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Miami

Cypen & Cypen
NEWSLETTER
for
SEPTEMBER 29, 2011

Stephen H. Cypen, Esq., Editor

1.      FEDS PAID OVER $600 MILLION TO DEAD RETIREES: The U.S. government has paid more than $600 Million in benefits to dead federal government retirees in the past five years. UPI reports that the Office of Personnel Management’s inspector general found OPM’s improper payments to dead retirees ranged from $100 Million to $150 Million a year during the five-year span. Improper payments to dead retirees have climbed 70 percent in the past five years, much more than the 19 percent increase in overall annuity payments. In one case, a son of a dead recipient of federal annuities continued receiving benefits through 2008, 37 years after his father’s death!  The payments, totaling more than $500,000, were discovered after the son died. (Maybe the grandson took over from there?) A classic government understatement, the Inspector General said OPM could do a better job tracking improper payments. Really. 

2.      REVISING MILITARY RETIREMENT SYSTEM COULD DERAIL INCENTIVE TO SERVE: A Pentagon advisory board has suggested a radical overhaul to the military retirement system. At its core, the plan would shift the military away from the decades-old 20-year “cliff vesting” model and toward corporate-style 401(k) accounts to which the government would contribute. The change would be a boon for the more than 80 percent of troops who do not serve until retirement, but clearly it would be a huge hit for those who are willing to make the military a career. Of particular concern is how the plan would affect troops already in uniform but short of 20 years, and those already retired. Writing in marinecorpstimes.com, Retired Coast Guard Command Master Chief Alex Keenan who served 28 years, reminds us that the proposing group has no authority to implement any changes.  Some people believe the current retirement system is too generous, and it always seems to be on the table when talk turns to budget-cutting. The context too often seems to focus heavily on cost. What about fairness?  What about morale?  What about recruiting and retention? It is easy to see the military as a young person’s occupation. However, today’s military operates as a complex, technologically-sophisticated environment, and the future workforce will require many of the same skills and talents that are in demand in the private sector. How can you grow a seasoned, experienced leadership cadre if you offer little or no incentive to stay in uniform for any length of time, rather than taking your military skills and education benefits and heading off to the private sector? Bottom line, for Keenan, is there must be a significant incentive to serve for a full career.  Without that incentive, the foundation of the all-volunteer force begins to look pretty darn shaky. (If we had sound, here we would play the theme from “The Twilight Zone.”) 

3.      FLORIDA PENSION FUND TAKES $30 MILLION HIT, AS BANKS PROFIT: The Florida Retirement System took a $30 Million hit from 2001-2010 because of lax oversight by a state agency and questionable trading practices by two large banks hired to safeguard the fund, according to The St. Petersburg Times. Like similar cases in California and Virginia, the FRS lawsuit accuses one of the banks of shortchanging the pension fund. FRS fraud investigator Harry Markopolos (sound familiar?) says there is evidence that big banks have taken pension funds for a ride, hiding exorbitant markups from them and pocketing billions of dollars in unearned profits in the process. Documents raise questions about the high price of some foreign trading activities, but they also show inadequate monitoring by the State Board of Administration, which oversees the $145 Billion fund. Bank of New York Mellon Corp. and Boston-based State Street Corp. deny wrongdoing.  

4.      NCPERS OFFERS NOVEL RETIREMENT ROUTE:  A flood of U.S. retirement is threatening to burst its dam and drown aging Americans with rising costs, but, according to Reuters, National Conference on Public Employee Retirement Systems is proposing a novel way to protect private-sector workers:  invest in public pension plans. The proposal, to allow small- to medium-sized firms to buy into public retirement funds, is called the Secure Pension Choice. The current retirement deficit stems from lack of pensions in private sector and small 401(k) accounts. About half of private sector employees have employer-sponsored retirement plans, mostly 401(k)s, where they and their employers contribute money to purchase investments. In contrast, 85 percent of public sector employees participate in defined benefit plans, which are traditional pensions that pay retirees a fixed amount. The financial crisis destroyed the value of investments in many 401(k)s, which resulted in some workers delaying retirement or returning to work after retiring to rebuild their nest-eggs. Meanwhile, Social Security expects a surge in demand in coming decades from nearly 78 million retiring Baby Boomers. And because of declining death rates, the generation born after World War II will draw benefits longer. Moreover, small businesses say administering retirement accounts is costly. So, under the proposal, states would open retirement systems to contributions from companies that lack pension plans.  Employees would be fully vested immediately, and amounts contributed to the plans, plus earnings, would be guaranteed. The U.S. government would have to tweak its compensation laws, and states would have to pass legislation allowing the scheme. (NCPERS is already talking to several states about the issues.) However, the biggest hurdle to the plan may be public opinion: over the last year, public pensions have become a subject of national controversy. The last recession created a triple threat for pensions -- governments cut contributions for public pensions, layoffs meant fewer employees made contributions and investments providing the bulk of funding plunged. Although there is currently a public pension shortfall, of late, the returns on investments have come galloping back, and public retirement systems have grown for six straight quarters. The vast majority of pension plans are well-funded, plus they have the advantage of professional managers. A poll conducted by National Institute on Retirement Security shows the proposal may appeal to private-sector workers.  It found 84 percent of Americans believe people with pensions will enjoy a secure retirement, and 81 percent believe all workers are entitled to pensions.  We can always count on NCPERS Executive Director Hank Kim for innovative ideas 

5.      AUTHOR SAYS U.S. PENSIONS PLUNDERED BY CORPORATE GREED:   If the average worker did not have enough to worry about, Ellen Schultz, award-winning Wall Street Journal reporter and author of Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers, says that in some instances the fat paychecks of top paid executives are coming directly out of the pocket of average workers. As recently as a decade ago there was a quarter of a trillion dollars in surplus assets in corporate funds, Schultz tells The Daily Ticker. There was plenty of money in pension plans; there was plenty to pay the benefits but corporations went about taking the money away. As the title of the book suggests, Schultz believes this situation did not happen by accident, claiming corporations have been exaggerating their retiree burdens and plundering retirement plans in a variety of ways, including: 

  • Siphoning billions of dollars from their pension plans to finance downsizings and sell the assets in merger deals.  
  • Overstating the burden of rank-and-file retiree obligations to justify benefits cuts, while simultaneously using the savings to inflate executive pay and pensions.
  • Hiding growing executive pension liabilities, which at some companies now exceed liabilities for the regular pension plans.
  • Purchasing billions of dollars of life insurance on workers and using the policies as informal executive pension funds.  When the insured workers and retirees die, the company collects tax-free death benefits.  
  • Excluding millions of low-paid workers from 401(k)s to make the plans more valuable to the top-paid.   

According to Schultz, these and related measures have become commonplace among Fortune 500 companies, while U.S. corporate pension plans now face a gap that companies claim is a result of the 2008-2009 stock market crash, higher costs and an aging workforce. Schultz claims such excuses are bogus: executive compensation has risen dramatically over the same time frame.  And as they have cut other people’s benefits with pensions being frozen, they have increased the benefits of executive pay and pensions. Watch the entire short interview athttp://finance.yahoo.com/blogs/daily-ticker/retirement-heist-u-pensions-plundered-corporate-greed-author-131151510.html;_ylc=X3oDMTNua2xjNWI3BF9TAzExODMzMDgwNzMEYWN0A21haWxfY2IEY3QDYQRpbnRsA3VzBGxhbmcDZW4tVVMEcGtnA2Y4M2I5ODE2LWEwYjQtMzAyYy1hOGIyLWVmYWQxYmRmMDFkYwRzZWMDbWl0X3NoYXJlBHNsawNtYWlsBHRlc3QD;_ylv=3

6.      LAKE WORTH, FL, GETS INITIAL APPROVAL TO FIRE ASSESSMENT FOR PENSIONS:  Lake Worth, Florida, Commissioners voted 3-2 to approve an annual assessment that will cost residential property owners $60 per dwelling unit to help pay for firefighter pensions. As reported by Palm Beach Post, a public hearing and second reading of the ordinance has been scheduled for October 4, 2011. In addition to the residential assessment, it will cost 13 cents per square foot for commercial buildings, 2 cents per square foot for industrial/warehouse buildings and 9 cents per square foot for institutional buildings. The $1.4 Million raised through the assessments would be used to cover most of the $1.8 Million annual cost. 

7.      GASB EXTENDS PENSIONS COMMENT DEADLINE: Governmental Accounting Standards Board has extended the deadline for commenting on the Board’s proposals on pension accounting and financial reporting to Friday, October 14, 2011.  The deadline was previously September 30, 2011 (see C&C Newsletter for July 14, 2011, Item 1). The Board decided to extend the deadline based on requests for additional time and its conclusion that potential respondents would benefit from a longer period to complete their submissions. 

8.      SENIORS CONTINUE TO SUFFER IN SILENCE: Recently released data from the U.S. Census Bureau show that the overall number of older adults living in poverty has increased. Even more significant is the number of seniors who have experienced an increase in economic insecurity -- or those simply living on the edge. The National Council on Aging reports that seniors with incomes below 200% of the Federal Poverty Level rose from 33.7% (13,000,000) in 2009 to 34.6% (13,600,000), and those living below 100% of the Federal Poverty Level saw a modest, yet significant, increase from 3.4 to 3.5 million.  Numbers do indicate that some individuals aged 65 and older have seen a rise in their incomes, mostly due to Social Security, as more and more Boomers reach retirement age. The current official poverty measurement system needs an update. Developed in the early 1960s, the Federal Poverty Level measures poverty by comparing a family’s income to a threshold level of need, which is based on food consumption patterns of 1955, and does not reflect current living standards.  The measure of income evaluated against this threshold does not reflect tax liabilities, out-of-pocket spending on health care and other significant costs – it also does not account for important forms of public assistance.  As a result, the measurement does not adequately reflect who is poor.  If a more modernized measure of poverty were used, there would likely be an even larger proportion of older adults living in poverty.  More than 13 million older adults live in or on the edge of poverty, on less than $22,000 a year.  These seniors live one bad break, one accident, or one layoff away from economic disaster. And with continued cuts in federal, state and local programs serving older adults, expect to see even more seniors struggling to make ends meet. 

9.      HARVARD “HAPPINESS EXPERT” LINKS POSITIVE ATTITUDE WITH WORK SUCCESS:  Predicting an employee’s future success at a company has traditionally stumped experts, and relying on metrics such as IQ level, only tells 25% of the story, according toEmployeeBenefit News.  What makes up the other 75%, says Shawn Achor, Harvard researcher and positive psychology expert, is the optimism that your behavior matters, a positive social support system and whether you view a challenge as a stress or an impetus to improve. Achor studies companies and schools to determine the greatest predictors of success. He has found that the old way of thinking simply does not cut it. The goal shifts from teaching to and aiming for the average, to moving the average up in an organization, which requires changing the way our brain filters the world. The brain is like a single processor in a computer:  it can make a conscious or unconscious decision for happiness.  If someone is constantly scanning the world for negatives, then they will have no energy left over to look for the positive. In other words, by changing the way we appreciate happiness, we can improve on all dimensions of intelligence, and, because our brains are wirelessly connected to each other through mirrored neurons, we can actually infect others with a positive attitude. For example, the positive brain is 31% more productive than when the brain is negative, neutral or stressed. And a positive outlook can help lower depression rates, lead to superior productivity, make one more resilient, create less burnout, less turnover, and promote greater sales. Achor advocates the William James theory, in which if someone does a task for 21 days, it becomes a life habit and second nature. Complete the following five activities for 21 days in a row to improve your happiness quotient: 

  • Write three things you are grateful for.  They must be new things that occurred in the last 24 hours, and they must be specific.  (Simply saying you are thankful for your health is not sufficient.  Why are you thankful for you health?)  After 21 days, scroll through the list when confronted by a negative email, and be overwhelmed by the positivity.  
  • Journal every day.  Take two minutes to detail one meaningful event.  Because the brain cannot differentiate between reality and visualization, you are effectively reliving the good experience.  This way, the brain shifts from a task-based outlook to a meaning-based one. 
  • Exercise works not because of the neurochemicals released in the brain, but because it tells your brain that you are able to be successful.  This fact explains why executives who exercise in the morning are better equipped to deal with their inboxes at 2pm.  
  • Meditation helps you single task, which enables your brain to shine like a laser on a challenge, increasing your chances of success.  Start with as little as two minutes a day. 
  • Send random acts of kindness.  Each morning, send an email to one person in your social support network, thanking and praising him.  Twenty-one days later, your brain appreciates that you have 21 people to whom you are connected. Social support is the greatest predictor of job satisfaction. 

Achor admits that many of these notions are common sense; however, common sense does not always lead to common action --information does not always cause transformation. Ultimately, by accomplishing these five actions, one transforms a task-motivated brain into a satisfied brain.  This change matters not only for the individual, but for those around him.  Happiness spreads:  it can infect coworkers like an air-borne disease. What have you got to lose? 

10.    GRAB LIFE: At last, here is sensible Social Security reform everyone can support. Check it out at http://bit.ly/oRloSN

11.    NEWSLETTER PUBLISHED TODAY BECAUSE OF ROSH HASHANAH TOMORROW: We wish everyone who celebrates Rosh Hashanah a happy and healthy new year. 

12.    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.):    Some people hear voices. Some see invisible people. Others have no imagination whatsoever. 

13.    QUOTE OF THE WEEK: “We are never as unhappy as we think, nor as happy as we had hoped.” Rouchefoucauld

14.    ON THIS DAY IN HISTORY: In 2008, following the bankruptcies of Lehman Brothers and Washington Mutual, The Dow Jones Industrial Average falls 777.68 points, the largest single-day point loss in its history. 

15.    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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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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