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October 29, 2003 - 13,383 subscribers
Today's sponsor: Actuarial Systems Corporation

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(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)
Putnam Investments Accused of Fraud in Rapid Trading by Managers
Excerpt: "Federal and state securities regulators filed civil lawsuits yesterday against Putnam Investments and two of its former fund managers, accusing them of fraud. They are the first lawsuits against a mutual fund company and some of its executives produced by a widening investigation into the trading of fund shares.... Putnam recently dismissed the fund managers who were sued by regulators yesterday.... Founded in 1937, Putnam is one of the oldest mutual fund companies in the nation." (New York Times; one-time registration required)

Chronology of Mutual Fund Trading Probe
Current through 10/28/03. (Reuters FoxNews.com)

Text of Statement of Chairman of the Board of the Putnam Fund Trustees
Excerpt: "[T]o date we have not found any evidence of late trading in the Putnam funds or of special arrangements made by anyone at Putnam to facilitate market timing - i.e., conduct of the type that was the subject of the Spitzer complaint against Canary Capital announced in early September.... [A]lthough Putnam's systems and procedures have been effective in detecting and stopping the vast majority of attempts to market time Putnam funds in recent years, they have not been perfect." (Via Putnam Investments)

Text of Statement from Putnam Investments About Market Timing
Excerpt: "Putnam has initiated a broad internal review of short-term trading activity in our funds, including trading by Putnam employees. While our internal review is not yet complete, we are pleased to report that we have not found any evidence of late trading in any Putnam fund or of any special arrangement made by anyone at Putnam to allow market timing in any Putnam fund.... A specific prohibition against market timing trades by employees is part of Putnam's ongoing compliance program." (Putnam Investments)

Xerox and IBM Cases: Should Courts Be Left to Blow Up Cash Balance Plans on Their Own?
6 pages; 8/1/03. Excerpt: "Disgruntled employees scored big victories against Xerox and IBM ... If the [IBM] case stands, however, it may stand as the most pyrrhic pension victory of all time because employers have few options other than returning to the old final average pay plans, which they already have concluded do not fit their needs or the needs of their workforces, or, more likely, terminating the plans and relying on 401(k) and other defined contribution plans." (Nixon Peabody LLP)

Pension Costs Threaten to Increase Cities' Taxes in New York State
Excerpt: "Mayors from around the state warned Tuesday that cities face a public pension fund payment that will result in either steep tax increases or deep service cuts.... [T]he projected $1.75 billion payment due in December 2004 will cause financial chaos in many cities, villages and other local governments, the mayors argued." (Poughkeepsie [N.Y.] Journal)

Lessons from Behavioral Finance for Retirement Plan Design (PDF)
52 pages; working paper. Excerpt: "We divide the discussion into the natural phases of the retirement saving life cycle: accumulation, investment, and decumulation. After reviewing the lessons of behavioral finance, we conclude by outlining plan design alternatives that would be of use to plan sponsors and policymakers seeking to design more cost-effective and efficient retirement plans for the future." (Olivia Mitchell and Stephen Utkus, temporarily available through the Pension Research Council)

Overview: Defined Benefit Plans Must Make Minimum Required Payments (PDF)
10/03. Excerpt: "All qualified plans must begin making payments, called Minimum Required Distributions (MRDs), by a participant's required beginning date (RBD). Most defined benefit plans begin making pension payments at a participant's RBD, rather than making just an MRD payment. However, MRD rules do apply and may be most notable when an employee earns additional benefits after reaching his RBD." (CIGNA's Pension Analyst)

Germany Makes U.S. Pension Spousal Annuity Rules Look Good
Excerpt: "German law requires a divorcing couple to equalize pensions, and thus it is common for an ex-husband to pay part of his pension to the wife....' [I won't spoil it for you; click on the link for the interesting twist. -- Ed.] (Chuck Shepherd's News of the Weird via the Salt Lake Tribune)

Pension Facts Are Hard as Steel, Some Bethlehem Steel Retirees Learn
Excerpt: "[Retiree Arthur] Dickey and his former co-workers at Bethlehem Steel are among retirees from thousands of floundering companies who have found themselves relying on the [PBGC] to provide retirement benefits they once thought their employer would supply.... But what the PBGC agrees to pay can be less than the companies had promised." (SunSpot.net)

Text of Aon's Pension Freeze Study
Excerpt: "Aon Consulting reviewed more than 1000 private sector defined benefit plans and found that more than 20% of those surveyed froze plan benefits or will do so." (Aon Consulting)

Overview: PBGC Updates Underfunded Plan Guidance (PDF)
2 pages. Excerpt: "The Pension Benefit Guaranty Corporation (PBGC) has updated the participant notice rules that apply to certain underfunded defined benefit plans. PBGC Technical Update 03-17 contains no changes to the general notice rules. However, it does reflect the revised PBGC guarantee amounts for 2003. It also maintains the same guidelines as in 2002 for determining when a notice is due." (CIGNA's Pension Analyst)

Who's Afraid of a Poor Old-Age? Risk Perception in Risk Management Decisions (PDF)
25 pages; working paper. Excerpt: "I review evidence showing that individual and group differences in risk perception, much more than differences in risk attitude, are responsible for differences in the choices people make.... The risks associated with inadequate retirement planning have all the characteristics associated with hazards that do not evoke strong visceral reactions." (Elke U. Weber, temporarily available from the Pension Research Council)

Motivating Retirement Planning: Problems and Solutions (PDF)
17 pages; working paper. Excerpt: "[T]he pressures of immediate gratification, delayed benefit, the unknown, the uncertain, the uncomfortable, ally against wise decisions. Yet, while many people yield to these influences, many others make the right choice. That drives us to ask why.... This chapter examines the theory to understand why automatic enrollment has a good chance of overcoming the natural impediments to wise decisions about retirement investments." (Gary W. Selnow, temporarily available from the Pension Research Council)

Text of DOL Fact Sheet on 'Orphan Plans'
Excerpt: "401(k) retirement plans may become 'orphan' when there is no one with authority operating the plan due to death or absence of the persons designated as fiduciaries, neglect to appoint successor fiduciaries, and corporate mergers or bankruptcies. The warning signs of an orphan 401(k) plan include: ..." (U.S. Department of Labor, Employee Benefits Security Administration)

Fewer Employers Provide Retirement Plans
Excerpt: "The percentage of U.S. companies offering retirement plans has dropped sharply since the late 1990s, according to a new study of Census Bureau data. The percentage of employees participating in retirement plans has fallen by roughly the same amount." (SFGate.com)

Summary: Declining Levels and Geographic Differences in Retirement Plan Participation
Excerpt: "This Issue Brief examines the level of participation by workers (both public and private) in employment-based pension or retirement plans. Participation is examined for 2002 across various worker characteristics and those of their employers. The report then investigates retirement plan participation across U.S. geographic regions, including by state and certain consolidated metropolitan statistical areas (CMSAs). In addition, trends from 1987-2002 in this participation are presented." (Employee Benefit Research Institute)

Another Question is Answered in the 401(k) Plans Q&A Column
If a plan began August 1, 2003, with a plan year end of December 31, is the plan required by Code Section 415 to prorate the annual addition limit ($40,000 for 2003)? (BenefitsLink.com)

403bWise Identifies Littleton, Colorado Public Schools as Having 'Model 403(b) Plan'
Excerpt: "Employers who offer attractive plans recognize the necessity of the 403(b) for both recruitment and retention. And even more importantly, they recognize and value their employees. We hope the following list serves as a bench mark that all employers will strive to meet and even surpass." (403bWise.com)


Links to Items on Executive Comp, Benefits in General

Text of Milliman USA Comments on FASB Exposure Draft on Disclosure of Post-Retirement Liabilities (PDF)
9 pages; 10/27/03. Excerpt: "Because we are not accountants, we cannot speak directly to the issue of what should constitute generally accepted accounting practices. However, as actuaries and financial consultants heavily engaged in the preparation, use, and policy appraisal of financial statements, we offer experience and expertise that the FASB might find helpful in developing a revised Statement." (Milliman USA)

Opinion: NYSE Pay Committee's Ignorance Is All Too Common
Excerpt: "Hard on the heels of the headlines about Richard Grasso's pay, some members of the New York Stock Exchange's compensation committee defended themselves by proclaiming they didn't really understand all the goodies their former chief executive officer was getting. This defense isn't unique to the NYSE. It is heard at other companies whose compensation committees find themselves in similar circumstances." (Graef Crystal on Bloomberg.com)

Some Employers May Be Due Employment Tax Refund
Excerpt: "As a result of the CSX decision, some companies may be due refunds of Social Security, Medicare and unemployment taxes they had made on severance payments to separated employees following a layoff or termination. The court ruled such amounts are supplemental unemployment compensation benefits (SUCBs) and thus are not wages subject to payroll taxes." (Journal of Accountancy)

A Better Way to Name Cells in Microsoft Excel
Excerpt: "Although it takes a little more work initially to create names, it should be clear they make formulas easier to write and to read. This is especially true in large spreadsheets where you may have scores of references." (Journal of Accountancy)


Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

Benefits Analyst
for CPE
in CA

401(k) Client Relationship Manager
for Great West Life & Annuity
in CA

Employee Benefits Paralegal / Administrator
for Iris Bashi Associates, LLC
in NJ

Controller/Financial Manager
for Plumbers Local Union No.1 Welfare Fund
in NY

Sr. Consultant, Health & Welfare Actuary
for Mellon Human Resources & Investor Solutions
in CA

Account Manager
for Delaware Investments
in PA

Qualified Plan Administrator
for Pension Services Corporation
in MO

Retirement Plan Analyst - Compliance
for Invesmart
in WA
Newly Posted Webcasts
(Post Yours!)

The Long-Term Outlook for Stock Option Plans
on November 12, 2003
presented by Hewitt Associates LLC
Newly Posted Conferences
(Post Yours!)

Cross-Tested Plan Specialty Workshop - Expanded to full day for Fall 2003!
in CA, CO, CT, DC, FL, GA, IL, IN, LA, MA, MI, MN, MO, MS, NC, NE, NJ, NM, NV, NY, OH, OR, PA, TN, TX, UT, WI
November 4, 2003
SunGard Corbel

NCPERS 2004 Legislative Conference
in DC
February 10, 2004
National Conference on Public Employee Retirement Systems

Annual Benefits Fair and Trade Show
in MA
June 10, 2004
New England Employee Benefits Council
Newly Posted Press Releases
(Post Yours!)

IRS Grants Form 5500, Other Tax Relief for Victims of California Wildfires
(Internal Revenue Service)

Premier Annuity Distributes New Wealth Transfer Products
(Keenan & Associates)


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