Wednesday, November 12, 2014
AARP's Research released a new report on saving for retirement: Planning for Health Care Costs in Retirement: A 2014 Survey of 50+ Workers. According to the introduction, the reason AARP did this research was to understand how health care costs factor into retirement planning. This is not only an interesting point, it's an important one and worthy of research.
The key findings for this report show that as far as this issue, the news isn't good. Almost 40% aren't saving for health care costs and a bit over 40% relate they have no plans to do so. Slightly over a quarter of respondents do plan to begin to save...within the next few years.
Why aren't these folks saving? According to the findings, right now it's unaffordable, either because they're currently caring for another or they have other expenses. Although over 60% are saving for health care costs, almost half worried they won't be able to afford health care.
The study also shows a disconnect-between the belief of the need for saving and when the belief translates into action. I thought this finding quite interesting--this group plans to pay their own way when it comes to health care costs, with almost 90% replying that they will not rely on family for help with the costs of health care.
The survey also inquired into retirement readiness. The key findings show results that aren't particularly surprising, with about 75% respondents reporting they are "somewhat confident" while only slightly over 30% being "very confident". Concomitantly, 75% have saved to some extent while 1/3 saved "to a large extent." The full report is available here as a pdf.
Monday, November 3, 2014
While I was in California last summer, a friend introduced me to Lillian Hyatt. I had already known of her by reputation and it was a real pleasure to speak to her in person and to continue our communications by telephone and mail. She's a dynamo, a person who does not take aging "lying down." Born in 1925 (believe me, she doesn't mind me disclosing that fact!), Lillian Hyatt is just about as active in "retirement" as she was during her many years as a writer, consultant, advocate, social worker, and university professor.
So I was especially interested to notice that when I clicked on a hyperlink embedded in a recent New York Times article about the impact of "falling" in an "aging nation," it took me to a press release about Lillian Hyatt. Back in 2008, Ms. Hyatt filed suit against a California Continuing Care Retirement Community (CCRC), to prevent it from banning walkers from the dining room of this high-end retirement community. She needed the walker to maneuver in what was, in essence, her home.
The lawsuit, asserting violation of the federal Fair Housing Act and other state and federal laws that address discrimination based on disability, was settled in 2010. Others have pursued similar claims in assisted living settings, public spaces and more. For more on the continuing impact of Ms. Hyatt's advocacy -- even though, curiously, she is never mentioned by name in the NYT article -- read "Bracing for the Falls of an Aging Nation." Advocates such as Ms. Hyatt challenge all of us to work harder to find a better balance between protection and respect for independence.
Monday, October 27, 2014
Last week I was part of a panel hosted by the National Continuing Care Residents' Association (NaCCRA) in Nashville, a component of the larger (much larger!) annual meeting of LeadingAge. The theme for the panel was "Resident Engagement in Continuing Care Life" and for my part of the panel, I used an interesting Third Circuit bankruptcy court decision, In re Lemington Home for the Aged, to discuss whether residents of financially troubled CCRCs should be treated as entitled to enforce specific fiduciary duties owed by the CCRC owners to creditors generally, even unsecured creditors, fiduciary duties that may give rise to a direct cause of action connected to "deepening insolvency."
Jennifer Young (pictured on the left), a CCRC resident, talked about what it is like to "be" an unsecured creditor in a CCRC's Chapter 11 bankruptcy court proceeding. Her explanation of how creditors' committees operate in bankruptcy court (including how they hire legal counsel and how that counsel is paid out of the Debtor's estate) was both practical and illuminating. The closing speaker on the panel was Jack Cumming (below left). Jack's has deep experience as an actuary and a CCRC resident. He noted the disconnect between the intentions of providers and the realities faced by residents and called for stronger accountability in investment of resident fees. I always come away from my time with Jack with lots to think about. Our moderator was NaCCRA president Daniel Seeger (right), from Pennswood Village in Pennsylvania.
In my final comments, I reminded our audience that even though our panel was focusing on "problems" with certain CCRC operations, including some multi-site facilities, many (indeed most) CCRCs are on sound financial footing, especially as occupancy numbers rebound in several regions of the country. Both panelists and audience members emphasized, however, that for CCRCs to be able to attract new residents, the responsibility of the CCRC industry must improve. For more on these financial points, go to NaCCRA's great educational website, that includes both text and videos, here.
Interestingly, during the LeadingAge programming that began on Saturday, October 18 and continued through October 22, I was hearing a lot about a potentially major shift in the long-term housing and service market. Some of the largest attendance was for deep-dive sessions on new service models for "Continuing Care at Home," sometimes shortened to CCAH or CCaH. CCAH is often seen as a way for more traditional CCRCs to broaden their client base, particularly in the face of occupancy challenges that began with the financial crisis of 2008-2010.
As a corollary of this observation about market change, one of the topics under debate within the leadership of LeadingAge is whether Continuing Care Retirement Communities need a new name, and I can see movement to adopt a name that aligns better with the larger menu of non-facility based services that many providers are seeking to offer.
Of course, as a law professor, I wonder what these market changes mean for oversight or regulation of new models. Not all states are keeping up with the changes in the Continuing Care industry, and name changes may complicate or obscure the most important regulatory questions.
Tuesday, October 21, 2014
The New York Times ran a story on October 11, 2014 about the Dutch pension system. No Smoke, No Mirrors: The Dutch Pension Plan focuses on the straightforward way that the Netherlands runs their pension program. "The Dutch system rests on the idea that each generation should pay its own costs — and that the costs must be measured accurately if that is to happen." The Dutch system works well, but it isn't without costs. The workers put away almost 2% more than U.S. workers but the Americans are including Social Security, which is not intended to fully replace pre-retirement earnings, but instead should "provide just 40 percent of a middle-class worker’s income in retirement."
The article notes that Dutch employers, like those in the U.S., contribute as well, but usually with a ceiling on contributions. Seem odd to have it capped? The article offers that this is actually an incentive for employers to stay with the plans. There's also another advantage to the Dutch system-if the markets do well and the pension has a surplus, the employer can't access it.
There are additional provisions that ensure success and checks and balances put into the system. Check out the article.
Tuesday, September 30, 2014
Kudos again to my friend and colleague, Professor Mark Bauer (current chair of the AALS Aging & Law section, btw) for sending me this article, The Great Senior Sell-Off Could Cause the Next Housing Crisis. The article appeared in The Atlantic's CityLab, and although the article was published in 2013, I think it is still important to read (if you didn't when it was first published) because it predicts the busting of another housing "bubble" starting in 2020, just 6 years from now.
The article opens with looking at the various names of animals being swallowed by the python (that is, the Boomers and the American population). (As an aside, the article lists a number of animals--I'd only heard of the pig, but now I know we Boomers might also be compared to a bunny (cute) or "a really big rat" (ugh)). But I digress.
The focus of the article is on what will happen when the Boomers reach a certain age where they decide to sell their homes...and hope there are buyers galore for them. A researcher quoted in the article indicates that in certain larger metro areas, there should be buyers, but in less populous areas, not so much. He describes what he calls "the “great senior sell-off” .... sometime later this decade ... [that] he predicts that it could cause our next real housing crisis."
Changing demographics will also affect the housing market and demand will not be in sync with supply as housing preferences change with age and demographics. There is something of a bleak housing future ahead for many elders, according to the expert, who predicts "there will be two classes of seniors in America: those “aging in place” voluntarily, and those “aging in place” involuntarily because they can’t sell their homes." His concerns about aging in place are best summarized by how a person's abilities change once s/he gets to an advanced age and becomes unable to do basic upkeep or maintenance yet the housing market will tumble, leaving some only the choice of abandoning their homes.
Friday, September 26, 2014
I always love learning new lingo. I've heard parts of the US described as the "sun belt", the "rust belt" and the "corn belt" to name a few. Now I've learned that I live in the "sun belt" and next door to the "Grey Belt." Thanks to my friend and colleague Professor Mark Bauer for sending me the Associated Press article, Fla.'s 'Gray Belt' a glimpse at nation's future.
According to the article, Citrus County, Florida is the heart of the "Grey Belt" in which "more than a third of residents are senior citizens, one of the highest rates in the nation... The county isn't simply a stereotype of Florida, where in just 15 years, one in four residents will be 65 or older. It's a peek into the not-too-distant future of the nation, where the number will be one in five."
So what's the implication of living in the "Grey Belt?" The article notes that the businesses reflect the population and the economy shows the effect of such a population. For example, the story notes that the "economy based on low-skill jobs such as health-care aides, retail clerks and food service workers." The result of a community where people move in to retire, rather than age-in place? "[Those who move into an area generally aren't eager to fund schools ... whereas those who remain in the communities where they worked and raised their families tend to support education and other public spending that doesn't benefit them directly. Citrus County voters lived up to that thesis as recently as two years ago when they decisively rejected a referendum to raise property taxes to fund schools."
The article discusses the dilemma these cities face-they need younger folks to work in the service jobs that cater to the elder residents, but these folks don't always want to move to a community that is primarily elder residents. One pastor even described his church as a "hospice church" because "congregants either die or move back north to spend their last years near relatives. Changes that might attract younger families for the almost 500-member congregation often meet resistance..."
Although Citrus County might be the center of the Florida Grey Belt, the phrase actually refers to a swath of 8 counties with "among the oldest populations in the nation, not to mention in Florida, which has long had the highest rate of seniors in the nation, and will for decades yet... [with] Sumter [county] ... home to the largest concentration of seniors of any county in the nation..."
Ok but really--is Florida the only location of the "Grey Belt"? We all know the US population is aging, so what about it--do we have more grey belts? Depends on how you look at it. According to the AP article, "North Dakota, Texas, and Michigan have pockets of seniors on par with the Gray Belt counties in Florida. But unlike the Florida counties, which have grown from the migration of new seniors, they have gotten grayer as a result of younger residents leaving."
Keep in mind that the Florida grey belt only encompasses 8 counties. The state is a bit of a hodgepodge, demographically speaking, since the grey belt "contrasts starkly with the state's younger and more diverse major metro areas ... and the interests of Gray Belt residents will diverge politically, socially and economically from Florida's more youthful cities." Competing interests based on age will show up at the ballot box as well--talk about a tightrope for state leaders!
According to an economist with the U. of Florida ("in the nieghborhood" of the grey belt), "[s]ince voting power will tilt in favor of the older residents because of their higher voter-participation rates, the key to keeping both sides happy is to devolve all kinds of governmental decisions on taxes, planning and education from the state level to the local level so that residents in areas with both high and low concentrations of seniors will feel like their voices are being heard."
Here we go....and please, no jokes about Florida and voting. Deal?
Thursday, September 18, 2014
My colleague and dear friend Mark Bauer (current chair of the Aging & Law AALS section) sent me a link to an article published in CityLab. The article is titled Where Are the Baby Boomers Going to Live Out Their Golden Years? The article mentions a recent report from Harvard's Joint Center for Housing Studies, Housing America's Older Adults. The Harvard website for this project includes a number of resources, including the report, an interactive map, an infographic, videos of the keynote address and panel discussion. If you don't have time to read the entire report, be sure to read the executive summary, available here.
The CityLab article mentions some other helpful sources, including an AARP survey on preferences regarding aging at home. The article references aging and disability, looking at the suitability of Boomers; homes for them in the future
The housing stock built for Baby Boomers largely wasn't designed with accessibility in mind. There are five universal-design housing features that tend to address a variety of disabilities that residents face as they age: no-step entries; single-floor living; switches and outlets set at lower heights; extra-wide hallways and doors; and lever-style doors and faucets. Nearly 90 percent of existing homes have one of these features, according to the report—but just 57 percent have two.
The article notes that more recently built homes are more likely to include at least some of these universal design features, but concludes
Yet these detached, single-floor, single-family homes—and the automobile-centric society that comes with them—are only going to fall further out of step with the needs of residents over time. And sooner rather than later. Homes can be retrofitted with lever-style handles and no-step entries (albeit at great expense). It's much harder to turn exurban and rural communities where older Americans live into places that nurture seniors rather than isolate them.
Friday, September 12, 2014
In a GAO study titled "Inability to Repay Student Loans May Affect Financial Security of Small Percentage of Retirees," researchers reveal that a significant -- and growing -- proportion of "student loan" debt is owed by Americans aged 65 or older. In addition to the growth in the total amount of "senior" student loan debt, from $2.8 billion in 2005 to $18.2 billion in 2013, the GAO findings include:
- Relatively few households headed by individuals 65 or older hold student loan debt -- the number is about 706,000 households in the U.S. -- but the amount they owe may be significant, with estimates that the median debt owed is around $12,000, as compared to a median for those aged 64 and younger of $13,000.
- Most -- about 82% -- of this debt was for the individual's own education. It is not known whether how "old" the loans are.
- Older borrowers hold defaulted federal student loans at a higher rate -- and defaults can have conquences, including offsets on Social Security payments. Generally speaking, student debts cannot be discharged in bankruptcy; however adjustments may be possible to keep the individual's monthly income above the poverty threshold.
For more discussion on the GAO report, see "Senior (Citizen) Student Debt Rising," in Inside Higher Ed by Michael Stratford. Hat tip to Professor Laurel Terry for pointing out this new study.
Thursday, September 11, 2014
Put me in coach---a phrase often associated with a competitive sport of some sort. We think about coaches for teams, but we need to broaden our perspective, to think about coaches in a much broader aspect: life coaches, marriage coaches, business coaches, study coaches, and now... retirement coaches. The NY Times ran an article, Finding an Identity Beyond the Workplace: There's More to Retirement Than Financial Planning. We have heard stories before of people whose identities are so intertwined with working, that they are lost when they retire. Coaches can help those folks, and others, in finding goals for their post-work time.
This entry in the non-sport coaching field, retirement coaching, can help with goals and motivation, according to the article. "Retirement coaches ... are popular these days. The cadre has emerged in the crowded coaching field to cater to a growing number of boomers who are grappling with what’s next." According to one expert quoted in the article, part of this need for assistance is longevity--with the years post-working stretching out longer in the future, people are looking for help in defining what to do in those years.
Here's how one retirement coach describes what they do "[w]hen someone retires, they tend to be literally levitating with excess productivity that can’t be channeled ... We help them slowly build a basket of activities."
So what's in the basket? It could be a veritable potpourri of activities, such as "part-time work, humanitarian endeavors, entrepreneurial adventures and artistic pursuits, [as well as] ... a search for legacy and significance ...." A significant number of clients of one coach are described by the coach as "hav[ing] some kind of ‘give back’ gene. They want to get involved with a charitable board, or find ways to be a teacher or tutor.”
There are plays to be run in retirement coaching, just like in sports. It takes time for the recently retired to learn those plays and to be prepared for the "game." This means the first play run will be "a self-assessment that examines values and strengths and clarifies goals, hopes and dreams for the future." The playbook involves running numbers, too, using "retirement calculators to be sure they won’t outlive their savings." But although a football coach can use a stop watch to see how fast a player can run the 100, it's more intangible with retirement coaching. "[I]t’s far harder to compute in advance how to best navigate the intangibles like building a new social network and finding value in how you spend your time in retirement."
How long do you need your coach? It simply depends. Cost does as well. There isn't quite as much regulation for these types of coaches as there are in sports, but there still are at least two organizations, according to the article. So why use a coach? One of the coaches is quoted: “This is a fresh track adventure ....Be patient. For the first time in your life, you need to be able to deal with white space. People get addicted to busyness. White space is the source of creativity and strategic thinking, so don’t fill up your dance card too fast.”
Since all of us are "in the game" of life and aging, we all need to think about our retirement readiness. Now we can have our own coach for that, and maybe there will be an app as well. (Please note my sports analogies are an attempt, feeble as it may be, to have a bit of fun in writing this post. Any sports analogy errors are definitely my own).
Monday, September 1, 2014
The NY Times ran an article a few days ago about retirees who are spending the rest of their lives (or a substantial part thereof) traveling...abroad. The August 29, 2014 article, Increasingly, Retirees Dump Their Possessions and Hit the Road focuses on the rising number of individuals who choose to travel when they retire. The article cites to statistics from the Commerce Department that "[b]etween 1993 and 2012, the percentage of all retirees traveling abroad rose to 13 percent from 9.7 percent...." As well, over a quarter of a million Social Security recipients receive their benefits at an oversees address, close to "48 percent more than 10 years earlier...." The article discusses the value of post-retirement travel, from checking items off one's bucket-list, to quoting experts on how today's retirees are changing the notion of a "typical" retirement. One expert describes the travel value this way: "an extended postretirement trip can assuage a sense of loss from ending a career." Of course, many chose domestic travel over international, but the opportunities are there-whether to see the world, or to give back to a global community.
The article highlights a trend of sorts. Of course, not everyone may choose this path for retirement. But it does make for an interesting question when deciding where to spend the holidays when mom is now living in another country ....
Thanks to Stetson Law student Erica Munz for bringing the article to my attention.
Friday, August 22, 2014
Articles recently posted by U.S. law school academics on the Social Science Research Network's (SSRN's) Elder Law Studies network:
- "Rethinking ERISA's Promise of Income Security in a World of 401(k) Plans," by Prof. Larry Frolik (Pitt Law), to be published in the Connecticut Insurance Law Journal (2014)
- "Making Mediation Work in Guardianship Proceedings: Protecting and Enhancing the Voices, Rights and Well-being of Elders," by Prof. Jennifer L. Wright (St. Thomas Law), for the Journal of International Aging, Law and Policy (2014)
- "Storm Surges, Disaster Planning and Vulnerable Populations at the Urban Periphery: Imagining a Resilient New York after Superstorm Sandy," by Prof. Andrea McCardle (CUNY Law) to be published in the Idaho Law Review (2014)
- "Letters Non-Testamentary," by Deborah Gordon (Drexel Law), to be published in Kansas Law Review (2014)
- "Complex Decision-Making and Cognitive Aging Call for Enhanced Protection of Seniors Contemplating Reverse Mortgages," by Profs. Debra Stark (John Marshall Law), Jessica Choplin (Depaul), Joseph Mikels (Depaul), and Amber McDonnell (John Marshall Law), for the Arizona State Law Journal (2014)
Thursday, August 21, 2014
We have blogged several times on articles about whether Americans are "retirement ready". A recent article published by Rand offers good news (or at least better news) about retirement readiness. The recent research brief, More Americans May Be Adequately Prepared for Retirement Than Previously Thought, concludes "that, overall, about 71 percent of individuals ages 66–69 are adequately economically prepared to retire, given expected consumption... [there are] large disparities across subsets of the population and the significant contribution of Social Security to seniors’ financial preparation for retirement [continues]. The key findings from the research explains a bit more:
•Overall, 71 percent of Americans are adequately prepared for retirement: 80 percent of married persons and 55 percent of single persons.
• Those with low education are much less adequately prepared than those with higher levels of education, especially single women.
• Social Security benefits contribute significantly to financial security at older ages.
Wednesday, August 13, 2014
The July, 2014 issue of the Social Security Administration's International Update is now available.
The Update includes articles on Germany's new pension rules, proposals for revamping Australia's social support system, and more.
For individuals with at least 45 years in the work force, Germany recently lowered the minimum age for full retirement benefits to age 63. As explained on NPR's story, the reduction is both popular and unpopular, depending on the point of view. Critics point to the reduction as pandering by political parties seeking short term voter support, and cite Germany's past objection to bailouts for lower-age retirement benefit programs in other countries, including Greece. Here's the link to the Morning Edition podcast.
Tuesday, August 5, 2014
Arin Fife, from the family law firm of Boyle and Feinberg in Chicago, offers "Don't Let Divorce Derail Your Retirement Plans: Understanding Your Options Before, During and After Your Marriage" in the Summer issue of the ABA's magazine Family Advocate. She reviews retirement basics, including differences between defined benefit and defined contribution plans, how accounts are valued, how accounts may be divided and addresses what do do with contributions during the divorce proceedings. She reminds that a low-income spouse may be advised to delay a divorce if approaching the ten-year anniversary of the marriage date, thereby maximizing Social Security options based on the stronger earner's SSA record. She warns that some "states consider this an offset against accumulation during marriage. Ask your lawyer for clarification in your state."
Lots of good tips here, including the reminder that if retirement accounts will be divided using a "Qualified Domestic Relations Order" or QDRO, it is important to give the plan administrator an opportunity to review and "pre-approve" the plan, thereby avoiding arguments or surprises after the property division or divorce is complete.
Sunday, August 3, 2014
I was reading an article about Merrill Lynch hiring a financial gerontologist, Five Questions for Financial Gerontologist Cyndi Hutchins. Ms. Hutchins "works with other Merrill Lynch financial advisers to manage their clients' transitions into retirement. She specializes in settling the fears many aging people have about life without a steady paycheck." In the interview, Ms. Hutchins explains why she got a degree in gerontology and explains what concerns clients vis a vis retirement: paying for out of pocket health care costs, including long term care, as well as those for family members. Comparing the Boomers and Millenials, Hutchins references the proverbial 3-legged stool and says for boomers-it's 2 legs--with no pension leg, but for Millenials, it's just one leg (savings). Her biggest challenge--client fears. "Helping them keep a healthy outlook and keeping it real is probably the biggest challenge. You don't want to come out there sounding like a Debbie Downer, but you want your clients to understand the issues that they're facing and face those issues head on and feel like they have clarity. There's so many things to consider."
I was intrigued by this concept of financial gerontology so I did a google search and found out Ms. Hutchins is not the only one out there. The American Institute for Financial Gerontology offers not only CEs but also a registered financial gerontologist program ("RFG®"). The faculty include several individuals well-known to elder law attorneys. Dr. Sandra Timmermann wrote an article that was published in 2005 in the Journal of Financial Services Professionals, Looking into the Crystal Ball and Seeing Gray: Predictions For Financial Services. At the time of authoring the article, Dr. Timmermann "was the founder and Executive Director of the MetLife Mature Market Institute" (dissolved 06/2013) and is currently a consultant for businesses on aging.
Thursday, July 31, 2014
At the 2014 International Elder Law and Policy Conference hosted by John Marshall Law School in Chicago on July 10 and 11, many weeks of hard work culminated in adoption of a "Chicago Declaration on the Rights of Older Person." The 11th draft -- of what is to be a working document for the future -- will be presented at the Fifth Working Session of the United Nations Open-Ended Working Group on Ageing to be held in New York City this week.
In addition, the Chicago Declaration was submitted by United States Representative Janice Schakowsky (Illinois) to the Congressional Record on July 25.
Congratulations to all who worked on this, with the leadership of many, including Associate Dean Ralph Rubner and Amy Taylor, Head Research Coordinator at John Marshall Law School. More work for everyone is ahead on this exciting task of seeking wider recognition of the human rights of older persons.
Speakers at the "Side Event" for the Chicago Declaration, to be held on August 1 at the U.N., include William Pope, Commissioner of the American Bar Association Commission on Law and Aging, and Ebbe Johansen, Vice President, AGE Platform Europe from Brussels.
Tuesday, July 22, 2014
Mexico and countries in the Caribbean, Central and South America have been working very hard on the question of whether laws are needed to recognize and promote the human rights of older persons. This commitment was demonstrated during the 2014 International Elder Law and Policy Conference in Chicago, by Rosa Bella Caceres Mongelos from Paraguay, as one of the speakers on the panel focused on "Dignity, Equality and Anti-Ageism Rights of Older Persons."
Professor Caceres Mongelos is the current president of the Central Association of Retired Public Servants and Teachers in Paraguay, and has experience as a master teacher, educational administrator, and vocational counselor. She has also taught classes at the university level on leadership. When I asked whether her organization is comparable to AARP in the U.S., which was started by a retired teacher, she laughed and said "maybe some day." I think she would not mind me saying that she's tiny but powerful -- and certainly she is an articulate spokesperson for the issues her country, with a total popularion of 6.8 million, is facing.
Professor Caceras Mongelos has served as a spokesperson for her civil society organization during regional meetings for Latin America and the Caribbean in 2012 and 2013 that led to endorsment of a formal international convention on the rights of older persons.
The participation of Paraguay in international discussions of aging is forward-thinking, as it is actually a comparatively young country in terms of its overall population. Persons aged 60 and over comprise approximately 8% of the population. Recent news reports indicate that more than 66% of its population is less than 30 years old. At the same time, with their citizens already experiencing relatively long-life spans, especially on a comparative basis (average life span is now 75 according to some reports), the country will begin to see the impact of aging as a nation starting in 2038.
The organization headed by Caceres Mongelos has adopted advocacy goals for its members, including health related goals, such as securing free health care (including mobile clinics) for retirees for critical matters such as vision and dental care, and for treatment of cancer and chronic diabetes, all issues recognized as important for the self-esteem of older persons. Her Central Association has a project called "Hogares de Jubliados" or "Homes for the Elderly," with a goal of providing space for as many as 200 persons deemed vulnerable and unprotected. Her organization seeks to "monitor and insure safekeeping of social security funds under control of the treasury" during the current fiscal crisis. A better system of public transportation is another key goal.
She described her Central Association's recent Yellow Ribbon Campaign to re-enforce recognition of the rights of civil services and retirees to be free from pay discrimination under the Constitution of Paraguay. She described the yellow ribbons as symbols for the "struggle to claim solidarity, love, better living and the light of hope for a bearable and dignified old age." Despite the small proportion of Paraguayans currently deemed older -- in their "third age" -- she said "fragility" often characterizes their life conditions, with more than a quarter of the population of older adults illiterate and with only 19% currently receiving any form of income from pension or retirement benefits. In addition, her association stresses that real attention must be paid to the needs of older persons in indigenous communities and Afro-descendants.
In closing, Professor Caceres Mongelos called for an end to procrastination on international recognition of the rights of older persons. She said, "Declaring and implementing the regulations calling for dignity, equality and non-discrimination ... for older persons needs to be achieved as quickly as possible [toward] the goal of improving quality of life and respecting the human rights of older persons."
Sunday, July 20, 2014
The growing significance and scope of "elder law" is demonstrated by the program for the upcoming 2014 Elder Law Institute in Philadelphia, Pennsylvania, to be held on July 24-25. In addition to key updates on Medicare, Medicaid, Veterans and Social Security law, plus updates on the very recent changes to Pennsylvania law affecting powers of attorney, here are a few highlights from the multi-track sessions (48 in number!):
- Nationally recognized elder law practitioner, Nell Graham Sale (from one of my other "home" states, New Mexico!) will present on planning and tax implications of trusts, including special needs trusts;
- North Carolina elder law expert Bob Mason will offer limited enrollment sessions on drafting irrevocable trusts;
- We'll hear the latest on representing same-sex couples following Pennsylvania's recent court decision that struck down the state's ban on same-sex marriages;
- Julian Gray, Pittsburgh attorney and outgoing chair of the Pennsylvania Bar's Elder Law Section will present on "firearm laws and gun trusts." By coincidence, I've had two people this week ask me about what happens when you "inherit" guns.
Be there or be square! (Who said that first, anyway?)
July 20, 2014 in Advance Directives/End-of-Life, Elder Abuse/Guardianship/Conservatorship, Estates and Trusts, Ethical Issues, Federal Cases, Federal Statutes/Regulations, Health Care/Long Term Care, Housing, Legal Practice/Practice Management, Medicaid, Medicare, Programs/CLEs, Property Management, Retirement, Social Security, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
Wednesday, June 18, 2014
Last week's news of a Chapter 11 Bankruptcy proceeding in the Texas-based senior living company Sears Methodist Retirement Systems, Inc. (SMRS) has once again generated questions about "entrance fees" paid by residents at the outset of their move to a Continuing Care Retirement Community (CCRC). CCRCs typically involve a tiered system of payments, often including a substantial (very substantial) upfront fee, plus monthly "service" fees. The upfront fee will carry a label, such as "admission fee" or "entrance fee" or even entrance "deposit," depending on whether and how state regulations require or permit certain labels to be used.
As a suggestion of the significance of the dollars, a resident's key upfront fee at a CCRC operated by SMRS reportedly ranged from $115,000 to $208,000. And it can be much higher with other companies. So, let's move away from the SMRS case for this "blog" outline of potential issues with upfront resident fees.
Even without talking about bankruptcy court, for residents of CCRCs there can be a basic level of confusion about upfront fees. In some instances, the CCRC marketing materials will indicate the upfront fee is "refundable," in whole or in part, in the event the resident moves out of the community or passes away. Thus, residents may assume the fees are somehow placed in a protected account or escrow account. In fact, even if the upfront fee is not "refundable," when there is a promise of "life time care," residents may assume upfront fees are somehow set aside to pay for such care. How the facility is marketed may increase the opportunity for resident confusion. Residents are looking for reassurances about the costs of future care and how upfront fees could impact their bottom line. That is often why they are looking at CCRCs to begin with. "Refundable fees" or "life care plans" can be important marketing tools for CCRCs. But discussions in the sales office of a CCRC may not mirror the "contract" terms.
One of the most important aspects of CCRCs is the "contract" between the CCRC and the resident. First, smaller "pre move-in" deposits may be paid to "hold" a unit, and this deposit may be expressly subject to an "escrow" obligation. But, larger upfront fees -- paid as part of the residency right -- are typically not escrowed. It is important not to confuse the "escrow" treatment of these fees. Of course, the "hold" fee is not usually the problem. It is the larger upfront fees --such as the $100k+ fees at SMRS -- that can become the focus of questions, especially if a bankruptcy proceeding is initiated.
The resident's contract requires very careful reading, and it will usually explain whether and how a CCRC company will make any refund of large upfront admission fees. In my experience of reading CCRC contracts, CCRCs rarely "guarantee" or "secure" (as opposed to promise) a refund, nor do they promise to escrow such upfront fees for the entire time the payer resides at the CCRC. In some states there is a "reserve" requirement (by contract or state law) for large upfront fees whereby the CCRC has a phased right to release or use the fees for its operation costs. Thus, the contract terms are the starting place for what will happen with upfront fees.
Why doesn't state regulation mandate escrow of large upfront fees? States have been reluctant to give-in to pressure from some resident groups seeking greater mandatory "protection" of their upfront fees. There's often a "free enterprise, let the market control" element to one side of regulatory debates. On the other side, there is the question of whether life savings of the older adult are proper targets for free enterprise theories. Professor Michael Floyd, for example, has asked, "Should Government Regulate the Financial Management of Continuing Care Retirement Communities?"
My research has helped me realize how upfront fees are a key financial "pool" for the CCRC, especially in the early years of operation where the developer is looking to pay off construction costs and loans. CCRCs want -- and often need -- to use those funds for current operations. and debt service. Thus, they don't want to have those fees encumbered by guarantees to residents. They take the position they cannot "afford" to have that pool of money sitting idle in a bank account, earning minimal interest. This is not to say the large entrance fees will be "misspent," but rather, the CCRC owners may wish to preserve flexibility about how and when to spend the upfront fees.
The treatment of "upfront fees" paid by residents of CCRCs also implicates questions about application of accounting and actuarial rules and principles. That important topic is worthy of a whole "law review article" -- and frankly it is a topic I've been working on for months.
In additional to looking for actuarial soundness, analysts who examine CCRCs as a matter of academic interest or practical concern have looked at whether CCRC companies and lenders may have a "fiduciary duty" to older adults/residents, a duty that is independent of any contract law obligations. Analysts further question whether a particular CCRC's marketing or financial practices violate consumer protection or elder protection laws.
There can also be confusion about what happens during a Chapter 11 process. First, during the Chapter 11 Bankruptcy process, a facility may be able to honor pre-bankruptcy petition "refund" requests or requests for refund of fees for a resident who does not move into the facility. Second, to permit continued operation as part of the reorganization plan, a facility will typically be permitted by the Court to accept new residents during the Chapter 11 proceeding and those specific new residents will have their upfront fees placed into a special escrow account, an account that cannot be used to pay the pre-petition debts of the company.
But what about the upfront fees already paid pre-petition by residents who also moved in before the bankruptcy petition? Usually those upfront fees are not escrowed during the bankruptcy process. Indeed, other "secured" creditors could object to refunds of "unsecured" fees. The Bankruptcy Court will usually issue an order -- as it did in SRMS's bankruptcy court case in Texas last week -- specifying how current residents' upfront fees will be treated now and in the future. A bit complicated, right? (And if I'm missing something please feel free to comment. I'm always interested in additional viewpoints on CCRCs. Again, the specific contract and any state laws or regulations governing for handling of fees will be important.)
Of course, this history is one reason some of us have been suggesting for years that prospective residents should have an experienced lawyer or financial consultant help them understand their contracts and evaluate risks before signing and again in the event of any bankruptcy court proceeding. "Get thee to a competent advisor." See also University of New Mexico Law Professor Nathalie Martin's articles on life-care planning risks and bankruptcy law.
As I mentioned briefly in writing last week about the SMRS Chapter 11 proceeding, CCRC operators have learned -- especially after the post-2008 financial crisis -- that the ability of a CCRC to have a viable "second chance" at success in attracting future residents will often depend on the treatment of existing residents. Thus, one key question in any insolvency will be whether the company either (a) finds a new "owner" during the Chapter 11 process or (2) is able to reorganize the other debts, thereby making it possible for the CCRC company to "honor" the resident refund obligations after emerging from the Chapter 11 process.
During the last five years we have seen one "big" default on residents' upfront. refundable entrance fees during the bankruptcy of Covenant at South Hills, a CCRC near Pittsburgh. A new, strong operator eventually did take over the CCRC, and operations continued. However, the new operator did not "assume" an obligation to refund approximately $26 million in upfront fees paid pre-petition by residents to the old owner. In contrast, Chapter 11 proceedings for some other CCRCs have had "gentler" results for residents, with new partners or new financial terms emerging from the proceedings, thereby making refunds possible as new residents take over the departed residents' units.
For more on how CCRC companies view "use" of upfront fees, here's a link to a short and clear discussion prepared by DLA Piper law firm, which, by the way, is the law firm representing the Debtor SMRS in the Texas Chapter 11 proceeding.
June 18, 2014 in Consumer Information, Federal Cases, Federal Statutes/Regulations, Health Care/Long Term Care, Housing, Retirement, State Cases, State Statutes/Regulations | Permalink | Comments (1) | TrackBack (0)