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Cypen & Cypen
October 31, 2019

Stephen H. Cypen, Esq., Editor

Vested participants of AT&T Inc.’s defined benefit pension plan have filed a lawsuit against the media giant, saying that the way early retirement benefits were calculated shortchanges its members and violates the Employee Retirement Income Security Act (ERISA). The complaint claims that the vested participants in the AT&T Plan have been denied their full ERISA-protected pension benefits0 and have been “forced to forfeit” accrued, vested pension benefits if they retire before age 65 or receive their pension benefit in the form of a joint and survivor annuity. The plaintiffs said the plan’s terms reduce alternative forms of benefits using “early retirement factors” and “joint and survivor annuity factors” resulting in plan participants receiving less than the actuarial equivalent of their vested accrued benefit, as required by ERISA. In an emailed response to the lawsuit, an AT&T spokesperson said that “we’re recognized for offering highly competitive wages and benefits. We’re proud to provide defined benefit pension plans for most employees, and 401(k) savings plans with generous matches, and our pension plans comply with ERISA.” One of the plaintiffs, Amy Eliason of Duluth, Minnesota, worked for AT&T Inc. or its predecessors from approximately 1975 until 1991, and participates in the AT&T Legacy Bargained Program of the Plan. In June, one month past her 63rd birthday, she elected to receive a lump sum payment as an early retirement benefit. According to the complaint, because an early retirement factor was applied in determining her lump sum benefit, Eliason will receive less than the actuarial equivalent of a single life annuity taken at normal retirement age. “ERISA requires that if a plan allows a participant to retire early with a reduced monthly pension, the value of their reduced monthly pension must be actuarially equivalent to the participant’s monthly pension benefit commencing at age 65,” the complaint said. For example, the plaintiffs said that under most programs of the AT&T plan, if a participant’s normal pension benefit beginning at age 65 is $10,000 per month, but retires at age 60, the monthly benefit is reduced by a factor of 0.58. As a result, the value of the monthly benefit is 58% of $10,000, or $5,800 per month. However, the plaintiffs argue that the actuarial equivalent benefit she is entitled to receive under ERISA is approximately $7,090 per month. AT&T is also alleged to have improperly reduced pension benefits involving a joint and survivor annuity, which it said under the plan’s terms does not provide participants with the actuarial equivalent of their vested, accrued pension benefit. For example, if a married participant’s single life annuity benefit is $10,000 per month the default form of benefit is a 50% joint and survivor annuity, which is reduced by a factor of 0.90 for most programs under the plan As a result, the participant’s monthly benefit is 90% of $10,000 per month, or $9,000 per month, when the actuarial equivalent benefit is approximately $9,200 per month. “Put simply, if a participant retires before age 65 … then her alternative form of benefit beginning at the age she retires must be the actuarial equivalent of her single life annuity benefit beginning at age 65,” said the complaint. “Nonetheless, the early retirement factors and the joint and survivor annuity factors set forth in the plan reduce participant benefits below their actuarial equivalent value and thus violate ERISA’s statutory requirement of actuarial equivalence.” Michael Katz, Chief Investment Officer, October 17, 2019.
Fund board would cost $267 million more than expected and would achieve full funding only a few years earlier, Toni Preckwinkle's CFO says.

Cook County officials say a “surprise” legislative proposal from the Cook County Pension Fund to increase payments in the coming years would cost $266.68 million more between 2021 and 2024. Cook County Board President Toni Preckwinkle's administration and officials from the pension fund have been in a months-long back and forth about permanent state legislative changes to secure the fund's future. County Chief Financial Officer Ammar Rizki responded to the pension board’s September proposal in a letter Friday, saying the proposal would put an “undue burden on the county’s fiscal position in the coming years for little gain to the CCPF in the long run,” achieving their desired funding level only three years earlier. In draft legislation, the pension fund proposed the county make a $588 million payment in 2022, $650 million in 2023 and $717 million in 2024--about $267 million more than the county was planning on. "That is not really realistic in these times," pension committee chair Bridget Gainer said last month, describing the proposal as surprising. "I don’t know how it will fare in Springfield. I don’t think that’s something we’d want to take on now." In September, the pension fund drafted its own legislation for Springfield lawmakers to consider that would have sped up payments from the county to bring the Cook County Pension Fund to 100 percent funding by 2051. County officials say they’re already on track to reach the fund's 100 percent funding ratio by 2053. The county makes pension contributions in two ways--a statutory requirement based on a “multiplier” and a supplemental payment of sales tax revenues. That supplemental payment is made via a yearly intergovernmental agreement between the county and the pension fund and comes from a 1 percent hike in the sales tax Preckwinkle pushed through in 2016. The county plans to dedicate $527.9 million toward pensions in 2020 and launched a contingency fund in case of a downturn that already has $30 million in it. Preckwinkle’s administration says it has paid an additional $1.3 billion to pensions since 2016, putting the fund on much more solid ground. But while grateful for the extra money, pension fund officials say the annual agreement doesn’t allow them to plan or invest long term and could be undone with a change of administration or a new board of commissioners that might want to raid those sales tax revenues for another cause. If the fund isn’t able to secure a long-term fix, the county employee fund estimates it will be insolvent after 2040. The two pension funds--one for county workers and the other for Forest Preserve employees--are just under 61 percent funded, with a combined $6.8 billion unfunded liability. Rizki told Crain’s editorial board last week that Preckwinkle’s administration is taking a slow and steady approach to a long-term pension fix.  It says the most recent proposal from the fund does not include essential changes, like retiree health care, payments to address potential shortfalls in benefits for Tier 2 employees, the fund’s governance and bringing the Forest Preserve pension under its umbrella. “We are approaching our pension package with a comprehensive manner,” Rizki said Oct. 10. “The challenges the fund has highlighted . . . the biggest is actuarial funding on a long-term basis. That is something that’s our vision too. . . .Obviously the pension fund has a different view in some of these instances. We’re still hopeful to come to a compromise that works together for everybody. We’re not in a hurry to get anything done at the state level.” While still willing to work with Preckwinkle’s administration, members of the pension fund board expressed frustration last month that the county was not acting quickly enough to address its needs. “This stuff is dragging too long,” pension fund board member Diahann Goode, a Teamsters Local 700 representative, said at a board meeting in September. “Politics aside, we’re talking about people’s futures. The county can’t have everything it wants. . . .People need to take action, stop stalling, stop using the politics to not get our stuff done.” Aside from the speed of funding, another sticking point is board governance. Preckwinkle’s administration wants to shift the board makeup from two appointed and seven elected members to five appointed by the county board president and five elected—two county employees, an employee of the Forest Preserve, two annuitants from Cook County and one from the Forest Preserve. The change would bounce Cook County Treasurer Maria Pappas from the board, a move that has previously incensed Pappas. The rest of the pension fund board said it was opposed to changing its structure. It says the current form “best represents and aligns the interests of the participants with the Retirement Board.” A.D Guig, Crain’s Chicago Business, October 14, 2019.

  • 20 colleges sued over retirement plan management
  • Series produced one trial, millions in settlements

Washington University in St. Louis and a group of workers who say they got a bad deal from the school’s retirement plan will argue their case today before the Eighth Circuit. The arguments come as the litigation series against elite college retirement plans enters its third year, with six settlements, one appeals court decision, and one trial under its belt. The 20 lawsuits--which target Yale University, New York University, Massachusetts Institute of Technology, and others--claim the schools’ retirement plans charge excessive fees and offer too many bad investments. The retirement benefits of at least 470,000 people, along with more than $64 billion dollars in plan assets, are at stake. With today’s arguments, the U.S. Court of Appeals for the Eighth Circuit will become the third federal appeals court to hear arguments on the merits of these cases. With several of the pending lawsuits heading toward resolution and the possibility of a trip to the U.S. Supreme Court on the horizon, here’s a look at where the three-year litigation push stands.
The Third Circuit in May became the first federal appeals court to wade into these cases, handing a loss to the University of Pennsylvania. The court partially revived the case against Penn--which a federal judge dismissed entirely in 2017--after finding the Penn workers plausibly alleged that the school didn’t prudently manage administrative fees or address the plan’s costly and duplicative investment options. Penn has announced plans to appeal this decision to the U.S. Supreme Court. The next ruling may come from the Seventh Circuit, which heard arguments in a case against Northwestern University in May. Northwestern won at the district court level, and the AARP, the Pension Rights Center, the American Benefits Council, and the U.S. Chamber of Commerce have jumped into the appeal by filing supporting briefs. The D.C. Circuit has been asked to hear two university retirement plan cases against Georgetown University and George Washington University. Both schools won at the district court level. The Georgetown appeal centers on whether the workers missed a court-imposed deadline, and the George Washington case asks whether the case is blocked by a release agreement. In the Washington University case, the Eighth Circuit has been asked to address the merits of the workers’ lawsuit.
Six schools have signed settlement agreements that together total more than $49 million. The University of Chicago was the first school to strike a deal, signing a $6.5 million settlement in 2018, several months after a federal judge declined to dismiss the case. Brown University and Johns Hopkins University also signed deals in the months after losing motions to dismiss. Brown settled for $3.5 million, and Johns Hopkins settled for $14 million. Duke University and Vanderbilt University negotiated their settlements after seeing their cases certified as class actions. The deals totaled $10.65 million and $14.5 million, respectively. Most recently, MIT announced its settlement Sept. 12, four days before the case was scheduled to go trial. Details of the settlement, including the dollar value, aren’t yet public.
The Second Circuit is also hearing a university retirement plan appeal involving New York University. NYU workers want the appeals court to undo a decision by a former judge in the Southern District of New York. Judge Katherine B. Forrest ruled for NYU on all claims after an eight-day trial in 2018. Forrest identified some deficiencies in how NYU managed its retirement plans, but said the workers failed to show that the school acted imprudently under the Employee Retirement Income Security Act or that the plans suffered losses as a result. The NYU workers asked for a new trial after Judge Forrest left the bench to rejoin Cravath Swaine & Moore LLP shortly after deciding their case. Forrest’s decision may have been tainted by her talks with Cravath, because another firm partner is a member of NYU’s board of trustees, the employees argued. A different judge from the Southern District of New York rejected this argument and declined to schedule a new trial. The NYU workers have appealed this decision to the Second Circuit, as well.
Six schools are still duking it out with employees in district court after early rulings in those cases favored the employees. Judges have certified class actions against EmoryColumbiaCornell, and Yale, and the parties have engaged in discovery. Both Columbiaand Cornell have filed motions asking that their cases be resolved without trial. The cases involving Princeton University and the University of Southern California are ongoing after the schools failed to win early dismissal. USC spent more than two years trying to have the case against it sent to arbitration, ultimately losing the issue in the Ninth Circuit and failing to obtain relief in the U.S. Supreme Court. Cases against the University of Rochester and Long Island University were voluntarily dismissed before either school filed a response to the lawsuit. To contact the reporter on this story: Jacklyn Wille, Bloomberg Law, September 25, 2019.
Until recently, the pension risk transfer (PRT) market was comprised mostly of small transactions resulting from plan terminations, and insurer pricing deviations were often financially immaterial to plan sponsors. While the typical transaction process of selecting a final “auction date” months in advance can be considered appropriate under those circumstances, in the case of the large, discretionary transactions that are common today it may result in plan sponsors leaving substantial money on the table. Analysis by Athene suggests that a transaction process that includes ongoing price monitoring can lead to more successful outcomes. Read more here. Athene, July 2019.
Since our March, 2019 alert on retirement plan guidance and compliance trends, the Internal Revenue Service (IRS) and the Department of Labor (DOL) have been quite busy issuing further waves of new guidance impacting tax-qualified retirement plans. This article provides a high-level overview of some of the new guidance. For your convenience, the below sections are hyperlinked to facilitate navigation of this update.

Read more here. Mary K. Samsa, Akerman, October 11, 2019.
The U.S. Department of Labor (Department) announced a proposed rule to allow retirement plan disclosures to be posted online to reduce printing and mail expenses for job creators and make disclosures more readily accessible and useful for America’s workers.
The proposal:

  • Offers more disclosure options, which will benefit retirees, workers, and employers by enhancing communication regarding retirement savings.
  • Saves an estimated $2.4 billion net cost over the next 10 years for ERISA-covered retirement plans by eliminating materials, printing and mailing costs associated with furnishing printed disclosures.
  • Ensures workers’ rights to make the decision on how best to access their retirement information.

Reflecting modern internet technology, the proposal offers a new, voluntary safe harbor for employers who want to make retirement plan disclosures accessible on a website, rather than sending volumes of paper documents through the mail.

  • Plan participants would be notified that information is available online, including:

          - Instructions for how to access the information.
          - The right to paper copies of information.

  • The proposal includes additional protections for retirement savers:

          - Standards for the website where disclosures will be posted and
          - System checks for invalid electronic addresses.

  • When the conditions of the safe harbor are met, plan administrators may furnish documents electronically unless participants affirmatively opt out.

For fact sheet in its entirety, see here. U.S. Department of Labor, October 2019.
With the addition of the new Retirement Calculator feature to my Social Security, there’s never been a better time to open or access your my Social Security account! The new mySocial Security Retirement Calculator gives you confidence in your retirement decisions:

  • See retirement estimates based on your personal earnings record for age 62, your Full Retirement Age (FRA), and age 70.
  • View retirement benefit estimates that compare your selected date or age to begin receiving retirement benefits with benefit estimates for ages 62, FRA, and age 70. You can also input expected future income for inclusion in the estimate.
  • See the estimated numbers as text and in a chart.
  • Get personalized retirement benefit estimates that are closer to what your actual benefit will be when you’re ready to start receiving them.
  • Get a better understanding of how you begin receiving benefits affects the monthly amount you can expect to receive.

Plan for your Future. Open or access your my Social Security account today! Mike Korbey, Deputy Commissioner for Communications, Social Security Administration, October 17, 2019.
You may have heard of using aloe vera for sunburn relief. A Florida company claimed its aloe products would relieve joint and muscle pain, diabetes, acid reflux and more -- and that health studies confirmed its claims. Not so, says the FTC. Under an FTC settlement, the company will pay a financial judgment of $537,000 and must stop making health related claims that aren’t supported by the necessary scientific evidence. According to the FTC, NatureCity LLC promoted its TrueAloe edible capsules and AloeCran drink mix, both containing processed aloe vera, through millions of mailers, on websites and on Amazon. NatureCity LLC ads mentioned human studies and “data” that confirmed the power of aloe vera to improve a range of serious health conditions, but the FTC says those claims weren’t backed by sound scientific evidence. Many NatureCity LLC brochures included photos and stories from satisfied customers claiming they had experienced remarkable relief from pain and other ailments. Some said they didn’t need prescription medications any longer. The FTC says the brochures didn’t reveal that, behind the scenes, NatureCity LLC offered customers free products, or discounted products with free shipping, if their testimonials were used in advertising material. Under the settlement, NatureCity LLC must send letters to its customers saying it was sued for deceptive advertising and that it gave some customers free products and shipping in exchange for positive reviews. Before you try a health product, talk with your doctor. Your doctor can explain the risks of a product, if there are reputable studies to support the claims, and if the product will have an effect on your medicines or treatments. If you spot a health-related fraud, please tell the FTC at FTC.gov/Complaint. Bridget Small, Consumer Education Specialist, Federal Trade Commission, October 16, 2019.
Commodity Futures Trading Commission
Federal Deposit Insurance Corporation
Office of Comptroller of the Currency
Securities and Exchange Commission

The Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC) and the Securities and Exchange Commission (SEC) announced joining the Global Financial Innovation Network (GFIN).
U.S. financial regulators have taken proactive steps in recent years to enhance regulatory clarity and understanding for all stakeholders and promote early identification of emerging regulatory opportunities, challenges, and risks. Participation in the GFIN furthers these objectives and enhances the agencies' abilities to encourage responsible innovation in the financial services industry in the United States and abroad. By promoting knowledge-sharing on innovation in financial services, U.S. members of GFIN will seek to advance financial and market integrity, consumer and investor protection, financial inclusion, competition and financial stability. Participation in international organizations such as this helps U.S. financial regulators represent the interests and needs of the nation and its financial services stakeholders. The agencies join 46 other financial authorities, central banks and international organizations from around the globe that are members of the GFIN to foster greater cooperation among financial authorities on a variety of innovation topics, regulatory approaches, and lessons learned.
Media Contacts:
CFTC          Public Affairs Office      (202) 418.5080
FDIC           David Barr                      (202) 898.6992
OCC           Bryan Hubbard              (202) 649.6870
SEC            Office of Public Affairs  (202) 551.4120
FDIC: PR-94-2019, Federal Deposit Insurance Corporation, October 24, 2019.
The October Question of the Month asked alumni, “Should there be a maximum age for judges, even those with lifetime appointments?” A slight majority, 52 percent of the 632 respondents, said yes. The consensus among the 220 who left comments seemed to be that there should be a process to determine whether a judge is physically, mentally and emotionally fit to stay on the bench. Wrote one judge, anonymously, as was most often the case with those leaving comments: “There is testing done for other professions where they are entrusted with people’s lives, such as airline pilots and train operators. Just as those folks need good reflexes and (an) ability to act under pressure, judges need to have brains operating clearly and precisely.” “Too many judges lack the personal courage it takes to step down when the mind or body indicates it’s time to step down,” wrote Sparks, Nevada, senior judge and NJC faculty member Larry Sage. “There are sitting judges who take medicines that affect their mind, judgment and even personality much more so than (those that warn) ‘Don’t drive or operate any mechanical devices while taking this prescription.’” Judges who favor age limits had these other thoughts:

  • There is a compelling need for public confidence in the courts, and a judge’s perceived ability can matter as much as actual ability;
  • Experience from a long tenure is valuable, but there also is value in having fresh eyes, attitudes and cultural values;
  • A lifetime appointment is symbolic of an outdated era since life expectancy has increased and judges may stay on the bench for 40+ years. Lifetime appointments also enable judges to time their departures from the bench for partisan ends;
  • Some judges stay on the bench for the wrong reasons (e.g., egotism, benefits, pensions);
  • Older judges may spend too much time on personal health issues, which can reduce the efficiency of the judiciary;
  • Some judges become so entrenched in the way they are accustomed to operating that change is almost impossible to implement.

Among the 48 percent who voted against a mandatory maximum, many said that age alone cannot determine someone’s fitness to serve. Clemson University Municipal Court Judge Debi Culler of South Carolina said: “We all age so differently. It would be a shame to have a mandatory retirement age that might preclude great legal minds from contributing to a system that definitely needs wisdom and experience.” An anonymous judge added: “Age, like race and sex, does not dictate a judge’s ability to fulfill his or her duties at the highest level with honor and dignity. False barriers of any kind for any type of employment is an impediment to a diverse culture.” Orange County (Florida) Circuit Court Judge Bob LeBlanc, who advocates age limits, wrote: “All judges except SCOTUS justices should retire at 72 ½ . If you’re old enough to require mandatory distributions from your IRA, then you should retire.” Others who indicated support for age limits for judges, even those with lifetime appointments, said they would like there to be an exception for Supreme Court Justice Ruth Bader Ginsburg, who is 86.
*Each month the College emails an informal, non-scientific one-question survey to its more than 12,000 judicial alumni in the United States and abroad. The results, summarized in the NJC’s Judicial Edge Today, are not intended to be characterized as conclusive research findings.
Anna-Leigh Firth, The National Judicial College, October 14, 2019.
Half our life is spent trying to find something to do with the time we have rushed through life trying to save.
Once you replace negative thoughts with positive ones, you'll start having positive results. – Willie Nelson
On this day in 1918, Spanish flu-virus kills 21,000 people in the US in a single week.


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