Ron Martin

Attorney Mark Rettig Attended Iowa State Bar Association’s 2019 Family Law Seminar

December 10, 2019 By Ron Martin

Attorney Mark Rettig recently attended the Iowa State Bar Association’s 2019 Family Law Seminar in West Des Moines, Iowa. Attorney Rettig regularly attends this annual seminar covering numerous issues affecting family law attorneys and their clients. This year’s topics included, but were not limited to, spousal support, analysis of a small business owner’s tax returns, a case law update, the interplay between elder law and family law, changes in Iowa’s guardianship statutes, and trial practice tips. Shortly after attending this seminar Attorney Rettig attended an additional seminar related to major changes in how guardianships and conservatorship are processed in the Iowa court system.

It is seminars such as these that allow attorneys to maintain proficiency in the law and keep up with the constant changes and evolution of the law and how best to represent their clients. If you need assistance with any of your family law matters, or matters related to guardianships and conservatorships, contact Attorney Mark Rettig at Day Rettig Martin, P.C.

The Icons of Football and the 2021 National Football League Collective Bargaining Agreement

November 14, 2019 By Ron Martin

The National Football League Players Association is the labor organization representing the professional football players in the National Football League. This union, like those Day Rettig Martin, P.C. represent, negotiate benefits through the use of collective bargaining agreements. There have been seven collective bargaining agreements between the NFL Players Association and the NFL team owners since the Association was first recognized in 1968.

The Problem

The 2011 collective bargaining agreement expires after the 2020 season. Of particular importance in the next collective bargaining agreement are the pension amounts for players who retired before 1993. Current retirees have the NFL’s 401(k) plan, the NFL’s Annuit Plan, a severance plan, a health reimbursement account, and the option to continue on the NFL’s group medical and dental insurance. Pre-1993 players receive only one benefit – a pension. The pensions of the 4,000 vested players from the 1950s to 1993 have remained stagnant at $255 per month per credited season. The exception to this is the increases that were part of the 2011 collective bargaining agreement. These increased those pre- 1993 pension benefits by $108 per month for each year played. So, a 10-year NFL veteran who retired prior to 1993, receives approximately $43,560 pretax dollars per year at age 55.

F.A.I.R.

An organization called Fairness for Athletes in Retirement (“FAIR”) brings awareness to educate to the pension inequality. Their website attempts to put things in perspective. They say a 10-year MLB veteran who played after 1993 receives a pension of approximately $200,000 a year at age 62. A 10-year NBA veteran who played after 1965 receives a pension of approximately $215,000 a year at age 62.

While awareness of this issue continues to grow, any solution remains murky. The Players Association has no obligation to represent retired players. Additionally, the NFL pension is underfunded. As of 2016, the pension plan was considered to be in endangered status because the funding percentage was less than 80%. The Retirement Board adopted a necessary funding improvement plan, which estimates the funding percentage to exceed the 80% threshold in 2021. The original funding improvement plan was adopted in 2011. Per the funding improvement plan, which is required by Federal law for plans that are less than 80% funded, the Retirement Board cannot accept a collective bargaining agreement or participation agreement that provides for a reduction in the level of contributions or a suspension of contributions with respect to any period of service.

The 2011 increases to pre-‘93 players caused the pension plan’s liabilities to balloon by more than $600 million. Partly because of this, and also due to the funding improvement plan, team owners tripled their contributions in 2013 to $300 million, followed by $305 million in 2014, and $266 million in 2015. The general funding issues of defined benefit plans may be why the NFL pushed to terminate the pension plan in the last round of negotiations.

Finding a Solution

So, while the pre-1994 retiree icons of the game set the wheels in motion for the record NFL revenues and salaries, there is no simple solution to the pension inequality that exists. It will be interesting to see what happens next year. As a football fan, I hope a resolution is reached so that there is no lockout.

These issues exemplify why every collective bargaining agreement is so important. Recently, our Firm has provided legal and employee benefit assistance to the General Mills union during negotiations of their collective bargaining agreement.

Please contact Attorney Joe Day regarding your labor and employment law needs.

Only 11% of Employees Fully Understand Heath Savings Accounts

October 28, 2019 By Ron Martin

According to a recent survey from Bank of America, only 11% of employees can name four of the distinguishing features of a health savings account (“HSA”). The four HSA traits that employees don’t understand include the triple tax advantage; HSA funds can be invested; the assets are portable; and the high-deductible health plan eligibility requirement.

Triple Tax Advantage

HSAs offer three separate tax benefits. Contributions are pre-tax, meaning the employee doesn’t pay taxes on the income received that goes into the HSA account. This is similar in concept to a 401(k) or IRA. Next, investment gains are tax-free. Lastly, withdrawals for qualified medical expenses are not taxed. In contrast, while a 401(k) or IRA offer pre-tax contributions and tax-free earnings, the withdrawals are taxed. There is a penalty when withdrawals from an HSA account are made for nonqualified medical expenses. However, once an individual reaches the age of 65, withdrawals can be made for nonmedical reasons without a penalty, but the amount would be treated as ordinary income for tax purposes.

Investing HSA Funds

HSA funds can be invested. Early contributions to one’s HSA account at a young age can grow over time and provide funds for medical expenses which will likely be larger at an old age.

Portability of HSA Assets

HSA accounts are owned by the employee. They stay with the individual and can be taken if the person changes jobs. In contrast, Health Reimbursement Accounts (“HRA”) are funded exclusively by the employer. Therefore, HRA accounts are not portable.

High-Deductible Health Plan Eligibility Requirement

To qualify, the employee must be on a high-deductible health insurance plan. By definition this means having a deductible of at least $1,350 for individuals or $2,700 or more for families. Additionally, out-of-pocket maximums can’t exceed $6,750 for individuals or $13,800 for families. You know it’s a good deal when the government imposes restrictions on how much you can contribute. Currently, the limits are set at $3,500 for individuals and $7,000 for families per year. All of these figures are set to increase by $50 for individuals and $100 for families, respectively.

Please contact the attorneys at Day Rettig Martin, P.C. for assistance with your labor and employment law needs.

Inherent Biases in the Bankruptcy Courtroom

October 25, 2019 By Ron Martin

It is expected that Judges will always apply the law evenly and fairly without any bias affecting their decisions. However, as Attorney Ron Martin learned from a presentation by the Honorable Mark W. Bennett at the 2019 All-Iowa Bankruptcy Conference, sometimes judges are influenced by factors they do not even realize are in play. According to a study conducted in 2006, Inside the Bankruptcy Judge’s Mind, inherent biases may impact a bankruptcy judge’s decision without the judge even knowing it is happening. The study identified two such factors as Anchoring and Framing. It is important for bankruptcy attorneys to understand what these factors are and how they can impact a judge’s ruling in a bankruptcy case

Anchoring

The study defined “Anchoring” as when a person uses an initial value to determine an ultimate estimate. The study tested bankruptcy judges’ susceptibility to Anchoring by asking them to determine a new interest rate on a restructured loan. Half of the judges were provided the old interest rate, and half were not. It should be noted that the old interest rate should not play a factor in determining the new rate in this situation. The study found that the two groups’ average interest rates differed by almost 1%. This was concluded to be a significant difference.

Knowing that judges are susceptible to Anchoring, attorneys should be able to structure their filings and the manner in which they deal with the court accordingly.

Framing

The second factor tested in the study that yielded positive results is “Framing.” Framing occurs when something is presented as a risk resulting in a gain or a loss. The study found that people are more likely to engage in riskier behavior when choosing between options that appear to represent losses than when those options represent gains. For example, people would rather be given $100 than have a 50% chance of winning $200, but they would rather have a 50% chance of losing $200 than give away $100.

In order to test Framing with bankruptcy judges, the study provided two groups with varying options for a liquidating company. Group A was given options that were framed to represent the loss, and Group B was given options that were framed to represent the gain. The options were the same, they were just worded differently for each group. The study found an 18.5% difference between the rulings of the two groups.

Knowing the importance of Framing, attorneys should be able to use Framing to their advantage when drafting filings.

Conclusion

Framing and Anchoring are not the only inherent biases that may affect the outcome of a judge’s decision. Judges may also be influenced by their political party, morals, or even the appearance of the debtor without the judge even realizing it. Attorneys cannot control all of these inherent biases or know how they may impact their cases, but they can understand them and try to use them to the advantage of their clients.

To further explore inherent biases that affect judges, your attention is directed to Rachlinski, Jeffrey J.; Guthrie, Chris; and Wistrich, Andrew J., “Inside the Bankruptcy Judge’s Mind” (2006). Cornell Law Faculty Publications. 1084. https://scholarship.law.cornell.edu/facpub/1084

If you have a question about bankruptcy, call Attorney Ron Martin.

Practical Student Loan Assistance

October 2, 2019 By Ron Martin

According to a study done by Forbes, the estimated average student loan balance of a 2017 college graduate is $28,650. Most millennials are savvy enough now to understand the importance of investing for retirement early so as to take advantage of compound interest. However, many have limited available funds early in their careers. This faces them with the conundrum of either investing or paying down student debt. There has been much discussion recently in the Democratic debates about possible solutions. Additionally, employers are attempting to assist and retain young workers in this tight labor market.

How Employers are Helping

Abbot Laboratories offers a very favorable benefit. They allow qualifying employees of the company’s 401(k) that contribute 2% of their eligible pay toward their student loans through payroll deductions to receive an employer match equal to 5% of their pay deposited into their 401(k). A private letter ruling from the IRS, issued in August 2018, recognized for the first time this type of benefit. By the same token, other companies offer different types of student loan repayment programs. A survey conducted by the International Foundation of Employee Benefit Plans showed 4% of organizations in the survey currently offer some type of student loan repayment assistance benefit. Additionally, 2% are in the process of implementing a program and 23% are considering a similar benefit in the future.

Furthermore, PwC started a program in September 2015 where it pays $100 per month towards a participating employee’s student debt. An extra $100 per month for an employee with student debt of $31,000 planning on paying it off over 10 years at a 6% interest rate will help the employee save almost $11,000 in interest. Correspondingly, the employee will be able to complete the obligation two years faster.

While an employer can provide up to $5,250 per year in tax-free employer-provided educational assistance, any student loan payments made by the employer will be treated as taxable income by the employee. There currently is a bill in Congress called the Employer Participation in Repayment Act of 2019. If passed, this bill intends to allow employers to contribute up to $5,250 per year in student loan repayment assistance tax-free.

College costs continue to rise. However, politicians, Congress, and employers recognize the problem and attempting to provide assistance. In various ways, some plans may be more realistic than others.

Association of Chapter Twelve Trustees Seminar

August 28, 2019 By Ron Martin

July 15-16, 2019, Attorney Ron Martin traveled to Indianapolis, Indiana, to attend the Association of Chapter Twelve Trustees Seminar. During the Farm Crisis of the 1980’s, family farmers did not have efficient methods to reorganize using the Bankruptcy Code. Chapter 11 was simply too complex, and Chapter 13 was too limited. In 1986, Congress created Chapter 12 to help family farmers reorganize and restructure their debts and give them a “fighting chance” to stay on their land. Chapter 12 was initially a temporary addition to the Bankruptcy Code; however, in 2005, it was made a permanent part of the Bankruptcy Code.

At this seminar, Ron attended sessions on topics such as: farm sales, tax considerations for Chapter 12, pre-bankruptcy planning, and more. He also was able to attend a seminar on updates to the Chapter 12 bankruptcy case law presented by Judge Diana Davis, former President of the Capital Region Bankruptcy Bar Association and the Capital Region Women’s Bar Association. Other seminars were also presented by forerunners in Chapter 12 bankruptcy.

Growing up on an Iowa farm, Ron Martin understands the difficulties presented to his Chapter 12 clients. He has focused his career on helping these individuals and continues to attend conferences such as this to be able to better help his clients. If you have any questions regarding debt restructuring or agricultural law matters, call Attorney Ron Martin.

C Corporations and Family Farms

August 15, 2019 By Ron Martin

Attorney John Sexton attended the Iowa State University Center for Agricultural Law and Taxation Summer Seminar on Agricultural Tax, Business & Transition Planning. Multiple attorneys spoke on the economic issues surrounding the agriculture community today. They also discussed how to best pass on family farm estates to future generations.

C Corporations for Family Farms

During the 1970s, Professor Neil Harl from Iowa State University advocated the creation of C corporations as the proper entity for farm operations. A great deal of experts now believe many of the advantages associated with incorporating in the 1970s are no longer prevalent today. Additionally, the double taxation feature of corporations results in an inefficient way to run the farm operations. Many clients now ask the question of whether it is possible to get out of the C corporation structure without incurring severe income tax consequences. The good news is that it is possible, but the bad news is that somebody must die.

Liquidating a C Corporation

What is the proper method of liquidating a C corporation farm? First: the farmer needs to convert the C corporation to an S corporation. Second: wait 5 years to avoid the built-in gains tax of IRC Section 1374. Third: wait for the death of a shareholder.

Ideally, all of the stock should be gifted to the parent with the shorter life expectancy. When that parent passes, the stock basis will get the stepped-up basis on the value of the farmland. The owner should now sell all assets of the corporation and liquidate the corporation in the same year as the parent’s death.

The estate (now the sole shareholder) recognizes capital gain of the amount of the value of the farmland at the time of death over the original basis amount. This gain also increases the basis of the stock which corresponds to the initial step up in basis for the value of the farmland. The corporation would then redeem the stock in liquidation. This would allow the estate to recognize a capital loss in the same amount as the initial capital gain. The beneficiaries would then receive the corporation’s land at the full stepped up basis.

Continuing the Family Farm

In the simplest form, the beneficiaries can divide the land equally and distribute it. Another option to consider is the parents can create a limited liability company. They would then distribute the membership interests to the children. The parents must take care in drafting the agreement if they wish to have certain family members continue to farm the land without the intervention of others. The on-farm heir should be elected as the manager of the limited liability company. Removal of the manager would then require unanimous consent. The off-farm heirs would receive their portion as rental income.

I commonly see a lack of exit plans for the beneficiaries of a family farm corporation or limited liability company. The operating agreement needs to be detailed in describing triggering events and purchase price.

Our Experience

Farms have constantly continued to increase in size. This leaves the running of large farms under the purview of a C corporation or limited liability company to the children. Fiduciary duties arise out of these business entity structures. We have successfully brought derivative suits when minority shareholders are victims of breaches of fiduciary duties by directors and officers. Beneficiaries should be mindful they are still running a business even if it is just with family.

A recent Wall Street Journal article discussed the economic difficulties facing the typical family farmer today. The article said that farmers currently file for Chapter 12 bankruptcy protection at the highest levels in 10 years. If you are a family farmer facing difficult financial situations, contact Attorney Ron Martin to discuss debt restructuring and Chapter 12 bankruptcy options.

Iowa Partition Law

August 8, 2019 By Ron Martin

Earlier this summer Attorney Ron Martin attended the Iowa State Bar Association’s 2019 Annual Meeting, which included a seminar on the New Iowa Partition Law.

What is Partition Law?

Partition law addresses the issue of joint ownership and co-ownership of properties. In the past, if the joint owners of property could not agree to the “in kind” division of property where one party gets a portion and the other party gets another portion of equal value, Iowa Courts would normally order the property sold and then divide the proceeds among the former joint owners.

One issue with this method of division is that it did not take into account is the strong emotional attachment many farmers have to the land. Often times farmland has been passed down through the family for generations. Because of this, the land has sentimental, cultural, or historic value to the family that would be lost if it was sold. Additionally, one or more family members who have an interest in the farm move to other farm careers leaving one or more family member continuing with the operation. That remaining member wants to continue farming. The forced sale approach can deprive the farming member the opportunity to continue the family farm.

Changes Made in 2018

Iowa made significant changes to the Partition Laws in 2018 to promote the preference for in kind partition and give direction to the courts to help them achieve equitable in kind partitions. The courts now take into consideration that family farms often present special circumstances and sale of the entire property and division of the proceeds should not be a first option.

How We Can Help!

The attorneys of Day Rettig Martin, P.C. are able to work with farmers, business owners, and others to develop estate and succession plans. They are also able to help persons who are experiencing issues with property co-owners, including farm corporations and trusts. The attorneys have experience in agricultural law, real estate, trusts and estates, and family farming corporations. They understand the importance of your family farm. Our attorneys can help you negotiate with your co-owners and represent you in the court. Contact us if you need assistance with dealing with joint ownership issues.

Linn County Fair 4-H and FFA Livestock Auction

August 7, 2019 By Ron Martin

After the hottest days of summer 2019 so far, the heat finally broke for the Linn County Fair’s 4-H/FFA Livestock Auction on the morning of July 1^st. Day Rettig Martin, P.C. continued its support of young agriculturalists by participating in the livestock auction. Ron Martin made his annual trek to the fair to view the livestock and other fair exhibits. Ron represented the firm at the auction by bidding and purchasing some livestock from the young participants.

All of us here at Day Rettig Martin, P.C. would like to congratulate the young exhibitors and we wish them all the best in their future agricultural and other endeavors.

Multiemployer Pension Plan Withdrawal

May 6, 2019 By Ron Martin

On March 25, 2019, Associate Attorney John Sexton attended a webinar titled “Multiemployer Pension Plan Withdrawal: An In-Depth Examination.” The webinar focused on the evolution of the Multiemployer Pension Plan Amendments Act and strategies for minimizing liability.

The Multiemployer Pension Plan Amendments Act (MPPAA) was enacted in 1980. This Act created withdrawal liability whereby employers withdrawing from multiemployer pension plans must, upon withdrawal from a plan, pay a share of the plan’s unfunded vested benefits. “Withdrawal,” as defined by Title IV of ERISA, can occur through a complete withdrawal or a partial withdrawal. [Read more…]