Cypen & Cypen
NOVEMBER 24, 2010
Stephen H. Cypen, Esq., Editor
1. FLORIDA SBA RELEASES 2010 ANNUAL INVESTMENT REPORT: The Florida State Board of Administration released its 2010 annual Investment Report, providing an overview of SBA’s investment performance and accomplishments for fiscal year ended June 30, 2010. The State Board of Administration is an agency of Florida state government that provides a variety of investment services to various governmental entities, including the Florida Retirement System Trust Fund. Currently, SBA invests in six asset classes: global equities (U.S. and non-U.S.), fixed income, private equity, strategic investments, real estate and cash. SBA exceeded its investment objectives for fiscal 2009-10, capturing significant economic benefit as global financial markets recovered from the upheaval of the prior year. The SBA’s largest mandate, FRS, total fund net return was 14.03%, 2.53 percentage points ahead of target, Investment returns added $13.9 billion to the fund before net distributions of $4.1 billion to retirees, resulting in a net asset value increase of $9.8 billion. SBA has a history of cumulatively producing required returns since the fund’s inception. Over the past 22 years, more than 66% of Pension Plan benefit payments have been funded by investment gains, not from taxpayers. Since June 30, 2010, the Pension Fund value has grown an additional $9 billion, to over $118 billion, after approximately $1.5 billion being paid to retirees. Florida’s position as one of only four states with a fully-funded pension plan going into the 2008 recession put it in a strong position to weather the market downturn. Based on June 30, 2010 figures, FRS was estimated to have a preliminary funding ratio of almost 88% (when most objective sources consider a funding ratio of 80% as financially secure).
2. FPPTA NOVEMBER 2010 E-NEWSLETTER: Florida Public Pension Trustees Association’s November 2010 E-Newsletter contains updates about its media initiatives, news clips, an industry report and a legislative update. A copy is available at: http://www.fppta.org/docvault/2010/11/322.pdf. Our readers know that FPPTA provides trustee education and industry information in an effort to protect defined benefit plans. Now, more than ever, it is critical that you help FPPTA help you.
3. STATE WILL OWE BIG BUCKS IF IT MISSES PENSION CONTRIBUTION DEADLINE: The Teachers’ Retirement System of Illinois says taxpayers will owe more than $6 billion over the next three decades if the state fails to make its required annual contribution to the state pension fund before June 30, 2011. As reported by chicagobusiness.com, the fund, which comprises non-Chicago public school employees, will need $2.36 billion to help cover its fiscal 2011 liabilities. Without that contribution, taxpayers could be called upon to make up the shortfall to meet state legislators’ goal of fully funding the retirement program by 2045, totaling $6.6 billion over 34 years. Buy making its contribution for fiscal year 2011, the state will be avoiding more than $4 billion in additional costs. Even with the contribution to fiscal 2011, which begins July 1, 2011, the pension fund will cover less than 50% of current and projected liabilities for fiscal 2012. The pension fund blames the shortfall on decades of underfunding by the state government, as well as the recent economic recession that cost it over 25% of its investment value.
4. CALPERS REQUIRES CONTRACTORS TO DISCLOSE BUSINESS CONNECTIONS: California Public Employees’ Retirement System will now require contractors to disclose whether they are using an agent to seek business with the nation’s largest public pension fund. The CalPERS Board also voted to require contractors to disclose how much they paid the agent in fees and whether they have financial or familial relationships with current or former board members. They must also generally identify payments, gifts, loans and other items of value offered to board members or CalPERS staff. The policy, which takes effect December 1, applies to contracts valued at $10,000 or more. It also applies to those contracts made from Requests for Proposals and Invitations for Bid, regardless of amount. CalPERS already requires external money managers to disclose whether they use placement agents when seeking the fund’s business. Recently, a CalPERS-backed bill requiring placement agents to register as lobbyists and prohibiting them from being paid fees based on whether their clients obtained CalPERS business was signed into state law.
5. EMPLOYEES FOCUSING ON LONG-TERM PLANNING: The tide has shifted, according to Financial Finesse Reports, and never before have there been so many employees focused on long-term planning. In the third quarter of 2010, more than one in every four calls into Financial Finesse’s Helpline was related to retirement planning, and in total, over 60% of employee interactions involved discussions surrounding long-term planning issues. Apparently, employees are beginning to regain confidence in their overall financial picture. If the trend continues, more employees should be financially better prepared for the future. Although it will take many years to see benefits of this planning, it should help contribute to a sustainable economic recovery. Here are some other key trends:
Financial Finesse was founded with a single mission: to provide people with information and guidance they need to become financially secure and independent. Financial Finesse says it is the leading provider of unbiased financial education programs to corporations, municipalities and credit unions.
6. FLYING FRUIT LID SPARKS $150K SETTLEMENT OFFER: You read that right. The Associated Press reports a man who allegedly was knocked unconscious when a lid exploded off a jar of fruit and hit him in the face has been offered $150,000 to settle his lawsuit against the grocer and a fruit company. The defendants insist there is no credible evidence that the jar was unsafe, but they made the offer after a judge refused to dismiss a lawsuit. For his part, the man’s lawyer said the offer is too low because his client has permanent eye damage. The man reported the stubborn lid flew through the air and struck him in the eye after he hit it with a rubber handle of a screwdriver, having first placed the jar under warm water. Moral of the story: don’t mess with Orchard Select mixed fruit in a jar.
7. ICI LOOKS AT PRIVATE-SECTOR RETIREMENT PLAN INCOME AFTER ERISA: Employee Retirement Income Security Act of 1974 established sweeping changes in regulation of pension plans, including new rules regarding reporting and disclosure, funding, vesting and fiduciary duties. ERISA was aimed primarily at assuring the equitable character and financial soundness of defined benefit pension plans. Since ERISA’s enactment, two trends have changed the nature of retirement savings. First, a decreasing share of private-sector employees has worked for employers that sponsored traditional DB plans and an increasing share has worked for employers that sponsor defined contribution plans, particularly 401(k) plans. Second, individual retirement accounts, created by ERISA, have become increasingly important as a repository for pension benefits of all types, both private-sector and public-sector plans, and both DB and DC plans, accrued by employees who have separated from their employers, either due to retirement or job change. The movement away from employer-managed DB plans toward employee-directed DC plans—or, in case of assets transferred to an IRA, toward accounts outside of the employer plan system—has raised concerns among some in the public policy community. These concerns typically focus on whether Americans will have adequate retirement resources and whether they have ability to manage assets prior to and in retirement. To help provide context for retirement policy discussion, a new Research Prospective from Investment Company Institute examines the role that private-sector pensions historically have played in providing retirement income. Some more specific findings are as follows:
8. BAN ON OKLAHOMA SHARIA LAW AMENDMENT WILL CONTINUE…AT LEAST TEMPORARILY: A ban on the Sharia law amendment to the Oklahoma Constitution will stay in place for a week while a U.S. District judge studies the issues. The judge said she needs more time to decide if a voter-approved restriction against Islamic law should be kept out of the state constitution (See C & C Newsletter for November 11, 2010, Item 6; and C & C Newsletter for November 4, 2010, Item 6). At issue is an amendment to the Oklahoma Constitution that forbids state courts from using or considering international law or Islamic Sharia law in making decisions. On November 2, 2010, Oklahomans approved the “Save Our State” amendment with more than 70% of the vote. Newsok.com reports that an Oklahoma City Muslim has challenged the amendment, saying it demonizes his faith. The judge says she must weigh the will of a large majority of voters against an individual’s rights to protections found in the U.S. Constitution, particularly the First Amendment.
9. U.S. SUPREME COURT SETS RECORD FOR LONGEST OPINIONS: The U.S. Supreme Court set a record last term that may not be welcome news to law students or journalists who rely on its opinions: the median length of the court’s majority of opinions was the longest ever. Last term the median majority opinion had a record-setting 4,751 words, abajournal.com reports. Median length of the entire decision, including majority on all separate opinions, was 8,265 words, also a record. In the 1950s, by way of contrast, the median length of opinions was about 2,000 words. Some critics say today’s lengthy opinions are not necessarily models of clarity. They point to reasoning that fails to provide clear guidance to lower courts, sometimes seemingly driven by a desire for unanimity that can lead to fuzzy, unwieldy rulings. Justices Antonin Scalia and Stephen G. Breyer are the court’s clearest writers, while Justice Ruth Bader Ginsburg is the most complex, according to a linguistic computer analysis. In addition, a study that tried to identify the amount of ghostwriting in Supreme Court opinions found the least variation in writing styles of chief Justice John G. Roberts Jr. and Justices Scalia and Breyer. Less variation may indicate a justice is doing more of his own writing.
10. FORECLOSURE LAWYER HAS NOT PAID OWN MORTGAGE IN 4 YEARS!: A Florida lawyer who has gotten national publicity as an expert in foreclosure defense has one thing in common with his clients—he is fighting to keep his home, too. Peter Ticktin and his wife have not made a payment on their 4,000-square-foot Boca Raton house since December 2006, and were sued by their mortgagee in 2007, the South Florida Sun-Sentinel reports. Ticktin is embarrassed, but now understands his clients better than some lawyers who never had a problem in their lives. Ticktin’s 19-attorney Florida firm is handling 3,000 foreclosure-defense cases. Do as I say, not as I do.
11. RECORD-BREAKING YEAR FOR FALSE CLAIMS ACT RECOVERIES: The U.S. Justice Department recovered more than $5 billion under the False Claims Act since the beginning of 2009, the largest amount in any two-year period in history. In that time, heath care fraud recovery amounted to $4.6 billion. Overall recovery included cases of procurement fraud, grants for small businesses and federal/Indian mineral leases. In fiscal year 2010, DOJ recovered $3 billion. Most cases that resulted in recovery of taxpayer money were brought under the whistleblower provision of the False Claims Act. Recoveries included mega-settlements with Pfizer ($670 million) and AstraZeneca ($520 million), according to LegalTimes.
12. BILL WOULD GIVE PENNSYLVANIA FIREFIGHTERS PRESUMPTION FOR CANCER: Everybody knows that firefighters’ work is full of risks. What is not so widely known is the risks that come later, after they have hung up their helmets. Philly.com reports a recent study found male firefighters 100 times more likely than other men to contract testicular cancer. Because of that danger and other cancer dangers linked to exposure to toxic chemicals, firefighters have urged Pennsylvania Governor Rendell to sign a bill that would make it easier for firefighters to qualify for health-coverage even after retirement. The bill, which rose and fell through years of revision and negotiation before winning overwhelming legislative approval this fall, would establish that certain cancers are “a work hazard” for the roughly 65,000 volunteer and 7,000 paid firefighters in Pennsylvania who are exposed to toxics virtually any time they enter a burning building. The bill would give firefighters coverage for life if diagnosed with certain cancers before retirement or within five years thereafter. During that time, the burden of proof would be on employers to show that the cancer is not work-related. The Governor has until November 26, 2010 to act on the bill.
13. RAISING SOCIAL SECURITY RETIREMENT AGES WOULD HAVE SERIOUS IMPLICATIONS: U.S. Government Accountability Office has issued a report entitled “Social Security Reform: Raising the Retirement Ages Would Have Implications for Older Workers and SSA Disability Rolls.” Life expectancy has increased over the last several decades, and by 2050 persons age 65 or older will account for more than 20 percent of the total U.S. population, up from 13 percent in 2000. Without significant changes in retirement decisions, these improvements in longevity are expected to lengthen the average number of years that Americans spend in retirement and contribute to the expected long-term revenue shortfall in the trust funds for Social Security's Old-Age and Survivors Insurance and Disability Insurance programs (collectively, OASDI). The 2010 report from the Social Security Board of Trustees projects that the trust funds' assets will be exhausted by 2037. In light of the long-term trust fund solvency issues and increased longevity, many have suggested changing the earliest eligibility age at which workers first qualify for retirement benefits, the full retirement age at which they receive full benefits, or both. By reducing monthly benefits for those taking early benefits or delaying eligibility, raising retirement ages could create an incentive for workers to delay retirement, thus earning more income and possibly saving more for retirement. However, raising retirement ages would likely increase the number of workers applying for and receiving DI benefits. More DI applications and beneficiaries would reduce some of the financial savings for the combined OASDI and DI trust funds, and increase the Social Security Administration's disability caseload, which already faces a serious backlog (See C & C Newsletter for November 18, 2010, Item 5). In this context, Congress asked GAO to address issues related to potential impact of raising the earliest eligibility age or full retirement age on the DI program and on older workers--in general, workers in their sixties, but in particular those approaching age 62, just prior to becoming eligible for retirement benefits. The report answers the following questions: (1) What do the health, occupational, and demographic characteristics of those near retirement age indicate about potential for these individuals to continue working at older ages? (2) What is known about the effect a change in Social Security's earliest eligibility age and full retirement age could have on retirement and disability benefits and applications for disability? (3) What policy options might help mitigate effects of increased retirement ages on those who may not be able to work longer? The short answers are (1) While general improvements in longevity, health and workplace conditions over recent decades suggest that most workers would be capable of working to a later retirement age, many older workers would face health or physical challenges that could prevent them from working longer; (2) Raising the earliest eligibility age or full retirement age could increase the number of applications to and beneficiaries of DI and other assistance programs, as well as change retirement benefits; (3) Modification to DI program and policy changes that provide alternative income support for low-income workers or employment support could help older workers who are unable to work, do not qualify for DI benefits, and are unable to receive enough support from existing programs. In sum, a change in retirement ages could conceivably improve retirement security for able-bodied workers if it causes them to work longer and save more for retirement, but it could worsen security for those unable to do so. While policy options exist to mitigate impact on affected workers, doing so will likely require expanding programs and increase benefit costs. Finding the balance between worker protections and costs will likely be challenging. Understatement of the decade. GAO-11-125 (November 18, 2010)
14. FIREFIGHTER WHO SHOT TURKEY SUSPENDED FROM POLICE JOBS: In a story we would only do on Thanksgiving, standardspeaker.com reports that a firefighter who killed a wild turkey while on duty outside a city fire station was suspended in the two communities where he is a part-time police officer. One city suspended the firefighter indefinitely, pending a council meeting to decide whether to retain the firefighter as a part-time police officer. The other city also suspended his part-time police officer position for one month. The firefighter/part-time police officer/part-time police officer had pleaded guilty to killing big game out of season, and was fined $1,000 by the state Game Commission. In addition, he was also cited for firing a weapon inside city limits, to which he also pleaded guilty. This case maybe the first example of “triple-dipping,” and we don’t mean cranberry sauce.
15. ALL PUNS INTENDED: Everyone has a photographic memory; some just don't have film.
16. OXYMORON: My life has a superb cast but I can't figure out the plot.
17. AGING JOKES: I still have a full deck; I just shuffle slower now.
19. QUOTE OF THE WEEK: “You know your getting old when you stoop to tie your shoes and wonder what else you can do while you are down there.” George Burns
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BEST WISHES FROM OUR FAMILY TO YOURS
FOR A VERY HAPPY THANKSGIVING
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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.