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Cypen & Cypen
NEWSLETTER
for
August 2, 2018

Stephen H. Cypen, Esq., Editor

1. CENTER FOR RETIREMENT RESEARCH AT BOSTON COLLEGE 2017 DATA NOW AVAILABLE IN THE (PPD) WEBSITE:
The Public Plans Data (PPD), a unique repository of data on state and local pensions, has added:

  • 10 new local plans to the existing sample of 170 state and local plans; and
  • 2017 data for over 100 variables. 

To access these data, the PPD offers a wide variety of features:“quick-fact” pages with key data at the national, state, and plan levels, and:

  • an enhanced interactive data browser for customized searches;  
  • a full-scale downloadable dataset for researchers; and
  • downloadable financial reports and actuarial valuations. 

The Public Plans Data Website is developed and maintained through a collaboration of the Center for Retirement Research at Boston College, the Center for State and Local Government Excellence and the National Association of State Retirement Administrators.The site can be accessed here.
 
2. PUBLIC PENSION FUNDS ADOPT COST-SHARING MECHANISMS TO STEM VOLATILITY: 
In Pensions & Investments, Bloomberg says that in spring 2016, Sandy Matheson, executive director of the $14.3 billion Maine Public Employees Retirement System, was panicking. After earning 2% the previous fiscal year, record low bond yields and global stock market turmoil were dragging the pension's returns even lower - and further away from its 6.9% assumed annual return. Ms. Matheson modeled government pension payments under a scenario where investments returned 4% a year for four years and then 6.9% thereafter. The result: government contributions would increase every year until 2032, reaching 21% of payroll from 10%. "My hair was on fire," Ms. Matheson said. "(I was) near hysterical at the thought of what is going to happen if we continue on earning less than our discount rate. We would just be cutting benefits." Ms. Matheson, with the help of the fund's actuarial firm, put together a plan in which the risks of investment gains and losses were not just assumed by taxpayers, but shared among local governments, their employees and retirees. Maine adopted the risk-sharing plan for municipal employees participate in the system starting the fiscal year that began July 1, 2018. Ms. Matheson plans to brief lawmakers on extending it to state employees and teachers. The goal of the model is to prevent any kind of damage or harm to the plan, due to the volatility in the markets. Employer rates have always gone up and down with the market, but both employee and employer rates will now go up and down. They will share in market risk. Most U.S. public pensions were fully funded as recently as 2000, but the collapse of the internet bubble and the Great Recession caused by the financial crisis of 2008 - combined in some cases with years of contribution shortfalls and unfunded benefit increases - resulted in pension debt exceeding $1 trillion. Between 2003 and 2013 the cost of making required pension payments almost doubled, according to a 2017 report from the Pew Charitable Trusts. In response, some pension systems have adopted formal cost-sharing mechanisms, adjusting contributions or benefits, instead of making unplanned benefit cuts or contribution increases. Almost 30 defined benefit pension plans in 17 states use cost-sharing mechanisms to manage risk. Some states, such as Illinois and New York, have constitutional or statutory prohibitions on changing retiree benefits. Maine capped contribution rates by municipalities at 12.5% and 9% for employees, giving both parties certainty about how high costs would go to make up for investment losses. If pension losses exceed the capped contribution rates, retiree cost-of-living adjustments are reduced. Maine's local governments and employees share in investment gains and losses at a 55% / 45% split. Had Maine's plan been in effect after the financial crisis, contribution rates would have increased to 12.5% and 9%, and held there for five years. Retirees would have had a 30% annual reduction in their COLA for seven years. Under a traditional plan, you have one lever that deals with something like a recession - that's the employer contribution. Here we have got the COLAs as well as the member contributions that reduce what otherwise would have been an employer contribution spike. When the markets rebound and investment gains exceed the assumed investment return, the COLA would increase until reaching a cap of 2.5%. Further gains would allow employers and employees to reduce contributions for services performed by current members when the plan is fully funded, to a minimum of about 14% - 7.7% for employers and 6.2% for employees. That would have served the pension well in the 1990s when roaring stock market gains allowed governments to stop making annual contributions. In South Dakota, where employer and employee pension contributions are each fixed by law at 6% of pay, the state adopted a plan that changes COLAs depending on the funding status of the pension plan, said Rob Wylie, executive director of the $11.6 billion South Dakota Retirement System, Pierre. "We were looking for ways to have the plan move with the marketplace: reward the plan when times were good, but also contract the plan when times were not so good," Mr. Wylie said. In most other public pension systems, "the benefits are not the flex point, the contributions are." South Dakota's pension plan is 100% funded. If the funding level falls below 100%, the cost-of-living adjustments can be moved between 0.5% and 3.5% depending on the plan's funded status and inflation. If the ratio of the pension's assets to liabilities falls below 80%, certain ancillary benefits must be cut, in addition to the COLAs. While beneficiaries know their cost-of-living adjustments might vary depending on the market, their defined benefit payment is secure, Mr. Wylie said. Before the pension fund adopted its new structure in 2016, South Dakota's actuary estimated COLAs represented 25% of its total liability. A defined benefit puts all the risk on the employer and defined contribution puts all the risk on the member. Why put it on one side completely? Those should not be your only choices.
 
3. INSPECTOR GENERAL WARNS PUBLIC ABOUT SSA IMPERSONATION SCHEMES: 
The Acting Inspector General of Social Security, Gale Stallworth Stone, is warning citizens about ongoing Social Security Administration (SSA) impersonation schemes. SSA and the Office of the Inspector General (OIG) have recently received several reports of suspicious phone calls claiming to be from SSA. In one case, an automated recording states the person’s Social Security number (SSN) “has been suspended for suspicion of illegal activity,” and the person should contact a provided phone number immediately to resolve the issue. The call concludes by stating if the person does not contact the provided phone number, the person’s assets will be frozen until the alleged issue is resolved. In another case, a caller claims to be from “SSA headquarters” and waits for the person to provide personal information, such as an SSN, address, and date of birth. In January, the OIG shared similar information from the Federal Trade Commission, which reported an increase in reports of suspicious phone calls from people claiming to be SSA employees. SSA employees occasionally contact citizens by telephone for customer-service purposes. In only a few limited special situations, usually already known to the citizen, an SSA employee may request the citizen confirm personal information over the phone. If a person receives a suspicious call from someone alleging to be from SSA, citizens should report that information to the OIG at 1.800.269.0271 or online via https://oig.ssa.gov/report. Acting Inspector General Stone continues to warn citizens to be cautious, and to avoid providing information such as your SSN or bank account numbers to unknown persons over the phone or internet unless you are certain of who is receiving it. “Be aware of suspicious calls from unknown sources, and when in doubt, contact the official entity to verify the legitimacy of the call,” Stone said. If a person has questions about any communication-email, letter, text or phone call-that claims to be from SSA or the OIG, please contact your local Social Security office, or call Social Security’s toll-free customer service number at 1.800.772.1213, 7 a.m. to 7 p.m., Monday through Friday, to verify its legitimacy. (Those who are deaf or hard-of-hearing can call Social Security’s TTY number at 1.800.325.0778.) Posted on July 16, 2018 by Andrew Cannarsa, OIG Communications Director.
 
4. TIPS FROM FTC TO AVOID TECH SUPPORT SCAMS:
You are working on your computer when, suddenly, a message pops up on the screen: “Virus detected! Call now for a free security scan and to repair your device.” That is a tech support scam. Do not call, text or email. Legit tech support companies do not operate that way. Scammers pose as big-name companies and use pop-up messages, fake websites and phone calls to trick you into thinking your computer has an urgent problem. Their plan is to get your money by selling you worthless software, enrolling you in fake programs or getting you to pay for useless tech support. The scammers urge you to call a toll-free number immediately, threatening that you may lose personal data if you do not. When you call, the scammer might ask you to give them remote access, pretend to run a diagnostic test or tell you they have found a virus or other security issue. They try to sell you a security subscription or other “services” that range from worthless (for instance, they are available for free elsewhere) to malicious (they install dangerous software that can help them steal your personal information.) What should you do? If you get a pop-up to call a number to fix a virus on your computer, ignore it. Your computer is almost certainly fine. But if you are concerned about your computer, call your security software company directly - and do not use the phone number in the pop-up or on caller ID. Use a number you know is real, like the one on a software package or your receipt. Tech support scammers like to place online ads pretending to be legitimate companies, so be sure you have the correct telephone number for the real tech company before calling. And if someone asks you to pay for anything - including tech support services - with a gift card, cash reload card or a wire transfer, that is a scam. No legitimate company will tell you to pay that way. If you see that, report it at FTC.gov/complaint. July was Military Consumer Month. Posted July 16, 2018, by Carol Kando-Pineda, Attorney, Division of Consumer and Business Education, Federal Trade Commission.
 
5. FACTS YOU MIGHT NOT KNOW ABOUT SOCIAL SECURITY:
Most people know at least something about Social Security. For decades, Social Security has been providing valuable information and tools to help you build financial security. Here is your opportunity to find out a little more, with some lesser-known facts about Social Security.
 
Social Security pays benefits to children.
Social Security pays benefits to unmarried children whose parents are deceased, disabled, or retired. See Benefits for Children for the specific requirements.

Social Security can pay benefits to parents.
Most people know that when a worker dies, we can pay benefits to surviving spouses and children. What you may not know is that under certain circumstances, we can pay benefits to a surviving parent. Read our Fact Sheet Parent’s Benefits, for the details.
 
Widows’ and widowers’ payments can continue if remarriage occurs after age 60.
Remarriage ends survivor’s benefits when it occurs before age 60, but benefits can continue for marriages after age 60.
 
If a spouse draws reduced retirement benefits before starting spouse’s benefits (his or her spouse is younger), the spouse will not receive 50 percent of the worker’s benefit amount.
Your full spouse’s benefit could be up to 50 percent of your spouse’s full retirement age amount if you are full retirement age when you take it. If you qualify for your own retirement benefit and a spouse’s benefit, we always pay your own benefit first. (For example, you are eligible for $400 from your own retirement and $150 as a spouse for a total of $550.) The reduction rates for retirement and spouses benefits are different. If your spouse is younger, you cannot receive benefits unless he or she is receiving benefits (except for divorced spouses). If you took your reduced retirement first while waiting for your spouse to reach retirement age, when you add spouse’s benefits later, your own retirement portion remains reduced which causes the total retirement and spouses benefit together to total less than 50 percent of the worker’s amount. You can find out more on our website.
 
If your spouse’s retirement benefit is higher than your retirement benefit, and he or she chooses to take reduced benefits and dies first, your survivor benefit will be reduced, but may be higher than what your spouse received.
If the deceased worker started receiving reduced retirement benefits before his full retirement age, a special rule called the retirement insurance benefit limit may apply to the surviving spouse. The retirement insurance benefit limit is the maximum survivor benefit you may receive. Generally, the limit is the higher of:

  • The reduced monthly retirement benefit to which the deceased spouse would have been entitled if he had lived or
  • 82.5 percent of the unreduced deceased spouse’s monthly benefit if he had started receiving benefits at retirement age (rather than choosing to receive a reduced retirement benefit early). 

Social Security helps secure your financial future by providing the facts you need to make life’s important decisions. Posted on July 19, 2018 by Jim Borland, Acting Deputy Commissioner for Communications.
 
6. MILLENNIALS ON TRACK FOR BETTER RETIREMENT OUTCOME - EMPOWER INSTITUTE:
According to a report, Robert Steyer says the youngest workers have a better chance of meeting retirement goals than older peers, according to research from the Empower Institute, the affiliated research arm of Empower Retirement. The Empower Institute found that millennials - those born from 1981 to 2000 - were on pace to replace 75% of their income in retirement, based on estimates of retirement plan savings and other financial factors, in a survey of 4,038 working adults age 18 to 65 who are enrolled in a workplace retirement plan. The projected replacement rate for Generation X - born 1965 to 1980 - was 61%. For late baby boomers, the replacement rate was 61%, while for early baby boomers, the rate was 55%. (Baby boomers' birth years span 1946 to 1964). The median for all respondents was 64%. The reasons for the millennials' leading projected performance are based on their being covered by defined contribution (DC) plans with more features to encourage more savings. Among the various age groups, millennials are most likely to benefit from improvements in DC plans following the Pension Protection Act of 2006, he said. That means a greater emphasis by plans on auto enrollment, auto escalation and qualified default investment alternatives. They are using the most modern form of defined contribution plans. By contrast, the oldest workers - the early boomers - might have had access to modern DC plans for only a portion of their careers, he added. Over the years, DC plans have improved communication and education, provided more personalized services and expanded use of technology and social media - all contributing to predicted better results for millennials. The Empower Institute survey described participants' post-retirement income replacement opportunities as a "retirement progress score." In addition to DC plan savings, the estimate included individuals' current savings, investments in retirement plans, taxable accounts, individual retirement accounts, variable annuities, cash value of life insurance, income from defined benefit plans, future Social Security benefits and projected future wage growth.
Pensions & Investments, July 11, 2018
 
7. WHICH GENERATION ARE YOU FROM?:
We are each defined by the time in which we live. We are all subject to the major events and technological advances defining our times. Some of us are old, and some of us are younger. Our influences are different, but one thing, however, remains unchanged: We are all bound together in a web of intermingling cultural generations.
 
Lost Generation
Born Mid-1880s to 1900, start at the 20th century (and a little before), this generation was known as the Lost Generation. As such, they were the group t=who went on to serve in WWI, and the term Lost Generation is actually a reference to that conflict.
 
The G.I. Generation
Born early-1900s to mid-1920s, are now the oldest living generation. As children and young adults, the G.I. Generation suffered the indignities of the Great Depression. Many of them rebuilt the country during the New Deal.
 
Silent Generation
Born between the mid-1920s and the early-1940s, the Silent Generation is one of the lesser-known generations in recent history. They also happen to be one of the more contradictory. They are the children of Lost Generation parents. Many were born during the Great Depression and fought in the Korean - and Vietnam Wars.
 
Baby Boomers
Baby Boomers are the most talked about of the generations. Born between the mid-1940s and the early-1960s, the Boomers are the children of the G.I. Generation, and up to that point, they were the largest demographic generation in history.
 
Generation X
Born between the mid-1960s and the early 1980s, they are largely the children of the Silent Generation and the Baby Boomers, and like their parents, the members of Generation X are slightly misunderstood. As a group, Gen Xers were the first group to grow up with both parents working full-time jobs. Thus, they were given the moniker latchkey kids. This status led Gen Xers to develop a fiercely independent streak that carried on well into adulthood. Gen Xers were the last group whose membership came of age during the Cold War.
 
Millennials
Face it, this next generation is the only generation that matters. They are the children of the Baby Boomers ... which means we have a ton to say about these folks, as well. They are the most diverse generation. They are now the largest demographic group, and that of course means we are talking about the Millennials, (also known as Generation Y.)
 
Generation Z
Born between the late 1990s to 2010, these are the children of Gen Xers, it is Generation Z. Obviously there are not much data to date on this group, however, what is remarkable is that many consider Generation Z to be the first true digital natives.
 
Generation Alpha?
Generation Alpha may be our newest generation ... the name has not been completely settled yet. Futurist, demographer and TEDx speaker Mark McCrindle came up with the moniker. Guess we ran out of letters in the English alphabet.
 
Note: all generation dates are approximations.
 
8. NEW OFFICE ADDRESS:
Please note that Cypen & Cypen has a new office address: Cypen & Cypen, 975 Arthur Godfrey Road, Suite 500, Miami Beach, Florida 33140. All other contact information remains the same.
 
9. PUN TIME:
Did you know they will not be making yardsticks any longer?
 
10. INSPIRATIONAL QUOTES:
Your present circumstances do not determine where you can go; they merely determine where you start. - Nido Qubein

11. TODAY IN HISTORY:
On this day in 1790, first US census conducted, the population was 3,939,214 including 697,624 slaves.
 
12. 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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