jlf

To Keith: Be careful about insulting those "hard hats" Personally,I have many friends with "only" a HS diploma and friends without one that have managed very large sums of money for the last 30 years which includes this era of "irrational exhuberance". I feel they have done over the past three decades quite well. They have adopted a 60:40 ratio (approximately)between an S&P 500 type fund and investment grade bonds. I BET THAT IS THE WAY THE SHEETMETAL WORKER'S DB PLAN TRUSTEES INVEST. As a HS teacher let me assure you that many, many of my former students never continued their formal education after HS but their desire to grow and learn before and after age 55 has always been present.

Hey guys, don't you just love the www? To mojo: Re: your post of 11-01. With the utmost respect, it is you, not I, who misses the point. "Irrational exhuberance" is totally irrelevant. The AIR (assumed investment return) I used in my statement of 10-20 is the same for both types of plans. The wealth building feature of my DC plan is the result of: 1. full and immediate vesting and 2. a level funding pattern. These points were made in my post of 10-20. You may wish to revisit it. Your post of 11-02: Ans. Absolutely, that's part of being empowered. ------------------

Boy, You guys are ganging up on me! Why don't you respond to my "right to choose" point. Or, are you attempting to protect the employee from himself? Social engineering is alive, quite alive! DB plans can only be defended when they start to SHARE, IN A MEANINGFUL WAY, THEIR EXCESS EARNINGS WITH THEIR FORMER EMPLOYEES. A retirement benefit should only be a floor, not also a ceiling. ------------------

Pax; A wage freeze at the discretion of the employer would be unthinkable! Why?, because of lost purchasing power. When it comes, however, to our retired brothers and sisters a pension income freeze doesn't seem to matter because they have been "pensioned off". This is how we treat our second class citizenry. The solution to the problem is to provide a CHOICE of plans. I venture to say that personal savings from take-home-pay is not as important to one's overall financial plan if one partipates in a DC plan rather than a DB plan. This is so because the DC account is a wealth builder as well as an income provider. BUT WE ALL RECOGNIZE THIS, DON'T WE? ------------------

A second class citizenry is the the result because the DB IS GUARANTEED TO LOSE IT'S PURCHASING POWER. Rest assure, however, this was all the DB design was INTENDED TO DO! This REALITY should not be defended based on the retirement benefit being voluntary. ------------------

Pax; you're on point. The relationship between a DB retiree and the Plan is akin to a creditor and debtor. The only claim the retiree has against the invested assets is the timely payment of benefits. As far as philosophy is concerned doesn't the DB System help maintain a second class citizenship? ------------------

Dear John A: Thank you for your considered reply. I am referring to a level % of salary plan. To the extent that investment earnings are not needed to pay a defined benefit the invested assets become a wealth builder and income provider to the plan sponsor because the plan sponsor owns the invested assets. Even if we assume a DB equal to 100% of the last year's salary the retiree can never expect to improve his or her standard of living because of NON-PARTICIPATION IN THE "EXCESS EARNINGS". History has shown that the best the fixed-income pensioner can expect from the DB plan(public or private)is an annual COLA with a cap. The "excess earnigs" are simply used to balance the employer's budget, public or private as the case may be.(leveraging in perpetuity) This practice flys in the face of the principle that a pension is deferred compensation. Using my assumptions the typical DB plan empowers the employer while the DC plan empowers the employee. Paternalism is alive and well with the DB plan I outlined above. ------------------

Have you examined the dialogue on this topic on the DB Message Board? ------------------

Have you read the dialogue on this topic at the Defined Benefit message board? ------------------

To Mojo; I am not editorializing as you assert. There are fundamentals of each type of plan that work in favor of the employer or the employee. Let's examine some of these fundamentals. Fundamental 1. PENSION CONTRIBUTIONS AS DEFERRED COMPENSATION: In a DC plan the employer's contribution is a stated per cent of the employee's salary. Each month the employer is therefore adding this % as deferred compensation to the employee's account. With a DB plan, in contrast, the cost of the defined benefit earned by a year's work depends on a person's age, salary, and years of participation in the plan. The employer's cost varies substantially from person to person, adding little or nothing to a younger person's compensation, and adding a great deal with advancing age and long-term participation in the plan. Under a typical DB plan the younger employee's own contributions are more than enough to cover the full cost of the defined benefits earned at the younger ages, and to cover most of the cost until nearly age 50. Thereafter, for a participant who remains with an employer for an entire career, the employer's share of the cost rises rapidly with advancing age and long service. In a typical plan with the employee starting at age 30 and retiring at age 65 more than 80% of the employer's cost is deferred until after the age of 55 or until after the 25th year of participation. This deferral has the unfortunate effect of making a disproportionate part of a person's lifetime compenstion contingent to age and loyalty to one employer. This favors the employer. Fundamental 2. DEATH BENEFIT PRIOR TO RETIREMENT: In most DB plans the employer's contributions are forfeited should death occur prior to retirement. These contributions with investment earnings are used to pay the employer's pension costs. For this discussion, however, let's assume full and immediate vesting in our typical DB plan. Because of the deferred funding pattern of a DB plan the account balance and therefore the death benefit is substantially smaller in a DB plan than in a DC plan throughout a career of service. At age 50 the death benefit is more than twice as large in a typical DC plan assuming identical salaries and interest credits. This favors the employer. Fundamental 3. RETIREMENT INCOME AND CAREER MOBILITY: Let's assume that an employee accrues the same DC or DB benefits regardless of whether or not the person works for one or several employers. The DC participant's ultimate benefit is the same whether the person works for one or several employers. The ultimate Defind Benefit pension,in contrast, equals the Defined Contribution pension ONLY if the DB participant remains with one employer. If we assume the DB participant changes jobs at age 40 and then again at age 50 and retires at age 65 from the last employer he or she will earn an ultimate DB equal to 70% of his or her counterpart in a DC plan; assuming the same salary history and interest credits. This occurs because the "cold storage vesting" of most DB plans provides no way for vested benefits to increase between termination of employment and retirement. This favors the employer. ------------------ [This message has been edited by jlf (edited 10-21-1999).] [This message has been edited by jlf (edited 10-24-1999).]

Dear IRC 401(a) , A DB plan, in contrast to a DC plan, is a wealth builder and income provider for the plan sponsor not the employee. Even one that provides a COLA does not provide what the employee/retiree is clearly entitled to.....the full economic value of the employer's contributions (invested assets). A DC plan is the hero of the employee!! ------------------

Has there ever been any litigation that has compelled a DB plan to convert to a DC plan? ------------------

Has there ever been any litigation to compel a DB to DC conversion? ------------------

Has there ever been any litigation to compel a DB plan to convert to a DC plan?

Peter; What is the situation in NY? Thanks, JOEL L. FRANK ------------------

Dear Ms. Calhoun: Do you know of any governmental DB plans that offer distribution options based upon ANNUITIZATION FOR LIFE EXPECTANCY (RATHER THAN FOR LIFE) with full earnings participation on the invested reserves? Thanks, JOEL L. FRANK ------------------

Phil: I urge you to telephone the IPERS DIRECTLY FOR YOUR ANSWER.

I'm concerned that there has been no response to my post of 8-27-99? ------------------

YES ------------------

Hi Dook: Check your member profile. You may want to correct your mis-spelling of the word "conscious". I'm glad to be of assistance. Let's hope that I don't see fit to edit this message! ------------------

Tom; are not in-service withdrawals distributions, absent the satisfaction of a triggering event? ------------------ [This message has been edited by jlf (edited 09-09-1999).]

Get in touch with a large no-load mutual fund group. Tell them your story. They will send you the paperwork to effectuate a Direct Rollover of your former 401(k) account to an IRA. I suggest an S&P 500 index fund. ROLL THE MONEY OVER FIRST TO A TRADITIONAL IRA AND THEN TO A ROTH IRA. DO THIS AN YOU WILL BE AN I WITNESS TO THE MIRACLE OF COMPOUND INTEREST. ------------------

A 1999 required minimum distribution should be made if the decedent's required beginning date was reached prior to death. Did the beneficiaries rollover their portion of the inherited IRA to their own IRA with the use of their own life expectancies in the computation of their own required minimum distributions? Please advise. ------------------

bgholtz: Is the "consultant" a commissioned salesperson representing the Met? I suspect he is. The Met distributes its products through a commissioned sales force. Assuming this is the case, then he is surely attempting to save your account. TIAA-CREF is a no-load firm.(no commissioned sales force) I would communicate directly with an executive of the Met. Ask him for the company's official policy in writing. This policy can also be found in the annuity contract you signed with the Met. The consultant works for the Met. He should be stating the company's official position. Not one he would like them to take! ------------------

Bgholtz: Would you please clarify your situtation. jlf ------------------