ALEXANDRIA, Va. - US Airways Group pilots on March 11 appealed a judge's decision permitting the bankrupt airline to close its underfunded pilots pension plan.
On March 1, Judge Stephen Mitchell of U.S. Bankruptcy Court in Alexandria, Va., permitted the airline to terminate the plan and pass the liabilities to the Pension Benefit Guaranty Corp. Roy Freundlich, pilots' spokesman, said the appeal, filed by the Air Line Pilots Association, could be heard within weeks. Even with the judge's ruling, the airline still needs PBGC approval to terminate the $1.3 billion underfunded pension plan.
Mellon Institutional combines equity units into Boston Co.
BOSTON - Mellon Growth Advisors and Standish Mellon's equity group, both affiliates of Mellon Institutional Asset Management, will be merged into The Boston Co. Asset Management, according to Mellon. The merger raises The Boston Co.'s institutional assets under management by $3 billion, to $24 billion.
Corey Griffin remains president and CEO at Boston Co.; David Cameron, head of equity strategies at Standish Mellon, will lead the new teams; Frank Antin, CEO of Mellon Growth, remains chairman of Boston Co. Last month, Mellon Institutional consolidated its institutional fixed-income operations under Standish Mellon.
Ronald O'Hanley, president of Mellon Institutional, said the merger reflects the firm's "broad and deep commitment" to enhanced research.
Portfolio managers David Smith and Edward Allinson, two of the three founders of Mellon Growth, were terminated as a result of the merger, Mr. O'Hanley said. The third, Emerson Tuttle, remains with Boston Co. as a growth portfolio manager. Messrs. Smith and Allinson could not be reached for comment by press time.
Plan sponsor coalition to lobby against cash balance proposal
WASHINGTON - A group of 54 defined benefit plan sponsors established the Coalition to Preserve the Defined Benefit System, a new group to lobby against the Treasury Department's proposed rules on cash balance plans and age discrimination. The coalition will send a letter to President Bush on the proposed regulations, and members plan to testify at the Treasury Department's April 9 hearings on the proposal.
"Many common defined benefit designs and features would be disallowed under the regulations as proposed," said Randall Rakosnik, director of benefits at the $650 million fund of Fortune Brands Inc. Lincolnshire, Ill., a coalition member.
The coalition is backed by consultant Watson Wyatt Worldwide and includes the $7.6 billion pension fund of Dow Chemical Co., Midland, Mich., and the $2 billion pension fund of R.J. Reynolds Tobacco Holdings Inc., Winston-Salem, N.C.
Kandarian: PBGC shouldn't be liable for 'shutdown benefits'
WASHINGTON - The PBGC should not have to pay $15 billion in "shutdown" pension benefits promised by financially ailing old-line companies when it takes over their underfunded pension plans, Executive Director Steven A. Kandarian said. Mr. Kandarian told members of the Senate Finance Committee March 11 that financially troubled companies don't set money aside for these benefits. ERISA "is silent on the issue," he told lawmakers. In recent months, the federal pension insurance agency has pre-emptively shut down pension plans of failing companies to avoid paying shutdown benefits.
3M contributes $809 million to U.S. pension plans in 2002
MINNEAPOLIS - 3M Corp. contributed $809 million to its U.S. defined benefit plans last year, including $212 million in the fourth quarter, according to its 10-K report filed with the SEC and the company's quarterly earnings report. U.S. pension assets totaled $5.9 billion as of Dec. 31, and the fund had a $6.5 billion accumulated benefit obligation, according to the 10-K.
Also last year, 3M contributed $277 million to its non-U.S. pension plans, which had total assets of $2.1 billion and an accumulated benefit obligation of $2.4 billion as of Dec. 31.
For its U.S. pension plans, 3M kept the assumed rate of return at 9%, but lowered the discount rate assumption to 6.75% from 7.25%.
3M's fourth-quarter earnings report indicated that global pension cost affected earning per share by about 17 cents in 2002 and are estimated to affect EPS by about 27 cents this year.
Sprint lowers assumptions on returns, discount rate
OVERLAND PARK, Kan. - Sprint Corp. lowered the long-term rate of return assumption for its $2.4 billion defined benefit plan to 9%, from 9.5%, according to the company's annual report. Sprint also lowered the plan's discount rate assumption to 6.75%, from 7.5%. A company spokesman said Sprint will likely be required to make a contribution to the plan this year. The plan, which was underfunded by $9 million in 2001, was underfunded by $1.1 billion at the end of 2002, according to the report. As a result of the additional liability, the company took an after-tax charge of $713 million in December.
Fairfax Uniformed on prowl for investment consultant
FAIRFAX, Va. - The $600 million Fairfax County Uniformed Retirement System is conducting an invitation-only search for an investment consultant. Previous consultant CRA RogersCasey can rebid, said Jeff Willison, investment manager. System officials hope to hire a consultant later this year.
PepsiCo sees pension expenses rising to $160 million this year
PURCHASE, N.Y. - PepsiCo Inc. expects $160 million in pension expenses this year, according to its 10-K filing with the SEC. The company reported a pension expense of $111 million in 2002, according to the filing. Officials for the $4.3 billion pension fund could not be reached for details by press time.
Bill would give Illinois governor new power over 2 state systems
SPRINGFIELD, Ill. -Gov. Rod R. Blagojevich would appoint the executive directors and board chairmen of the $21 billion Illinois Teachers' Retirement System, Springfield, and the $9 billion Illinois State Universities Retirement System, Champaign, under a bill now in an Illinois House committee. Both plans' executive directors and chairmen currently are selected by the boards of each system. The bill, sponsored by Rep. Jay C. Hoffman, D-Collinsville, also would allow the gubernatorial appointments to be made without legislative approval and would let the governor appoint all nine SURS board members and the four governor-appointed members of the teachers' system as of June 30 - even though some their terms have not expired under existing law.
The bill was referred to the House Executive Committee.
Pennsylvania auditor seeking quick action from state court
HARRISBURG, Pa. - Pennsylvania Auditor General Robert P. Casey Jr. petitioned the Commonwealth Court in Harrisburg to expedite the judicial resolution of his dispute with two state pension funds over his right to conduct independent performance audits of their investment operations.
Mr. Casey originally filed suit Jan. 23 against the $38 billion Pennsylvania Public School Employees' Retirement System and the $21 billion Pennsylvania State Employees' Retirement System, their chairs and their boards after the funds refused to turn over documents about their investment operations.
The amended petition said the preliminary objections to his suit, which the funds filed Feb. 13, "are completely without merit and consist entirely of misstatements of fact and law, falsehoods, half-truths, irrelevancies and, most disturbing, personal attacks."
The funds must respond to Mr. Casey's amended petition by April 4. Evelyn Tatkovski, spokeswoman for the public school fund, declined to comment. Sean Sanderson, spokesman for the state employees' fund, didn't return calls seeking comment by press time.
DuPont Capital to launch emerging markets strategy
WILMINGTON, Del. - DuPont Capital Management plans to launch an emerging markets strategy for outside clients by the end of the year, according to George J. Saxon, chief investment officer-equities. The firm, which manages $19.5 billion in pension fund assets for E.I. du Pont de Nemours & Co. Inc., Wilmington, and $2.1 billion for other clients, runs about $640 million in emerging markets equities for DuPont's pension funds.
Police pension fund closing in on choice for first consultant
SPRINGFIELD, Ill. - The $70 million Springfield Police Pension Fund will select its first consultant at its April 30 meeting, said Kevin D. Barrington, president and chairman. Marquette Associates and Becker, Burke Associates are finalists. The decision to seek a consultant was a matter of fiduciary responsibility, he said, and not because of investment performance.
South Carolina panel approves increasing equity allocation
COLUMBIA, S.C. - South Carolina Budget and Control Board approved increasing the $20 billion South Carolina Retirement System's equity allocation by 2.5 percentage points, or about $500 million, from 30%, said Michael Sponhour, spokesman. The fixed-income allocation will be pared. The additional money will go to existing managers.
Group expanding its website, adds corporate bond prices
WASHINGTON - Bond Market Association added corporate bond prices to its website on a four-hour delayed basis. The site, at www.investinginbonds.com, offers prices on Treasury and municipal bonds. There is no charge for the service. Corporate bond prices are offered through TRACE, the trade reporting and compliance engine developed by NASD and the SEC.
$90 million pension expense expected by R.J. Reynolds
WINSTON-SALEM, N.C. - R.J. Reynolds Tobacco Holdings Inc. expects this year's pension expense to be $90 million, compared with $39 million in 2002. The company, whose pension liabilities surpassed its pension assets by $933 million as of Dec. 31, reported its pension assets dropped by $245 million. The company, in its annual financial report, said it also lowered the expected rate of return on pension assets to 9% from 9.5%. Reynolds also blamed declining corporate bond yields and declining interest rates for adversely affecting its pension expense in 2003.
RLI to do first complete reviews of ESOP and pension plan
PEORIA, Ill. - RLI Corp. is conducting its first comprehensive reviews of its $56 million ESOP and its $6 million pension plan, said Michael E. Quine, vice president-administration.
Plan officials are open to making many changes, including launching a separate 401(k) plan, but no decisions will be made until the studies are completed in June, Mr. Quine said. Watson Wyatt is advising.
Lamson & Sessions contributes $6 million to pension fund
CLEVELAND - The Lamson & Sessions Co. made a $6 million contribution to its pension fund in the fourth quarter and expects a $2.2 million increase in pension expenses early this year, according to its annual 10-K filing with the SEC.
The company made the contribution to its $62.8 million defined benefit plan because of poor investment performance. In all, it contributed $6.5 million to the plan in 2002, up from $310,000 in 2001, according to the company's annual report.
BNY Brokerage introduces OTC trading desk
NEW YORK - BNY Brokerage launched an over-the-counter trading desk, providing execution management with access to OTC issues across multiple electronic communications networks and market makers.
Traders will seek best execution while minimizing market impact for OTC block trades, regardless of the order size, according to a BNY statement.
Museum endowment mulls invitation-only searches
WASHINGTON - U.S. Holocaust Memorial Museum Endowment may conduct invitation-only searches for domestic small-cap to midcap growth equity and international (developed countries) growth equity managers, said Zelda Silberman, investment officer.
The $95 million endowment's current domestic small-cap to midcap value equity manager is Cramer Rosenthal McGlynn, and AllianceBernstein is international value equity manager, she said. The endowment board will decide on the searches at its May 13 board meeting.
Clarcor reviewing DB, DC plans; manager changes unlikely
ROCKFORD, Ill. - Clarcor Inc. is conducting comprehensive reviews of its $70 million pension plan and $70 million 401(k) plan; they will be finished by December, said JoAnn Buffington, director of compensation.
Plan officials are conducting the studies because of the current marketplace, she said. Manager changes are unlikely for either plan, she said. Russell Investment Group will assist with the study of the pension plan, which currently is 60% equity and 40% fixed income.
Plan officials are not using a consultant for the 401(k) study.
Wisconsin to use ISS data for research, management
MADISON, Wis. - The Wisconsin State Investment Board will use Institutional Shareholder Services' Corporate Governance Quotient data in its investment research and portfolio management for the $7.5 billion in active domestic equities it manages internally, said Keith L Johnson, chief legal officer for the $49 billion system.
How big a determinant the CGQ will be in investment decisions will depend on the portfolio manager, Mr. Johnson said. The $49 billion system will also use CGQ as an aid in deciding how to vote proxies.
CGQ, launched last year, quantifies the corporate governance performance of more than 5,000 U.S. companies, looking at factors involving the board of directors, auditing, executive compensation and other areas of shareholder concern.