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)
Sunday, June 15, 2014
According to news reports, on June 10 Sears Methodist Retirement System, Inc. filed a voluntary petition in bankruptcy court in Texas, seeking relief under Chapter 11. Apparently the private company, organized as a nonprofit that currently operates eleven senior living properties in Texas, including Contining Care Retirement Communities (CCRCs), Assisted Living facilities and Veterans homes, is seeking to reorganize some $160 million in debts. The multi-company operation provides housing and services to some 1,500 residents. A detailed early report by Peg Brickley at Daily Bankruptcy Reports explains the initial relief sought:
The Texas nonprofit organization is asking the U.S. Bankruptcy Court in Dallas to authorize it to quickly borrow $600,000 from existing bondholders, warning that it would be forced to cease operations without access to the funds.
"Such an abrupt cessation of the...businesses would have devastating effects on the residents at the senior living facilities such debtors own and/or operate, including leaving many residents without food, medical supplies, and the health and support services that they require," Chief Restructuring Officer Paul B. Rundell said in court papers.
"In fact, many residents may be forced to immediately relocate, causing extreme hardship and putting both their lives and health at risk," added Mr. Rundell, of Alvarez & Marsal's Healthcare Industry Group.
Sears Methodist blamed the declining property market for some of its troubles. Older people are having trouble selling their homes and liquidating their stock portfolios to raise the money for the upfront payment to get into the senior-living communities, according to court papers.
I would expect some of the SMRS properties to be financially stronger than others, and thus could be spun off or taken over by other senior living operators, perhaps those with expertise in the specific type of property. When CCRCs are involved, residents have often paid very large "entrance" fees and must continue to pay substantial monthly service fees. Even when their entrance fees are described as "refundable," CCRC residents are usually treated under bankruptcy law as "unsecured" creditors and thus become especially nervous during the proceedings.
Over the last several years, I've seen growing recognition that reassurance of existing residents, if possible, is critical to the continuation of the CCRC as a viable operation once it emerges from bankuptcy. Fortunately, despite continuing ups and downs (downs and ups?) in senior living markets since the 2008 financial crisis, the market has seen fairly strong players emerging. There is also better appreciation for appropriate -- and inappropriate -- levels of risk and the importance of maintaining resident confidence over the long-term.
Thursday, June 12, 2014
On June 12, the U.S. Supreme Court issued its decision in Clark v. Rameker, concluding that "inherited" IRAs are not protected from a holder's creditors during bankruptcy. Justice Sotomayor delivered the opinion for a unanimous court. In so ruling, the Court rejected application of the "retirement fund" exemption, because unlike a holder's self-funded IRA, inherited accounts lack the "planning" motivation that justified protection of the funds as a retirement asset.
Forbes described the result as "an opinion with far-reaching implications."
Hat top to ElderLawGuy Jeff Marshall as the first to send the link this decision.
With thanks to Phoenix, Arizona Elder Law practitioner Thomas Murphy for the heads up, the Internal Revenue Service is offering a free phone forum on "Retirement Plans after Windsor," on Thursday, June 26 from 2:00 p.m. to 3 p.m. Eastern time. The forum will be "rebroadcast" on July 8.
Not a lot of details are available on-line about the forum. Here are links to basic information, plus the June 26 registration page (registration is required, but it does not appear the forum is limited to registered agents).
Here's a link to a separate registration site for the "rebroadcast" on July 8.
Thursday, May 29, 2014
Law & Society Association's Annual Meeting is always a feast -- with hundreds of presentations and papers, often with cross-discipline themes and presenters. This year's four day program starts today in Minneapolis. On tap are three elder law-themed sessions hosted by Aging, Law & Society. The session on "Rethinking Elder Law's Rules & Norms" will be chaired by Nina Kohn, Syracuse University.
Scheduled paper presentations include:
- Adult Protective Services and Therapeutic Jurisprudence, by Michael Schindler, Bar-Ilan University;
- Age, Gender and Lifetime Discrmination against Working Women, by Susan Bisom-Rapp, Thomas Jefferson School of Law and Malcolm Sargeant, Middlesex University Business School;
- Effective Affective Forecasting in Older Adult Caregiving, by Eve Brank and Lindsey Wylie, University of Nebraska-Lincoln;
- Sexuality & Incapacity, by Alexander Boni-Saenz, Chicago-Kent College of Law;
- Beyond the Law: Legal Consciousness in Older Age Care Contexts, by Sue Westwood, Keele University
Nancy Knauer of Temple Law School is chairing the session on "Accessing and Experiencing Jusice in Older Age." Presentations include:
- From Vienna to Madrid and Beyond, by Israel Doron, University of Haifa;
- Lessons from Detroit: Retiree Benefits in the Real World, by Susan Cancelosi, Wayne State University Law School;
- Older Persons Use of the European Court of Human Rights, by Benny Spanier, Haifa University;
- Crossing Borders and Barriers: Assessing Older Adults' Access to Legal Advice in the Search for Effective Justice, by Katherine Pearson, Penn State University Dickinson School of Law, Joseph Duffy, Queens University Belfast, and Subhajit Basu, University of Leeds
A workshop on "Ethics of Care and Support in Law and Aging," to be chared by Sue Westwood, Keele University, includes:
- Aging with a Plan: What You Should Consider in Middle Age to Plan for Caregiving and Your Own Old Age, by Sharona Hoffman, Case Western Reserve University;
- An Ethic of Care Critique of the UK Care Bill/Act, by Sarah Webber, University of Bristol;
- Both Property and Pauper: Slaver, Old Age, and the Inverted Logic of Capitalist Exchange, by Alix Lerner, Princeton University;
- Responding to Financial Vulnerability: Advances in Gerotchnology as an Alternative to the Substitute Decision Making Model, by Margaret Hall, Thompson Rivers University and Margaret Easton, Simon Fraser University
An international cast of characters, yes? More soon, with details from the front.
Friday, May 23, 2014
John Marshall Law School and Roosevelt University, both in Chicago, and East China University of Political Science and Law in Shanghai, are jointly sponsoring an International Elder Law and Policy Conference in Chicago on July 10-11.
Keynote speakers include Professor Israel Doron of the University of Haifa in Israel and Dr. Ellinoir Flynn and Professor Gerard Quinn, both from National Unviersity of Ireland, Galway School of Law.
Scheduled panel topics include:
- Dignity and Rights of the Elderly
- Elimination of Age Discrimination
- Caregivers and Surrogate Decision Makers
- Social Security, Pensions and Other Retirement Financing Approaches
- Prevention of Elder Abuse
- Access to Justice
Here's the link to the Registration website.
Wednesday, May 7, 2014
In part 6 of the ABA Journal's series on retirement issues, retiring lawyers are reminded that one important option is to purchase "extended reporting endorsements" (ERE) or "tail coverage" for existing professional liability insurance policies. Such an endorsement permits a longer period to report claims for coverage. Mark Bassingthwaighte, an attorney and risk manager for Attorneys Liability Protection Society (ALPS) explains, "Tail coverage ... [is] not a new policy." Rather, the existing policy explains the terms of any ERE coverage option, with the cost set as a fixed percentage of the expiring policy's premium.
"'I recommend that the retiring partner talk with other partners and request to be kept in the loop within the applicable state statute of limitations for malpractice should the firm dissolve; even formalize an agreement that works best to protect all parties involved,' says Matt Lubaroff, ALPS director of client services. 'The firm's ERE can only be purchased at the time of dissolution, and for certain firms the best answer would be upon the first retirement.'"
Additional planning topics for retiring lawyers appear in "Retirement Reset" by Susan Berson in the May issue of the ABA Journal.
Tuesday, May 6, 2014
Last Sunday, the Philadelphia Inquirer carried an Op-Ed by Patrick Murphy, an Iraq war veteran, and Karen Buck, executive director for SeniorLAW Center in Philadelphia. Their words provide a welcome reminder, contrasting with the news I reported earlier today about allegations of inadequate care for veterans in Arizona. In part they write:
"Experts estimate that 14 percent of the adult homeless population has served in the U.S. military. After valiant service, beterans deserve the most basic of human needs: safe shelter, protection from abuse, enought to eat.
What can we do to change this story for older veterans?
First, know who the veterans are in your daily life and thank them for their service. Peace at home is a gift made possible by the harsh sacrifice of others; it's easy to take for granted. Join us in doing more by showing gratitude through action.
...Help connect an older veteran with the services he needs -- and encourage him to access them. Many older veterans don't know what resources are available or they associate asking for help with weakness. Yet, from the VA, they may be eligible for income supports, home-based or nursing home care, health care, burial assistance, education, and other benefits. Nonprofits can help provide free legal assistance to address issues that arise over housing, family, health care, consumer issues, elder abuse, and financial exploitation. Legal services rank among the top unmet needs of veterans, but we can all become advocates to help vets get the support they need and deserve."
As Patrick and Karen demonstrate, support for local legal service organizations in your area can be effective in helping veterans access key benefits, while also providing another important watchdog to help reduce or prevent the likelihood of fullblown VA scandals.
Monday, May 5, 2014
In an article for the May issue of the Journal of Gerontology (Series B: Psychological Sciences), a team of international researchers present a report on "Benefits of Having Friends in Older Ages: Different Effects of Informal Social Activities on Well-Being in Middle-Aged and Older Adults." The article is technical, but the implications and conclusions of their research are persuasive. It seems that having "friends" is more important to life satisfaction for older adults than it is for middle-aged adults. And their research points to the importance of friendships rather than "just" relationships with spouses and children. The authors conclude:
"Our results have strong implications for mental health promotion in older adults, as they suggest supporting older adults in building and maintaining friend-based social networks, for example, by encouraging volunteering in old age in elder-helping-elder programs . . . or programs aiming at increasing informal social interactions, such as cultural programs, . . . university programs, . . . or occupational therapy programs."
I suspect that one potential limitation of the study may be the difficulty in measuring whether a lowered feeling of "life satisfaction" is actually a trigger for withdrawal from friends and friendship-based activities, rather than being simply an outcome of not being engaged with friends. The "chicken or egg" question of cause and effect? Nonetheless, the research does underscore the potential importance of engagement in increasing the long-range potential for positive feelings and mood. So call up your friends and invite them on an outing; don't wait for them to call you.
Thursday, April 17, 2014
An arbitral award in March 2014 by Financial Industry Regulatory Authority (FINRA) ordered Signator Investors, Inc., a firm aligned with the John Hancock Financial Network, to pay an older couple and their elderly mother's estate $1.2 million for losses arising from failed retirement investments inappropriately marketed to them by a Signator broker. The award to the claimants included "compensatory" damages plus interest, and ordered rescission of all the claimant's investments in Colonial Tidewater Realty Partners. The award also granted Signator's cross-claim against its former broker, James Robert Glover, for breach of contract, fraud and negligence as potential indemnification on the damage award.
As is true with most arbitration awards, the ruling on Docket No. 13-00579 (available via search at the FINRA website) is "bare bones," providing little in the way of explanation about which legal theories support the outcome. A detailed explanation is unnecessary for FINRA arbitration rulings, which cannot be appealed.
The claimants, a husband and wife (both 70+) and the husband's mother (who died in 2012 at the age of 103), reportedly invested their entire retirement savings through Glover, who put them into securities not held or offered by Glover's brokerage company. This practice is sometimes described as "selling away." Signator's defense that Glover's actions were therefore outside the scope of his authority with their company and not subject to their control or responsibility to supervise was implicitly rejected by the FINRA arbitrators. News reports indicate some 40 other pending complaints connected to Glover's actions. Glover was sanctioned personally by FINRA in March 2013.
FINRA, created in 2007, is the successor to NASD, the National Association of Securities Dealers, the former enforcement operation for member brokerage firms and exchange markets regulated by the Securities and Exchange Commission. A single arbitral award of $1+ million through FINRA is interesting by itself. For example, for the entire year of 2013, FINRA ordered a total of $9.5 million in restitution to harmed investors.
But what caught my attention was the additional award of $453,970 in attorneys' fees for the claimants against Signator, "pursuant to California elder abuse statutes." The amount of the fees appears to be roughly 40% of the damage award. Most securities claims are handled by attorneys on a contingency fee arrangement and a fee of 40% of the award is not unusual in this challenging field. Thus, even a successful claimant before FINRA may not be made whole, absent a contractual or statutory basis to claim attorneys' fees. So the award of compensatory damages and interest, plus attorneys fees' is significant.
Unlike many states, California has a comprehensive provision for attorneys' fees connected to civil actions for abuse of elderly or dependent adults, at Cal. Welfare & Institutions Code Sections 15657-15657.8, including Section 15657.5 providing for attorneys' fees where it is proven by a preponderance of the evidence that a defendant is liable for "financial abuse."
Monday, March 24, 2014
From January through March, the ABA Journal has run an interesting series of articles on retirement planning for lawyers, with clear messages for all age groups. Following that series, the ABA is hosting a live Webinar on "Retirement Expectations and Trends for 2014" on Wednesday, March 26. The program is scheduled to begin at noon Eastern time. The faculty, including Sally Hurme from AARP, Dean Deanell Reece Tacha from Pepperdine School of Law, and financial planning consultants, will
"...go beyond the basics of retirement and financnial planning to discuss other factors that can make your retirement what you want, including goal-setting; making the actual transition to retirement; determining whether a second or part-time post-retiremetn career is right for you; and dealing with the emotions of being retired. Faculty will also provide guidance on the ethics of transitioning out of your practice, transitioning your clients, and selling your practice."
The 90 minute program is free for ABA members and $50 for the general public; no CLE credits are attached to the program. Registration is here.
Thursday, March 6, 2014
New GAO Report on "Retirement Security: Trends in Marriage, Work, and Pensions May Increase Vulnerability for Some Retirees"
The decline in marriage, rise in women's labor force participation, and transition away from defined benefit (DB) plans to defined contribution (DC) plans have resulted in changes in the types of retirement benefits households receive and increased vulnerabilities for some. Since the 1960s, the percentage of unmarried and single-parent families has risen dramatically, especially among low-income, less-educated individuals, and some minorities. At the same time, the percentage of married women entering the labor force has increased. The decline in marriage and rise in women's labor force participation have affected the types of Social Security benefits households receive, with fewer women receiving spousal benefits today than in the past. In addition, the shift away from DB to DC plans has increased financial vulnerabilities for some due to the fact that DC plans typically offer fewer spousal protections. DC plans also place greater responsibility on households to make decisions and manage their pension and financial assets so they have income throughout retirement. As shown in the figure below, despite Social Security's role in reducing poverty among seniors, poverty remains high among certain groups of seniors, such as minorities and unmarried women. These vulnerable populations are more likely to be adversely affected by these trends and may need assistance in old age.
Friday, February 14, 2014
Via University of Michigan Retirement Research Center, a call for papers connected to an upcoming conference:
With support from AARP, a conference on Social Insurance and Lifecycle Events Among Older Americans will be held on December 5th of 2014 in Washington, DC.
The conference will focus specifically on lifecycle events commonly encountered by older Americans, the responsiveness of current policies to those events, and new thinking about policies consistent with a changing political environment.
The conference will be organized into three sections dealing with the importance of:
- changing career/job patterns,
- changes in family structure, and
- health limitations.
Papers should focus on experiences and policies aimed at addressing Americans age 50 and older and highlight the experiences of different socio-economic groups, with a particular emphasis on the disadvantaged.
Funding is available for domestic travel to the conference for one author of each paper to be presented. It is anticipated that either a special issue of a scholarly journal or an edited volume will be produced based on papers delivered at the conference.
Paper proposals for the conference should be sent to Professor Kenneth Couch by March 15, 2014. Authors will be notified of acceptances by April 15, 2014. Drafts of papers to be presented at the conference will be due by the end of October. Additional details here.
Saturday, January 18, 2014
New report from SSA's Office of Retirement and Disability Policy addresses SS, SSI participation rates by African Americans
African Americans: Description of Social Security and Supplemental Security Income Participation and Benefit Levels Using the American Community Survey
Patricia P. Martin and John L. Murphy
Research and Statistics Note No. 2014-01 (released January 2014)
Intro/summary: African Americans encounter significant economic disadvantages, making them a critical focus for social insurance programs. Examining how the African American population uses Old-Age, Survivors, and Disability Insurance (OASDI, or Social Security) benefits and Supplemental Security Income (SSI) payments clarifies the role these programs play in supporting at-risk populations.
Earlier research has explored various facets of the relationship between Social Security and African Americans. For instance, many studies investigate African Americans' low retirement benefit receipt rates relative to whites (Abbott 1977, 1980; Thompson 1975; Huntley 1979; Parsons 1980; Gibson 1987, 1991, 1994; Farley 1988; Hayward, Friedman, and Chen 1996; O'Rand 1996; Gendell and Siegel 1996; Choi 1997; Hendley and Bilimoria 1999; Gustman and Steinmeier 2004; Bridges and Choudhury 2007, 2009; Favreault 2010). Others examine the prominent role of children's benefits for African Americans (Newcomb 2003/2004; Tamborini, Cupito, and Shoffner 2011). This analysis contributes to that body of research by using a relatively new, publicly available, and comprehensive data source, the American Community Survey (ACS), to document the demographic and economic characteristics of African American OASDI beneficiaries and SSI recipients. It is designed to lay the groundwork for future detailed analyses of how African Americans interact with Social Security and related programs.
In this note, we first discuss the strengths of the ACS and the methodology of this analysis. Next, we present the demographic and economic characteristics of the African American population in the 2009 ACS. Then, we present ACS data on OASDI and SSI participation and benefit levels, comparing African American participants with overall participants in three age distributions: the full age range for which benefit statistics are available in the ACS (15 or older), working age (18–61), and retirement age (62 or older).
Monday, January 13, 2014
Earlier today I posted about a new article on tightening scrutiny of investment plans and financial products marketed to seniors. On the theme of liability for those who push completely unsuitable investments, I should add that the U.S. Supreme Court recently accepted cert on Fifth Third Bancorp v. Dudenhoeffer, where employees challenged the investment practices of their 401(k) plan administrators. The issue is breach of fiduciary duties for continuing to encourage investment of employee retirement monies in the employer's securities despite the company's deepening involvement in the subprime mortgage market that drastically increased risk.
The plan administrators argue that they are entitled to a "presumption of reasonableness" for investing in employee stock ownership plans (ESOPs) under ERISA law, citing 29 USC 1104(a)(2). The workers challenge application of such a presumption at the pleading stage. They assert continued recommendations to invest, rather than divest, combined with what they believe and allege was the plan administrators' knowledge of the risk, are sufficient to frame a cause of action for violation of fundamental fiduciary obligations under ERISA protections.
I wish I could predict the Supreme Court's action means that employees and retirees will have a better chance of getting past motions to dismiss on pleadings in retirement plan cases. Afterall, even a conservative such as Chief Justice Rehnquist rejected application of heightened standards at the complaint stage as grounds to dismiss civil rights cases, in Leatherman v. Tarrant County Narcotics (1993). But, the fact that the Court accepted cert where the 6th Circuit actually ruled in favor of the employees makes me a little less than hopeful. There is a split in the circuits, with, for example, the 2d Circuit ruling in 2011 in favor of plan administrators on similar allegations in In re Citigroup ERISA Litigation.
Lots of interesting blog commentary on this topic, including SCOTUS Blog.
AARP is filing an Amicus brief for the plaintiffs in the Dudenhoeffer case, as discussed by Drexel Law Professor Lisa McElroy in AARP's Blog.