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Cypen & Cypen
NEWSLETTER
for
JULY 3, 2003

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. MARYLAND PENSION SYSTEM SETTLES TECHNOLOGY SUIT...BY DROPPING IT:
According to PlanSponsor.com, the Maryland State Employee Pension System has dropped its $22 Million lawsuit against a technology vendor hired to upgrade the System’s old computers. The dismissal may be a tacit admission that the Fund’s own errors in its electronic procurement process made the lawsuit tenuous. It gets worse: under the settlement, the Pension System will pay the vendor $3.5 Million, most of which it withheld because of dissatisfaction with the work.

2. LOCAL MASSACHUSETTS FUNDS MAY GET CONTRIBUTION RELIEF:
Talk about dangerous precedents: a Massachusetts proposal would allow communities to suspend 2/3 of their unfunded liabilities in fiscal 2004 and 1/3 of their total pension payments in 2005. Retirees, understandably, are up in arms, reports PlanSponsor.com. They oppose any refinancing of unfunded liabilities, arguing that they must be paid off by 2030, and that the state should not raid retirement assets to pay ordinary operating expenses.

3. FRESNO COUNTY, CALIFORNIA, SUES RETIREMENT BOARD OVER PENSION CALCULATIONS:
Alleging that the practice could cost it more than $30 Million, Fresno County has sued its retirement board over the manner in which pensions are calculated for County employees. Most government agencies throughout California base retirement on a single year’s pay -- or 26 consecutive pay periods. In Fresno, pensions are calculated based on the highest 26 pay periods during an entire career. Because the highest pay for most retirees is received during the last year, the methodology does not benefit the majority of retirees: only 250 out of 3,500 retirees are affected. But, because in 1997 Fresno County and other counties settled a lawsuit on retirement benefits that added vacation payouts and other benefits into pension calculations, the more liberal calculation “spikes” a few pensions as much as $1,000 per month. A Superior Court Judge will set a hearing on the matter, but has denied a temporary injunction to stop the practice pending the litigation.

4. MEMBER OF FLORIDA MUNICIPAL FIREFIGHTER PENSION BOARD IS AN “OFFICER”:
Reiterating opinions that go back almost 20 years, the Florida Attorney General has held that a member of a municipal firefighter pension board created under provisions of Chapter 175, Florida Statutes, is an officer for purposes of the dual office-holding prohibition in Article II, Section 5(a), Florida Constitution. The issue arose in context of a city considering appointment of a county commissioner as a member of its firefighter pension board. We often wonder if people ask the same question over and over again, hoping to get a different answer. AGO 2003-27 (June 25, 2003).

5. BUFFETT ON DERIVATIVES:
The global credit derivatives market, which wasn’t even tracked until 1997, has ballooned to $2 Trillion based on the so-called notional value of the debts that underlie the contracts, according to Fitch Ratings Service. That market, Fitch predicts, will grow to $4.8 Trillion by next year. In his annual letter to shareholders in February, 2003, Warren Buffett, Chairman of Berkshire Hathaway, said “the range of derivatives contracts is limited only by the imagination of man, or sometimes, so it seems, madmen.” Incidentally, during Berkshire Hathaway’s recent annual meeting of shareholders, Buffett played bridge with some of the attendees, terming the game “child’s play” compared with the arcane game of credit derivatives.

6. DAVE BARRY NAMES HIS CAR “THE ACTUARY”:
For all of our actuary friends, we felt the need to report on a recent column from Dave Barry, Miami Herald humorist. Because his car has a modern, quiet engine, he assumes it has an engine: “I’ve never had a reason to look under the hood. For all I know, there’s a small alien spacecraft in there, or Vice President Cheney.” He reminisces about his 1971 Chevrolet Vega, “which was the result of a bet among General Motors designers to see if they could make a car entirely out of plastic and rust.” By today’s standards, the Vega was not so much a motor vehicle as a paperweight with a horn. “And yet I vividly remember that car, unlike the cars I’ve had in recent decades, all of which have the personality of a pension actuary. In fact, that might be the formal name of my current car: The Actuary.” In the old days, they wrote great car songs, like Ronny and the Daytonas’ “Little GTO” and the Beach Boys’ “409.” But “nobody will ever write a song like that about my Actuary, or any other modern car. Modern cars are just not songworthy.” So, Barry has resolved to get a vintage Vega, and carry it in a Tupperware container in the glove compartment. Then, “when I encounter other vintage-car guys, I’ll lower my window, and shake my Vega at them. That way they’ll know that, inside my Actuary, I am still cool.” Hey, with all those lawyer jokes circulating, a fun-piece about actuaries ain’t no big deal.

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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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