Nancy Kassebaum, R-Kan., chairman of the Senate Labor and Human Resources Committee, introduced a bill requiring the Labor Department to clarify that pension fund assets held in insurance companies' general accounts are exempt from federal pension law. Ms. Kassebaum's bill would require the Labor Department to issue that guidance retroactively to Jan. 1, 1975. The bill would not, however, affect any pending litigation.
The bill is intended to reverse a 1993 Supreme Court decision in John Hancock Mutual Life Insurance vs. Harris Trust and Savings Bank that resulted in insurance companies becoming fiduciaries for certain portions of pension plan group annuity contracts they hold in their central investment pools.
The bill, introduced at the request of the life insurance industry, aims to prevent copycat lawsuits. Ms. Kassebaum hopes the bill might pass the Senate by unanimous consent, said Michael Horak, a spokesman.
U.S. Rep. Philip S. English, R-Pa., member of the House Ways and Means Committee, predicted the likelihood of some sort of expanded IRA provision in the federal budget as ``very high.''
``Some sort of retirement savings provision'' will be included in the final congressional budget bill, he said.
Mr. English also suggested there is increasing support in the House for a more moderate asset reversion provision, along the lines of the proposal passed by the Senate Finance Committee in its tax bill, but he said he couldn't predict the ultimate outcome. He spoke today at the National Defined Contribution Council in Washington.
Staff of the $88 billion California Public Employees' Retirement System, Sacramento, is recommending the board approve an RFP for currency overlay management services, both active and passive. The contracts for the fund's two currency overlay managers - Pareto Partners and BEA Associates - expire June 30.
The contracts could be extended, but the staff is asking for the RFP instead. Pareto has declined to accept additional assets under management at the current contract fee arrangement with the fund.
The staff and general consultant Wilshire Associates recommend against allocating additional assets to BEA. And the fund's currency overlay program has grown to the point where it may be prudent to contract with more than two managers, the staff said. The RFP request is expected to be approved next week by the fund's board.
The State of Michigan Employees' Retirement Systems, Lansing, contributed $200 million in cash and apartments to purchase 80% of a new real estate company. The $25 billion pension fund is the major shareholder in a limited liability company that will be the general partner in the new company, Simpson Housing L.P., according to J. Robert Love, Michigan's trustee to the new company. Simpson Housing Corp., a developer and manager of apartments in the western United States, owns the other 20%.
Michigan contributed 3,414 apartment units it owns in the western United States. Simpson contributed assets valued at $250 million, bringing the total size of the new entity to $450 million.
BARRA is developing a model to forecast the cost of stock transactions to allow investors to improve investment decisions and monitor trading execution, said Kamal Duggirala, president.
``There are no tools available to include transaction costs to help make investment decisions,'' he said. With the model, investors can see how much they are losing or gaining by trading. ``You need to understand the sources of transaction costs to make better decisions,'' he added.
For the model, BARRA is looking at trades ``tick by tick'' for information that drives trading, including the motivations of short-term and long-term investors. He expects BARRA to have the model available for pension funds and money managers by early next year.
Bundled service costs for a small 401(k) plan can vary by as much as $23,000 a year, an index developed by Pension Dynamics Corp. shows.
The Butler Index, developed by Stephen J. Butler, the consulting firm's president, compares charges for a hypothetical plan with $1 million in assets and 50 employees for basic, turnkey services.
The survey found Principal Financial Group, with annual fees and expenses of $9,497, was the low-cost provider among 11 vendors studied. Great-West Life & Annuity, was the most expensive, with annual charges of $32,796. The average was $18,912.
Pension Dynamics is developing a new PC-based software package for a January introduction that will enable plan sponsors to prepare a cost comparison worksheet using the particular variables of their own plans. Mr. Butler said the new program will include 20 vendors.
Confidence about retirement replacement income drops sharply among older Americans, a new survey by Aetna Retirement Services found. More than two-thirds (69%) of respondents between the ages of 25 and 44 said they expect to be able to retire completely from work at the traditional age of 65. That confidence eroded to 63% of respondents between 45 and 54 and dropped to less than half (49%) of those older than 55. About one-third (36%) of respondents named employer-sponsored plans as the single most important source of retirement income, while 13% picked Social Security
