A
year ago, the 401(k) match became an expendable benefit for a big slice
of Corporate America panicked about their revenue prospects in the
throes of the financial crisis and recession. Watson Wyatt says about 25 percent of large firms it surveys reduced or suspended their match in 2009. An unofficial tab kept by the Pension Rights Center suggests that plenty of smaller firms followed suit.
401(k) Match Policy Signals Better Job Outlook
A new survey from Watson Wyatt
suggests employers are slowly easing out of panic mode. Of firms that
cut their match this year, 35 percent say they intend to reverse that
decision in the next six months. That’s a sharp increase from June,
when just 5 percent said they were going to reinstate their match in
the near future.
Granted, 35 percent is not 95 percent, but the
trend suggests that employers are now less concerned about layoffs and
more focused on how to retain existing employees and attract new hires.
It’s Back — Sort of
Seventy
percent of firms in the survey say they will reinstate the same
matching formula that was in place before the cut/suspension. But 13
percent say they are coming back with a lower match, and 17 percent say
they will now peg their match to annual profits. Seems we have
ourselves an emerging New Normal for retirement benefits, too.
Market-Timing Employers Cost Employees Plenty
With Bill Bernstein’s strawberry and nausea retirement advice still
fresh in my mind, it’s frustrating to realize that the firms that
pulled the plug on their match in 2009 kept their employees from maxing
out on the chance to buy low. It’s not just that employees lost their
2009 match; they also lost having that match participate in the 60
percent market rally since the March low. I’m guessing that’s not a
strategy mentioned in the 401(k) educational material employers
dutifully provide to plan participants.
In
Charleston, West Virginia, two bills before the House and Senate would
allow cities to enroll new hires in newer, less expensive pension
programs. They also give cities 40 years to pay off their unfunded liability and any interest that has accumulated on that liability.
In
New Jersey, Elise Young reports that New Jerseyans will fund pension
benefits for a lobbyist earning $191,000 a year – just one of scores of
non-government employees, including high-paid executives and their
staffs, who are entitled to public retirement payouts.
In Russia, Sergei Nikolayev reports in the Moscow Times that Central Bank Averts $44M Pension Fund Heist:
The
Central Bank has foiled an attempt to steal 1.25 billion rubles ($44
million) from the state’s Pension Fund using counterfeit documents, a
scheme that bankers say couldn’t have been carried out by ordinary
criminals.
The Pension Fund discovered the theft Monday when
it received a notice from the Central Bank that 1.25 billion rubles had
been transferred from its account, Marita Nagoga, a spokeswoman for the
fund, said Tuesday. She said the Pension Fund had made no such request
to the Central Bank, which holds the fund’s accounts.
The
Pension Fund said the transactions were carried out after the Central
Bank received two counterfeit payment orders, with fake signatures and
stamps from the fund. The purported swindlers went to the bank’s Moscow
Branch No. 5 on Friday evening, where they first managed to transfer
1.25 billion rubles, set aside for construction and planning work, to
the Pension Fund’s account with the Central Bank. Then they made a
second transfer, moving those funds to an account controlled by
Spetstekhprom at Kuban bank, an Interior Ministry source said.
The
two transfers were completed Friday, and on Saturday the criminals
began transferring the funds to a variety of different banks, including
some abroad. By Tuesday evening, the Central Bank had managed to block
the transfers and return the money to the Pension Fund.
A
secretary at Kuban, who only gave her first name, Irina, told Vedomosti
that the bank’s managers could not speak to journalists because they
had all been taken away for questioning after their office was
searched.
Kuban has existed since 1989, but little is known
about the lender, which doesn’t have a web site. According to the
Interfax-100 bank ratings, Kuban has assets of 223 million rubles
($7.75 million) and capital of 42 million rubles, and it is not part of
the state’s deposit insurance system.
Alexei Frenkel, a
banker convicted last year for organizing the 2006 murder of Central
Bank First Deputy Chairman Andrei Kozlov, listed Kuban among the banks
that he said were unfairly denied access to the deposit insurance
program because they were suspected of money laundering.
The
bank was led by Marina Burova for several years, but her place was
recently taken by Vladimir Zasorin, according to the Bankrange.ru
industry portal.
A bank executive said it was possible that
the lender was purchased before the attempted theft in order to carry
out the heist. Vedomosti was not able to confirm with the Central Bank
the changes in management or the possible change in ownership at Kuban.
People who answered the bank’s telephones declined to identify the
lender’s director.
If the Central Bank believed that a bank
was being used to steal money, it could block the lender’s
correspondent account, said Andrei Yegorov, first deputy chief of SB
Bank. Then cash could only be withdrawn in person, but the criminals
either decided not to do that, or the bank was not the end point for
the theft, he said.
The Central Bank sees all ruble
transactions within the country, and it takes several days for ruble
payments to go abroad, which means the regulator has plenty of time to
look into them, said a vice president at another bank.
The
bankers said they were baffled, however, that the swindlers were able
to bring counterfeit payment orders to the Central Bank.
All
banks are Central Bank clients, and officials at several lenders
explained how things work at the regulator’s offices. Outsiders aren’t
even allowed into Central Bank branches, which require a special pass.
The passes are typically given to two or three representatives for
Central Bank clients who have legal authority to order transactions.
Even
if a client gets a new representative, preparing the entry pass takes
several days. The electronic system means that it’s easy to see who has
entered branches and at what time, one of the bankers said.
Additionally, there are video cameras monitoring the work of all
Central Bank tellers.
A teller is not required to check the
authenticity of a payment order, another banker said. They just look to
make sure that the bank managers’ signatures are present and that the
stamps match those on record at the bank. As a result, any
representative who regularly visits the Central Bank could conceivably
counterfeit and deliver faked documents.
Nagoga
said all of the Pension Fund’s transactions were done electronically
and that no one from the fund brought requests to the Central Bank on
Friday evening. A well-informed banker said the Central Bank would not
necessarily find anything suspicious about the order, since such
payments are not uncommon, but that an unfamiliar representative would
likely put a teller on guard.
“The Central Bank has created a
commission, led by First Deputy Chairman Georgy Luntovsky, to carry out
an internal investigation,” the Central Bank said.
Finally, George Frey of BusinessWeek reports that European Central Bank
President Jean-Claude Trichet on Wednesday urged European insurers and
pension funds to have sufficient capital on hand, stressing they are "systemically important" to the financial system:
Trichet,
who has long encouraged the eurozone's commercial banks to build their
capital reserves, noted the companies play an important role in
ensuring stability due to their size, investments, interconnectedness
and the economic function of insurance.
In
remarks at the Euro Finance Week in Frankfurt, Trichet warned there are
"reasons to be cautious about the durability of the recent recovery of
insurers' profitability."
He said "the supportive
environment for investment income is unlikely to continue once market
conditions begin to normalize." He did not elaborate.
"Although
there are few solvency concerns facing the industry, there is no room
for complacency in this environment. Insurers will have to be mindful
of having sufficient capital buffers in place.
"The default of an insurer could cause financial distress in these sectors."
He
said euro zone insurers and pension funds had about euro6 trillion ($9
trillion) in investments at the end of June and that they held about
euro435 billion of debt securities issued by euro area banks,
representing about 10 percent of the total debt securities outstanding
at those banks.
The eurozone counts 16 countries sharing the
single currency. Some of its biggest insurers include Allianz SE and
Munich Reinsurance AG in Germany and AXA SA of France.
Insurers
and reinsurers, which sell backup coverage to insurance companies to
spread risk in the event of catastrophe, are closely watched for their
investment decisions and assessment of the economy because they
generally invest large sums of premium capital.
"Most of the
time, given the typically long-term investment horizons of insurance
companies and pension funds, they are a source of stability for
financial markets.
However, due to the sheer size of their investment
portfolios, reallocations of funds or the unwinding of positions by
these institutions have the potential to move markets. In extreme
cases, that could put at risk financial stability by triggering large
swings in asset prices," Trichet said.
I have long
argued that insurers and pension funds need to be monitored by
regulatory agencies that respond to systemic risks. Unfortunately, the
New Normal for retirement benefits looks a lot like the old normal
based on chicanery and deceit. When will we ever learn?
Great piece Leo ! Quality data points and important metrics. Pensions/ endowments and especially the "fund managers" within insurance companies posing as asset managers are simply terrible investors without the first inclination, let alone idea of how, to trade.
[7/18/2008 6:50:41 PM] <Chopshop> its also a good thing that insurers / re-insurers have budgeted extra dollars for an increase in extreme damage ( grade III of V ) claims .. oh wait, they haven't , oops... well at least such instances are down significantly as their anal-ysts anticipated ... oh wait, they're up significantly , oops ... well at least insurance companies ( as a crude group on the whole ) have done a good job in managing their books since their budgeting was crap .. oh wait, "they" ( as a crude group reference ) own some of the worst toxic sludge en masse ( 2nd / 3rd rate money mkt funds, lol ) , oops .... well at least the managers / investment officers of such highly esteemed institutions have: a solid handle on the credit climate / cycle; a firm understanding of the liquidity spigot and correlative sentiment indices, etc, etc ... oh wait, many, not all, but many of these CIO/ CMS etc ( top brass ) are basically kudlow klown junkies , oops
[7/18/2008 6:57:12 PM] <Chopshop> 2007 vintage paper ~ meaning its period / year of origination ~ and referring primarily to RMBS but also including CDO / CDS etc. is T H E worst slime imaginable .. im talking deep " Florifornia " paper ... FL, CA, TX, NM, AZ, NV, OH, MI .. stuff being valued RIGHT NOW @ 55- 70 cents on the dollar of Origination ( a VERY important distinction between Origination ~ Org. and MMB ~ mark to make believe ) ... it *MIGHT* fetch 42-47 cents on the Org. $ if you got a real sucker on that line or a junkie fiend like the FED / PPT ... 36 is next stop on way to 27-24 before teenagers
+ 1 ........" Kudlow Klown Junkies " meet Armageddon. What a nightmare !!