Six Are Found Guilty of Tax-Shelter Fraud
Government Cheated Out of $32 Million (December 28, 2004)
A Seattle federal court jury found six people guilty yesterday of
conspiring to cheat the government out of $32 million through the use of
an overseas tax shelter that ended up siphoning millions of dollars from
investors. These shelters, which can be fraudulent, also withhold taxes
that otherwise would help finance the "common good" or public
welfare, such as fire departments, schools, etc.
World: The Number of Old People in the World is
Soaring. Soon They Will Change Everything from Politics to Tax Structures
to the Width of Doorways (November 29, 2004)
"The elderly are no longer a sidelined sliver of society, but its
mainstream. . More and more, it's not the children who are our future,
it's the seniors," says Ann Pawliczko of the United Nations
Population Fund. It's why societies have to change. The rapidly shifting
demographics now force a radical rethinking of many facets of our lives.
Two billion elderly will need new systems of care and support. Some
changes have been already been made. Different countries have their own
approaches. But it's still necessary to change mentalities, because the
young often abandon older persons and view them as "dead."
Age Before Duty (November 28, 2004)
More seniors today continue to work through retirement. Some change
careers after a lifetime on another job track. Some want to stay
physically and mentally young. Others have to work for social or financial
reasons. This situation benefits both seniors and younger workers, as well
as employers. Furthermore, it demonstrate how society is going to change
for the future older persons
Retirement Isn't Just a Date - It's a New Life
(November 23, 2004)
Retirement has to be prepared for. "The biggest mistake people make
is not realizing there's a psychological component to retirement." It
represents many transitions in a seniors's life : they no longer have the
identity that their job gave; they may change their community and their
relationships. "Leaving a job is a lot more than just ceasing
work,"
The author claims that fewer than 10% of retired or partly retired persons
had any preparation on how to spend their time.
USA : The Majority of The Baby Boomers in Good
Health Are Not Going to Retire... (November 19,2004)
About three-quarters (74%) of affluent Baby Boomers who are still at work
do not plan to fully retire when they reach their chosen retirement age,
according to a new report released by the Spectrem Group. (The study
defines affluent as those households with $500,000 in investment assets.)
In lieu of traditional retirement, 34% of this group intends to work a
reduced schedule, 30% plans to start a new career, and 10% does not expect
to retire at all. Further, nearly two-thirds of affluent, non-retired Baby
Boomers (63%) intend to finance their eventual retirement by selling their
primary residence. Does this mean that even the affluent worry about
having cash to fund retirement? Spectrem Market Insights(TM) reported
these findings in a recent publication, "Serving Baby Boomer
Retirees."
The « Papy Boomers » Reinvent Work !
(November 9, 2004)
(Article in French)
In the United States, during the 1950's, many employees left their jobs at
retirement age and devoted themselves to a life free of paid work. It
meant staying at home, travel, playing golf, tennis, or bridge with other
retiree friends. Now, this time doesn't exist anymore! In the USA, many
older persons are really active and some seniors now return to the
workplace. And this movement is likely to continue as baby-boomers
generation get older.
SEC Said to Probe Pension Accounting (October 18, 2004)
The Securities and Exchange Commission (SEC) is looking into whether six
large companies manipulated their assumptions about pension fund
performance. The SEC Enforcement Division sent letters to those companies
earlier this month, asking for documents to explain how they came up with
their estimates. According to the SEC, some companies assume returns of 9
percent or more on pension fund assets, which is “tough to justify.”
The issue in question is that if the estimated return exceeds the pension
cost, the company can count the surplus in its earnings. If the large
companies are lying about their performance, it makes choosing an
appropriate “private” pension problematic for workers of any age.
Cost of Pensions Hurts N.Y. Communities
(October 10, 2004)
Ogdensburg is about 220 miles away from the new $82.5 million
limestone-and-granite-veneered 15-story building that houses the offices
of the State Retirement System in downtown Albany. But decisions reached
there and at the Capitol have affected the lives of people like Shelley
Breen, a mother of eight who lives in Ogdensburg, a city of 12,000 people
along the St. Lawrence River near the Canadian border.
Squeezing More Pennies from a Cache of Cash (October
10, 2004)
Investment in stable value funds could help U.S. workers save more money
for their retirement. While interest rates for many types of investment
keep falling, stable value funds, devised primarily for employer-sponsored
401(k) retirement plans, have the average returns of more than 4 percent.
Gina Mitchell, president of the Stable Value Investment Association, says
workers should examine stable value funds since it “[has] been the life
raft for retirement savers through the rocky times of the last four
years.” Terms such as guaranteed interest income funds, capital
preservation funds, and fixed-income funds are known as the synonyms for
stable value funds. Sorting out options is not easy.
Pension Guarantor Calls for Changes –PBGC Asks
Congress for New Powers- (October 8, 2004)
Facing a $9.7 billion deficit, the Pension Benefit Guarantee Corp. (PBGC),
a federal insurance agency, has asked Congress to re-examine the powers
granted to PBGC. They also suggested that PBGC should be given more
flexibility to negotiate with bankrupt companies in order to keep them
operating. Following a number of bankruptcies, especially in the steel and
airline businesses, the agency’s deficit is estimated to increase if no
changes are made. “The longer-term solvency of the pension insurance
program … is at risk,” said Bradley D Belt, executive director of the
PBGC, in the Senate Commerce Committee. Current arrangements mean that
companies can “game” or cheat the PBGC; further, the agency has no way
to attach financial assets to protect employees’ pensions.
‘Pension Fairness Act’ Proposed to Freeze Some
Executive Benefits (October 8, 2004)
The Pension Fairness Act, a bill introduced earlier this month, will
prohibit bankrupt companies with under-funded pensions from paying special
pensions to top executives for the following five years. Many bankrupt
companies, including a major airline industry like Delta Air Lines, tend
to shed pension payments for their employees while keeping special
payments for top executives and directors. Though the bill has little
chance of passage before Congress recesses due to the election, Ellen E.
Schultz, from the Wall Street Journal, points out that the introduction of
the Pension Fairness Act is among the first efforts by a lawmaker to link
“the fate of executive pensions to rank-and-file pension.”
Report Sees Retirement Plan Growth: Average 401(k)
Up 25 Percent (September 30, 2004)
The 401(k) retirement plans grew 25 percent in 2004, reaching the average
balance of $55,000, according to Fidelity’s fifth annual Building
Futures, the nation’s biggest fund management company. In spite of the
growth, however, the survey conducted by the company shows that “a
disturbing number of Americans are under-saving for their retirement
years.” In addition, only about 10% of the American workers who are
using a 401(k) plan are saving $12,000 a year, the maximum amount allowed
to save under the 401(k) plan. Time to re-think 401(k)’s?
“Goodbye, Pension. Goodbye, Health Insurance.
Goodbye, Vacations” (September 23, 2004)
US welfare capitalism is going to disappear, and the US will look more
like Europe in terms of welfare economy, according to author Daniel Gross.
He points out the changing nature of private welfare programs in the US.
While prominent companies of the 1920’s made tremendous efforts to
ensure the welfare of their employees, those of the 21st century tend to
shed company’s health insurance as well as pension plans. Businesses
increasingly switch their pension plans to 401(k)s, and a decreasing
number of workers are now covered by employers’ health insurance. Thus,
private sector no longer provides such benefits. Will the public sector
begin to pick up the slack? Or will US workers simply become poorer and
die earlier due to sickness and old age?
Miami Police Ex-chief Denied Pension (September
16, 2004)
Donald Warshaw, former Miami Police Chief, is not entitled to his annual
police pension of about $128,8000 on the ground that he was convicted of
diverting $70,000 from a charity for his personal use, the Florida State
Appeals Court ruled. Attorney Ivy Ginsberg who represents Warshaw said
“We’re planning to move for a rehearing by the entire court” and
claimed that the funds Warshaw was convicted of misusing were not really
public money but the private funds of Do The Right Thing that was meant be
spent to reward teens for good civic deeds. Though he has not pleaded
guilty to this case, he was once arrested for federal mail fraud in 2002
and has the record of serving one year in federal prison.
17,000 Enron Pension Holders to Get Paid in Full (September 14, 2004)
Enron finally agreed to fund fully the under-funded pensions for its
17,000 retirees, Houston Chronicle reported. Though retirees in four
different pension plans will receive the full amount of pension that was
originally expected, the issue of future payments for current employees
has not been solved. According to Houston Chronicle, Enron will most
likely arrange with an insurance company to take over the plans.
Pension Agency May Be Broke by 2020 (September 14,
2004)
The Pension Benefit Guarantee Corp. (PBGC), the government agency that
insures corporate pensions of about 43 million more, is estimated to go
“broke” by 2020 without a taxpayer-funded government bailout,
according to a study conducted by PBGC. Due to the increasing numbers of
bankruptcy in private companies, PBGC now pays benefits to some 1 million
Americans. The study also shows that, out of those insolvent companies,
the airline and steel industries had accounted for more than 70 percent of
claims since its insurance program was created in 1974. If U.S. Airlines
defaulted on their pension obligations, the agency itself will end up
being “insolvent” by 2018.
As Returns Sag, Employers Turn Up Heat on 401(k) Fees
(September 14, 2004)
Do you know that the 401(k) retirement plan often has some invisible fees?
Many of Schulte Roth’s employees did not--- earlier this year, after
finding out how much they lost in those hidden fees, they finally
persuaded Wachovia Corp. to slash those fees that were charged by the bank
to run Schulte Roth’s retirement plan. Fees in question are usually a
percentage of money invested and they usually range from 0.5% to 2%.
However, the quarterly statements only show investors how much money their
401(k) made or lost in the previous quarter, which are calculated after
the fees are deducted. This means, if your quarterly statement shows a
gain of 5%, your fund may have gained up to 7% but 2% deducted from your
fund as a fee. Ken Brown, from the Wall Street Journal, writes about the
little known truth about 401(k) “fees.”
Pension-Fund Billions for Hedge Funds –Institutions
to Invest $300B in Hedge Funds (September 13, 2004)
Institutions may boost their investments in hedge funds by as much as $300
billion in the next five years, according to the study conducted by the
Bank of New York. Partly because stock market losses caused pension fund
deficits in the past three years, many institutions are now looking into
investing in hedge funds. “Institutions will lower their expectations
for annual returns to 8 percent as they look for less-volatile investments
and lower risk,” the study said. It also predicted that defined-benefit
pension plans will be the fastest segments to increase investment in hedge
funds.
Pilots Might Alter Their Pension Plans- Norhtwest
Weighs Retirement Benefits (August 27, 2004)
Pilots unions at seven of the biggest U.S. airlines, including Continental
Airlines and Northwest Airlines, are gearing up to protect their pension
plans, Bloomberg has reported. Their common strategy focuses on freezing
the current plan and switching to defined benefit plans, such as a 401(k).
Defined contribution plans have become popular in recent years because
they provide benefits to employee accounts on a regular basis before
retirement. “We want to look at ways to increase the security of our
plan,” Northwest’s pilots union spokesman Hal Myers commented.
Retirees May Suffer In Pension Takeover (August 30,
2004)
Duane Warning, a 60-year-old former pilot in Chicago, wound up with only
about half of the pension that Trans World Airline promised him. After
airline companies go bankrupt and a federal insurance agency takes over,
retirees like Warning do not receive 100 percent of the benefits once
promised to them. “I was decimated. I was upset. But there was nothing I
could do. I had to swallow it,” said Warning helplessly. Though pension
funds are supposed to be protected by the Pension Benefit Guarantee Corp.,
a federal insurance agency, why can’t they often get the expected amount
of pension? Why do those retirees who worked for the company for a long
time have to suffer from the company’s failure? And it may get worse as
US taxpayers must bail out the federal insurance agency itself. With the
current regressive tax system in the U.S., low and middle income workers
who actually pay income tax will have to supply most of the funds. Rich
Americans have hired accountants or bank offshore to allow them to duck
taxation. Not a pretty picture.
Struggling Pension Plans May Need $350 Billion
Bailout, Study Says (August 25, 2004)
According to the study conducted by the Cato Institute, a $350 billion
pension shortfall among U.S. companies may force the Pension Benefit
Guaranty Corp (PBGC), federal insurance agency for private companies, to
seek a taxpayer bailout. The PBGC's deficit has been dramatically
increasing due to the skyrocketing number of businesses that claim a
bankruptcy, including Bethlehem Steep Corp. and US Airways, and the
deficit is likely to swell to $18 billion in the next 10 years. "If
exposures create claims that reach catastrophic levels, taxpayers will be
called upon to provide a bailout," says Richard Ippolito, who wrote
the Cato study.
Study by the Century Foundation: Promises To Keep (August
11, 2004)
"What can working people count on for their retirement?" ---The
Century Foundation raises a fundamental question in its report about the
future of the U.S. pension systems. While the Social Security system is
currently estimated to be able to provide promised benefits through 2052,
it will definitely need additional funding after that. Private pensions,
on the other hand, may lower benefits or raise the level of insurance
contributions when they want to, and thus seem to be less reliable. While
more companies claim bankruptcy and tend to shed their pension plans,
maybe it's time for us to think about and re-examine the structure of
private versus public pension guarantees.
Admit We Have A Problem (August 9, 2004)
Bob Herbert, New York Times journalist, strictly points out that American
citizens, including seniors, are facing a serious economic decline. As a
result of more income going to housing and other rising expenses related
to medical care, education, vehicles, and so forth, "more people will
end up bankrupt than will suffer a heart attack" or "than will
graduate from college" in 2004. About 32,000 jobs were created in the
month of July, but it is "equivalent to no jobs," considering
the size of the U.S. economy. No matter which party wins the presidency,
Herbert concludes, the first step for the better U.S. economy is to
recognize and acknowledge the enormous size of the problem we have.
Gov't Holds Millions In
Unclaimed Pensions (August 6, 2004)
The federal government is holding approximately $75 million in unclaimed
pension benefits for thousands of Americans, the Associated Press
reported. The Pension Benefit Guaranty Corp., a federal insurance agency,
has a list of about 26,000 people who are eligible for the benefits. The
unclaimed benefits vary from person to person, but they range from $1 to
as much as $264,548. If you believe you or anybody you know may be
eligible for those lost pension money, you can check for their names on
the PBGC website at
Enron Battles Agency Over Funding Of Pensions
(August 6, 2004)
Enron Corp., facing the emerging criticism over its under-funded pension
status, has announced that they would seek to work out a "standard
termination" for four of its pension plans. Applying a standard
termination for the workers and retirees means that Enron would buy
annuities from private insurers and pay all the plans' benefits. However,
according to Pension Benefit Guaranty Corp.(PBGC), a federal insurance
agency, "Enron has failed to make any progress toward executing a
standard termination" and thus the company's sincerity is
questionable. If Enron fails to carry out its commitment to exercise a
standard termination, PBGC is to pay all of the guaranteed benefits to
Enron pensioners, which could cost as much as $321.8 billion.
Pension Funding Improves Among Large Companies (August
5, 2004)
The funded status of pension plans among large US companies improved from
an average of 82% in 2002 to 88% in 2003, according to a study conducted
by Watson Wyatt consulting firm. Kevin Wagner, a consulting actuary at the
firm, has commented that the change is to be highly regarded, considering
the market tendency of "low interest and weak investment
performance" over the past three years. The analysis was based on
information gathered by 622 of the nation's 1000 largest companies. But
why aren't pensions fully funded? Why do companies' keep tapping the
pensions funds that they are obligated to pay their pensioners?
Enron Pension Decision Expected -Settlement Ruling
Set For Tuesday- (August 2, 2004)
Enron employees are anxious to find out if U.S. Bankruptcy Judge, Arthur
Gonzalez, authorizes Enron Corp.'s insurance companies to release $85
million to partially settle pension-fund claims that stemmed from Enron's
2001 bankruptcy. Gonzales said he would try his best to make his ruling
before U.S. District Judge Melinda Harmon considers the settlement on Aug.
19. Employees have also taken a legal action, accusing the management of
encouraging them to increase Enron shares to their retirement accounts
while the management-level officials keep selling their shares.
Bailout Feared If Airlines Shed Their Pensions -U.S.
Taxpayers Could Face Huge Bill If United Sets Off Chain Reaction- (August
1, 2004)
If United Airlines defaults on its pensions, the federal agency that
insures company pensions now faces a possible multi-billion problem. By
law, industries' pension systems are to be secured by the money they set
aside, but United had saved only about $7 billion in the pension funds as
of December 2003. The figure is far less than $13 billion that United is
supposed to pay its pensioners. Now the airline has proposed a smaller
pension as well as a pay cut for its current employees. If the United
decides to shed some or all of its $13 billion in their pension
obligations, the federal insurance agency worries, a domino effect in
airline industries is more likely to happen, which is ultimately going to
be a financial burden for the U.S. taxpayers. The pension insurance
program shouldn't be used "as a piggy bank to help companies
restructure," Bradley Belt, the executive director of the
government's Pension Benefit Guaranty Corp. said.
Microsoft Gives Public Pension Funds Boost (July
27, 2004)
The bigger the share, the greater the payout! Business giant, Microsoft,
has opted to contribute an additional $3 per share to public employee
pension funds. New York's state and local government currently holds 45
million shares of Microsoft and stands to gain $135 million. California's
Public Employees Retirement System owns 54 million of Microsoft stock and
also stands to profit significantly from the contribution. Conversely,
others such as David Neustadt, spokesman for state Comptroller Alan Hevesi,
insist that the dividend payout is relatively small and will not cause
much difference in the pockets of pensioners.
United's Pension Decision `Illegal' (July 27, 2004)
The government and unions accuse United Airlines of trying to discontinue
illegally their worker pension plans. In an effort to reduce mounting
debt, the Airline allegedly made an agreement with lenders to stop
contributing to funds while in bankruptcy. The $1 billion in loans that
United borrowed from money-lenders contractually prohibits payouts while
the company is beholden. United Airline's pension funds are estimated to
be underfunded by $7.5 billion.
The Coming Retirement Crisis (July 20, 2004)
In June, the Pension Benefit Guaranty Corporation failed to fund existing
pensions adequately. The Corporation revealed that companies with
underfunded pension plans saw a total shortfall of $278.6 billion during
the last year. This figure indicates a huge increase from 1999 when the
reported shortfall was $18.4 billion. Even worse, many corporations do not
offer any pension to their workers. Workers and retirees alike fear
poverty at the end of their lives. In addition to underfunding, the writer
notes that poor enrollment in pension schemes may also cause a problem for
future retirees. Citizens must struggle for a portable pension system that
is based a real, publicly controlled program.
Safer Retirement Just A Click (Or 50) Away (July
18, 2004)
At least they had the right idea, suggests Bruce Mohl of the Boston Globe.
In a recent trial of LTSave Incorporated’s purportedly 10 minute
internet-based retirement sign up, the program failed to live up to its
proposal. Nonetheless, the company appears to offer a very comprehensive,
unique and convenient way to monitor retirement investments. It is
anticipated that other firms in the future will adopt a similar strategy
to allow easier access and management of retirement funds. Will it be
“objective” and not push certain products? Hard to say!
Mothers Call For Pension Reinstatement (July 12,
2004)
Many teachers in New York are fighting for the enactment of what is being
called, "The Mommies Bill." Teachers who left their jobs in the
80s and early 90s, many to raise children, are being forced to live on
pensions of little more than half what they would earn had they returned
to work after the passage of the first reinstatement bill in 1998.
Sixty-four year old Carol Cocozzo complains that she is living in poverty
because of her low pension. She stopped teaching for 13 years to raise her
children and now receives a pension of approximately $8000 annually. Had
she returned to work in 1998 or later, she would be receiving almost two
times that amount. It will cost state and local employers as much as $22
million and increase the annual pension bill to $3.8 billion to elevate
the retired teachers to Tier 1 pension status.
Comparing Pensions Around the World (July 12, 2004)
It's a small world after all. A comparison of several countries' pension
schemes reveals that there exists a universal problem in pension funding.
Increased life expectancy is costing billions more for retirement plans
annually and though large private firms are often in a better position to
foot the costs, they too will have to fork out millions more to keep up
with the change. The report also revealed variations from country to
country. The U.S. for instance of seems to have the highest pension bill
of all western nations.
County Pension Gravy Train (July 10, 2004)
Los Angeles County boasts some of the nation's wealthiest pensioners,
states the Los Angeles Daily Times. According to a recently published
article in the paper the region has over 1,100 retirees with $100,000-plus
pensions, the highest of which is $316,047. "These people are
millionaires" counters an incensed Steven Frates, senior fellow at
the Rose Institute of State and Local Government at Claremont McKenna
College. The state pays an enormous amount of money to maintain the
current pension system. For the coming year, however, the cost will
increase to $2.6 billion, up from $160 million last year. The California
Public Employees Retirement System estimates that the average family, not
receiving a pension, will end up paying $300 in taxes to support the
system. Nonetheless, for the 1,198 Los Angeles retirees riding the pension
gravy train, there is no immediate plan to retract the pricey passes any
time soon.
Debt Woes Hitting Elderly (July 7, 2004)
How did a notoriously thrifty generation of baby boomers come to be
knee-deep in debt? That is the question that many like Dale Gravelle are
asking. The answers vary. Some blame social security, which they argue
does not stretch nearly as far as they initially thought. Others blame
absurdly high medical costs. Whatever the reason, credit cards don't help.
Gravelle explains that her cards forced her $22,500 in debt. Her overall
advice, "rely on good old-fashioned cash and maybe a debit card for
some bills."
More States Using Pension Money to Lure Biotech Start-Ups (July 6, 2004)
The anticipation of an economic shake-up in the Biotech industry has
states across the United State investing pension fund assets in private
venture capital firms. The industry is expected to see job increases of up
to 13 percent through 2012, more than overall annual job growth for other
sectors. In an industry where the annual salary is, on average, $18, 600
more than other businesses, the redirected investment of public funds
seems a good move. Many fear, however that state officials are acting
prematurely and warn that investing in the life-sciences industry is risky
and leaves state finances open to uncertain returns.
Governor's Pension Deal Just New Way To Borrow (July
1, 2004)
In an apparent attempt to comply with appeals from state workers,
California Governor Arnold Schwarzenegger has relinquished plans to
postpone employee pension increases approved during former Governor Gray
Davis' incumbency. Schwarzenegger opted for the abandonment under the
condition that incoming state workers agree to a two-year probationary
period. During this time retirement funds will be directed to a savings
account and can later be translated into pension funds or can be used at
will by the employee. The deal will prove beneficial to the state, in
particular, because the government will not be required to contribute to
an employee's retirement plan during these two years. Some speculate that
the Governor has ulterior motives and suggest that he has agreed to the
pension plan, as well as several other proposals for employee raises,
primarily to legitimize borrowing money in excess of $900 million from
state revenue.
Loophole Lets Teachers Avoid Government Pension
Offset (June 29, 2004)
Under Texas State law, Social Security benefits for a couple in which one
person is a teacher residing in Texas, is calculated by deducting
two-thirds of the teacher's pension from the entire spousal benefit. The
couple can then claim the remaining amount. The June 30 expiration of this
so-called "offset," has many teachers in Texas racing to catch
the retirement clock. For the first time since 1977, teachers in Texas
will be able to claim the entire amount of their spousal benefit.
Pension Reform Deal Reached (June 28, 2004)
California overcame another of several hurdles this week when it approved
a statewide pension reform. The amendment was accepted in concordance with
proposals made by Assembly Speaker Fabian Núñez and Assemblyman Darrell
Steinberg and is estimated to save the state as much as $2.6 billion over
the next 20 years. The new scheme will not affect current employees but
will render newly hired public safety workers ineligible for state pension
for up to 2 years. In its stead workers can allocate funds to an
interest-yielding, tax-free account. At the beginning of the third year,
employees can either enter the scheme as a "third year" worker
or they can keep the money and begin a new scheme as a first year
employee. Officials speculate that if at least 75 percent of employees
continue the scheme after their second year as third year workers, the
State will save close to $59 million.
Pension's Demise Whacks Retirees (June 28, 2004)
Studies that quantify the average pension earned per household indicate
that retirees today are poorer than their predecessors. Research that
suggests the converse omits the amount of traditional pension being earned
by the family's retirees. The data also reveals that more than 60 percent
of households in 1983 had a retiree receiving a pension. Almost two
decades later, less than fifty percent of households do. The significant
difference, explains New York University economist, Edward N. Wolff, has
to do with employee compensation. Some 18 years of research indicates that
middle and low-income families today earn approximately 2.2 percent less
than their counterparts did a few years ago. With middle class families
making less and fewer people investing in pension schemes, the gap between
the pensions of upper and lower class groups is much greater. Other
factors that influence retirement funds include deregulation, job-change
and self-retirement schemes.
Life-Science Ventures Lure More State Pension
Funds (June 22, 2004)
Bio-technology and the Life Science industry is expected to grow in the
coming years. Many state governments are keen to tap into this growth and
want to invest public pension dollars in such schemes. States such as
Oregon, Florida, Ohio and Washington have already started investing in
such schemes. What are the implications of investing public pension
dollars in the speculative private sector?
Assembly Relents, Keeps Pension Bill (June 18, 2004)
The Californian Assembly returned the controversial pension bill SB 9 to
an Assembly committee for a hearing. The pension bill is supposedly to go
into effect on July 1. Two years ago, a law was passed that offered
generous public-safety pensions to 3,200 state workers. The SB 9 bill
intends to reverse this law that exempted workers who were state driving
examiners, inspectors of milk, livestock and funeral homes. The law, if
passed, would save the state about $11 million annually.
Pension Plan Underfunding Drops 9 Percent To
$278.6 Billion (June 17, 2004)
The Pension Benefit Guaranty Corporation reports an overall deficit of
$305.9 billion over the previous year in pension plan funding. The data,
which was released on April 15 for the 2003 period, indicates that the
more than 1000 underfunded pension plans filed experienced a loss a 9
percent, the equivalent of approximately $278.6 billion. The statistics,
which are generally released later in the year, are expected to draw
attention to the seriousness of the existing private pension system and
possibly foster awareness among retirees about their pension plan. Since
the enactment of a new pension bill in Congress during the Bush
administration, underfunded filings have increased significantly from 166
in 1999 to as much as 1,050 in 2003. Even the Pension Benefit Guaranty
Corporation is seeing substantial loss. For May, 2004 the PBGC saw a
deficit of $9.7 billion resulting from an increased number of bankrupt
pension plans.
Corporate Reform: Democracy, Soviet Style (June 16,
2004)
Due to the recent scandals, the Securities and Exchange Commission is
trying to change the way mutual fund directors are elected and inject some
democracy into the process. The SEC wants to make directors more
"independent" and watchful of shareholders' interests. However,
companies and their lobbyists are putting pressure on the SEC to change
its mind.
Baby Boomers May Want To Consider Drawing Pensions
Early (June 14, 2004)
Millions of Americans have changed jobs at least once in their careers.
Many of them left defined benefit pension plans behind. Some workers are
not even aware that they are eligible for this money. Older baby boomers
should start locating these pensions now. In most cases, the benefits are
paid out as a fixed monthly payment for a set number of years. Since
pension payouts are taxable as income, baby boomers can seek help from
financial planners or advisers to decide if they should find their missing
pension benefits or not.
Une Retraite De Plus En Plus Tardive Au
Massachusetts (June 14, 2004)
(Article in French)
Baby boomers in Massachusetts will soon retire. However, many of them will
have to work longer in order to have a sufficient income in old age. With
the stock market's golden age over, workers are counting more and more on
their Social Security pension. However, age discrimination might be one of
the problems they face as they enter the last phase in their careers.
Healthier and Wiser? Sure, but Not Wealthier (June
13, 2004)
Today's older workers appear more ready for their retirement than any
previous generation. However, traditional pensions, widely available until
the early 80's have slowly disappeared from the American workplace.
Retirement benefits offered today, especially the 401(k) account, are not
worth as much as the older kind of retirement. Also, many Americans have
lost part of their pension by moving from one job to another. Others that
stayed in the same company saw their benefits sheared off when their
company merged with another one or was reorganized. Many older workers
will have to work longer in order to have a decent retirement.
Pension Insurer Takes over 4
Enron Retirement Plans (June 4, 2004)
The Pension Benefit Guaranty Corporation filed a notice to terminate four
of Enron's pension plans and to take them over as trustee. This measure
concerns about 17,000 workers. If the PBGC had not acted now, the funds
would have paid off creditors instead of covering the shortfall in the
pension plans.
Many Young Workers Shirk 401(k), so Industry
Pushes 'Autopilot' Plans (June 4, 2004)
Many young workers ignore the calls from financial planners encouraging
them to join 401(k) plans. Global political instability and corporate
corruption do not persuade them to participate when they are eligible.
Young workers have a hard time planning retirement now since they need to
earn money to pay living expenses and save for houses or cars. Paperwork
concerning those plans can also become overwhelming. However, experts find
that education is not working. The way the plan operates and is designed
needs to change. Or perhaps an involuntary public system, such as an
augmented Social Security, is better.
Actuaries Under Scrutiny On
Pension Fund Pacts (June 2, 2004)
The trade publication, Pension and Investments, revealed that some firms
asked their pension fund clients to sign clauses limiting their ability to
sue them. Instead of suing, any disputes should be solved through binding
arbitration. Also, the amount of damages the clients could seek in a
lawsuit should be limited. The Department of Justice asked several large
actuarial firms for information to learn if certain provisions violate
antitrust laws.
To Afford Retirement, Cut Your Taxes, Fire Your Broker, And Get a
Part-Time Job (June 2, 2004)
When you retire, you do not want to run out of money before you run out of
breath. You need to pick the right investments and cut unnecessary
expenses to make sure you can benefit from a secure retirement. Four
strategies can be implemented. First, use a broker or planner with
mutual-fund expenses that do not amount to more than 1.2% a year of your
portfolio's value. Then, you can sell your home and buy a smaller one to
cut down housing expenses. Also, you can shrink your income and invest
strategically to cut back the amount of taxes you need to pay. Finally,
you need to keep busy with a paid or volunteer job to prevent superfluous
expenses.
In Connecticut, a Pension Fund Trial Could Shake
Wall Street (May 27, 2004)
Connecticut's Attorney General Richard Blumenthal and State Treasurer,
Denise L. Nappier accused Theodore J. Forstmann and his private equity
firm, Forstmann Little & Company to have improperly invested $125
million of the state's pension fund money. If the plaintiffs prevail in
this case, it could lead to more suits against Forstmann, Little and other
buyout firms that lost investors' money. However, many investors in
Forstmann Little's fund refused to join the suit. Some legal experts
believe that the firm is standing on firmer ground than Connecticut's
Attorney General. So far, the firm persuaded the judge to throw out two
securities law charges removing the main accusations.
S.E.C. Mutual Fund Inquiry Widens to Include
Wellington (May 26, 2004)
The Securities and Exchange Commission is investigating the Wellington
Management Company, one of the nation's oldest and most respected money
management firms. As of March 2004, Wellington managed $416 billion in
stock and bonds portfolios for approximately 1,000 clients. The company is
also an adviser to more than a dozen funds offered by the Vanguard Group.
The S.E.C. declined to comment on its investigation so far. However, the
commission is probably looking at personal trading by fund managers, at
various institutional accounts and at the possibility that commissions on
securities trades were directed to firms that helped Wellington's
marketing efforts.
Not Much Movement in 401(k)s (
May 25, 2004
)
Many employees have not yet signed up for their 401(k) plans despite
the stronger stock market. Participation is one of the key measures of a
plan's success. Employers also want high participation rates so their
plans don't fail anti-discrimination tests. But many employers are still
having a hard time getting younger, lower-paid people involved. Some
employers take advantage of employees' inaction by automatically enrolling
them in the plan as soon as they are eligible. However, employees must be
given a chance to opt out if they want to. If they don't, a certain
percentage of their pay is automatically invested in a default option,
usually a money market fund. Even when they participate, only a few
employees are actively managing their plans.
S.E.C. Feels Pressure to Weaken Some Rules (May 10,
2004)
The Securities and Exchange Commission is under pressure from businesses
and some members of the Bush administration to weaken the proposed rule
changes in the way corporate boards are elected, mutual funds are governed
and hedge funds are regulated. The agency's chairman, William H.
Donaldson, is considering changing some of the original proposals. The
agency had planned to allow big shareholders to propose their own
candidates for board seats at troubled companies. Another rule would have
forced the boards of mutual funds to be led by chairmen not involved in
the management of the funds. Under the proposed rules, eighty percent of
the nation's mutual funds chairmen would need to be replaced.
Voters Release Houston From
Pension Law (May 17, 2004)
In 2001, pension officials added a generous package of benefits for
Houston city workers. In 2003, the Texas Constitution required by law the
city to pay all the pension benefits. Now, the cost is too high. In a
referendum, seventy three percent of Houston residents voted to exempt
their city's pension plan from pension requirements. Mayor Bill White
insisted however that he did not want to reduce city worker's pension.
Houston just needed more flexibility to keep benefits affordable.
Pension Agency Proposes New
Penalties (May 6, 2004)
The Pension Benefit Guaranty Corporation proposed a revised penalty system
for companies that fail to notify workers of underfunded plans. The fines
would be based on the number of plan participants instead on how late the
participants were notified. The revision would increase the penalties for
big companies while easing them for smaller companies.
Some Cities Struggling to
Keep Pension Promises (May 5, 2004)
A few years ago, the city of Houston, Texas, decided to increase its
workers' retirement benefits. Along with their traditional pensions, city
workers nearing retirement were offered special accounts, fed with the
city pension fund's money. Although the accounts would pay generous
returns to pensioners, a study showed the cost for the city would be
modest. However, it turned out that the city cannot support the payouts.
It has about $1.5 billion less than the benefits it owes the work force.
On May 15, Houston will decide in a referendum whether to opt out or not.
Early-Retirement Cost 'Cries for' Probe, Gov's Office
Decides (May 5, 2004)
An Illinois State program enabling 11,000 state workers to retire early
unexpectedly quadrupled in cost, leaving taxpayers with a $2.45 billion
bill. John Filan, the budget chief is expected to ask Comptroller Dan
Hynes to investigate why the cost increased so much. Lawmakers approved
the plan thinking it would eventually pay for itself by inducing high-paid
employees off the payroll and not replacing them.
A Broker's Empty Promise, a Retiree's Shattered Dream (April 18, 2004)
Norman Huff worked 30 years at the East Ohio Gas Company. When he was
offered an early retirement package, he was tempted but with his wife,
they worried it would not be enough. Nonetheless, under the influence
Michael G. Dobbins, a vice president and broker at a local branch of
Prudential Securities, the Huffs invested all their savings into a
portfolio of stocks. Mr. Dobbins promised them they could live very
comfortably for the rest of their lives. However, it is not the case. The
Huffs lost everything. This situation is disturbingly common. Stockbrokers
see in older Americans receptive and trusting targets from whom to pocket
assets.
On Their Own, in the Same Boat (April 13, 2004)
A recent study by two private groups, the Employee Benefit Research
Institute and the Milbank Memorial Fund, concluded that single women face
the greatest difficulties in order to plan for a decent pension. Many
women work at low-wage or part-time jobs. They often jump in and out of
the work force to take care of children or elderly parents and do not
accumulate enough to have a full pension. According to this study, only 35
percent of single women have 401(k)'s, IRA's or other retirement accounts
compared with 63 percent of married couples or 42 percent of single men.
To fight their way out of poverty, women need to decide whether to work
longer or leave their community for a cheaper living area. Sometimes, they
even need to choose between drugs and food.
How to Plan Ahead for your Retirement (April 13, 2004)
Many future retirees wonder if they have accumulated enough wealth to
sustain their standard of living during their retirement years. Planning
for retirement can be challenging but four steps can be followed to make
it easier. First, individuals need to establish retirement goals and
determine where they stand today. Then they can calculate their retirement
needs and re-evaluate their retirement goals. Finally, they need to
revisit the entire process periodically to update it. Being involved in
the retirement process is the best way to have a secure financial future.
All the Nest Eggs in One
Company Basket (April 11, 2004)
George Stewart and Gordon Casterline both worked for Corning Inc. Their
loyalty and faith led them to bet their entire retirement portfolios on
their company's bonds. When the stock market crashed, the company's bonds
were worth far less than ever before and employees saw their retirement
accounts drop. Mr. Stewart managed with a well-off pension because he
retired before the crash. However, Mr. Casterline suffered from the market
loss and had to keep working. Nationally, over eleven percent of employees
have almost nothing else than company's stock. Retirement accounts should
have a more diversified portfolio in order to prevent workers from losing
their pension benefits.
An Update on Americans and Retirement (April 11,
2004)
Many Americans are unprepared for retirement. According to a new survey
from the Employee Benefits Research Institute, Americans think they will
work longer, earn more and spend less as they move into their 60s and
beyond. But it will not be the case for everyone. Preparation could
prevent many retirees from being taken by surprise when they face
financial difficulties. A couple of tips are given in this article to plan
for a safer retirement. First, future retirees can look for health-care
saving accounts, IRA and saving plans. Individual homes can also be great
assets in old age. Finally, back up plans for saving and earning money can
be thought of before retirement.
Want to Be an Independent Fund Director? Good Luck!
(April 5, 2004)
After last fall's scandals, the fund industry should be finding new
independent directors to replace the ones accused of illegal trading or
improper management of the fund. However, when qualified independent
people seek that position, the most frequent answer is no, you are not
needed. For years, board members were chosen for their connections to fund
companies' executives or their prestigious experience in other fields.
Their understanding of the mutual fund industry was not necessary. So now,
board members still prefer tapping personal connections to find
independent directors instead of interviewing outside candidates.
Commissions Come In for Scrutiny (April 6, 2004)
Inspections in the mutual-fund industry are not over. The Securities and
Exchange Commission issued a study asking whether funds reveal enough
information on commissions and trading costs. Mutual funds now report the
dollar amount of brokerage commissions paid, but consumer advocates argue
that funds should report brokerage costs as a percentage of assets.
Informing people about the trading costs is necessary for them to
understand what they are paying for. Although low commissions don't help
to get good prices for the shares, high commissions can reduce returns and
rob investors of superior fund performance.
Growing Number of Retirees May Drive up Pension Costs
(April 5, 2004)
According to the Daily News of Los Angeles, thousands of retired
government employees in California receive an annual pension of more than
$100,000. In the next few years, many state agencies will have to pay out
even more retirement benefits although pensions suffer from investment
losses and reduced contributions from current workers. However, not all
government employees receive large pensions. The vast majority receive
small pensions that can barely help them make ends meet in retirement.
Negotiators Reach Accord on Pension Bill (April
2, 2004)
After companies strongly lobbied for pension relief, Republican Senators
and House negotiators have finally reached an agreement on a bill that
will save US companies about $80 billion in pension costs over the next
two years. A special provision was offered for steelmakers and airlines.
Now, the bill has to go through Congress and the Senate, before President
George W. Bush's signature. And it might not be that easy. Democrats
believe only a few large corporations will benefit from it, denying any
relief to smaller companies. The Federal government is also fears getting
stuck with pension plans if they collapse. Finally, pension specialists
worry this would set a precedent for other companies to invoke in the
future.
Companies Ask Congress to End Impasse Over Pensions
(March 31, 2004)
Corporations operating pension plans urged Congress to resolve the
disagreement between Democrats and Republicans, preventing the passage of
a bill that would allow pensions to use an interest rate based on an index
of corporate bonds, rather than the 30-year Treasury bond. Such a change
would reduce the value of the plans' liabilities, cutting the amount of
money companies would have to pay into their pension funds. Businesses
argue that if the law is not changed, employers will have to hold back
resources from investment and job creation.
Congress Urged to Act on Pensions Bill (March 30, 2004)
Business groups are urging Congress to act on the legislation reducing
employers' contribution into the pension plans by $80 billion. This would
protect pension funds from insolvency and free money for investment and
hiring. However, the White House is opposed to the Senate-passed bill
because it offers relief to multi-employer plans, run jointly by unions
and management. According to the White House, these plans are in better
shape than single-employer plans and the bill would only encourage
underfunding the plan.
State Pension Officials Accuse Safeway Leaders of
Conflict (March 25, 2004)
Ten state pension officials are urging the supermarket chain Safeway
shareholders to withhold their votes for the chairman and chief executive,
Steven A. Burd and two other Safeway directors. Pension funds officials
think conflicts of interest in Safeway boardroom are keeping the directors
from representing shareholder's interests adequately. Furthermore, pension
officials believe Mr. Burd permitted the company's total market value to
drop by $20 billion over the last five years. Safeway believes on the
other hand that the pension trustees' initiative was politically
motivated.
Pension Funds of 5 States Seek
to Meet Disney Directors (March 23, 2004)
Representatives of pension funds from California, Connecticut, New York,
North Carolina and Ohio gathered together to call for a meeting with the
directors of Walt Disney. Although they don't all want the same thing,
these five states are concerned about the company's uncertain future and
what it means for the funds' long-term investments.
Pensions Take More Risks as Shortfalls Grow-Survey
(March 22, 2004)
Mutual funds see their pension obligations increase with the current low
interest rates and the higher life expectancy. Due to funding shortfalls,
some US pension plans are trying to boost their returns by increasing
their investment risks into international equity portfolios with stocks
from exotic regions. However, the reporter claims that if policy makers
allow the revaluation of securities at the current market price
(mark-to-market), then it would affect negatively US employees and global
equity markets.
Boomers' Retirement Plans Change with the Market
(March 21, 2004)
Today, some experts argue that baby boomers are more aware that they
should rely less on the stock market and more on their own savings to meet
their financial needs in old age. After the optimism in the stock market
of the late 1990's and the pessimism of the early 2000's, boomers are
building a more balanced portfolio with the help of trained professionals
in order to face Social Security cuts and higher health costs. However,
some boomers are still prone to excess and unless they start saving, they
will have to reduce their spending, work longer or will face financial
trouble.
San Diego's City Manager Resigns in Wake of Pension-Fund Scandal (March
16, 2004)
San Diego 's City Manager Michael Uberuaga resigned after the US
Securities and Exchange Commission and the US Attorney's Office
investigated the city's financial practices. They were questioning whether
city officials had provided fraudulent information to investors or not.
They also looked into the city's $1.1 billion pension fund deficit.
Ford Resumes Bonuses, 401(k) Contributions (March 12,
2004)
Starting on July 1st, Ford Motor Co. will resume its contributions to US
salaried workers' 401(k) accounts. With its renewed competitiveness and
profitability, Ford will pay 60 cents on the dollar for up to 5 percent of
US employees' base salaries. This is less than what they were paying in
2002 when the company stopped its contributions.
Companies Must Reveal Pension Information (March 12,
2004)
A new rule set by the Financial Accounting Standards Board requires any
company with a traditional retirement plan to file reports on its pension
investment strategy. For the first time, the company must inform the
public on how much of the plan is invested in stocks, bonds, real estate
and other vehicles. Pension assets represent an enormous amount of money
so these new rules of transparency were necessary.
Regulators Reconsider New Trading Rule to Avoid
Harming Retirement Plan Investors (March 10, 2004)
The Securities and Exchange Commission investigating mutual fund abuses
considers alternatives to a proposal designed to curb after-hours trading
abuses. The new plan could hurt investors in retirement plans. Managers of
these plans with slower order processing would be forced to make their
fund trades several hours before the 4 p.m. stock market close leaving the
West Coast investors at a disadvantage.
Report Tracks Gay Couples'
Retirement Plans (February 23, 2004)
The first US study to look at same-sex couples and retirement revealed
that the satisfaction's level in the relationship influences significantly
retirement planning. However, even gay men and lesbians in unhappy
relationships need to make sure they are not ignoring their future. The
study also found that when lesbians make financial planning, although they
are less inclined to do so than men, they do it with their partner. Gay
men tend to plan individually.
Putnam Loses Fla. Pension
Contract (March 9, 2004)
Bloomberg news reports that Putnam Investment lost another contract of
about $950 million for Florida's state pension fund. The mutual fund
company was the first one sued for improper trading last fall. Instead of
Putnam, the Florida board hired New Star Asset Management Ltd. of London
and the Bank of Ireland Asset Management to oversee the pension portfolio.
Pension Rule Changes Aided Top City Officials (March 3, 2004)
In Houston, Texas, new rules increased significantly the pension benefits
officials will receive. Under the 1998 pension rules, chief administrative
officer Al Haines would have earned $36,000 in retirement. The rules left
after Mayor Lee Brown departure from the office, allows Haines to receive
about $103,000 per year. City Attorney Anthony Hall justified the increase
as a way to compensate the extremely low salaries earned by city workers.
However, it seems that only the department heads and the chief
administrative officer got extra benefits that doubled their payouts. In
the meantime, Houston's main pension fund is facing a $1.5 billion short
fall over the next 18 years. To resolve the problems, taxpayer
contributions to the fund could be increased next year.
Retirees Worried over Pension Uncertainties
(February 28, 2004)
The US private pension system is in trouble because the stock market
declined from early 2000 to early 2003, reducing the value of pension
funds that invested heavily in stocks. At the same time, interest rates
dropped, increasing what companies must contribute to meet their pension
obligations. The US Senate and House passed legislation providing two
years of relief for companies until a long-term solution is found.
Supporters of the bills fear that without relief some companies could go
bankrupt, putting the pension fund in worse shape. But opponents claim
that encouraging underfunding of pensions could put retirees at even
greater risk. If the pension plan is taken over by the federal Pension
Benefit Guaranty Corporation in case of bankruptcy, US retirees could have
less to live on.
Big Blue's Pension Problems
(February 20, 2004)
A Federal judge in East St. Louis ruled that IBM owes billions of dollars
to 140,000 older employees that the computer giant harmed when it
converted to a "cash balance" plan in 1999. Traditional pension
plans reward employees for staying in a company, giving them more
retirement benefits during their last years of service. On the other hand,
"cash balance" plans provide employees with individual accounts
they can take with them if they switch jobs. This technique is attractive
to young people but discriminates older workers. IBM appealed the decision
but if it fails, then "cash balance" plans could be illegal and
companies would have to come up with alternatives.
Political Money Said to Sway
Pension Investments (February 10, 2004)
For over ten years, a small group of businessmen contributed tens of
thousands of dollars to the political campaigns of their county
commissioners in Luzerne County, Pennsylvania. In exchange, elected
officials handed over control of the county's pension fund to the
businessmen, who gambled it on the stock market in exchange for millions
of dollars in concessions. However, when the stock market turned sour, a
newly elected county controller filed suit against the businessmen.
Controller Stephen L. Flood accused the men of unsuitable and risky
investments, excessive fees and commissions, and passed new laws to
eliminate the county's "pay to play" pension system.
Pension Plans Still Imperiled (February 4, 2004)
As the stock market recovers, some of the strain has eased for US pension
plans. However, corporations and taxpayers still face years of rising
contributions to pay for pensions promised to retiring baby-boomers - the
stock market's recent gains won't be enough to support all retirees.
Furthermore, analysts worry that major pension managers are betting too
much on the temporary recovery by investing heavily in hedge funds and
other equities.
City Pension Woes Called 'Significant' (February 4,
2004)
According to Dick Murphy, mayor of San Diego, the city's pension system
and finances are in good shape. However, top officials with Moody's
Investor Service, a major Wall Street credit-rating agency, disagree with
this statement. Moody's claims that city officials intentionally
underfunded the San Diego City Employees Retirement System to balance the
city's finances, which were full of accounting errors. The damage to the
pension system was hidden by stock market gains, but with the market's
decline, the system is now in debt. Moody's has downgraded the city's
rating from "stable" to "negative."
Baby Boomers Getting Finances in Order (February 3,
2004)
Now is a good time for baby boomers to ensure they are financially ready
for their retirement years, even though most are not thinking about
retiring yet. Boomers, many of whom are entering their late-50s, should
start gathering financial records, adopting savings strategies, and even
thinking about possible part-time jobs or volunteer work during their
retirement years. Financial advisors say boomers should avoid credit card
debt at all costs and should try to pay off mortgages before they stop
working.
Tax Cuts and Savings Plans (February 3, 2004)
The Bush administration presented a series of tax reforms it says will
stimulate the economy and simplify tax laws, many of which critics have
labeled costly handouts to the rich. Among the proposals, however, is a
controversial plan to convert traditional company pensions into
"cash-balance" plans, portable pension plans that follow workers
who switch companies at any point in their careers. While cash-balance
plans may benefit younger workers who change jobs frequently, longer-term
employees who stay at one firm will find their pensions smaller in the
end. A recent court case ruled the practice age discriminatory.
Pension Agency to Cut Its Stock Holdings (January 30,
2004)
The Pension Benefit Guaranty Corporation has decided to shift its
investments away from the stock market, just ten years after it began an
"all equities" policy. PBGC head Steve Kandarian says the agency
will reduce its stock investments to just 15 percent of total investments
to protect the PBGC against losses and minimize risk of a potential
taxpayer bailout. The move comes just as the Bush administration steps up
rhetoric to allow workers to invest Social Security money in the stock
market.
Senate
Passes a Bill to Cover Pension Plans (January 29, 2004)
The US Senate passed legislation creating a temporary new formula for
companies to calculate their pension contributions, which would save
targeted companies about $80 billion over the next two years. The
provisions are intended to help airlines, steel companies and unions that
operate pension plans through a period of unfavorable market conditions.
The Bush administration remains skeptical about the pension relief, saying
it "encourages firms to underfund their pensions." Pension
specialists hope Congress will use the next two years to make fundamental
changes in the pension law itself.
Hevesi
Proposes Way to Delay $1.2 Billion in Pension Costs (January 27, 2004)
New York State Comptroller Alan G. Hevesi outlined a set of proposals to
provide $1.1 billion in pension relief to local governments, while
protecting pensioners and allowing the state to save more than $100
million. Hevesi developed the plan in opposition to Governor Pataki's
proposal to put a cap on contributions to the state's Common Retirement
Fund. According to Mr. Hevesi, the governor's proposal would hurt the
fund's viability. However, according to Kevin C. Quinn, spokesman for the
state Division of the Budget, Mr. Hevesi's plan does not provide long-term
relief.
Many Wait on Congress to Fix 'Bleak' Pension Shortfall
(January 23, 2004)
Many US companies are struggling to come up with the necessary funds to
meet their pension obligations as a result of stock market losses, growing
numbers of retirees, and what some call an "artificially low"
interest rate. The US Senate is considering whether or not to allow
employers to reduce their required pension fund payments by using a higher
bond rate in an effort to help them remain competitive.
Agreement Reached On Pensions (January 23, 2004)
Key US senators reached an agreement on a bill granting major
pension-funding relief to airline and steel industries, allowing companies
to pay only 20 percent of their pension obligations in the first year and
40 percent in the second year. Senator Edward Kennedy defended the plan as
"immediate short-term measures needed to deal with [a] temporary
crisis," but the Bush administration argues it will only allow the
weakest plans to grow weaker.
Many Retirement Funds Affected by Scandal-Survey
(January 22, 2004)
In a recent poll by Financial Executives International, almost half of all
corporate chief financial officers surveyed said their company 401(k) plan
included funds tainted by charges of improper trading and excessive fees.
About 38 percent of the companies have since changed their plans, and 39
percent are considering switching investments. Many chief financial
officers are concerned about the legal and fiduciary consequences if they
do not switch from funds connected to the scandal.
Hevesi, Spitzer Want Combined Pension Power of States
Used for Reform ( January 16, 2004 )
State officials controlling more than $400 billion in pension assets
have joined New York Attorney General Eliot Spitzer to pressure the mutual
fund industry to disclose management fees and other costs to clients at
all times. The states' massive combined buying power could exert powerful
leverage on pension funds, and they will try to convince other pension
funds and large investors to request the reforms as well.
Pension Agency Piles Up Record-Setting Deficits (
January 16, 2004)
The Pension Benefit Guaranty Corporation (PBGC) is facing its greatest
deficit in history, after taking over 152 failed pension plans in the last
year. The agency will be able to pay pension benefits for a few more
years, but if the situation does not improve, taxpayers might be called in
to bail out the agency. PBGC's executive director, Steven A. Kandarian, is
pushing the government to reform the system by creating tougher funding
requirements for companies that sponsor pension plans. However,
corporations warn that tougher requirements could force them to drop
seriously underfunded plans altogether.
L'Amertume des Cols Bleus
(January 15, 2004)
Article in French
For the last 4 years, the US steel industry has weathered a
financial crisis as factories close one after another, leaving retirees
and future retirees with drastically reduced pension and health insurance
benefits. Many former steel workers and their families survive merely on
Pension Benefit Guaranty Corporation (PBGC) funds. Steelworker unions
accuse the government of shirking its responsibly for the fate of
pensioners who were guaranteed a decent retirement package. One unionist
in particular thinks the US should use its dollars to help its own
people first.
Ponzi Scams Still Bilk Many,
Watchdogs Say Senior Citizens are among Con Artists' Top Targets ( January
14, 2004)
While the mutual fund scandal has attracted the most press coverage,
the old-fashioned "Ponzi" scheme ranked first in the North
American Securities Administrators Association's (NASAA) top 10 investment
scams. The Ponzi scheme, named after flapper-era scam-artist Charles Ponzi,
lures investors by promising high returns and then using new investors'
money to pay off old investors. The scheme collapses when it runs out of
victims. In California , 3,290 investors were robbed of $800
million. Investment scams frequently target seniors, and big losses can
"wipe out retirement homes and shatter dreams for a better
life."
S.E.C. Has Found Payoffs in
Sales of Mutual Funds ( January 14, 2004 )
The Securities and Exchange Commission (SEC) revealed that a
significant number of mutual funds provide cash and other compensation to
brokerage houses for directing investors towards specific funds. The
charges raise the mutual fund scandal to a new level, exposing undisclosed
conflicts of interest and transaction fees passed on directly to
investors. Regulators had suspected the inadequate disclosure of payments
for years, but SEC officials ignored the issue until members of Congress
and the New York State attorney general, Eliot Spitzer, pressured the
commission to clean up the industry and restore investors' confidence.
Pension Agency To Post Deficit Above $10 Billion ( January 13, 2004)
The government's Pension Benefit Guaranty Corporation (PBGC) is facing
a $10 billion deficit, a landmark figure that does not bode well for
millions of American workers' pensions. For many Democrats, the White
House and the Republican Congress have not done enough to protect workers'
retirement plans, and they will use the criticism as a political weapon in
the upcoming elections. The Bush administration continues to allow
companies to pass billions of dollars worth of pension debt onto the PBGC,
threatening the solvency of the agency and leaving employees with huge
retirement-benefit cuts.
SEC looking at pension consulting firms (January 12, 2004)
The Securities and Exchange Commission has opened an investigation of
investment-consulting firms' dealings with pension fund clients, with
particular scrutiny on a practice called the "pay-to-play"
system. "Pay-to-play" involves a situation in which a money
management firm might pay a consultant through various hidden means, in
return for a recommendation to a pension fund. The Department of Labor
unsuccessfully attempted to restrict this method of
"cooperation" in the late 1990s.
Kaiser Aluminum Aims to Ax Benefit Plans (January 12,
2004)
Kaiser Aluminum Corporation says it cannot continue to pay medical and
life insurance for its retirees and dependents, and the company's 25,000
retirees could lose up to $800 million in health insurance benefits.
Kaiser also filed a motion with a federal bankruptcy court to turn over
its underfunded pension plan to the government's Pension Benefit Guaranty
Corporation. United Steelworker District Director David Foster argues,
"Almost two years after filing for Chapter 11 protection, Kaiser
Aluminum is now forcing retirees--its most vulnerable stakeholders--to
shoulder the greatest burden in reorganizing the company."
Pension Peril
Looming: U.S. (January 11, 2004)
Steven Kandarian, outgoing head of the Pension Benefit Guaranty
Corporation (PBGC) issued a severe warning in his resignation letter,
characterizing the US private pension system as a "time-bomb."
The agency, which insures the pensions of millions of Americans, is $8.8
million in the red after a wave of corporate bankruptcies. Kandarian warns
that workers, retirees, and healthy companies have suffered from the
actions of irresponsible corporations, and, left unchanged, tax-payers may
be left to pick up the tab for mounting costs. So far, PBGC has been able
to cover the gap with its sizable assets, but those reserves won't last
forever.
For Boomers Near
Retirement, Toolboxes Aplenty (January 4, 2004)
Investment companies in the US are preparing marketing tactics to help
baby boomers make the transition into retirement, and to profit from a
huge potential market for financial advice. Increasing life expectancies,
higher health care costs and some lingering unrealistic expectations about
investment returns make it difficult for some investors to get complex
retirement decisions right. However, experts warn that financial advice
should be taken with "a dose of skepticism." Investors should
ask for a detailed breakdown of the cost of any financial advice, and to
check the credentials of potential advisers before signing any document.
2003 Mutual-Fund Scandals an Affront to Small
Investors (January 1, 2004)
Investors who had already weathered countless corporate scandals and
dot-com busts found in 2003 that even seemingly trustworthy institutions
are not above malfeasance. Mutual funds were supposed to be a more secure,
responsible way to manage money, leaving small investors stunned at the
news of widespread illegal and unfair trading practices at multiple fund
companies. Apparently, the time-honored Wall Street tradition of favoring
big investors was too hard to overcome.
