Headlines about "Ret plan investments - misc"
Gathered from the web by the editors at BenefitsLink.com.
[Guidance Overview] Anheuser-Busch Sued Over QDIA Selection
Excerpt: "Anheuser-Busch has been hit with a federal court lawsuit alleging the beermaker and a trustee improperly designated an overly risky qualified default investment alternative (QDIA) for participants' cash proceeds from a stock sale. Employee David K. Parsons alleged that Anheuser-Busch was obliged under the Employee Retirement Income Security Act (ERISA) to pick a less risky QDIA in November 2008 to house funds in participants' accounts generated when InBev acquired Anheuser-Busch by paying shareholders $70 a share. Shareholders included participants who had built up blocks of stock through their pension plan. According to Parsons' complaint, which seeks class action status, Anheuser-Busch circulated a flyer to its employees just after the sale was completed telling them they would have until November 7 to choose an investment fund for the cash from their stock sale and that if they did not, the money would go to an 'Indexed Balanced Fund.'" (PLANSPONSOR.com; free registration required)
[Guidance Overview] Liquidity Issues for Plan Fiduciaries Relating to Securities Lending or Stable Value Funds
Excerpt: "Plan fiduciaries are currently facing various liquidity issues in connection with pension and 401(k) plans. There are two circumstances, in particular, where plan administrators are dealing with new and unexpected concerns: securities lending programs and stable value funds. Plan administrators have been surprised to learn that, in the current economic climate, what were once considered safe investments, may actually be quite volatile. As discussed in greater detail [in the target document], plan administrators should be aware of the current issues surrounding securities lending programs and the 'stability' of stable value funds." (The Metropolitan Corporate Counsel)
Securing the next generation of life cycle funds
Excerpt: "We think that financial providers, policymakers and plan sponsors should find ways to lower the volatility of life cycle offerings near retirement and enhance their ability to provide lifelong income reliably. Here are four steps that could create a more robust model for the next generation of life cycle funds." (Investment News; free registration required)
[Guidance Overview] ESOP Plan Sponsor Held Liable for Issuance of 10-Year Note to Satisfy Repurchase Obligation (PDF)
3 pages. Excerpt: "In a case recently decided by a federal district court in Indiana, Craig v. Smith, 2009 WL 438635 (S.D. Ind. Feb. 20, 2009), Ontario Corporation was held to have violated ERISA by issuing a 10-year promissory note in payment for shares that had been credited to the account of a former employee, Charles A. Craig, under the company's employee stock ownership plan (ESOP), as it violated the requirement that the term of any note issued in satisfaction of a terminated ESOP participant's put right could not exceed five years." (Morgan, Lewis & Bockius LLP)
[Guidance Overview] Federal Court Denies ESOP Participant Claims for Breach of Fiduciary Duty (PDF)
3 pages. Excerpt: "In Blankenship v. Chamberlain, 2009 WL 1421201 (E.D. Mo. May 20, 2009), the court considered a complaint with five counts, including two claims for breach of fiduciary duty under ERISA (one for injunctive relief and one for monetary relief), a common law claim for breach of fiduciary duty, a claim under Missouri state law to remove the defendant as an officer of the company and a trustee of the ESOP, and a claim for an accounting." (Morgan, Lewis & Bockius LLP)
[Guidance Overview] Smith Barney Fails to Get Florida Pension Case Moved Out of Court
Excerpt: "The U.S. District Court for the Southern District of Florida has declined to enforce arbitration clauses contained in account agreements between the City of Delray Beach Police and Firefighters Retirement System and Smith Barney. According to the court's decision, chairman of the retirement system's board William Adams signed Pension Consulting Agreements and other documents for Smith Barney. The agreements have an arbitration clause that says contract disputes must be resolved by arbitration. Smith Barney moved to remove the case from court and have the court direct the board to proceed through arbitration. However, the board argued that Adams lacked authority to execute the account agreements, and the court agreed." (PLANSPONSOR.com; free registration required)
How Will the Stock Market Collapse Affect Retirement Incomes?
Excerpt: "Urban Institute projections suggest the stock market collapse will have small effects on most Americans' retirement incomes. It's estimated that 37 percent of Americans born between 1941 and 1965 owned no stocks when the market crashed in 2008 and that income from assets will account for a small share of retirement income, even for those with stocks. For most retirees, Social Security provides the majority of income. Had Social Security been invested in private accounts with equities, the impact of the crash would have been much larger -- positive or negative, depending on one's birth cohort and on future market performance." (Urban Institute)
Managing Risks in a Market Meltdown: Effects on Portfolios and Retirement (PDF)
11 pages. Excerpt: "Among various outcomes, the current environment has the potential to wreak havoc with an individual's retirement savings and thus their plans for retirement. A recent TIAA-CREF Institute survey of TIAA-CREF participants age 50 and older found that a substantial minority have delayed their planned date of retirement and changed how they plan to live once retired as a result of developments in the financial markets. This in turn means that managing retirement patterns on campus, already a challenge for many colleges and universities, only becomes more challenging. On April 24, 2009, the TIAA-CREF Institute [held a symposium] to discuss addressing the challenges raised by the dramatic drops in financial markets for both individuals and colleges and universities; in particular, issues related to risk management in individuals' retirement portfolios and managing and facilitating employee retirements." (TIAA-CREF Institute)
SEC Proposes Money Market Funds Improvements
Excerpt: "The Securities and Exchange Commission (SEC) has voted unanimously to propose rule amendments designed to significantly strengthen the regulatory framework for money market funds to increase their resilience to economic stresses and reduce the risks of runs on the funds. According to an SEC press release, the proposed amendments would, among other things: Require that money market funds have certain minimum percentages of their assets in cash or securities that can be readily converted to cash, to pay redeeming investors." (PLANSPONSOR.com; free registration required)
Regulators Eye Target-Date Funds As Retirement Plan Investment Option
Excerpt: "One new option that some plans are beginning to offer is a target date fund with insurance protection built in. The funds are more expensive, and their value still fluctuates with the market, but in exchange for the higher price tag investors receive a certain level of guaranteed retirement income. Should an employee's savings be wiped out due to a market meltdown just before retirement, for example, the insurance would kick in to provide the annuity income." (CFO.com)
Owning Too Much Company Stock Puts Workers' Retirement at Risk, According to Study
Excerpt: "Congress should ban employer stock from company-sponsored retirement plans to spare workers the risk of putting too much of their nest eggs in one basket, a new study by a University of Illinois legal expert says. Sean Anderson says employee stock ownership plans, or ESOPs, are the biggest threat, with even heavier investment in company stock than the 401(k) plan that gobbled up workers' savings when energy giant Enron Corp. collapsed amid scandal in 2001. Workers whose employers have ESOPs also typically have no choice about whether to invest in company stock, said Anderson, who wrote an article that will appear in the Loyola University Chicago Law Journal." (Agency Science)
[Guidance Overview] Single Equity Fund Within Plan Did Not Give Rise to Violation of ERISA Diversification Requirement
Excerpt: "Plan participants' charge that single equity investment funds offered under a plan, rather than plan investments as a whole, were insufficiently diversified, did not state a claim under ERISA for fiduciary breach, according to the U.S. Court of Appeals in New York (CA-2) in Young v. General Motors Investment Management Corp. In addition, the participants did not allege sufficient facts to sustain a claim that fees charged by funds under the plan were excessive relative to the services rendered." (Wolters Kluwer)
[Guidance Overview] Tougher Financial Regulation Proposals May Hinder 401(k) Plan Sponsors
Excerpt: "The Obama administration's string of proposals to regulate the financial services industry may have some negative consequences for 401(k) plan sponsors, particularly smaller ones. Among the proposals, which were announced Wednesday, June 17, is one that would impose 'fiduciary duty' on brokers who provide investment advice, which is a more stringent standard than what they are held to today, experts say. Currently the legal standard that brokers must meet is a 'suitability test,' which means that the broker believes a specific investment option is a reasonable investment for a client of a certain age. The higher standard of fiduciary duty means that the broker is acting in the best interest of clients." (Workforce Management; free registration required)
Target-Dates Useful but Flawed, Witnesses Tell SEC and DOL
Excerpt: "In a joint hearing on target-date funds before the Department of Labor (DoL) and the Securities and Exchange Commission (SEC), witnesses were in favor of the use of target-date funds, but said the current market for the funds is flawed. In opening remarks, DoL Deputy Secretary Seth Harris noted that recent concerns have been raised about variation in the glide paths of same-date target-date funds offered by different providers, and how this variation may result in plan participants and investors unknowingly placing their retirement assets at risk. He said the hearing will help the agencies determine whether regulatory or other guidance would be helpful to alleviate these concerns." (planadvisor)
DOL Webcast: Investment of 401(k) and Other Retirement Plans in Target Date Type Plans
Excerpt: "[The June 18, 2009, webcast of the joint public hearing of the Department of Labor's Employee Benefits Security Administration (EBSA) and the Securities and Exchange Commission (SEC) heard] testimony on the investment of 401(k) and other retirement plans in target date type plans. [There is also a link to] a list of requests to testify and of comments received by EBSA and the SEC." (U.S. Department of Labor)
Remarks of Deputy Secretary of Labor at Hearing on 401(k) Investments in Target Date Funds
Excerpt: "Deputy Secretary of Labor Seth Harris [addressed the] public hearing to explore the use of target date funds 'as appropriate investments for plan sponsors to use when investing 401(k) plan contributions of participants.'" (U.S. Department of Labor)
Rebuilding Target-Date Investment Options
9 pages. (Meridian Wealth Management)
Bridging Employees' Retirement Income Gap with Income Annuities: An Employer's Guide
24 pages. Excerpt: "This paper is intended to help employers assess the feasibility of adding income annuity options and to understand how they can do so with minimal disruption to the plan's administration and coststructure." (Principal Financial Services, Inc.)
Exchange-Traded Funds Target 401(k) Plans
Excerpt: "ETFs may seem more attractive to plan sponsors, given current market conditions, but there is much for them to consider before adding these products to their plans." (Workforce Management)
[Guidance Overview] Second Post-Enron ERISA 'Stock Drop' Trial Victory for Tellabs and Its 401(k) Plan Fiduciaries (PDF)
Excerpt: "The Brieger plaintiffs, on behalf of a nationwide class of plan participants, alleged that Tellabs stock was an 'imprudent' 401(k) plan investment option under ERISA because (1) Tellabs executives (who were also plan fiduciaries) made misstatements to the market and to participants regarding sales/demand for Tellabs' products, which operated to artificially inflate the stock price; and (2) the stock lost about 90% of its value between December 2000 and July 2003, when Tellabs and other telecom companies went through a significant industry downturn and Tellabs had reduced sales and multiple rounds of layoffs." (Morgan, Lewis & Bockius LLP)
Stock and Bond Subclasses Key to Target-Date Fund Performance
Excerpt: "Target-date funds' allocations among stock and bond subclasses were among the primary determinants of the funds' performance, new Vanguard Group research finds. A Vanguard news release said the new study 'Target-Date Funds: Looking Beyond the Glide Path in 2008' by the firm's Investment Counseling & Research Group found that the losses realized in 2008 in the equity portions of target-date funds were magnified by larger allocations to developed and emerging international markets, whose results lagged the U.S. stock market by 6 and 16 percentage points, respectively." (PLANSPONSOR.com; free registration required)
Target-Date Funds: Looking Beyond the Glide Path in 2008
Excerpt: "This paper outlines some target-date methodologies across providers, highlighting different risks associated with the various strategies and illustrating the impact of those strategies on TDFs' performance over both a longer period as well as a shorter, more volatile, period like that of 2008." (The Vanguard Group, Inc.)
[Opinion] Statement on Behalf of Profit Sharing / 401k Council of America for Hearing on Investments in Target Date Funds and Similar Investment Options (PDF)
5 pages. June 18, 2009, Hearing. Excerpt: "In April 2009, PSCA and Casey, Quirk & Associates, a management consultancy focused on the global fund management industry, conducted a survey of target date fund practices in employer sponsored defined contribution plans. More than four hundred companies of various sizes participated. Twenty-one percent have fewer than 200 hundred participants and twenty-seven percent have 5,000 or more participants. Eighty-seven percent use a packaged target date fund program. Thirteen percent of the programs are custom designed. Most plan sponsors in the survey are satisfied with their target date investment options, despite weak performance during the recent market crisis." (Profit Sharing / 401k Council of America)
SEC-DOLTarget-Date Hearing Witness Lineup Released
Excerpt: "The Securities and Exchange Commission (SEC) has announced the lineup of witnesses organized in nine panels that are set to testify before SEC and Department of Labor (DoL) officials on June 18 about target-date funds. . . . Witnesses will include representatives of plan participants and beneficiaries, plan sponsors, investor organizations, academia, and the financial services industry. The hearing will be transcribed, and a live Webcast will be available at the SEC and Labor Department Web sites. The SEC hearing announcement is available at http://sec.gov/news/press/2009/2009-138.htm. For more information, contact Tara Buckley in the SEC's Division of Investment Management at (202) 551-6825." (PLANSPONSOR.com; free registration required)
The SEC's and DOL's Cross Agency Retirement Plan 'Compliance Waltz'
Excerpt: "It is striking . . . how separate the securities compliance world is from the ERISA compliance world-though it is a 'separation' which will eventually die a natural death. Security practitioners and ERISA practitioners will be getting to know each other well, and probably sooner than later. So this is my contribution to that effort. The link below brings you an article which describes ERISA compliance for the security law compliance officer. To many of you, this will be very basic, and pretty boring stuff. The securities folks, however, have expressed amazement of some of the basic things I have written about, things which we take for granted. ['SEC's and DOL's Cross Agency Waltz: The ERISA Connection to Disclosure, Advice, Compensation and Conflict of Interest' at http://www.businessofbenefits.com/uploads/file/Toth_PCRM_03-09(2).pdf]" (Giller & Calhoun, LLC)
Choosing Between 401(k) and 403(b) Plans
Excerpt: "BNA has published a brief article on choosing between 403(b) and 401(k) formats for retirement plans at http://www.bnatax.com/tm/insights_kenty.htm. The summary is well written and brief, both of which are real virtues. I have only two comment[s]." (403(b)-457 Plans Blog)
AIG Alleges Former Top Executive Plundered Retirement Plan
Excerpt: "The former top executive of American International Group Inc. plundered an AIG retirement program of billions of dollars because he was angry at being forced out of the company, a lawyer for AIG told jurors Monday at the start of a civil trial. Attorney Theodore Wells told the jury in Manhattan that former AIG Chief Executive Officer Maurice 'Hank' Greenberg improperly took $4.3 billion in stock from the company in 2005, after he was ousted by the company amid investigations of accounting irregularities." (AP via Google)
The Future of Retirment, 2009 (PDF)
64 pages. Excerpt: "This report is inspired by the rapid improvements in longevity witnessed in the last half century. With these trends set to continue, the way in which we fund retirement will become one of the most profound challenges facing the world. The presence of a demographic mega-trend will affect every aspect of our economic and social life. This will include changing working patterns, family life, as well as the need to reassess funding healthcare and what will, in all likelihood, be an extended retirement." (HSBC Insurance Holdings Limited)
Appendix with Additional Data on the U.S. Retirement Market, 2008 (PDF)
23 pages. Excerpt: "Share of Total Retirement Market. Total U.S. retirement assets fell by 22 percent in 2008 to $14.0 trillion . . . . Mutual fund assets held by individual retirement accounts (IRAs) and employer-sponsored defined contribution (DC) plans represented 22 percentof U.S. retirement assets at the end of 2008 . . . . Annuities (variable and fixed) not held in retirement savings accounts held $1.4 trillion of the total U.S. retirement market . . . . Variable annuity (VA) mutual fund assets outside of retirement accounts were $687 billion at year-end 2008 . . . ." (Investment Company Institute)
The U.S. Retirement Market, 2008 (PDF)
Excerpt: "mployer-sponsored retirement plans play a key role in helping American workers save for retirement. The bulk (nearly two-thirds) of Americans' retirement assets was held in employer-sponsored retirement plans at year-end 2008. Furthermore, a significant portion of assets held in IRAs originated in employer plans and were then transferred (or 'rolled over') into IRAs." (Investment Company Institute)
[Guidance Overview] DOL and Banks' $9.6M Settlement in Aloha Airlines Pension Dispute
Excerpt: "The U.S. Department of Labor (DoL) and two Hawaiian banks have worked out a $9.6-million settlement of a lawsuit over funds from Aloha Airlines' pension plans used to buy now-worthless shares of stock in the now-defunct air carrier's parent company. A DoL news release said the money from the suit against Aloha Airlines Inc., Bank of Hawaii and First Hawaiian Bank over plan losses from the stock purchase will be paid to the Pension Benefit Guaranty Corporation, which now runs the four plans from the bankrupt airline . . . ." (PLANSPONSOR.com; free registration required)
[Guidance Overview] Administrator Breach of Fiduciary Duties by Loaning Plan Funds to Start-Up Company
Excerpt: "EBIA Comment: Investments sometimes go awry. Fiduciaries are not required to guarantee good investment results -- but they are required to follow a prudent process when evaluating plan investments. To satisfy this 'procedural prudence' standard, fiduciaries should follow a thoughtful and prudent review and decisionmaking process and document the steps they have taken." (Employee Benefits Institute of America)
Stable Value: A Closer Look at This Hybrid Fixed Income Strategy
20 pages. Excerpt: "Executive summary. The financial crisis and credit crunch in 2008 have prompted plan sponsors and investors to reassess the return and risk of their investment assets. Even stable value and money market funds -- investment vehicles often considered the safest options in 401(k) plans -- have been subject to increased scrutiny (Kim and Laise, 2008). Given investors' risk?reward reassessments as well as the recent cash inflows into fixed income securities, this paper examines some of the unique characteristics of stable value funds and details the benefits and potential downsides to investing in funds of this type. We also look at the performance characteristics as well as recent negative plan events affecting these funds." (The Vanguard Group, Inc.)
Law Firm Looks into Securities Lending at Northern Trust 401(k)
Excerpt: " The Keller Rohrback L.L.P. class-action law firm announced Thursday that it is investigating the investment activities of Northern Trust Company (NTC) and Northern Trust Investments (NTI), focusing on their securities lending program in The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies. The news release said the program may have resulted in severe losses to the participants' retirement savings in violation of the Employee Retirement Income Security Act of 1974 (ERISA)." (PLANSPONSOR.com; free registration required)
Retirement-Planning Software Needs Overhaul
Excerpt: "In the past year, improbable financial events became all too real, calling into question some commonly-held beliefs about retirement planning -- and forcing a closer look at software tools that use probability models as a basis for helping people prepare for retirement. These days, savers, retirees and advisers are looking in the rearview mirror, questioning the value of software that failed to live up to its billing. Likewise, firms -- perhaps validating the notion that such software failed -- are rolling out new versions of their retirement-planning tools in hopes of meeting the needs of savers in a world where nothing is guaranteed." (MarketWatch)
Target-Date Funds in the Spotlight: An Overview
Excerpt: "Employers . . . cannot rely entirely on the fact that under Department of Labor rules, target-date funds are qualified default investment alternatives (QDIA's) in a company's 401(k) plan. They are still liable as fiduciaries in choosing an appropriate set of target date funds for employees in the fund." (Mind Over Market)
Fiduciary Duty to 'Assess and Protect' Plan Interests
Excerpt: "It has been reported that there were many ERISA-covered retirement plans impacted by the Madoff-Ponzi scheme. As a result, the DOL issued a notice back in February . . . indicating that fiduciaries of ERISA plans should take 'appropriate steps' to 'assess and protect the interests of the plan and its participants and beneficiaries.' The DOL then went on to include in the notice a list of 'appropriate steps' for fiduciaries to take in fulfilling their duty to 'assess and protect' the interests of plan participants. One of those steps included filing and asserting claims against the bankruptcy estate." (ERISA Fiduciary Guidebook)
Risk Pooling and the Market Crash: Lessons from Canada's Pension Plan
Excerpt: "The challenge is to capture the higher expected returns equities offer in a way that provides reasonably secure and reliable incomes in retirement. One approach would make individual retirement accounts more secure and reliable through the use of mandates, defaults, guarantees, or risk-sharing arrangements. This brief offers a different approach, examining the Canada Pension Plan (CPP) and how it manages the risk that comes with investing retirement savings in equities..." (Center for Retirement Research at Boston College)
Teachers Union Takes Minnesota County to Court over Vendor Reduction
Excerpt: "The Minnesota District 861 school board may now wish it had heard employees' grievances over the reduction in vendors offered in their 403(b) plan. The Winona Post reports that district officials learned that the teachers union and paraprofessionals union have filed a joint lawsuit in Winona County District Court seeking to compel them to go to arbitration over a decision made last year regarding 403(b) investment offerings. Former school board chair Brian Neil told the unions in January that the matter is not open to arbitration or grievance because it is an issue not governed by union contracts . . . ." (PLANSPONSOR.com; free registration required)
Default, Framing and Spillover Effects: The Case of Lifecycle Funds in 401(k) Plans
Excerpt: "Important behavioral factors such as default and framing effects are increasingly being employed to optimize decision-making in a variety of settings, including individually-directed retirement plans. Yet such approaches may have unintended 'spillover' effects, as we show with regard to the introduction of lifecycle funds in U.S. 401(k) plans. As anticipated, lifecycle funds do reshape individual portfolio choices through large default and framing effects. But unexpectedly, they also create a new class of investors which holds these funds as part of more complex portfolios. Our results are directly relevant to those interested in retirement plan design and retirement security; they also highlight the importance of assessing such spillover effects in other consequential settings where techniques drawn from behavioral economics may be employed." (Pension Research Council; registration required to download fulltext of paper)
Strengthening Target-Date Funds with Guarantees to Enhance Retirement Security (PDF)
15 pages. Excerpt: "While plan sponsors and participants have been quick to adopt target-date funds, the inherent risks of this approach have become apparent during the recent financial turmoil. Plan providers can mitigate these risks by combining target-date funds with income guarantees." (Prudential Retirement)
Annuity Ladders
Excerpt: "Enter the concept of laddered annuities. Or perhaps we should say welcome back. In a recent study entitled Variable Payout Annuities and Dynamic Portfolio Choice in Retirement, Olivia Mitchell, a professor of insurance and risk management at the Wharton School of the University of Pennsylvania, argues that by laddering the purchase of annuities-buying annuities gradually over time, while keeping the rest of a portfolio invested in a mix of equities and bonds-people can substantially increase the likelihood of meeting their retirement income goal. They can also 'do almost as well as the fully optimized outcome if they hold variable annuities invested 60/40 in stocks/bonds.'" (Financial Planning)
The 401(k): Employers Look to Cut Costs, Workers Crave Stability Following Market Crash
Excerpt: "Retirement plan consultants foresee financial firms and employers embracing hybrid plans with features of both 401(k)s and pensions. Fred Cox, director of compensation and benefits at Evansville-based Vectren Corp., talked with a vendor in late May about adding an annuity option to the gas and electric utility's 401(k) plan. The option would help participants invest in stable choices that guarantee a certain yearly payment upon retirement -- like a pension does. 'What you've created is sort of a floor out of what's going to come out of that annuity,' Cox said. Such tweaks are not enough for Monique Morrissey, an economist at the liberal Economic Policy Institute in Washington, D.C. She wants to see individual retirement accounts mandated, controlled and guaranteed by the government -- because 401(k)s have failed to provide Americans what they need in retirement." (Indianapolis Business Journal)
[Opinion] American Benefits Council Proposed Modification of H.R. 1988, The Conflicted Investment Advice Prohibition Act of 2009 (PDF)
Excerpt: "H.R. 1988 is easily modified to achieve its intended purpose through a very simple amendment. Under such amendment, the following would be inserted on page 23 between lines 12 and 13: '(E) This paragraph shall not apply to investment advice provided to a plan or to a participant or beneficiary if such advice . . . ." (American Benefits Council)
Administration Explores 'R Bond' As Option for Retirement Accounts
Excerpt: "Officials in the Obama administration are moving quickly to develop the investment infrastructure behind the president's proposal for mandatory automatic enrollment in individual retirement accounts, which could be supported by the creation of Treasury-issued retirement bonds. J. Mark Iwry, deputy assistant secretary for retirement and health policy at the Department of the Treasury, said that administration officials are exploring some 'conservative' options for investing the assets of 78 million Americans that he estimates could be automatically enrolled in this 'universal' workplace retirement system." (Investment News; free registration required)
Registered Investment Advisors: Fiduciaries for What? (PDF)
At p. 2 or 4-page newsletter. Excerpt: "Because of these issues, advisers need to be prepared for the high cost of litigation. Of course, fi duciary liability insurance is one way to do that. As a word of warning, don't rely on your malpractice, or errors and omissions, insurance to guard you against fiduciary breaches. Most have specific exclusions from fi duciary coverage." (Reish Luftman Reicher & Cohen)
Beyond Rebalancing -- Rethinking Long-term Asset Allocation
Excerpt: "[L]ooks at the topic of rebalancing from the perspective of today's plan sponsor, challenged with managing investment decisions in an extremely uncertain environment." (JPMorgan)
Chrysler Speeds Past Legal Limits in Race to Live; Bondholders, Step Aside!
Excerpt: "Today was supposed to be the day that Chrysler LLC sold itself to Fiat and embarked on a new, government-designed chance at survival. Instead, its lawyers are arguing in a federal appeals court this afternoon to please, please let the sale go through." (James Pressley on Bloomberg.com)
Chrysler Says Indiana Pension Funds Can't Win Appeal
Excerpt: "The Indiana pension funds challenging the sale of Chrysler LLC's assets to a group led by Fiat SpA can't win, and the deal is better than liquidating the company, Chrysler lawyers said in appeals court documents filed [Thursday June 4]." (James Pressley on Bloomberg.com)
Risk Management and the PBGC
Excerpt: "[The authors] provide commentary on the PBGC's asset reallocation plan. This article was written before the capital market downturn that began in Sept./Oct. 2008. Recent events do not change the questions posed or perspectives offered herein." (Society of Actuaries)
[Opinion] Chrysler vs. Indiana: The Little Pension Fund That Could
Excerpt: "Now, the popular defense of the Indiana pension funds is that they have a fiduciary duty to their beneficiaries to maximize the value of their assets. (Hedge funds should have the same duty to their limited partners, unless I'm missing something, but let's set that aside.) There is a deal on the table worth 29 cents on the dollar. Apparently they think Chrysler can do better by finding a a higher bidder (not likely at this point), or they can get more in liquidation. But that is far from a certainty, and the value of Chrysler is deteriorating as time passes; and if they manage to drag this out past June 15, Fiat can back out of the deal. So it's not at all clear that their actions have a positive expected value for their beneficiaries." (Seeking Alpha)
Chrysler Enters Legal Homestretch in Case Brought by Indiana Pension Funds
Excerpt: "Invoking founding father James Madison and their rights under the Constitution, the Indiana pension funds argue that the government-orchestrated sale of most of Chrysler's assets violates numerous laws." (Washington Post; free registration required)
Court of Appeals Today Hears Indiana Pension Funds' Appeal of Chrysler Deal
Various Indiana state employee pension funds are contesting their treatment as bondholders, saying unsecured creditors are being favored ahead of Chrysler's bondholders. OppenheimerFunds filed a brief in support of the pension funds. (AP via New York Times)
Whats in a Target-Date Funds Name? Misled Investors and Troubling Results Might Lead to Crackdown
Excerpt: "The SEC is considering cracking down on the use of target-date retirement fund names that could be 'misleading or confusing to investors,' SEC Chairwoman Mary L. Schapiro testifies during a Senate subcommittee hearing." (Workforce.com)
FASB Accounting Standards Codification to Officially Launch on July 1, 2009
Excerpt: "The Financial Accounting Standards Board (FASB) [on Wednesday June 3] voted to approve the FASB Accounting Standards Codification(tm) as the single source of authoritative nongovernmental U.S. Generally Accepted Accounting Principles (GAAP) to be launched on July 1, 2009. The Codification will be effective for interim and annual periods ending after September 15, 2009, which means that preparers must begin to use the Codification for periods that begin on or about July 1, 2009." (Financial Accounting Standards Board)
More Detail on Indiana Pension Fund Grounds for Objecting to Chrysler Deal
Excerpt: "The Indiana funds making the challenge, which include those representing state teachers and police officers, hold about $42.5 million of Chrysler's $6.9 billion in first-lien debt, so called because it is first in line for repayment. But holders of about 92 percent of those loans agreed to a government plan whereby they would receive 29 cents on the dollar in cash for their claims. The Indiana funds bought its holdings in July 2008 for 43 cents on the dollar. Lawyers for the funds have questioned whether Chrysler could have realized a better deal than the Fiat transaction or through a liquidation. They have also raised objections to the sale on constitutional grounds . . . ." (New York Times)
Does Your 401(k) Need An Annuity Combined with an Investment Portfolio?
Excerpt: "[L]ess than 20% of employees would be able to meet their needs in retirement. That's prompting several firms to introduce a new type of 401(k) plan that combines elements of traditional pensions and 401(k) accounts. Like pensions, they offer a deferred annuity to provide a guaranteed income throughout retirement. . . . Along with the annuity, these new 401(k) plans contain an investment portfolio. That allows you to take advantage of growth in the stock market." (MainStreet)
EBRI Study Addresses Plan Demographics, Participants' Saving Behavior, and Target-Date Fund Investments
Excerpt: "This analysis explores (1) whether plan demographic characteristics would affect individual participant contribution rates and target-date fund investments and (2) equity glide paths for participants in relation to plan demographics by considering target replacement income and its success rate." (Employee Benefit Research Institute (EBRI))
Principal Financial Group Lays Off 140 in Des Moines
Excerpt: "The positions are primarily in the retirement business to accommodate changing customers needs, said spokeswoman Susan Houser in a statement." (DesMoinesRegister.com)
No Bond Safe from Obama's 'Shared-Sacrifice' Plan
Excerpt: "Bondholders have a new risk to contend with -- the Obama administration's policy of 'shared sacrifice.'" (David Reilly on Bloomberg.com)
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