WASHINGTON - The Senate Health, Education, Labor and Pensions Committee on March 21 approved a Democratic pension package by an 11-10 vote along partisan lines.
The committee rejected a Republican substitute by the same vote. The package, the "Protecting America's Pension Act," sponsored by Sen. Edward M. Kennedy, D-Mass., would permit employees to move out of employer stock after three years; permit companies to offer their stock either as a match or as an investment option, but not both unless it offers a "substantial" pension plan as well; give employers protection from being sued by employees for bad financial advice so long as they hire independent investment advisers; and give participants quarterly statements on their investments, including a notice about the importance of diversification. The legislation also would require employers to give a 30-day notice before imposing a "lockdown" during which employees can't move among investments, and reiterate that employers will be liable for participants' investments during such a period. The legislation also extends fiduciary duty to officers and plan providers, and also requires employees to have a say in the management of pension plans.
The legislation also includes an amendment by Sen. Paul Wellstone, D-Minn., that would amend federal pension law to protect whistleblowers, who are not plan participants, from retribution. The package also includes an amendment offered by Sen. Tom Harkin, D-Iowa, that would require employers to give participants detailed comparisons between lump sums and annuities, or monthly pensions for life, based on their actuarial values. The provision would require the treasury secretary to give employers guidelines on this information, including using examples to show the relative values of the benefits, including early retirement.
Mr. Kennedy will next confer with Senate Majority Leader Tom Daschle, D-S.D., and Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, on possibly melding the bill with the pension package the Senate tax-writing committee is crafting. But the Republican pension counsel for the Senate pensions committee warned that the Democratic legislation is on a fast track to nowhere. "This bill is fundamentally bad," he said, noting the legislation is unlikely to be voted upon by the full Senate. Sen. Judd Gregg, R-N.H., the ranking member of the Senate Health, Education, Labor and Pensions Committee, prefers to work with the Senate Finance Committee in crafting a compromise proposal that would have bipartisan support, he said.
CIEBA backs company stock provisions of pension law
WASHINGTON - CIEBA, representing the nation's largest corporate plan sponsors, supports changes in federal pension law that would prevent employers from offering company stock as an investment option if they also offer it as a matching contribution. CIEBA also supports changes that would let employees sell matching contributions of company stock after three years, and require employers to give workers a month's notice before imposing any blackout period. Moreover, the association supports legislation limiting the ability of top management to sell company stock during such blackouts, and making it easier for employers to provide investment advice to employees.
However, the organization opposes legislation requiring participant representation on retirement plan boards or expanding legal remedies against plan sponsors.
Trust Fund Advisors, ULLICO sued for soured investment
WASHINGTON - The Labor Department sued Trust Fund Advisors and its parent, ULLICO, for investing more than $10 million in assets of two union pension funds in a failed real estate project. TFA was investment manager for the two pension funds of the Laborers International Union of North America, Washington, in the early 1990s. The plans have combined assets of more than $1.3 billion.
The lawsuit, filed in U.S. District Court in Washington, alleges TFA and Union Labor Life Insurance Co. used the plans' assets to purchase and develop land in North Las Vegas, Nev., but failed to investigate the project and ultimately abandoned it in 1997 without selling any lots. The land was sold in June 1999 to Capital Pacific Holdings for less than the investment. The Labor Department wants to recover the funds' losses, plus interest, and prevent similar situations in the future, according to a release.
Ian Lanoff, a partner at the Groom Law Group in Washington, who represents TFA and ULLICO, disputes the Labor Department's assertion. "It is our position that both acted prudently and we believe that ultimately our position will be vindicated." The pension funds lost $1 million, said Mr. Lanoff, who noted the Labor Department is using a "novel theory" to increase that amount by using a real estate index representing developed property, instead of undeveloped properties.
GAO looks into oversight of defined contribution plans
WASHINGTON - The GAO is examining whether defined contribution retirement plans should remain exempt from securities rules.
The General Accounting Office also is considering whether participants should receive prospectuses for the underlying investments in their retirement plans. A 1992 SEC study recommended the changes to securities laws, but no action was taken. Sen. Paul Sarbanes, D-Md., chairman of the Senate Banking, Housing and Urban Affairs Committee, asked the GAO to report its findings and recommendations by late June.
Tom McCool, managing director of financial markets and community investment and head of the investigation, said the GAO will consider whether the SEC should be more involved in supervising defined contribution plans under current law or if Congress needs to give the securities regulator more authority.
Wisconsin 457 plan sticks with Nationwide Retirement
MADISON, Wis. - The Wisconsin Deferred Compensation Plan renewed its 19-year relationship with Nationwide Retirement Solutions, which provides administration, record keeping and participant education for the $1.1 billion 457 plan, said Tiffany Swinehart, Nationwide spokeswoman.
Chicago Municipal drops Oppenheimer, Waddell & Reed
CHICAGO - The $5.6 billion Chicago Municipal Employees Annuity & Benefit Fund terminated Oppenheimer Capital, which ran $285 million in active domestic large-cap value equities, said Terrance Stefanski, executive director. The firm, which had been on a watch list for 21 months, was terminated because of performance, he said. The fund will distribute the money among its existing large-cap value managers Bear Stearns, Wellington, Great Lakes Advisors and Brinson, and a commingled S&P 500 index fund run by Northern Trust; amounts have not been determined. Jeff Sheran, marketing director for Oppenheimer, said the firm had no comment.
The fund also terminated Waddell & Reed, which ran $35 million in active domestic small-cap growth equities, because of style drift, said Mr. Stefanski. The money will be split between the fund's existing small-cap growth manager, TCW, and small-cap core manager, TIMCO; amounts have not been determined.
The fund also removed Brinson Partners from its watch list because of positive performance. The firm, which manages $100 million each in active domestic large-cap value equities and core fixed income, had been on watch since June 2000.
6 firms in running for Workers Comp mandate
ST. PAUL, Minn. - Workers' Compensation Reinsurance Association, St. Paul, named six finalists in its search for a manager to run $50 million in active domestic large-cap growth equities for its $1 billion investment pool, said Keith Summers, investment manager. The finalists are: INVESCO National Asset; Marvin & Palmer; Credit Suisse Asset; Strong Capital; Peregrine Capital; and Voyageur Asset.
Funding will come from reallocation of assets from other portfolios. A selection is expected by mid-June, Mr. Summers said.
Massachusetts Turnpike stays course with consultant
BOSTON - The $180 million Massachusetts Turnpike Authority Employees' Retirement System retained New England Pension Consultants as consultant, said Tom Arcadipane, director. NEPC likely will conduct an asset allocation study after the system's board meeting in April. The current allocation is 57% equity and 43% fixed income.
Strong to launch domestic core-plus fixed income strategy
MENOMONEE FALLS, Wis. - Strong Capital Management will introduce a new domestic core-plus fixed-income strategy within the next few months, said Lawrence B. Zuntz, managing director. Unlike Strong's existing strategy, the new approach likely will have a 10% limit on high-yield investments and will invest only in the higher quality tiers of the high-yield arena, he said. Controlling the allocation to high yield, combined with investment in higher quality securities, likely will produce more manageable expectations for both upside returns and downside risk, he said.
Lockhart sworn in as Social Security deputy commissioner
WASHINGTON - James B. Lockhart III last month was sworn in as deputy commissioner of Social Security. Mr. Lockhart, who was PBGC executive director from 1989-`93, is principal deputy to Social Security Commissioner Jo Anne Barnhart, and COO. Mr. Lockhart also will serve as the secretary to the Social Security Board of Trustees, and is also a member of President Bush's management council.
Utica Insurance reviews 401(k) plan options
NEW HARTFORD, N.Y. - Utica Mutual Insurance Co., New Hartford, N.Y., is reviewing the seven investment options in its $80 million 401(k) plan, said Steve Guzski, compensation manager. He said the plan likes to conduct a comparative analysis of its options on a quarterly basis. Consultant Exeter Fiduciary Consulting will conduct the review, which should be finished by the end of April, he said. HSBC is administrator, record keeper and trustee.
Boston Advisors buys Babson-United assets
BOSTON - Boston Advisors acquired the assets of Babson-United Investment Advisors. Terms of the deal were not disclosed. Babson-United manages $1.2 billion in assets for institutions and high-net-worth individuals.
The combined firm will operate under the Boston Advisors name and will manage $3.5 billion. Babson-United's portfolio managers and research staff, including Peter Meenan, president and chief executive officer, will join Boston Advisors. The transaction is expected to close in May.
Greenwich: Online foreign exchange trading on rise
GREENWICH, Conn. - One-quarter of pension funds and other institutional fund managers used an online format for trading on foreign exchanges as of year-end 2001, an increase of eight percentage points from the year before, according to a new study by Greenwich Associates.
Of the 301 pension fund and money manager respondents, 24% said they plan to start trading electronically on foreign exchanges within a year, while 51% said they do not trade electronically and have no plans to do so.
Tim Sangston, consultant at Greenwich, said the roadblocks to implementation are marketers not doing an adequate job in promoting the advantages of electronic trading; the costs of implementing the new technology required for online trading on foreign exchanges; and traders not wanting to learn a new system.
The study interviewed 1,438 users of foreign exchanges at 301 pension funds and money management firms.
American Skandia to quit DC record keeping business
SHELTON, Conn. -American Skandia is leaving the defined contribution record-keeping business, said Matthew Della Croce, spokesman. The business was not profitable, he said.
American Skandia will concentrate on its mutual fund and variable annuity business, which is "what we do best," he said. The company will continue to serve existing clients but will stop taking new qualified plan business after July 1. The change will affect less than 3% of its workforce, many of whom will be offered positions elsewhere in the company, he said.