Conrail ESOP participants will have to wait until the end of 1998 to collect their entire share of the $500 million windfall from the company's acquisition by CSX and Norfolk Southern, CEO David M. LeVan said this week.
Workers who lose their jobs this year as part of the merger might never get all of the money, because only employees on the rolls in 1998 will be eligible to collect next year's payout. And employees will have to forgo contributing to their 401(k) plan in 1997 and 1998. Contributions already made this year will be returned.
Conrail must stagger payments of the profits the ESOP collected in the merger because tax rules limit the amount employers can contribute annually to retirement plans to 25% of pay, or $30,000, whichever is lower. The IRS treats as employer contributions the spread between the price at which the ESOP acquired the shares and the price at which it tendered them in the merger.
Merrill Lynch's broker-dealer subsidiary and the Orange County, Calif., district attorney reached a settlement covering the company's role as an underwriter of four county note issues in 1994. Merrill Lynch, while denying any wrongdoing, agreed to pay Orange County $27 million and reimburse the county for the $3 million cost of the investigation. It also agreed to implement enhanced procedures for internal coordination of certain California municipal offerings.
The settlement has no effect on pending litigation stemming from the county's bankruptcy in December 1994.
Chicago Municipal Employees' Annuity and Benefit Fund probably will review its asset allocation following legislative changes, and continues to look closely at adding managed futures to the mix. The state Legislature recently passed a bill that would allow the fund to adopt a prudent investor rule, said James Stack, executive director for the $4.2 billion fund. Gov. Jim Edgar is expected to sign the bill.
Also, the fund's board decided to bring in representatives from both RXR, a futures manager, and Baldwin, a manager of managers, to examine a possible joint hiring of the two firms. Board members will try to schedule a joint meeting with board members of the Chicago Laborers Annuity & Benefit Fund, which shares some board members and a consultant, Becker Burke, and also is looking at managed futures.
Phoenix Duff & Phelps agreed to acquire a majority stake in GMG/Seneca Capital Management. Under the terms of the deal, Phoenix Duff & Phelps will assume majority ownership. Existing GMG/Seneca senior management will retain a significant equity stake. Existing management will continue to run the firm. The deal valued GMG/Seneca at $54 million; Phoenix Duff & Phelps would not disclose the size of the equity stake it acquired.
Fidelity Investments issued a ``report card'' on the attitudes and behaviors of longtime 401(k) plan participants today to mark the 15th anniversary of the 401(k) plan.
401(k) plan participants seem to be doing a better job of accumulating retirement assets, according to the study's conclusions. More than half who averaged 45 years old saved more than $50,000 in their 401(k) plan and 29% saved more than $100,000. This compares with the findings of a recent study by Public Agenda, a public opinion research company, that found 46% of the general population had saved less than $10,000 for retirement.
Bank Julius Baer opened a Frankfurt-based money management arm to expand services to the German pension fund market. The new German subsidiary, Julius Baer Kapitalanage AG, specializes in management of securities for domestic and foreign institutional investors. It is headed by managing directors Harald Fuchs, responsible for administration and marketing, and Kurt Ochner, in charge of investment policy. Both had been at Julius Baer Capital GmbH, an internal advisory arm. They have not been replaced.