Cypen & Cypen
AUGUST 4, 2011
Stephen H. Cypen, Esq., Editor
1. FLORIDA WORKERS RETIRING IN DROVES: In the three months since the legislative session ended, Florida Retirement System has seen a substantial uptick in the number of new retirees, according to Sunshine State News. Likely at least in part in response to a new law that dramatically changed the state’s retirement plan by requiring employee contributions for the first time in over three decades (see C&C Special Supplement for May 12, 2011), about 10,100 retired or exited the Deferred Retirement Option Program in May, June and July, an increase of more than 900 people from the same time last year. Governor Rick Scott has said he is interested in more pension changes, calling this year’s law a “first step.” Separately, the Columbus (Ohio) Dispatch reports that half of all retirement-eligible employees in Ohio’s Public Employee Retirement System are considering retirement next year, with one-third of all employees say they are “very likely” to retire within a year.
2. FGFOA TAKES AIM AT PENSIONS, INSURANCE PREMIUM TAXES: Florida Government Finance Officers Association has released its 2011 Legislative Policies and Recommendations. And squarely in the cross-hairs are pension “reform” and premium taxes for public safety pension benefits:
It is incredible how some people either have lost their memory or would like to rewrite history. Before the 1999 premium tax legislation was enacted, ALL premium tax monies were required to be used for extra benefits. There was no frozen amount to which a municipality was entitled to use in an unrestricted fashion. Chapter 99-1 was a compromise among cities, unions and pension boards. It staved off imminent litigation that was to be initiated against cities around the state, in cases where they had used less than all (and sometimes none) premium tax monies for extra benefits. No good deed ever goes unpunished.
3. FIREFIGHTERS WILL GET $2 MILLION IN REVERSE DISCRIMINATION CASE: Seven years after suing New Haven, Connecticut, in a reverse discrimination case that was affirmed by the U.S. Supreme Court, 20 white firefighters who claimed their promotions were blocked by city affirmative action policy will settle for about $2 Million, according to The Hartford (Conn.) Courant. The firefighters sued in 2004, a year after the city refused to certify results of an examination on which only white candidates for positions of captain and lieutenant scored high enough to qualify for promotion. Of 118 candidates taking the test, 27 were black, none of whom scored high enough to qualify for the 15 immediately-available positions. Although all 20 plaintiffs qualified, the city civil service board scrapped the test results and promoted nobody. While Title VII of the Civil Rights Act of 1964 prohibits race-based decisions in hiring and promotion, it also requires employers to disregard tests that produce “disparate” results among test takers of different races -- unless the employer can prove the test is job-related, necessary and that no less discriminatory alternatives exist. The Supreme Court ruled the firefighters were victims of illegal racial discrimination. However, although critical of the city for using “raw, racial statistics” to invalidate a promotional examination, the court stopped short of ordering broad changes in race-and-hiring law sought by the firefighters. In a 5-4 decision, the Court left intact that portion of the law that New Haven used to invalidate the examination. (See C&C Newsletter for July 2, 2009, Item 1.)
4. PROTECTING PENSION PROMISES MADE TO PUBLIC EMPLOYEES: California Public Employees’ Retirement System has prepared a pamphlet entitled Vested Rights of CalPERS Members, to articulate the current state of California law regarding the nature of its Members’ pension rights and the extent to which such rights have become vested and not subject to impairment. The California Supreme Court long ago established that a promise of a pension made by a public employer to its employees is a promise the employer must keep. In other words, public employers in California are legally required to honor promises to current and former employees, regardless of how much money they have to set aside for that purpose. California has a strong public policy, enunciated through published legal decisions over the past half century, establishing that public employee retirement benefits are contractual obligations entitled to protection of the Contract Clauses of the State and Federal Constitutions. A public employee’s pension constitutes an element of compensation, and a vested contractual right to pension benefits accrues upon acceptance of employment. Here is Rule 1 of seven rules that have emerged through California jurisprudence:
CalPERS acknowledges the budgetary challenges that the State and other public agencies throughout California are presently facing, and will play an appropriate role in addressing these challenges. In this process, it will be vitally important for all interested parties to heed the legal rules protecting vested rights of CalPERS’ members, which have developed over the course of many decades. Without due consideration of these rules, well-intentioned proposals may not achieve the purposes for which they are designed; indeed, they may lead only to additional litigation and administrative costs, which can only increase the long term cost of delivering benefits that have been promised to CalPERS members. CalPERS hopes that this paper will provide guidance to all parties as they address these challenges. Readers can access the paper athttp://www.calpers.ca.gov/eip-docs/about/press/news/vested-rights.pdf.
5. REDUCING PLAN LEAKAGE IMPROVES RETIREMENT INCOME SECURITY: The Defined Contribution Institutional Investment Association has released a new research report entitled “Plug the Drain: 401k Leakage and the Impact on Retirement.” The report documents the negative impact of leakage factors such as cashouts, hardship withdrawals and loans on defined contribution plan participants’ likely retirement income adequacy. It finds that plan leakage can reduce by more than 14 percentage points probability that low-wage participants will successfully be able to replace most (80 percent) of their income in retirement after 31-40 years of plan eligibility. As such, DCIIA suggests that plan sponsors seek to reduce leakage by encouraging new employees to rollover assets from prior employers’ plans, taking steps to retain retirement assets, and modifying current practices involving plan loans and hardship distributions. When it comes to American workers’ retirement income adequacy, policymakers, plan sponsors and the industry have tended to emphasize successfully enrolling eligible employees in their 401(k) plans at robust levels, which is critical to building retirement income. The new research underscores the importance of going a step further to encourage employees and retirees to retain assets in the defined contribution plan. While we do not believe a DC account should ever be substituted for a defined benefit pension plan, we support anything that helps those who have defined contribution accounts.
6. LABOR-FORCE PARTICIPATION RATES OF POPULATION AGE 55 AND OLDER: Employee Benefit Research Institute has publishedLabor-Force Participation Rates of the Population Age 55 and Older: What Did the Recession Do to the Trends? The labor-force participation rate continued to increase for those aged 55 and older, even after the recent economic downturn. For those ages 55-64, this result is being driven almost exclusively by increase in women in the work force; the male participation rate is flat to declining. However, among those age 65 and older, labor-force participation increased for both males and females. Education is a strong factor in an individual’s participation in the labor force at older ages: Individuals with higher levels of education are significantly more likely to be in the labor force than those with lower levels of education. This disparity increased from 1987-2009 for those without a high school diploma, as their rate declined while those with higher levels of education had a participation rate that stayed the same or increased. This upward trend is not surprising, and is likely to continue because of workers’ need for access to employment-based health insurance and for more earning years to accumulate assets in defined contribution plans, particularly after the stock market and economy downturn in 2007-2008. Older Americans, particularly those who worked in the private sector, increasingly have considerably less access to guaranteed levels of income (such as pensions) or health insurance benefits when they retire; consequently, they have a greater need to work to help make their assets last longer or to continue to build up (or rebuild) assets that they did not (or were not able to) accumulate when they were younger or may have lost in the recent downturn in stock and bond markets. Nevertheless, financial concerns are not the only incentives involved here -- there also is an increased desire among many Americans to work longer, particularly those with more education, for whom more meaningful jobs that can be done well into older ages are often available. The recent economic downturn did not alter the trend of older workers increasingly being in the labor force; rather, it appears that this remains the trend, as more opportunities for older workers exist and there is a greater necessity for them to remain in the labor force to accumulate sufficient or adequate resources for retirement. As many workers have found, the road to retirement is not always smooth. Ebri.org Notes Vol. 32, No. 2 (February 2011).
7. WHO REALLY OWNS AMERICA?? HINT -- IT’S NOT CHINA: Truth is elusive, but it is a good thing we have math – according to globalpost.com. Many people -- politicians and pundits alike -- prattle on that China and, to a lesser extent, Japan, own most of America’s $14.3 Trillion in government debt. One little problem: it is just not true. While the Chinese, Japanese and plenty of other foreigners own substantial amounts, Americans really hold most of America’s debt. Here is the breakdown:
So, America owes foreigners about $4.5 Trillion (31 percent) in debt, but America owes itself $9.8 Trillion (about 69 percent). Memo to comic Andy Borowitz: tell China not to try to put America for sale on E-bay; obviously, it just won’t work.
8. LEGALLY WEIRD: Once again, here are some legally weird items from FindLaw’s Legal Curiosities Blog:
Pot Plants Growing in Yard of Florida Mayor, 84, Not Hers. Volusia County Sheriffs have found 10 potted marijuana plants growing in the yard of 84-year-old Oak Hill, Florida, Mayor Mary Lee Cook. She claims someone planted the potted pot plants on her property to ruin her reputation. If authorities do not find any evidence linking her to the plants, chances are Mayor Cook will not be facing any charges. Apparently, the octogenarian has no history of drug use or other criminal activity.
9. PARAPROSDOKIAN: (A paraprosdokian is a figure of speech in which the latter part of a sentence or phrase is surprising or unexpected in a way that causes the reader or listener to reframe or reinterpret the first part. It is frequently used for humorous or dramatic effect.): A diplomat is someone who can tell you to go to hell in such a way that you will look forward to the trip.
10. QUOTE OF THE WEEK: “Never date a person you can hear ticking.” Unknown
11. ON THIS DAY IN HISTORY: In 1862, U.S. Government collects its first income tax.
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