Cypen & Cypen  
Home Attorney Profiles Clients Resource Links Newsletters navigation
777 Arthur Godfrey Road
Suite 320
Miami Beach, Florida 33140

Telephone 305.532.3200
Telecopier 305.535.0050

Click here for a
free subscription
to our newsletter


Cypen & Cypen
OCTOBER 21, 2010

Stephen H. Cypen, Esq., Editor

1. DID CITIGROUP USE RECESSION AS EXCUSE TO FIRE WOMEN?:  Citigroup was accused in a lawsuit of using companywide layoffs during the recent financial turmoil to purge its workforce of scores of female employees to save the jobs of less-qualified men.  The lawsuit filed in U.S. District Court in Manhattan, as reported by The Associated Press, accused the company of accepting government bailout money even as it continued a pattern of pervasive discrimination and retaliation against female employees during the November 2008 layoffs.  The suit also alleges that women are paid less than men and often lose out on promotions, raises and good assignments.  The six women plaintiffs seek unspecified damages, class action status and a court order to end discrimination.  In addition, the lawsuit says at least 50 women who have complained about discriminatory practices against themselves and other women have faced retaliation since March 2008.  The lawsuit also provides specific information about Citigroup’s Public Finance Department, saying 89% of managing directors and directors were men, but only 55% of workers in those positions who were terminated in layoffs were men.  Thus, afterward, the percentage of women in those positions fell from 11% to 7%.  Don’t worry, ladies, you can always get a job at Joe’s Stone Crab.

2. WASHINGTON MUTUAL INVESTORS ACHIEVE CLASS ACTION STATUS:  Investors suing Washington Mutual, the former owner of the biggest U.S. bank to fail, won certification as a class-action case of their suit alleging shoddy lending practices.  As reported by, shareholders who lost money on stock purchased from October 2005 to July 2008 can proceed with claims in a single lawsuit, consolidating more than twenty cases filed against Washington Mutual that claim the bank secretly lowered lending standards, artificially inflated home-price appraisals and failed to disclose its deteriorating financial condition when the loans began to fail.  Named plaintiffs include Ontario Teachers’ Pension Plan Board, the largest single-profession pension plan in Canada, and four other pension groups. 

3. FINAL RULE TO IMPROVE TRANSPARENCY OF FEES AND EXPENSES IN 401(K)S:   Department of Labor’s Employee Benefit Security Administration has released a final rule that will help America’s workers manage and invest money they contribute to their 401(k)-type pension plans.  The rule will ensure: that workers in this type of plan are given, or have access to, information they need to make informed decisions, including information about fees and expenses; delivery of investment-related information in a format that enables workers meaningfully to compare the investment options under their pension plans; that plan fiduciaries use standard methodologies when calculating and disclosing expense and return information so as to achieve uniformity across the spectrum of investments that exist among and within plans, thus facilitating “apples-to-apples” comparison among their plan’s investment options; and a new level of fee and expense transparency.  By way of background, EBSA is responsible for administering and enforcing fiduciary, reporting, and disclosure provisions of Title I of ERISA.  The agency oversees approximately 708,000 private pension plans, including 483,000 participant-directed individual accounts such as 401(k)-type plans.  An estimated 72 million participants are covered by these participant-directed plans, which contain nearly $3 trillion in assets.  Here is an overview of the final rule: 

  • Investment of plan assets is a fiduciary act governed by the fiduciary standards in ERISA section 404(a)(1)(A) and (B) which require plan fiduciaries to act prudently and solely in the interest of the plan participants and beneficiaries. 
  • When a plan allocates investment responsibilities to participants or beneficiaries, the plan administrator must take steps to ensure that such participants and beneficiaries, on a regular and periodic basis, are made aware of their rights and responsibilities with respect to investment of assets held in, or contributed to, their accounts, and are provided sufficient information regarding the plan and the plan’s investment options, including fee and expense information, to make informed decisions with regard to management of their individual accounts.
  • A plan administrator must provide to each participant or beneficiary certain plan-related information and certain investment–related information, such as administrative expense information, individual expense information, statements of actual charges/deductions, performance statements and benchmark information.

The rule provides plan administrators protection from liability for completeness and accuracy of information provided to participants if the plan administrator reasonably and in good faith relies upon information provided by a service provider.  The final rule was published on October 20, 2010, and will become effective beginning on December 20, 2010, becoming applicable to covered individual account plans for plan years beginning on or after November 1, 2011 and for calendar years on January 1, 2012.  The entire rule is available at and a model comparative chart is available at  29 CFR Part 2550

4. PLAIN WRITING ACT OF 2010:   On October 13, 2010, President Obama signed into law H.R. 946, The Plain Writing Act of 2010.  In sum, the law requires the head of each executive agency to: (1) designate a senior official to oversee the agency’s implementation of the act; (2) communicate the act’s requirements to the agency’s employees; (3) train agency employees in plain writing; (4) establish a process for overseeing the agency’s ongoing compliance with the act’s requirements; (5) create and maintain a plain writing section of the agency’s website that is accessible from its homepage; and (6) designate one or more agency points-of-contact to receive and respond to public input on the implementation of the act.  Within one year after enactment, each agency is required to use plain writing in every covered document of the agency that the agency issues or substantially revises. “Covered document” is very broadly defined, but excludes regulations.  (Sure, why not exclude regulations, the most important documents an agency issues?)  Believe it or not, 80 Republican and 2 Democratic house members voted against this bill, (probably because the language was not plain enough).

 5. AYE, AYE, SIR:  While researching the above item on the Plain Writing Act of 2010, we came across an interesting blog on what is the difference between yea/aye and nay/no?  There is no meaningful difference between yea and aye and nay and no; they both mean “I vote in favor” or “I vote against.”  The difference is just a matter of procedure.  The United States Constitution, however, requires “yea” and “nay” for votes on passage of bills, so the House and Senate both follow such procedure for those particular votes.  In fact, the Senate uses yea and nay for all votes, keeping things simple.  However, there are two peculiarities of the House that make the answer not so simple.  First, they use aye and no for all voice votes, where members of Congress just shout out their vote and the Chair rules who won just by listening.  The second peculiarity of the House is that it operates in two modes of procedure, and that determines which kind of vote is used for recorded votes other than on passage of bills.  One mode is for normal House floor debate, which uses yea and nay for recorded votes (so you will see aye and no for voice votes but yea and nay for recorded votes).  The other mode of debate is when the House operates as a Committee of the Whole, in which mode aye and no are used for recorded votes as well as voice votes.  On reflection, we do not think this explanation could pass “plain writing” muster! 

6. THE MOVIE THAT HELPED MAKE A SUPREME COURT JUSTICE:   We have previously written about “12 Angry Men,” the 1957 film about a jury deliberating the case of a young man accused of murder (See C & C Newsletter dated July 31, 2008, Item 13).  Around the time that Justice Sonia Sotomayor was entering college, The New York Times says the man who would eventually become her husband took her to see the film, which turned out to be a pivotal moment in her life, as she had been considering a career in law.  In particular, she was inspired by a moment in the film in which one of the jurors, a naturalized American citizen, expresses reverence for the American jury system.  She then realized she was on the right path.  But even as much as she admired the film, Justice Sotomayor said that when she was a lower court judge, she would sometimes refer to it to instruct jurors how not to carry out their duties.  The film was far from reality, including its depiction of some jurors’ behavior.  There was an awful lot speculation.  She praised the American jury system, and said that during her long career, she nearly always thought juries had always returned correct verdicts.  We wish we could agree with her.

7. SOME RFPs ASK FIRMS HOW GREEN THEY ARE:   Money managers are increasingly going green, and we don’t mean due to the moolah they make.  Consultants who study the subject say part of the move toward becoming environmentally friendly is pure reputation.  Another reason, however, according to, could be the pension funds and their requests for proposals are beginning to ask money managers about their environmental practices.  U.S. plan sponsors are also starting to drive the issue through RFPs, although the volume is still quite small.  As with all ESG criteria (environmental, social and governance practices), we urge caution, and suggest that such only be used in cases where all criteria are otherwise equal. 

8. NO COLA FOR SOCIAL SECURITY:  Monthly Social Security and Supplemental Security Income benefits will not automatically increase in 2011, as there is no increase in the Consumer Price Index from the third quarter of 2008, the last year a COLA was determined, to the third quarter of 2010.  Social Security’s Old-Age, Survivors and Disability Insurance program limits the amount of earnings subject to taxation for a given year.  The sale annual limit also applies when those earnings are used in a benefit computation.  The limit generally increases each year with increases in the national average wage index.  The annual limit is called the contribution and benefit base, which, for earnings in 2011, remains at $106,800 (unchanged since 2009).   The OASDI tax rate for wages paid in 2011 is set by statute at 6.2% for employees and employers, each.  Thus, an individual with wages equal to or larger than $106,800 would contribute $6,621.60 to the OASDI program in 2011, and his employer will contribute the same amount.  The OASDI tax rate for self-employment income in 2011 is 12.4%.  For Medicare’s Hospital Insurance program, the taxable maximum was the same for the OASDI program from 1966 until 1990.  Separate HI taxable maximums of $125,000, $130,000 and $135,000 were applicable in 1991 through 1993, respectively.  After 1993, there has been no limitation on HI-taxable earnings.  Tax rates under the HI program are 1.45% for employees and employers, each, and 2.90% for self-employed persons.

9. POLL FINDS NEGATIVITY TOWARD FEDERAL WORKERS:   More than half of Americans say they think federal workers are overpaid for the work they do, and more than a third think they are less qualified than those working in the private sector, according to a Washington Post poll.  Half also say the men and women who keep the government running do not work as hard as employees at private companies.   The critical views of federal workers—just one in seven of whom works in the D.C. area—echo the anti-Washington sentiment roiling the midterm elections, as some Americans lose confidence in their government to solve the country’s problems.  Still, of those who have interacted with a federal agency employee, three in four report that the experience was positive.  In addition, the survey revealed a generation gap, with younger Americans more likely to give federal civil servants positive reviews.  The survey also shows public views of federal workers deeply split along party lines, with Republicans more apt to see a disconnect between government pay and that in the private sector.  Republicans’ more negative views in the poll reflect the party’s souring view of government in general.  Fully 80% of Republicans say federal priorities are misplaced. 

10. INVESTMENT-MANAGEMENT OUTSOURCING:    If you are thinking about investment-management outsourcing, here are seven of the biggest myths and realities:

  • It is just for mid-size sponsors.   While the mid-size market remains active, there is much more of a trend at the larger end.
  • It is just about managing managers.  It is not just managing assets; it is managing the funded status. 
  • Only defined benefit plans get outsourced.  These plans have used outsourcing most, but defined contribution sponsors increasingly consider it.
  • It cost a lot, or saves a lot.  A majority do recognize some savings, in form of hard-dollar expenses for investment managers, custody and performance measurement.  On average, the savings might be around 10%. 
  • Sponsors can offload their fiduciary responsibility.  Employers must realize that they retain significant fiduciary obligations even if they outsource. 
  • It means giving up all control.  There is no one right answer on how involved in day-to-day workings a sponsor should stay after resourcing. 
  • Outsourcers only sell pre-packaged solutions.  Outsourcing has a lot of different permutations in the marketplace.  No two organizations have identical needs. 

This piece comes from, which has a link to 

11. PBGC ANNOUNCES MAXIMUM INSURANCE BENEFIT FOR 2011:   The Pension Benefit Guaranty Corporation has announced that the maximum insurance benefit for participants in underfunded pension plans terminating in 2011 will be $54,000 per year for those who retired at age 65.  The amount is higher for those who retire later and lower for those who retire earlier or elect survivor benefits.  The PBGC maximum insurance benefit is indexed to the contribution and benefit base in Social Security law.  Because that amount does not increase in 2011, the PBGC maximum insurance benefit is unchanged from 2010.  If a pension plan terminates in 2011 but a participant does not begin collecting benefits until a future year, the 2011 maximum insurance limits still apply.  For plans that terminate while the plan sponsor is in bankruptcy proceedings, the Pension Protection Act of 2006 provides that the maximum benefit payable is determined by the legal limits in force on the date the plan sponsor filed for bankruptcy and not on the date of plan termination.  The maximum insurance benefit is set by law.  Two additional legal limits on PBGC’s insurance coverage can also affect participants’ benefits.  The first prohibits PBGC from guaranteeing benefits that exceed the amount payable at the plan’s normal retirement age.  The second limits PBGC’s guarantee of benefit increases made within the five years prior to the plan termination, or the date a plan sponsor filed for bankruptcy, if the sponsor is in bankruptcy when the plan terminates.  The overwhelming majority of participants in the plans taken over by the agency face no reduction in benefits due to legal limits on coverage.  The largest reductions occur in cases where participants earn pensions that significantly exceed the maximum insurance benefit or provide generous early retirement subsidies.  Under PBGC’s single-employer insurance program, retirees sometimes can receive more than the maximum guaranteed benefit.  In general, three conditions must apply: (1) the participant earned a benefit in excess of the maximum guaranteed amount; (2) the participant retired or was eligible to retire at least three years prior to plan termination; and (3) the plan had sufficient assets to pay benefits above the guaranteed amount.  PBGC is the federal agency that guarantees payment of private pension benefits when companies and plans fail.  It protects some 44 million Americans in over 29,000 private defined benefit pension plans.  PBGC pays benefits using insurance premiums and assets and other recoveries from plans and their sponsors.  PBGC receives no taxpayer funds.  PBGC No. 11-04

12. ALL PUNS INTENDED:  Why do croutons come in airtight packages? Aren't they just stale bread to begin with?
13. OXYMORON:  Why does someone believe you when you say there are four billion stars, but check when you say the paint is wet?

14. AGING JOKES:  Youth is a disease from which we all recover. 

15. FABULOUS RANDOM THOUGHTS:  A conclusion is the place where you got tired of thinking.

16. QUOTE OF THE WEEK:   “The secret of managing is to keep the guys who hate you away from the guys who are undecided. “  Casey Stengel

17. 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. 

18. PLEASE SHARE OUR NEWSLETTER:  Our newsletter readership is not limited to the number of people who choose to enter a free subscription.  Many pension board administrators provide hard copies in their meeting agenda.  Other administrators forward the newsletter electronically to trustees.  In any event, please tell those you feel may be interested that they can subscribe to their own free copy of the newsletter at  Thank you. 

Copyright, 1996-2011, all rights reserved.

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.

Site Directory:
Home // Attorney Profiles // Clients // Resource Links // Newsletters