Warning: High Explosives! Here's an issue that many would like to pret

[John G]

Originally posted by Greg Judd

While I might quibble over the spread between  John G's hypothetical bond/stock portfolios (historical differences in real rates of return, while significant, are not as great as suggested

Nothing hypothetical about the data I reported. The data represent the average annual performance of all mutual funds in the catagory that have existed more than 20 years as reported in August Kiplinger Financial. I choose the 20+ catagory as this does the best job in washing out the unussual last five years and the blossoming number of niche/sector mutual funds. Since these three fund catagories are not likely to include utilities due to the catagory definition, one might argue there is a slight bias towards growth stocks.

The number of observations in each catagory is not reported, but the data base included thousands of mutual funds. Clearly, the sample size shrinks when you eliminate anything younger than 20 years. However, the 10 year performance is less than 1% higher for aggressive growth but is surprisingly slightly less than 1% lower for growth/income and long-term grown.

I thought 20 years was "historical"! Now if someone wishes to publish a list of 30 and 40 year returns, I will report them. The data on mutual funds in the 40+ range that I possess is very similiar to the averages Kiplinger reported.

The often cited "stocks average 10% annual return" is the most poorly documented statistic on Wall Street. It is sort of the emperors new clothes issue. No one wants to stand up and say something is wrong. I traced one reference back to a comparison various common stock indicies, but that analysis left out all the dividends and therefore was wrong. Given the changes in the economy, I have trouble finding a lot of statistical value in data more than 50 years old. Since these funds are what folks can select in retirement accounts, and annual taxation is not an issue, the data seem awfully relevant to me.

[Greg Judd]

John, I'm not questioning the rigor of your legwork--just noting that based on stats I've seen (compiled by FRB, I believe) re: historical equity/debt performance, the gap may be narrower than 6 or so percentage points. Kiplinger's ok in my book--the family shared a lot of wealth with the patriarch's (& my) collegiate alma mater.

The central point, on which we seem to agree, is that an investor's choice of the mix that will result in 'successful' investment performance is subjective--whatever the theoretical 'best' economic outcome may be.

Tell you what, I'll let you be right on the data aspects of this one--if you'll let me be President. 8^)

[Guest tschenk]

John G- Just a note about using mutual fund data vs asset class data. One of the many quirks among others of using MF data is "suvivorship bias". Over the years, the funds that are dogs either fold up or are merged into other funds. When these low values are eliminated from the data set, this obviously skews returns to the high side.

Still your point is valid about the gap of returns between the asset classes. I believe returns for equities going back to the Depression is a tad under 11% and Bonds are about 6%. While equities appear to be about double, when you adjust for inflation and back 3-4% out of these numbers, equities appear to return almost 4x more than bonds! Over an investing lifetime, equities have clearly been the best way to grow money.

However, one of the "costs" of that superior asset class is a big emotional price for most investors. This is where theory and practice diverge. People become their own worst enemies as emotions take over during the inevitable market swings. And if they made terrible choices to begin with then things really get messy.

Greg- Your point is also well taken about the importance of participating. Obviously, if you're not saving anything, it doesn't matter what your returns are. Clearly these are two different issues.

Now if I were president... I'd say give a professsionally managed pool(s) as an ALTERNATIVE to the traditional menu. Now you've taken care of one problem.

For the second problem of saving/participating, how about replacing some of these drab investment meetings with some personal finance seminars, like how to get out of debt. The employees often in the sorriest circumstances are so up to their ears in debt, that saving anything is a joke - much less for an event far into the future like retirement. If they can get help getting their financial house in order then they can begin to feel good about themselves. Now they're thinking about money in a more positive light. Now saving and investing for retirement has a relevence, now it makes sense.

This common-sense step is overlooked in almost all participant directed plans! Instead, the same old lame messages are repeated until they are background noise. This is why all of these surveys are showing these sad results.

[John G]

Originally posted by tschenk

MF data is "suvivorship bias"... dogs either fold up or are merged into other funds...this obviously skews returns to the high side.

...I believe returns for equities going back to the Depression is a tad under 11% and Bonds are about 6%.      

You are correct about survivorship bias. Unfortunately, I have never seen anyone try to quantify it. There is also a size bias which works the other way. The data I provided was arithmetic averages not asset weighted. Since the most successful funds tend to grow larger, a simple average understates the catagory performance. For example, you have Fidelity Magellan with 22.7% annual return over two decades and it is one of the largest funds. And I suspect that very small funds or funds that are not in a family cluster may be overlooked because of data collection issues.

The 11% return for equities (like the 10% figure) that you site is a commonly used benchmark that you can find it lots of magazines and computer models. My conclusion after working with data from various sources is that it understates by a few points what can be achieved with equities.

I agree with your comment on lame corporate investment meetings. In one company, I worked one on one with a few clerical staff and getting financial affairs in order which did indeed start with credit card debt problems. It took 2-3 years before they were ready to step into the 401k club. One of the hurtles that had to be overcome was their distrust of senior management which was shrouded in male/female issues of trust.

[Guest tschenk]

For those who think adding a brokerage window to 401(k) plans is a great idea, here's a paper hot off the press.

"Trading frequency doubles and portfolio turnover rises by over 50%."

That doesn't sound like what long-term investors do...

http://papers.nber.org/papers/W7878

[Greg Judd]

Re: that interesting-looking NBER report, I'm no expert on study design, but that big bump in trading frequency could be quickly attributed to lots of biasing factors unless the guys who did the study controlled very carefully for the composition of the 'have brokerage option/don't have it' groups they analyzed.

Of course, if I wasn't too cheap to pay the $5 to get the whole report, I could put some teeth into my quibbling....

tschenk, based on your initiation of this fine thread, & the high caliber of your posts & replies, I'm prepared to concede my self-nomination & hand you the Prexy job unchallenged. Serve well!

[John G]

Originally posted by tschenk

"Trading frequency doubles and portfolio turnover rises by over 50%."  

http://papers.nber.org/papers/W7878

This could be meaningless data. If the average person was making one purchase/sell a year and now makes two, that would mean trading frequency doubles. If portfolio turned over 20% and now turns over 30% that also meets this statistic.

Here are some of the key Qs: What is sample size? What comprises the base from which the sample was drawn? Does the analyst have a neutral view or are they affiliated with a group like Nasdac, mutual funds or brokerages where we can assume that they have a "point of view". Are these statistics based upon averages or medians? Over what time period? Are the results skewed by the significant actions of some subset, like young workers, those with internet access, etc. Does this reflect just equity trades or mutual fund exchanges?

In this case, the data reflects just internet trading at just two firms.... and if that means someone like Microsoft or HP, just how meaningful do you think that comparison would be? And just 18 months of data... means the newness has not even worn off, so you are capturing the impact of a new gadget. Since the report summary says those that try stick with the web method, one might argue they like the results.... so maybe this is good news not evidence of failure or a problem.

When I see the phrases like "doubles" or "50%" increase, my first thought is how valid the analysis. These are the kinds of words used by the media and folks with an ax to grind. I smell hype. Twenty years ago my consulting firm locked horns with some hot shot engineering firm that predicted solar energy would comprise 20% of all industrial energy consumption by the year 2000. Gees, only off more than an order of magnitude. Call me skeptical. And I am not even from Missouri.[Edited by John G on 09-06-2000 at 02:25 PM]

[Guest Brooks]

Originally posted by tschenk

Jean-

My Readers Digest version of what I would think would be the ideal plan is one where the do-it-yourself participants can pick and choose from the traditional menu (even a brokerage window) and all the others can direct a money manager to manage their assets.  The money manager would indeed be a fiduciary to the plan (unlike a lifestyle fund mgr.) and the money manager would choose the appropriate asset allocation for the individual. Now the most clueless participant on the planet (or those who do not have the time or desire to manage their own portfolio) can have the opportunity to get institutional level returns.  

The company stock issue is another hot potato.  Yes, if offered at all, I think it should be limited to 10% max...in a perfect world.

************************************************************

Jean-

How do you feel about a company that makes the 401(k) Matching Contribution in company stock in a Plan that then "locks" the employee into that stock - i.e., a Plan where the participant can't change the assets making up the company's match account.

Assume an employee contributes 6% of pay, and the company match is 4% (i.e., 66.66%). Assume the employee makes $50,000 annually; contributes $3,000, and gets a $2,000 match in company stock. Thus, 40% of the annual contributions is in company stock.

Now, and finally, assume that over the past decade the company stock has had an annual investment return of -10% (the S&P is around a +15%).

Anybody out there feel the company may have a huge legal problem? Does anybody feel that 404© offers any protection at all in this type case? Does anybody (else) feel that these facts and circumstances may even constitute a breach of ERISA fiduciary responsibility, per se?

For a better way to deal with the issue this thread discusses (i.e., that too many 401(k) participants are novices when it comes to investing), see

http://www.worth.com/articles/Z0004G01.html[Edited by Brooks on 09-07-2000 at 10:29 AM]

[Greg Judd]

Brooks, that Worth article you mentioned sounds good, but the link you posted is a dead-end, unfortunately. Do you have its title by chance?

re: Anybody out there feel the company may have a huge legal problem? Does anybody feel that 404© offers any protection at all in this type case? Does anybody (else) feel that these facts and circumstances may even constitute a breach of ERISA fiduciary responsibility, per se?

The short answer's "no, but". The 401k plans of today basically owe their existence to 2 forces: tax laws providing favorable treatment to profit-sharing plans, & Ted Benna. The objectives of profit-sharing plans were (& arguably are) not coincident with plans aimed at providing employees with tax incentives for long-term capital accumulation for income at retirement.

So, 401ks evolved out of existing 'retirement-oriented' programs that encouraged use of company stock as a centerpiece of employer funding. Not right or wrong, just the way it is.

Though participants in plans where the company match is in company stock aren't as locked in today as they were in the early days, there are certainly further steps that might be taken to enable participants to diversify appropriately. Employers & employees should certainly coax their congressional representatives to hear their positions & legislate as necessary. We may only hope we aren't marched into "better" results at the muzzle end of the 'policymaking' weaponry wielded by Dickie Scruggs & co--else we end up with no overarching policy at all.

[John G]

"Anybody out there feel the company may have a huge legal problem? ...."

I would say yes. The company clearly has assume fiduciary responsibilities from many prospectives. There are still lots of companies that force company stocks. When a company's long term (not 1 or two years) stock performance is horrible, then I would say they have failed their fiduciary duties by restricting choices.

But lets look at the big picture. How easy will it be to attract and retain employees when this significant element of compensation is extremely unattractive. I know of a handful of employees that were heavily motivate to change jobs to regain control of their investments. One fellow was an MBA and calculated that he would have an opportunity cost of over 100k if he stayed another three years and his significant 401k continued to stagnate. He was correct about that.

[Greg Judd]

Originally posted by John G

But lets look at the big picture.  How easy will it be to attract and retain employees when this significant element of compensation is extremely unattractive...

Bang on the dot, John. Employees will vote on such bonehead policies with their feet--or in increasing numbers, & with increasing vehemence (if not reason), via this kind of 'lectronic soapbox. More than a few companies are likely to experience their own version of IBM's cash-balance conversion imbroglio over the coming years.

[Guest Brooks]

Originally posted by Greg Judd

So, 401ks evolved out of existing 'retirement-oriented' programs that encouraged use of company stock as a centerpiece of employer funding. Not right or wrong, just the way it is.

Greg:

My historical take is that 401(k) was added to the Code, in 1978, by a Congress that intended it to be a statutory "fix" to the coverage issue with "cash or deferred arrangement" type plans - i.e., the old "CODA" type plans.

Since WWII, many companies have desired, for example, to put say 5% of pay into a "plan" for all employees. Then, this "ideal" plan would allow any person (complying with the then constructive receipt issue) to elect to either take the cash out immediately or leave the money in the plan's deferred account until retirement (death, disability, or quit, etc.)!

In practice, many of the NHCE crowd took the cash; many of the HCE did not. So, how many employees did the plan actually cover? The company argued that the "plan" covered 100%, since all got the initial 5% allocation . . . the IRS argued that these CODA type plans only covered the few that did not take the cash.

401(k) was added to provide a statutory "safe-harbor" formula to solve this issue. Initially, this test compared the average deferral for the highest paid 33% versus the average deferral for the lower 67%, with a 3% "gap" being OK. Trivia: This 33% - 67% test came from a speech made by the legendary IZZY in San Francisco many eons ago.

401(k) was not a big deal at the time, and the evidence is that nothing much happened in the initial years after 401(k) was added to the Code. Things got exciting after Reagan.

We have read that Benna submitted a request to IRS for a PLR asking, in essence, this question. Assume John Doe earns $30,000 annually and contracts with his Employer to reduce his pay to $29,000, provided the Employer will make a company contribution to a Plan qualified under 401(k) of the Code. Query: will the $1,000 be deemed a company contribution under 401(k), . . . or an employee contribution.

Ask 1000 people who made the contribution, and probably 1000 will say the employee! We all know that the IRS ruled that the $1,000 would be deemed to have been made by the Employer (isn't the word "deemed" wonderful?).

And the rest is, as they say, history. This has been my take on the evolution of 401(k) - but I am confident (and thankful) that any error in this historical view will be brought quickly to my attention!

[Guest tschenk]

John- The data from that report was with 100,000 participants over an 18-month period. The authors, two from Harvard and one from Wharton, do not appear to have a commercial affilliation. But to answer all of your questions, you need to pop for the 5 bucks and download the paper.

Further, at 401kWire,

http://www.401kwire.com/scripts/401kwire/p...?ArticleID=2621

today they have a good article about self-directed accounts which presents an alternate view of the merits of these windows in plans.

There have been great discussions in this forum about how SDA's could affect 404©...which is another discussion altogether.

The theme that I hope comes across to the readers of this thread is the hype & PR about all of the latest bells and whistles such as SDA's, advice engines, 1000 fund choices, daily val, oceans of information, VRU's, etc. all work great for SOME portion of participants (ususally it's the same do-it-yourselfer group) - but not all. After two decades, current studies are saying that Johnny can't invest very well.

I am, not saying "all" participants are making poor, uninformed choices - but I am saying "a lot". (And yes, low savings levels are indeed the second terrible problem in these plans.) Florida's program will, no doubt, be great for some but will doom many others to thousands of dollars less at retirement from inefficient investment portfolios or dumb decisions.

The evidence suggests, as stated in the studies mentioned earlier and others, that there is a significant body of individuals in these plans that are leaving a ton of money on the table over their investmenting lifetime! At a time when plans are scrutinizing costs of 2 basis points here or 10 basis points there, the "opportunity cost" to this group of perhaps (easy now, I'm guessing) 50% of their employees may be 500-1000 basis points annually or more from making emotional/uninformed decisions that they probably never wanted to make in the first place.

Who's out there who would like to share some participant portfolio range of return stats with our readers?

To amplify Brooks' summary of the strange evolution 401(k) plans, these were founded on the assumptions that:

- everyone would drop the paternal pension mentality that had been in place for generations,

-and would (and could) acquire the disciplines and skills to manage a retirement portfolio that may have to carry them for a quarter century or more.

Forget the fact that, in the past, corporations used to hire teams of money managers, consultants, performance analysts, and actuaries to perform these duties.

Then toss in some of these crazy company stock programs along with the wide open wording of ERISA (with little case law yet established), longer lifespans (and all the actuarial implications that go with this hot potato), and a court system with a well established record of the plaintiff as the "victim", the incentives of the 6-figure sums of money involved per individual, and there's the making for some unprecedented litigation in these plans. Not to mention a lot of todays workers who will become burdens to their families and our social system - or maybe the corporations and shareholders may be holding the bag.

(Whew, it is a good thing I'm not saying what's really on my mind!) 8~)

[Guest Brooks]

Originally posted by tschenk

Who's out there who would like to share some participant portfolio range of return stats with our readers?

Hi Tom:

Here is an actual case:

Actual Plan with 3,000 - 4,000 participants and over $75 million in assets.

Quintile Age Pay All Contributions Yield

First 41 $47,701 10.81% 24.06%

Second 44 $45,199 11.91% 20.36%

Third 43 $43,803 11.10% 16.60%

Fourth 40 $39,788 10.67% 11.96%

Fifth 40 $33,795 7.76% 4.14%

Thus, the Top 20% earned 24.1% for the year while the Bottom 20% earned 4.1%. Use any method you like to "normalize" these returns, and you still get those doing best projected to retire at full pay or better, and those doing poorly projected to retire at 15% of pay or less.

It is just a matter of time until we all see this ad in the WSJ (or wherever):

************************************************************

Friends, are you being forced to make investment decisions regarding your retirement nest-egg by your employer, when he knows full well that you don’t know a stock from a bond? And further, that you really don’t care to go back to school to try to learn how to become your own investment manager/expert? And is this being done to you in a conniving attempt by your employer to avoid his responsibility to you under the pension laws of America? Finally, and as a result, are you now growing old, and poor, destined to be a burden to your children and an embarrassment to yourself? Even though you have sacrificed and saved enough to assume you have assured your well being in your golden years, will you only be reaping fool’s gold because of your employer’s treachery and his deliberate indifference to the despair he has selfishly inflicted on you? Well, relax my friends. Just call the following 800 phone number and you too can become rich.

************************************************************

Those who laugh now at the thought of such a legal marketing program may be among the first to laugh, but those laughing last will be on the way to their bank. For if the protection seemingly promised by 404© is the illusion that a growing number of pundits believe it to be, certainly in most cases, ERISA fiduciaries will be liable (and personally liable) for the dismal investment results achieved by participants who obviously are investment novices, and yet are forced to direct their own investments.

The ultimate question that the U.S. Supreme Court will be called upon to answer one day may thus be (when you boil it all down): is deliberate indifference to participant plight by ERISA fiduciaries, with actual knowledge of that plight (i.e., that many/most employees have been forced down a road leading only to despair) legal or not. The key words, we feel, will prove to be "actual knowledge" and "deliberate indifference".

Remember, we are a people who seem to demand victory for our victims!

Get your bets down.

[Greg Judd]

Brooks, terrific precis of the run-up to modern-day 401ks.

I managed somehow to obscure my own point, which was only that the 401k we know--& discuss--today grew out of something having quite different objectives & expectations. Further, that one sign of that is the prevalence of plans that employ company stock to fund the company contribution/match. These suckers really weren't designed for diversification of risk. Accomodating those issues isn't too hard design-wise, but getting peoples' minds right--sponsors' as well as participants', and maybe public policymakers' as well--is another matter.

Originally posted by Brooks

(isn't the word "deemed" wonderful?).

I always liked the variant 'deemer'. Deemer deemer deemer!

[Greg Judd]

Originally posted by tschenk

To amplify Brooks' summary of the strange evolution 401(k) plans, these were founded on the assumptions that:

- everyone would drop the paternal pension mentality that had been in place for generations,  

-and would (and could) acquire the disciplines and skills to manage a retirement portfolio that may have to carry them for a quarter century or more.  

....[T]here's the making for some unprecedented litigation in these plans

tschenk, can't go with you on the assumptions you list here--except that "there's the making for some unprecedented litigation...".

First, what's now 401ks, weren't, back when. No one assumed 'real' pension plans would go away--though a surprising number predicted as much. 401ks were no more expected to be the sole best hope for retirement income security than was Social Security.

Further, few talked about the need for 401k participants to acquire investing discipline & skills. Investment choices & means of control were limited, if they existed at all. 401ks emerged out of plans most eligible workers thought of as bonus programs--sources of money for buying holiday presents--see Brooks' breakdown of who left money in them, vs cashing out.

Our very recently emerged daily balance, universe of investment options environment certainly contributes to obscuring the view of where we came from, and may well impair sensible efforts to improve on existing policy.

[Guest tschenk]

Greg-

Hey, you personally handed me the job of President then imply that I exaggerated a statement?!? LOL!

Well, you're correct. I did overstate the situation when I stated that k-plans were "founded" on those assumptions. Too much coffee when I wrote that.

Clearly, these plans evolved as opposed to carefully crafted. I believe few ever envisioned them to become the dominant retirement vehicle for 30+ million workers.

I'll restate those two assumptions as "unspoken, generally accepted, or at least implied" assumptions. Take your pick.

Nevertheless, I still believe those "assumptions" are at the source of the problems facing this huge demographic group made up of: those who don't get it and never will, those who don't have the time to get it, and those who don't have the desire to get it (until it's too late).

Again, with this thread, I wanted to draw attention to this group that seems to be mysteriously unreachable with all of today's plan features and services.

One can say that it's their problem (litigation potential aside). Individuals need to recognize the importance of acquiring these skills and disciplines needed in preparing for their retirement. People need to take responsibility!

Intellectually, one would be absolutely correct. Now... one can do two things from that position:

1. Stick by it and let the employees and their families suffer the consequences of their own making.

2. Or accept the fact that these illogical and indifferent responses are simply realities of human nature and seek some solution - and fast because the clock's ticking and the problem will only become more difficult to remedy.

People are often not logical. There is a whole new area of study in B schools today called Behavioral Finance which essentially says that when it comes to people's money, it's an emotional thing and it doesn't always lend itself to intellectual solutions.

[Edited by tschenk on 09-08-2000 at 02:04 PM]

[Guest Brooks]

I was attracted to this thread by the following quote from Tom:

Originally posted by tschenk

The articles highlight several recent surveys that say that participant confidence in their investing skills is declining, that the addition of more fund options has not done anything to improve participant asset allocation, and that, in general, many participants are still clueless about appropriate asset allocation.  

[/b]

This is just ONE of the problems caused by a change in the "Replacement Income" Model in the USofA. To illustrate:

OLD “REPLACEMENT INCOME” MODEL: Just a generation ago, the “average employee” probably participated in a defined benefit pension plan that essentially guaranteed him/her a monthly pension at normal retirement age (nearly always 65) based on two things: (i) final average pay and (ii) years of service. To illustrate, an employee might receive a benefit equal to (a) times (B) times ©, where:

a equaled average annual pay the last 5 years worked,

b equaled total years of service, and

c equaled 1.5%.

Assume John Doe will have average annual pay of $80,000 between age 60 - 65, and, after having been hired at age 30 (at $24,000 annually), now intends to retire at age 65 after working 35 years. His annual pension at age 65 would thus be $42,000 [1.5% x 80000 x35], plus social security. Actuarially speaking, as a pension has a lump-sum value at age 65 of around 100 times the monthly benefit, this pension will be worth around $350,000 at retirement. Note that this lump sum value is roughly 4.4 times John’s final average pay.

OLD MODEL CHARACTERISTICS: During his 35 year career, Doe will benefit from several very important factors, namely:

✓ He will be protected (both before and after retirement) from any “market risk” - i.e., whether the stock market soars or crashes, he will receive the same benefit - $3,500 monthly (which is one reason these type plans are called “defined benefit” plans);

✓ He will also be protected from pre-retirement inflation, as his benefit will be based on his average pay over his final 5 years of work;

✓ He will typically not be required to make a personal contribution to the plan (historically, the average pension plan in America has cost a company around 7% - 7½% of payroll, and has provided an average benefit equal to approximately four times the cost - i.e., the average benefit has been around 27% - 30% of pay);

✓ He will pay nothing at all insofar as the plan’s fees and expenses are concerned; and

✓ Finally, he will have no responsibility at all regarding directing the investment of the money annually contributed to the plan to provide his future benefit.

So, . . . what has really happened? Let's see: we have "shifted" quite a few things onto the backs of the workers via the new (DC) RI Model. I.e., the market risk, the inflation risk, over half of the benefit's cost, all of the expenses. and finally, the investment risk.

Whether the change to the new RI Model was intended, or not, the chickens will some day come home to roost - and the U.S. taxpayers will pick up the tab (unless Atlas shrugs).

[Greg Judd]

tschenk,

I'm relieved that I don't have to smack you concerning this post...

Originally posted by tschenk

Greg-

People are often not logical. There is a whole new area of study in B schools today called Behavioral Finance ...when it comes to people's money, it's an emotional thing and it doesn't always lend itself to intellectual solutions.

That precept is helpful when examining, predicting, and 'improving' individual financial actions. Problem arises when we try to make public policy that way.

Dave started a separate thread today (ews Analysis -- Pension Reform: Making a Bad Situation Worse?)that takes off from an article in which the author basically rips the history of US public pension policy. He 'proves' that the US's policy of promoting pension plan creation via tax incentives has robbed the poor to give to the rich, citing statistics to the effect that "some 53 percent of currently employed workers have no pension coverage, and 48 percent of retirees have no private pension income".

The concerns expressed in the current thread--that too many people will make too many bonehead investment moves too often, so creating a victim class Dickie Scruggs only dreams of--are tangled up with the concerns to be discussed in the News Analysis thread, one of which is: should pension policy aim at wealth redistribution, or is it all about incentives for wealth creation (rather than after-the-fact rewards to the wealthy)?

[Guest tschenk]

Greg-

Whew! How about something less cotroversial like religious beliefs.

I'm not comfortable with "redistribution". To me, the term conjures up feelings of receiving something one feels they got cheated out of (never mind that they didn't deserve it in the first place) and someone else got a share they did not deserve. The conflict between the haves and the have-nots is as old as dirt. History has shown some of these conflicts as justified because of injustices and or corruption and others not so justified. When you think about it, this is why our nation's founding fathers split the sheets with England.

However, as discussed earlier, the broad wording of ERISA and the significant financial incentives for trial lawyers may indeed have the courts doing some redistributing in the future. No philosophy may alter that course.

I feel reforms should encourage wealth creation. And incentives to accomplish that should also be encouraged. This seems consistent with our nation's values. To me, this implies maximizing one's savings (and returns) out of the money one earns from their work plus what their employer saw fit to add as agreed upon at the time and condition of employment.

This doesn't mean screw the little guy, too bad he can't save more money. In a perfect world, it should mean that those more fortunate now have an opportunity to help the less fortunate. You shouldn't have to legislate that stuff because someone will always feel like they were gyped and another will feel like they should be entitled.

I would like to believe that eventual reforms or sytems could develop a hybrid of the latter and some other alternative(s).