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Cypen & Cypen
November 9, 2017

Stephen H. Cypen, Esq., Editor

1.  BLAME AMAZON FOR AMERICA'S UNDERFUNDED PUBLIC PENSIONS:  You have to give Amazon credit, says The Hill. In a rare public auction, the retail giant promised up to 50,000 jobs at a second headquarters, or “HQ2,” and sat back while 238 cities and states tripped over each other to offer the most lucrative tax break packages. While most of the bids have yet to be disclosed, some are staggering, especially considering the same states have recently claimed they do not have money for pensions, education, infrastructure or other state priorities. Illinois and New Jersey, two states notorious for underfunding their public pensions, are suddenly flush with cash when Amazon comes calling. Illinois’s bid with Chicago is priced at $2 billion. New Jersey’s bid with Newark more than triples that at a whopping $7 billion. Since 2000, New Jersey has ranked last among the 50 states in making its annually required contribution to the pension system. After pushing through harsh benefit cuts for workers, Gov. Chris Christie further shorted pension payments by almost $2.5 billion in his 2014 and 2015 budgets. New Jersey is so strapped for cash that it cannot keep its promise to workers, contributing money they have earned into their pension systems, yet it has $7 billion to offer Amazon? Now, you might say, New Jersey must be in this situation because of its overly generous pensions. But in fact, a study from the New Jersey Policy Perspective found that New Jersey ranks 95 out of 100 in generosity among the largest public sector pension plans. Pension benefits in New Jersey average $26,000 annually. While New Jersey shortchanged retirees, Christie has granted more economic development subsidy deals worth hundreds of millions of dollars than any governor in U.S. history. Some of his costliest deals simply paid companies to move around within the state, and the appearance of “pay to play” surrounds the many deals in which executives at subsidized companies gave large contributions to Christie’s reelection campaign, the governor’s mansion fund or the Republican Governors Association while Christie headed it. Before New Jersey makes any more corporate handouts, it should be forced to pay the bills it already owes to its firefighters, teachers, and public employees. Amazon is not the only corporation seeking handouts from states at the expense of other critical state services. With the blessing of the White House, Taiwanese electronics manufacturer Foxconn played states against each other for a new liquid crystal display factory. Michigan offered $3.8 billion, while the state’s legislature switched the default retirement plan for teachers to an inadequate 401(k)-style plan. It is hard to believe that Michigan “cannot afford” to invest in education and retirement security for teachers. Foxconn ultimately chose Wisconsin, where the state, by its own admission, will take at least 26 years to break even on its deal. Wisconsin took a risky bet on a technology product that could easily become obsolete 10 years from now. Taxpayers should be wary. There should be outcries in all 238 jurisdictions that bid for Amazon. Where is the accountability? It is your money that will not be used to keep classroom sizes reasonable for your children. It is your money that will not be used to fill the potholes that damage your car. It is your money that will not be used adequately to staff fire and police stations. As one economist recently explained, the place that “wins” the Amazon HQ2 deal could actually overspend and end up a big loser. Politicians may tell you that pensions are to blame for public service cuts, but corporate tax breaks and subsidies dwarf pension costs in most states. Not to mention, pensions are a proven economic engine for states. So if you live in one of the 238 places courting Amazon, demand that they disclose their HQ2 bids and live up to their existing obligations first.
2.  ECONOMIC IMPACT OF FLORIDA RETIRED PUBLIC WORKERS: When a retiree receives a pension benefit payment, he spends it on goods and services, such as housing, food, clothing, medicines, a car or computer, reports These purchases create an important economic ripple effect.  Every taxpayer dollar contributed to state and local pension plans supported $9.19 in national economic output. Nationally, taxpayer contributions are about 24 percent of pension financing. Most of the funding comes from investment earnings and employee contributions.  In Florida, 2014 expenditures stemming from state and local pensions supported:

  • $2.4 Billion in federal, state and local taxes paid by Florida public retirees
  • $22,042, the average annual retirement benefit of Florida’s public workers
  • $6.8 billion, a direct economic impact of retired public worker spending in Florida
  • 108,370 jobs supported by retired Florida public workers
  • 70% of every monthly check, which comes from pension fund earnings, not taxpayer dollars

3.  MISSING PARTICIPANTS WITH UNPAID REQUIRED MINIMUM DISTRIBUTIONS — IRS RELEASES HELPFUL GUIDANCE FOR PLANS UNDERGOING IRS PLAN AUDITS:  Internal Revenue Service (IRS) publicly released guidance, previously provided to its Employee Plan auditors, establishing the criteria that the auditors should use to determine if a plan under audit has a qualification issue when required minimum distributions (RMDs) under Section 401(a)(9) of the Internal Revenue Code have not been timely paid to missing participants. Under the guidance, auditors are instructed not to challenge a plan as violating the RMD rules for failing to commence or make an RMD to a missing participant or beneficiary if the plan has taken the following steps: searched plan and related plan, sponsor and publicly-available records or directories for alternative contact information; used any of the following search methods: a commercial locator service, a credit reporting agency, or a proprietary internet search tool for locating individuals; and attempted contact via United States Postal Service certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers). This guidance, which applies to audits of cases that were already open on October 19, 2017, and to cases opened after that date, will be helpful for plans that have unpaid RMDs and are undergoing IRS audits now or in the future. However, the guidance states that it has no impact on Department of Labor (DOL) audits under Title I of Employee Retirement Income Security Act (ERISA). It is too early to know whether DOL will give any deference to IRS’s audit position with regard to what is an adequate search for ERISA purposes. Read more at:
4.  THE FINANCIAL CRISIS, 10 YEARS LATER:  RecoverMax Monitorsays that it is hard to believe that it has been 10 years since the credit crisis and resulting global financial meltdown that began in 2007. As investors are painfully aware, the crisis affected most, if not all, global capital markets with few jurisdictions offering a safe harbor in the years that followed. Mounting losses in shareholder value prompted a significant amount of securities litigation against a long list of financial institutions. Ten years later, billions of dollars have been paid to harmed shareholders; however, these recoveries pale in comparison to the losses incurred. The following is excerpted from “Trends in Credit Crisis Settlements” by National Economic Research Associates (NERA), and includes information beyond securities class action settlements: Between 2007 and July 2017, credit crisis-related settlements totaled $133.2 billion. While settlements related to the credit crisis are no longer near their 2014 peak, in 2016 alone there were $25.4 billion in settlements, and another $7.8 billion in settlements recorded in the first seven months of 2017. These findings are based on a proprietary database developed by NERA Economic Consulting to provide insight to litigation and the ensuing settlements related to the financial crisis. Litigation-related settlements increased every year from 2007 to 2014, and peaked at $20.8 billion in 2014. That year, the Federal Housing Finance Agency settled lawsuits with nine banks for $15.8 billion. Litigation-related settlements leveled off over the following two years, totaling $4.1 billion in 2015, and $5.1 billion in 2016. Litigation-related settlement values continued to climb with $6.8 billion in total settlements disbursed/tracked between January and July 2017. On the other hand, non-litigation settlements represented 72 percent of the total settlements in 2011, 45 percent in 2013, 53 percent in 2014, and 80 percent in 2016. Certain landmark settlements reached by both the Department of Justice and mortgage-backed securities trustees with MBS issuers and underwriters account for most of the settlement dollars during those selected years. Although the pace of litigation-related settlements has slowed down in recent years and the DOJ has already reached settlements with many banks and rating agencies, several notable credit crisis-related lawsuits and investigations remain outstanding.
5.  IS THAT PHONE CALL FROM US?:  It is the morning of a busy day at home and you get a call from an unknown number. You answer only to find yourself on the receiving end of a threatening message saying your Social Security benefits will stop immediately unless you provide your personal information. It happens every day to thousands of Americans. And it is not Social Security calling. Scammers have many ways to lure their victims into providing information and then stealing their identities. Sometimes they call under a guise of helping you complete a disability application. Protecting your information is an important part of Social Security’s mission to secure today and tomorrow. Any request from our agency will come to you as a written notice first. If you do receive a call from one of our representatives, he will provide you with a telephone number and extension. The Inspector General for Social Security urges everyone to stay vigilant for impersonation schemes and not to be afraid to hang up. You must always remember that you are in control. Also, remember that Social Security will never do any of the following:

  • Call you to demand an immediate payment;
  • Demand that you pay a debt without the ability to appeal the amount you owe;
  • Require a specific means of payment, such as requiring you to pay with a prepaid debit card;
  • Ask you for your personal information or credit or debit card numbers over the phone; or
  • Threaten you with arrest or deportation.

If you receive one of these scam calls or emails, do not provide them with any information. You should hang up immediately. For Social Security impersonations, contact Social Security’s Office of Inspector General at If you receive a notice from Social Security, please use the telephone numbers provided in the notice sent to you. You can also call 1-800-772-1213 or visit Remember that scammers try to stay a step ahead of the curve. You can do the same by protecting your information.
6.  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.
7.  CRAZY STATE LAWS: Good Housekeeping reminds us that there are crazy laws in every state. In Texas you cannot sell a human eye. Other human organs and tissues are included in this law too like the kidney, liver, heart, lung, pancreas, bone or any other organ that does not include hair or blood. We found this one pretty humorous!
8.  INSPIRATIONAL QUOTE:  The most difficult thing is the decision to act, the rest is merely tenacity. –Amelia Earhart
9.  PONDERISMS:  Junk is something you throw away three weeks before you need it.
10.  FUNNY TOMBSTONE SAYINGS:  Some tombstones are clever and could make you die from laughter. One tombstone reads: Finally, a real vacation.
11.  TODAY IN HISTORY:  In 2015 the World Anti-Doping Agency commission report recommends the Russian Federation be banned from athletic competitions for employing a "state-supported" doping program.

12. 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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