC moved for judgment as a matter of law on the administrative record. The district court granted both motions, concluding that Lincoln could not be liable to Bidwell because it was not a fiduciary under the plan and that UMC was immune from liability because it was entitled to the Safe Harbor protections of the DOL regulation. Bidwell appealed, and court of appeals affirmed. In 2007, the Department of Labor promulgated new regulations pursuant to the Pension Protection Act that aimed to insulate employers from liability for default investments made on behalf of retirement-plan participants who failed to elect their preferred investment vehicle. In essence, the DOL regulation created safe harbor relief from fiduciary liability for plan administrators that directed automatic-enrollment investments into QDIAs, which were defined by DOL as investments capable of meeting a worker’s long-term retirement savings needs. By creating incentives for employers to direct default investments into QDIAs, DOL sought to incentivize employers to move investments away from low-risk, low return default investments, such as stable-value funds, which may not always keep pace with inflation. Thus, through the Safe Harbor, DOL placed employers in position of being able to make riskier short-term investments that would be more lucrative in the long term, without fear of liability for market fluctuations. To accommodate existing default- investment structures, the regulation also grandfathered in stable-value funds that employers utilized as their default-investment mechanism prior to PPA’s enactment. In 2008, UMC sought to harmonize its investment practices with the new DOL regulation by making its default-investment vehicle the LincolnLifeSpan Fund, and transferring existing investments in the prior default fund, the Lincoln Stable Value Fund, into the Lincoln LifeSpanFund. UMC sent notice of the change to all participants with one hundred percent of their investment in the Lincoln Stable Value Fund. The notice advised participants that all existing investments in the Lincoln Stable Value Fund would be transferred to the LincolnLifeSpan Fund, unless participants gave instruction otherwise. Although notices went out by first-class mail, there is no record of whether the letters were actually received by the intended recipients. Bidwell maintains he never received notice. As a result, he could not respond by the deadline specified in the letter, and UMC transferred his investment from the Lincoln Stable Value Fund to the LincolnLifeSpan Fund, without his knowledge. Bidwell first learned of the transfer upon receipt of his quarterly account statement, immediately contacted UMC to inquire about the change and then switched his investment back to Lincoln Stable Value Fund. Due to market fluctuations in the interim, however, Bidwell suffered financial losses prior to return of his funds to the Lincoln Stable Value Fund. The appeal as to Lincoln was affirmed, as review of the district court’s dismissal of Lincoln as a non-fiduciary was waived on appeal. On appeal as to UMC, Bidwell contended that the district court conclusion that UMC was entitled to Safe Harbor relief provided in DOL’s regulation was erroneous because that provision can never insulate a fiduciary against claims by plan participants, like Bidwell, who previously elected his investment vehicle rather than having it chosen for him by default. Bidwell argued that the Safe Harbor provision applies only to employer-selected investments made on behalf of participants who fail to elect an investment vehicle, and that Bidwell did not qualify as such a participant because he specifically selected the Lincoln Stable Value Fund. In enacting the Safe Harbor provision, DOL made it clear that it did not agree with Bidwell’s interpretation of the regulation. In the preamble to the final regulation, DOL stated explicitly that the final regulation applies to situations beyond automatic enrollment, including circumstances such as failure of a participant or beneficiary to provide investment direction following elimination of an investment alternative or a change in service provider, the failure of a participant or beneficiary to provide investment instruction following a rollover from another plan and any other failure of a participant or beneficiary to provide investment instruction. It seems pretty clear to us, too. Bidwell v. University Medical Center, Inc.; Case No. 11-5493 (U.S. 6th Cir., June 29, 2012).
14. BANK SETTLES SECURITIES LENDING CASE FOR $280 MILLION: BNY Mellon will pay $280 Million to a group of investors, including some pension funds, that filed a lawsuit accusing the bank of improper securities lending losses stemming from investments with Sigma Finance Corp., according to ai-CIO. The lawsuit alleged that BNY Mellon invested and lost a significant amount of capital with Sigma Finance through a securities lending program with the plaintiffs. Sigma Finance, a $27 Billion structured investment vehicle, imploded in October 2008. Of course, the settlement is subject to court approval. (BNY Mellon is not the first bank to deal with fallout from securities lending misfortunes connected with Sigma Finance. Earlier this year, JP Morgan agreed to pay $150 Million to a group of pension funds that filed a lawsuit alleging securities lending improprieties involved with Sigma.)
15. TOP TEN THINGS TO TAKE AWAY FROM SUPREME COURT’S OBAMACARE RULING: The landmark Supreme Court Obamacare ruling (see C&C Newsletter for July 3, 2012, Item 1) and its aftermath offer some key lessons for all of us, neophytes and veterans alike, who follow the Supreme Court. Some teachings are forceful reminders of things we already knew (or should have known); others break new ground. Here is a list of the Top 10 from U.C. Davis Law School Professor Vikram Amar:
- Media do a poor job predicting Supreme Court results.
- Online predictions marketplace Intrade.com users do a poor job predicting Supreme Court results.
- Supreme Court suffers more problematic leaks than we have been willing to admit.
- Justice Kennedy is not the only Justice about whom we should care in big cases.
- Chief Justice Roberts is not likely to vote with the liberals consistently. (But see C&C Newsletter for July 12, 2012, Item 4.)
- The Commerce Clause Doctrine that got made, while symbolically significant, may not be terribly meaningful.
- The Spending Clause Doctrine that got made could be big.
- Hypocrisy in the Doctrine of Federalism remains a big problem.
- Congress dodged a bullet, and should be more careful in the future.
- Chief Justice Roberts was the big winner in this ruling.
Giving Congress the benefit of the doubt and upholding key aspects of Obamacare under the Taxation power clauses, while at the same time cutting back on established understandings of Commerce Clause power and Spending Clause power, Chief Justice Roberts claimed the current Supreme Court as his own, and began to build for himself a legacy of greatness.
16. FURNITURE BURNS MORE QUICKLY, SO FIREFIGHTERS RECONSIDER TACTICS: One of the first tasks for firefighters arriving at a blazing home has long been to ventilate the structure -- make holes in it -- so that hot gases and smoke can escape. The New York Times says it has been this way for generations: a so-called roof man from a ladder company opens a hatch or saws through the ceiling, while other firefighters break windows as they search inside, often before the first drop of water has hit the fire. But house fires have changed. Now, spurred on by at least one grievous injury to a firefighter last year, the New York Fire Department is rethinking its tactics for residential fires, while trying to hold onto its culture of “aggressive interior firefighting,” charging inside burning buildings as fast as possible. As it is the largest municipal department in the country, New York City’s new course may well affect the tactics of other fire departments. Plastic fillings in sofas and mattresses burn much faster than older fillings like cotton, helping to transform behavior of house fires in the last few decades. With more plastic in homes, residential fires are now likely to use up all the oxygen in a room before they consume all flammable materials. The resulting smoky, oxygen-deprived fires appear to be going out. But they are actually waiting for an inrush of fresh air, which can come as firefighters cut through roofs and break windows. As of this writing, scientists and the Fire Department intend to conduct an ambitious experiment on Governors Island in New York Harbor, where they will burn down 20 vacant row houses stuffed with modern furniture to gauge which techniques work best in fighting the blazes. Plastics, like the polyurethane foam used as filling in furniture, have drastically reduced the time it takes for a fire to heat a room above 1,100 degrees, the point at which it is likely to burst into flames. Ventilation is not the only basic firefighting tactic coming under scrutiny. For instance, it has long been considered a cardinal sin for firefighters to spray water on a room full of smoke with no flames. Water drives the smoke from the ceiling toward the floor, eliminating the low foot or two of visibility -- and oxygen -- along the floor that firefighters relied on to navigate an unfamiliar house and that survivors needed to breathe. Some experts have come to believe, however, that quickly dousing a smoky room to cool the gases near the ceiling might be more important than preserving any smoke-free corridor along the floor. Scientists will start burning the houses down, while studying how the slightest change in ventilation, an opened door or a broken window, affects the heat and pressure indoors. In one set of controlled burns, the Fire Department will study efficacy of its standard approach to fighting basement fires -- entering the house and descending the stairs to the basement. The experiments will test whether another approach, sticking a nozzle through a basement window, is more effective. The Fire Department has long been inclined to fight fires from inside residences, rather than through open windows, based on a belief that the outside method will drive the fire toward other areas of the house, where occupants might be. Results of the tests may, at some level, underscore how putting out fires quickly can sometimes be at odds with the Fire Department’s priority, which is to locate and rescue people. In years past, focus has been on search and rescue, and getting water on the fire is secondary. All of these differences have led to an intense debate within the department. But several fire officials insisted that no matter what, firefighters will still go in quickly if they think there might be lives to be saved. (Note the words on our masthead: “Never forget September 11, 2001.”)
17. GOLF WISDOMS: You can hit a 2-acre fairway 10% of the time and a two inch branch 90% of the time.
18. PUNOGRAPHICS: Why were the Indians here first? They had reservations.
19. QUOTE OF THE WEEK: “When I approach a child, he inspires in me two sentiments; tenderness for what he is, and respect for what he may become.” Louis Pasteur
20. ON THIS DAY IN HISTORY: In 1966, 50 year old Frank Sinatra marries 21 year old Mia Farrow in Las Vegas.
21. KEEP THOSE CARDS AND LETTERS COMING: Several readers regularly supply us with suggestions or tips for newsletter items. Please feel free to send us or point us to matters you think would be of interest to our readers. Subject to editorial discretion, we may print them. Rest assured that we will not publish any names as referring sources.
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