Proposals to let workers establish individual Social Security accounts ignore the enormous headache of setting up and administering such accounts, raising questions about whether a privatized system is viable, a new report from EBRI says.
The existing system is not affected by the huge time lag in crediting workers' earnings to their Social Security records, while any delay in crediting individual accounts under a privatized Social Security system could slow down the growth of those accounts through compounding, the report notes.
The costs of administering a privatized system could cut into the benefits of the individual accounts, the report also notes. The Cato Institute, a Libertarian think tank that strongly favors individual accounts, lambasted the EBRI study as "unrealistically pessimistic."
Staff, consultant at odds
The $134 billion CalPERS staff is recommending a $50 million commitment to Friedman Fleisher & Lowe Capital Partners, a partnership investing in underperforming companies. But alternative investment consultant Hamilton Lane Advisors is recommending against the commitment. Among its concerns: The partnership's principals, who expect to raise $600 million, have never worked together.
CalPERS' board will vote on the matter Nov. 16.
Lucent's Walsh dies
Lucent Technologies has not yet named an interim or permanent replacement for Florence L. "Meg" Walsh, vice president and treasurer, who died Nov. 7.
Ms. Walsh, 37, was one of the architects in the formation of Lucent, including overseeing the split of the now $38 billion defined benefit and $12 billion 401(k) plans from AT&T.
Memorial donations may be made to the New Jersey Battered Women's Shelter, P.O. Box 363, Morris Plains, NJ 07950.
The $35 billion Washington State Investment Board will issue an RFP late this month for active emerging markets managers. The number of managers and allocations have not been determined. A selection should be made in the spring.
Center undertakes study
Memorial Sloan-Kettering Cancer Center is doing an asset allocation study of its $1.7 billion endowment, which could lead to manager changes, said Michael P. Gutnick, senior vice president of finance.
Cambridge is conducting the study, which is expected to be completed in January.
Ohio School taps 3
The $7 billion Ohio School Employees' Retirement System hired three small-cap equity managers for $40 million each, said Thomas R. Anderson, executive director. It hired R J F Asset Management for a growth portfolio; Lord Abbett for value; and Aronson + Partners for a combined style. The money had been parked in a small-cap index fund with SSgA.
Frank Russell assisted.
The $74 million Jersey City (N.J.) Employees' Retirement System doubled its domestic small-cap equity allocation to 10%, said Stephen McGuire, pension fund manager. The additional assets will be placed with existing small-cap manager, Cadence. The allocation to large-cap equity manager Salomon Smith Barney will be reduced.
H. Scott Snead, former head of the pension funds at Johnson & Johnson and Champion International Corp., died Nov. 4.
Mr. Snead ushered in modern portfolio investment techniques at the corporate funds, but eschewed aspects of MPT, including indexing. "He was a proponent of knowledgeable active management," said William E. Rauh, director-pension funds at J&J. Under his tenure, J&J instituted its first master trustee. In 1982, he was one of the first to establish a corporate 401(k) plan.
At Champion, one of his key moves was measuring the performance of the pension fund, including separating returns for equities and fixed income.
Memorial gifts may be made to St. Andrew's School, 350 Noxontown Road, Middletown, DE 19709, or to St. Vincent's Medical Center Foundation, 2800 Main St., Bridgeport, CT 06606.
Hawaii to hike realty
The $9.7 billion State of Hawaii Employees' Retirement is considering whether to hire an additional real estate manager or to increase mandates to its current managers, said Nathan Fischer, CIO. The intent is to increase the fund's real estate allocation to its target 10% up from 6% he said. A final decision is expected Jan. 11.
Rockford nears hire
The $103 million Rockford (Ill.) Fire Pension Fund expects to hire its first small-cap equity manager at the end of the month. Funding will come from an internally managed fixed-income portfolio, said Ted Dutkiewicz, revenue manager.
Emerging managers eyed
The $5.2 billion New York City Fire Department Pension Fund interviewed seven emerging managers to determine whether to start an emerging manager program, said Richard Halverson, deputy comptroller of pensions. A decision will be made next month.
Essex delays switch
The $164 million Essex County (Mass.) Retirement Board has postponed switching custodians, said Kevin Leonard, the Segal Advisors consultant assisting with the search. Investors Bank and Trust will continue as the system's custodian.
The ERISA Advisory Council is recommending retirement plans must offer participants distributions in the form of annuities or lifetime monthly pension checks if their account balances exceed $5,000, said Barbara Ann Uberti, chairman of the task force on leakage. Plans also would be required to follow joint and survivor annuity rules. If participants elect to take their retirement savings out all at once, the money would be rolled over into other tax-favored plans such as IRAs. Moreover, retirement plans would be required to accept payouts participants receive from other plans. Pension plans would not have to pay federal pension insurance premiums if workers with pensions of less than $5,000 switch jobs but opt to keep their benefits in the plan.