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April 12, 2010

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Value at Risk for Pensions Expected to Decline for 2010, But Risks Remain High
Excerpt: "After gradually working their way back up to full funding after some rough market conditions during portions of the last decade, pension plan sponsors are again facing an uphill funding challenge. The deteriorating economic conditions that took root in 2007 have increased the funding gap for pensions and caused stock values to plummet, sharpening concerns about the risks posed by these plans."
(Towers Watson)

Simplifying Investment Options to Better Serve Participants (PDF)
8 pages. Excerpt: "One recent study shows that the more fund options employees are faced with, the less likely they are to participate in their plan: 'employees eligible for Defined Contribution plans are more likely to opt out when offered increasing numbers of fund options. Indeed, for every 10-option increase, predicted individual participation probabilities declined by 2%. In particular, as the number of funds increased from 2 to 11, there followed a steady decline in participation from 75% to 70%.' (Iyengar & Jiang, 2005) Faced with the multiple investment decisions required to save for retirement, many employees will procrastinate indefinitely or simply toss their enrollment form into the recycling bin out of pure frustration."
(Arnerich Massena & Associates, Inc.)

What Is the End Game with Target-Date Funds: Retirement or Death?
Excerpt: "An article recently published in a retirement plan industry journal addressed criticisms of the construction of Target-Date Retirement portfolios that are based on a 'through' retirement approach. The term 'through' retirement implies that the glide-path, the formula by which the portfolio's asset allocation rebalances over time, carries through retirement to death. This strategy is contrasted by the 'to' retirement approach, in which the glide-path is designed to end, or become static, at retirement, as opposed to death."

Some Target-Date Funds Adjusting After Criticism
Excerpt: "With so many people depending on these funds, and with dozens of companies offering new ones, some industry experts started to question the funds' design and methodology. 'We had been warning for years prior to 2008 that most funds were ignoring the requirement to protect participants' assets as they approached the retirement date by reducing equity exposure,' said Joe Nagengast, founder of Target Date Analytics in Marina del Rey, Calif."
(The New York Times; free registration required)

Court Clears Path for Stock Drop Class Action Against Comcast Corp.
Excerpt: "A former Comcast Corp. employee is qualified to serve as a class representative in a stock drop lawsuit against Comcast Corp., a federal judge in Pennsylvania ruled as he certified the participant case as a class action."

How Some Individuals and Couples Are Trying to Save Money for Retirement
Excerpt: "The Game Plan takes a look at how some individuals and families are saving for retirement -- and then asks financial advisers to comment on those strategies."
(The Wall Street Journal)

Illinois and New Jersey Legislators Try a New Tack on Pension Reform
Excerpt: "State legislators in Illinois and New Jersey have stood up to union members and lobbyists to approve noteworthy pension reforms. In two states where organized public employees hold powerful sway over legislators, that's a big deal."

Government Finance Officers Association's List of Best Practices for Public Pensions Should Be Adopted Nationwide
Excerpt: "The GFOA document starts with three key concepts which every pension board attorney should review with trustees every year . . . ."

Only a Brave Few Acknowledge an Entitlement Crisis
Excerpt: "A recent debate on 'Fox News Sunday' illustrated the differences between the few politicians who are, and the many who are not, willing to face facts. Marco Rubio, the former speaker of Florida's House of Representatives who is challenging Gov. Charles Crist for the Republican U.S. Senate nomination, made news by stating the obvious. Asked how the nation might address the projected $17.5 trillion in unfunded Social Security liabilities, Rubio said that we should consider two changes for people 10 or more years from retirement."
(The Washington Post; free registration required)

The American Society of Pension Professionals & Actuaries (ASPPA) and the College for Financial Planning (the College) have joined forces to offer advanced qualified retirement plan education to financial professionals. Beginning April 19, the College will offer instructor-led courses online that lead to ASPPA’s Qualified Plan Financial Consultant (QPFC) credential. Students will be able to sit for the QPFC exams and upon successful completion, apply for the QPFC credential with ASPPA!

"If you're a financial advisor engaged in the increasingly complex world of qualified plans, this partnership represents a significant opportunity to advance your career." ~Sheldon H. Smith, Esq, APM, President, ASPPA

For more information and to register, visit

Sponsored by ASPPA

Executive Compensation; Benefits in General

Clawback Policies on the Rise
Excerpt: "The trend for clawback provisions has been with us for several years. However, the trend has been accelerated by the clawback provisions included in TARP, the publicity surrounding them, and the resulting similar provisions in much of the recent proposed legislation."
(Michael Melbinger via Winston & Strawn LLP)

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