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The BenefitsLink Newsletter -
Retirement Plans Edition
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August 30, 2002 - 11,413 subscribers
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Fund Managers May Take Action on Inflated Pension Return Assumptions
Excerpt: "U.S. pension funds are considering a crackdown on companies that inflate their earnings by using too high pension fund return assumptions. CalPERS, the number one pension fund, and its sister fund CalSTRS, are weighing up whether to assess high- return assumptions on other companies' pension funds, as part of their investing strategy." (Financial Times via Yahoo! Finance)

Honey, I Shrunk the 401(k): Lower 401(k) Balances Could Spark Interest in Defined Benefit Plans
Excerpt: "That rumbling sound you hear in the distance is the growing chorus of very disgruntled employees who now realize that 401(k) account balances can shrink as well as grow--and who have discovered that they're not very good at managing them, anyway. They're calling for a return of the old-fashioned defined benefit plan, or for one of the new pension hybrids that meld features of defined benefit and defined contribution plans." (

Celebrate 401(k) Day: 401(k) System Shows Stability Amidst Chaos
Excerpt: "September 3 is 401(k) Day, the national day dedicated to celebrating the role of 401(k) plans in helping American workers take control of their long-term financial well-being through employer-sponsored plans. But after over a year of stock market chaos ... how does one celebrate 401(k)? ... [B]y taking a long-term perspective, ignoring day-to-day distractions, and recognizing that the value of participating in a 401(k) plan is not diminished when the stock market goes down." (Profit Sharing/401(k) Council of America)

Opinion: Pension Earnings Assumptions Are Worse Scandal Than Enron Accounting Practices
Excerpt: "Accounting chicanery at Enron and WorldCom was eye-popping-- but to see real financial wizardry, look at what firms do with their pension plans.... A report from acturial [sic] and benefit consultants Millimam USA [sic] states that the 50 largest corporations lost $35.8 billion on their pension portfolios, but managed to book $54.9 billion in profits.... At some point, cash will have to come out of earnings to fund all of these plans ... [L]ook for another market swoon." (James A. Lacey in the New York Post)

Another Question is Answered in the Who's the Employer Q&A Column
Corp A is 100% owned by a husband and wife. Corp B also is 100% owned by them. Company C is owned 95% by the husband and wife and 5% by their daughter. Only Corp A has employees. I would classify this as a controlled group, but does the fact that B and C have no employees (they're essentially shell companies) matter? (

Pre-retirees Stunned by Retirement Income Calculations
Excerpt: "Schwab analysts estimate workers need to save $230,000 for every $1,000 in monthly retirement income. According to these calculations, $1 million in savings provides $50,000 in annual retirement benefits. At an average age of 52, 56% of survey respondents have less than $250,000 saved, and 31% have banked less than $100,000." (

Opinion: Mutual Funds Managers Have Conflict of Interest
Excerpt: "The giant mutual funds are serving two masters. As owners of huge amounts of stock, it is their job to hold incompetent or self-interested management accountable. But there are massive fees coming their way when corporate executives award them 401K and pension fund assets to invest." (

The Gender Impact of Pension Reform: a Cross-Country Analysis (PDF)
37 pages. Excerpt: "Pension systems may have a different impact on the two genders because women are less likely than men to work in formal labor markets, earn lower wages when they do, and live longer after retirement. Recent ... pension reforms include a defined contribution (DC) pillar that tightens the link between payroll contributions and benefits, which leads critics to argue that they will fail to protect women.... [We find that] women are the biggest gainers from the pension reform." (Estelle James, Alejandra Cox Edwards and Rebeca Wong)

The Gender Impact of Pension Reform: a Cross-Country Analysis (Supplemental Tables) (PDF)
24 pages. (Estelle James, Alejandra Cox Edwards and Rebeca Wong)

Links to Items on Executive Comp, Benefits in General
(These items appear in both editions of the BenefitsLink Newsletter)

Split-Dollar Insurance Programs of Top Executives in Jeopardy Due to Sarbanes-Oxley Act
Excerpt: "In July, Congress passed the Corporate Responsibility Act of 2002, which banned company loans to executives. Now, according to the interpretation of tax lawyers and compensation experts, the premiums on split-dollar policies could be considered interest-free loans because the corporation is eventually reimbursed. The uncertainty over the policies has virtually halted their sale, pending clarification by the government." (New York Times; free registration required)

Possible Amendment to Pension Bill Could Tax Death Benefits from Corporate-Owned Life Insurance
Excerpt: "While Sen. Jeff Bingaman (D-N.M.) has not officially introduced an amendment to the bill yet, he apparently has said enough about his intentions to prompt four insurance trade organizations to write an angry letter to Senate Majority Leader Tom Daschle opposing taxes on the heretofore untaxed benefit." (

Doubts Grow on 'Covering' of Executives' Stock Options Due to Sarbanes-Oxley Act
Excerpt: "Corporations across the country have halted a longstanding practice of allowing executives and directors to exercise stock options without putting up their own money in transactions that are often worth millions of dollars. The decision to halt these arrangements-- a routine practice at public companies-- is being driven by uncertainty over whether they may now be considered loans and therefore criminal violations under a recently passed law aimed at curbing corporate abuses." (New York Times; free registration required)

High-Tech Firms Threaten to Cancel Options, ESPP Programs; That's 'Hogwash,' Critic Says
Excerpt: "Are companies serious -- or bluffing? That's the question at the heart of a controversial survey that suggests most companies -- many of them based in Silicon Valley -- would stop doling out options to rank-and-file workers if they are forced to take an accounting hit for stock options. Critics said ... [c]utting off rank-and-file workers not only would hurt their ability to hire top talent, but it also would cast doubt on the value of their current option programs." (Contra Costa Times via International Foundation of Employee Benefit Plans)

Opinion: How to Salvage Stock Options
Excerpt: "Start by addressing each of the terms of stock-option programs--exercise price, vesting, time to exercise, eligibility and grant size. This is a serious task for board compensation committees, which, like their audit committee counterparts, will need to ensure their members have the skills to evaluate alternatives to traditional options and the independence to act on behalf of shareholders, not like rubber stamps for executives." (

Newly Posted or Renewed Job Openings - Post a Help Wanted Ad

Retirement Plan Administrator
for Capital Investment Advisory in FL

Defined Benefit New Business Consultant
for New York Life Benefit Services, LLC in MA

401(k) / Pension Administrator
for Third Party Administration Firm in CA, NV

Newly Posted Conferences (Post Yours!)

Education Savings Plans
in MA on September 25, 2002
presented by Worldwide Employee Benefits Network (WEB) - MetroWest

The Future of Retirees in Multiemployer Plans: Health and Financial Issues
in FL on November 4, 2002
presented by International Foundation of Employee Benefit Plans

Developing Your HIPAA Compliance Strategy
in NY on September 24, 2002
presented by New York Metropolitan Area Chapter - ISCEBS

Newly Posted Press Releases

New Data Validation Center in Relius Administration Facilitates Automated Collection and Validation of Plan Data
(SunGard Corbel)

Allen, Gibbs & Houlik, L.C. Chooses SunGard for Straight-Through Processing
(SunGard Corbel)

Subscribe to the Welfare Plans Edition, too (click)

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Editor and Publisher: David Rhett Baker, J.D.