Broker Check

 June 30, 2016

Teamster Pension Default?

          The $16.1 billion Central States Teamsters Pension Fund, twenty-five years after being wrested away from corrupted trustees and organized crime is about to default under the respected administrators, Goldman Sachs & Co., and Northern Trust Global advisors while the Federal Department of Labor has stood watch.  The respected administrators were unable to reverse a decades long outflow of benefits payments over pension contributions; the professionals placed big bets on stocks and non-traditional investments between 2005 and 2008 with catastrophic consequences.

          Central States has lobbied congress to pass legislation allowing them to cut retirement benefits by up to 50% after Treasury Department approval.

          Special Master Kenneth Feinberg, who previously administered the 9/11 victims fund and the BP Oil Spill fund will be reviewing the 8,000 page application by Central States to reduce the average pension benefit by 22% for more than 400,000 American workers, retirees, dependents and survivors.

          Central States is considered to be a multi employer plan because thousands of independent trucking companies paid into a shared retirement fund for union drivers.  One problem with multi employer plans is that as some employers went bankrupt, the remaining employers faced larger liabilities.  Today, only 3 of the plan’s 50 largest employers from 1980 still pay into the plan.  And for each active employee, it has 5.2 retired or inactive participants.

          The chief problem facing the Central States plan has been under-funding.  Trucking deregulation in the 1980s exacerbated the funding problem because of the dramatic contraction of the industry.  Those bankruptcies substantially increased the fund’s legacy costs with no foreseeable way to make up those lost contributions.  This, rather than poor investment strategy or performance was primarily responsible for the severe under-funding that the fund is now experiencing. 4/6/16.

          However, at no time before this was it ever considered to reduce the promised benefits that are being proposed now.

          Have you recently reviewed your employer’s pension plan for its viability in view of this proposed default, and the potential defaults of the state of Illinois and cities of Houston and Chicago?

Business Clothing Not Deductible

          A Ralph Lauren salesman was not able to deduct the cost of business clothing even though his employer required all employees in sales position to wear the brand’s apparel while on the job and representing the company.  The Tax Court said the clothes were suitable for personal use outside the workplace.  Barnes TC Memo 2016-79.

Considering Leaving the U.S.
If Your Nightmare Candidate Wins In November?

          If you move but keep your citizenship, the U.S. will continue to tax you.  The U.S. taxes its citizens on their worldwide income, no matter where they reside.  You also will not be able to escape the rules on reporting foreign bank accounts.

         Those who decide to give up their U.S. citizenship could owe an EXIT tax if their average annual tax for the five years preceding expatriation exceeds $161,000 or if they have at least $2 million net worth.  They will be treated as selling all their assets for fair market on the day before their expatriation date and will be taxed on the profit from the deemed sale that exceeds an exemption of nearly $700,000.

Uncle Sam Uncle Tyrant

          There are many reasons why this year voters opted for the fringe candidates, Sanders and Trump.  One is that a growing part of the population feels oppressed.  One weapon of oppression the government uses against ordinary citizens is the criminalization of a number of what were once civil violations.  Before you think I am a crazy, consider these examples:

  • It is now a federal crime to walk a dog on federal lands with a leash that is longer than 6 feet.  Instead of a fine (why is one needed?) violators can be sentenced to up to 6 months in prison.
  • An 11 year old girl in Virginia who saved a Woodpecker from a cat was charged with a fine for “transporting” a protected species.
  • A fisherman who threw back some undersize fish he had caught was hauled into court and convicted of violating the anti-shredding clause of the Sarbanes Oxley Act.  (The Supreme Court! overturned this by a 1 vote margin).
  • A Maryland developer was prosecuted and sentenced to prison for violating the Clean Water Act when he improved a piece of land the Army Corps of Engineers claimed as “navigable water,” even though the nearest river was 6 miles away.
  • Several people began rafting down Idaho’s Snake River at 7 a.m. instead of 9 a.m. and used gas stoves for cooking at their campsite.  All were indicted and convicted.
  • An Alaskan fisherman sold ten otters to a person he thought was an Alaska Native.  Selling to non-Alaska Native is a felony and the fisherman pleaded guilty.
  • A chief engineer at a retirement home diverted backed up sewage to a storm drain.  Unbeknownst to him the drain was not connected to the city’s sewage system but to a stream that emptied into the Potomac River, a protected waterway.  He was convicted of a felony.

          There is a major effort in Congress by Senator Orrin Hatch to attach a mens rea requirement to the prison sentencing reform legislation.  This would protect individuals from being convicted for conduct they did not know was wrong.  At the very least, the government should have to prove criminal intent in order to convict.  Forbes June 21, 2016 p. 11.

          This truly is a “NETWORK” year.  The people have had it and they are not going to take it any more!

          As always, if you have any questions about these or any other matters, do not hesitate to call us.

          Remember, We’re Here For You!