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Cypen & Cypen
DECEMBER 1, 2005

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


If you invest in a mutual fund or are considering to do so, you must pay attention to fees and expenses. So, NASD has come up with a new mutual fund expense analyzer. NASD says its online tool contains fee and expense information of virtually all of the 18,000 mutual funds and 160 Exchange Trader Funds. The expense analyzer can be found at Incidentally, over 50 million American households have money invested in mutual funds.


Center for Retirement Research at Boston College has issued the second in a three-part series “Issue in Brief” that asks the question “Do Today’s Retirees Have Sufficient Income to Meet Their Needs?” (See C&C Newsletter for November 17, 2005, Item 4). One common way to address this question is to determine a household’s “replacement rate.” The replacement rate, defined as the ratio of post-retirement income to pre-retirement income, gauges the extent to which retirement income allows workers to maintain their pre-retirement standard of living. The central finding that emerges from the current analysis is that the majority of households retiring today are in pretty good shape. Regardless of how retirement income and pre-retirement income are defined, households with pensions approximate the 65-75 percent threshold of adequacy, and this group represents about two-thirds of all households. When deciding how sanguine to be about these results, it is important to keep four factors in mind. First, one-third of households does not have pensions and does not fare well. Second, the replacement rates are reported for newly-retired workers and will decline over time as inflation erodes the real value of pension income. Third, the calculations assume that people buy an actuarially-fair annuity, which assumption produces the maximum income stream but does not reflect actual behavior. Finally, the current situation represents the “golden age” of retirement income. (The landscape is changing for the coming wave of baby boom retirees, who will see lower replacement rates from Social Security and less income from employer pensions.)


The U.S. Bureau of Labor Statistics, U.S. Department of Labor, has issued its “National Compensation Survey: Employee Benefits in Private Industry in the United States, 2003.” The bulletin presents findings of the 2003 National Compensation Survey conducted by the Bureau of Labor Statistics. The survey provides information on detailed provisions of medical care, prescription drug, dental, vision, defined benefit and defined contribution plans. The 2003 NCS data on provisions of healthcare and retirement plans were obtained from over 3,000 private industry establishments representing approximately 103 million workers; of this number, over 79 million were full-time workers and the remainder -- nearly 24 million -- were part-time workers. The NCS uses the establishment’s definitions of full- and part-time status. The 100-page document is chock full of interesting information.


The Uniform Services Employment and Reemployment Rights Act was enacted in 1994 to improve the Veterans’ Reemployment Rights Act and prohibit employment discrimination on the basis of military service. An employer violates USERRA when a person’s membership in the Uniform Services is a motivating factor in the employer’s action, unless the employer can prove that the action would have been taken in the absence of such membership or obligation for service. Unlike in claims under Title VII of the Civil Rights Act of 1964, USERRA’s procedural framework shifts the burden of persuasion, as well as production, to the employer. Under USERRA, an employee must make an initial showing that military status was at least a motivating of substantial factor in the employer’s action. If the employee makes such a showing, the employer must prove, by a preponderance of evidence, that the action would have been taken despite the protected status. Because Maxfield satisfied his initial burden to show a genuine issue of material fact concerning the employer’s motivation, the burden of production of persuasion shifted to the employer to show that it would have terminated him even in the absence of his military status. Thus, the lower court’s grant of summary judgment in favor of the employer was reversed, and the cause remanded for trial. Maxfield v. Cintas Corporation No. 2, Case No. 04-2979 (U.S. 8th Cir., October 31, 2005).


According to a report published by National Association of Pension Funds, government must take positive action to halt the decline of workplace pensions. Entitled Making Pensions Work at Work, the report sets out the agenda ahead for workplace pensions. The report identifies the following four issues:

1. Managing the liability overhang. The Work and Pensions Select Committee should investigate whether schemes could be allowed to modify their existing liabilities to help employers retain their defined benefit pension plans.

2. Ensuring incentives hit the spot. Current incentives for pensions saving are complex and poorly understood. The Chancellor of the Exchequer should announce a review of pensions and savings tax regimes in this year’s pre-budget report to ensure that the right people are encouraged to save and that there is an appropriate range of savings products available via the workplace.

3. New generation pensions. The risks now explicit in DB plans are proving too great for many employers to bear. But the risks in individualized defined contribution schemes may prove to great for individuals. Government should encourage development of collective DC pension models under Master Trusts to help protect plan members.

4. Proportionate and risk-based regulation. NAPF has established a Better Pensions Regulation Taskforce involving key stakeholders to develop a modern, risk-based regulatory framework for workplace pensions.

NAPF is the leading voice of workplace pension provision in the United Kingdom. Some 10 million working people are currently in NAPF member plans, while about 5 million pensioners are receiving valuable retirement income from such plans. NAPF member schemes hold assets of some £750bn, and account for over one-sixth of investment in the UK stock market. So, pension problems are not limited to the United States. The full NAPF report is available at


Bloomberg News reports that the Securities and Exchange Commission is investigating the growing role of hedge funds in bankruptcy proceedings on worries that money managers are overstating their bond holdings to obtain access to inside information. Officials are trying to determine whether the funds exaggerate their stakes to gain membership on committees that oversee debt restructuring for bankrupt companies. Creditors’ committees are privy to developments that may affect the value of a company’s bonds, such as takeover offers, before they are disclosed to the public. The inquiry reflects SEC’s increasing awareness of the potential for fraud in bond trading on crippled and bankrupt companies, and underscores the agency’s effort to intensify scrutiny of hedge funds, investment pools for the wealthy that now manage a total of more than $1 Trillion.


Last time we reported on the cost of gifts in “The Twelve Days of Christmas,” it was for the year 2003 (see C&C Newsletter for December 22, 2003, Item 2). Now, according to PNC Advisors, the total price tag for the 364 items is $72,608.00, up from $66,334.00 last year and from $65,264.00 in 2003. Avian flu and energy prices are making it more difficult to get that perfect Christmas gift for your “true love.” Because the threat of avian flu has restricted international shipment of birds, the biggest hurdle will be the purchase of three French hens from France. Fortunately, there are domestic breeders of French hens, as well as the other feathered friends mentioned in the song. Incidentally, not everything is cheaper online: because of the expense due to shipping costs, to buy everything in the song on the web will cost almost $124,000.00.


Apropos of our article about using discretion with tasers (see C&C Newsletter for November 3, 2005, Item 9), a 26 year old Fort Myers Beach, Florida, man was caught breaking windows and trying to persuade women to touch him while he was running around totally nude. (What a cool guy.) When sheriff’s deputies approached, according to, the man tried to run away. When a deputy used his taser to immobilize the man in the process, one of the gun’s prongs accidently hit the man south of the border, and stuck. It DID, however, immobilize him. Yikes!

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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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