Impetus to DC is cost
In regard to the March 31 Others' Views commentary, "Defined contribution 'right' for public plans," I have spent many years working with public employer retirement systems in Michigan.
During 1992-'95 I was involved in several defined benefit/defined contribution plan conversions. The largest was Oakland County. This was after a lengthy RFP process. At the time, this was the largest defined benefit/defined contribution conversion in the United States, and was subsequently used as the model for many DB/DC conversions in Michigan and other states.
The primary reason for doing a defined benefit/defined contribution conversion is to reduce future costs.
Most public sector defined benefit retirement plans include post-retirement medical and disability pensions. The post-retirement medical is an expensive benefit and will continue to grow as the population ages. A defined contribution plan does not provide for post-retirement medical and the disability benefit is limited to the account balance.
There are many other reasons for this shift including a desire to budget predictable costs, changing demographics, the popularity of 401(k) plans and portability, but the driving force is to reduce future costs.
Dick VandenBrul
Livonia, Mich.via Internet
Privatize Social Security?
Your May 26 editorial, "Ruin, or reform," takes a dimmer view of Social Security than is warranted by its 60 years of successful operation. If the program is as bad as you claim, it would have been changed a long time ago. Even opponents realistically recognize the broad acceptance.
If the proponents of the major privatization alternative have made inroads, it is because they have mounted sustained criticisms of Social Security that have succeeded in raising concern. They have not yet, however, made the public fully aware of their proposal's high administrative costs, the $10 trillion of new national debt to be incurred, the $600 billion or so in outlay in interest alone at the peak of such debt, and the additional worker and employer contributions.
While you recommend pre-funding Social Security benefits, this is a concept appropriate for private pension plans but not for a social insurance program. One of the biggest objections, of course, is the potential for federal control of business.
The program - not surprisingly given its age and scope - needs adjusting from time to time. A fundamental change in privatization as you advocate should be looked at long and hard.
David Langer
Consulting actuary
David Langer Co. Inc.
New York
DC and DB services
This letter is in regards to the lead article "Big players keep top spots," in the March 31 special report on defined contribution service providers.
We are concerned that we were not mentioned in that article. How can we be included in any future articles on major defined benefit/contribution service provid-ers?
First Chicago NBD Investment Management Co. is a subsidiary of First Chicago NBD bank. As of Dec. 31, First Chicago NBD Investment Management Co. had approximately $5 billion in assets under management. We provide services to more than 1,500 total sponsors and 200,000 participants.
If articles are based on questionnaires submitted, please send any such forms to the attention of Jeff Kargl, vice president of product management and marketing.
Audrey Nagelberg
401(k) Retirement Services
Marketing analyst
First Chicago NBD Investment
Management Co.
Chicago
