WASHINGTON - The pension legislation pending in Congress could exacerbate the PBGC's $23 billion deficit, according to its own analysis.
Rep. George Miller, D-Calif., ranking member on the House Education and the Workforce Committee and an opponent of the legislation, and other lawmakers received the analysis from the pension insurer during debate over the bills.
The PBGC study showed the House bill would add about $2.5 billion in unfunded liabilities over the next decade, while the Senate bill would worsen the PBGC's deficit by about $3.1 billion for the same period, confirmed Randy Clerihue, a PBGC spokesman.
A stalemate over some key provisions in the Senate bill might mean Congress won't pass any pension legislation this year, said a Republican aide who did not wish to be identified. Senate Republican leaders have no desire to devote more time and energy to starting afresh on a pension bill next year, the aide said.
Phoenix acquires remainder of Kayne Anderson Rudnick
HARTFORD, Conn. - The Phoenix Cos. acquired the remainder of subsidiary Kayne Anderson Rudnick Investment Management, said Phoenix spokeswoman Alice Ericson.
Phoenix, which acquired a 65% stake in the firm in 2002, purchased the remaining 35% from the firm's management at the end of September. Kayne Anderson Rudnick manages $9.6 billion in U.S. equities.
The move was part of Phoenix's strategy to completely own each of its seven investment subsidiaries, said Ms. Ericson; Kayne Anderson Rudnick is the last Phoenix entity to become a wholly owned subsidiary. Phoenix will pay Kayne Anderson Rudnick's minority owners total consideration of $80 million over the next two years.
Richard Kayne, co-founder and chief executive officer of Kayne Anderson Rudnick, and Ralph Walter, chief operating officer, will remain with the firm until the end of 2006, according to a news release. Allan Rudnick, president and chief investment officer, was named CEO and will retain his current responsibilities. Stephen Rigali, chief marketing officer, was named executive vice president.
Lockheed will drop defined benefit plan for new employees
BETHESDA, Md. - Lockheed Martin Corp. is eliminating its traditional defined benefit pension plan for new employees. The Bethesda-based defense contractor is permitting current employees to continue participating in its $23 billion defined benefit plan, but starting in January new workers will be covered only by the $16 billion 401(k) plan.
``We felt we took a very considerate approach toward our active employees with a minimal change,'' said spokesman Tom Greer. ``The actions we took around our pensions were tailored to what our longer service employees told us was important,'' he said.
The company will permit workers to contribute up to 25% of their base pay - subject to the annual IRS limits - to the 401(k) plan, up from 17% now.
The employer match of 50% of the first 8% of pay - all in company stock - will remain unchanged. But employees will be able to immediately divest the company stock instead of waiting until they turn 55.
Also, employees will be able to invest as much as 75% of their 401(k) plan assets through a directed brokerage window, up from 50% now, Mr. Greer said.
MassPRIM cuts currency overlay program, Pareto
BOSTON - Massachusetts Pension Reserves Investment Management Board terminated Pareto Partners from a $1 billion mandate after deciding to eliminate the currency overlay program it put in place in the early 1990s. While Pareto had done a ``fine job,'' officials for the $37.8 billion fund said a number of changes - including the emergence of the euro, the reduced weight of the Japanese yen in global currency markets and negative correlations between currency and equity markets - had reduced the benefits of the currency risk-reduction program.
The overlay Pareto was managing came to 18% of MassPRIM's international equity exposure, well below the 50% hedging target PRIM policy dictated. At 10 basis points on the currency overlay total, PRIM was paying Pareto a $1 million annual fee on the portfolio.
Mike Dunn, a spokesman for Pareto parent Mellon Financial, said Pareto officials haven't heard of any decision about being terminated from the currency program and declined to comment.
Massachusetts state Treasurer Timothy Cahill and MassPRIM's general consultant, Cliffwater, both indicated PRIM could consider a ``value-added'' currency strategy as part of a new asset allocation study Cliffwater is preparing for MassPRIM's first meeting in 2006. The system conducts an asset allocation study every three years. Chief Investment Officer Stan Mavromates said the study could recommend changes to broad asset allocation targets, but they are likely to be less drastic than those made in the previous study, when a diversification strategy led to funding a number of new asset classes.
Mellon Financial to acquire Atlanta-based City Capital
PITTSBURGH - Mellon Financial Corp. will acquire City Capital Inc., an investment management firm, said Mellon spokesman Joe Ailinger. The purchase, to be completed by year's end, will be the fourth for Mellon's wealth management group since the start of 2004 and its second in Atlanta, following the July 2003 acquisition of the Arden Group. City Capital is to be combined with the former Arden Group office under the Mellon name to pursue ``huge'' market opportunities in Atlanta, said City Capital President Frank Donnelly. City Capital's more than $800 million in high-net-worth and institutional assets will swell Mellon's Atlanta-based assets to more than $2 billion, according to a news release.
Investors sue News Corp. over poison pill provision
WILMINGTON, Del.- Institutional investors including the $20 billion Connecticut Retirement Plans and Trust Funds, Hartford, and e168 billion ($204.69 billion) Stichting Pensioenfonds ABP, Heerlen, the Netherlands, sued News Corp., Chairman and CEO K. Rupert Murdoch and other company officials. They are asking the Delaware Chancery Court to bar the company from extending its poison pill anti-takeover measure.
The company's board promised to drop its poison pill after a year in exchange for shareholder consent for its reincorporation to Delaware from Australia, which became effective Nov. 12, 2004, according to the lawsuit. But News Corp. officials announced Aug. 11 that they would extend the poison pill provision for two more years as of Nov. 8, without a shareholder vote, the suit states.
``This case is about a promise broken - plain and simple,'' said Stuart Grant, attorney with Grant & Eisenhofer, which is representing the shareholder group.
``The company reviewed the complaint and believes its is baseless, frivolous and without merit,'' said a company spokeswoman, who said company officials would have no further comment.
Falcon Products gets nod to terminate pension plans
ST. LOUIS - Falcon Products Inc. received approval to terminate its three pension plans as part of its Chapter 11 reorganization, said Daniel Doyle, a partner with the law firm Spencer Fane Britt & Browne, who represents a committee of unsecured creditors in the case. The three plans had a combined $28.6 million in assets in November 2003, according to the St. Louis company's most recent annual report. Court papers stated the plans are underfunded by a total of $33.8 million.
U.S. Bankruptcy Court Judge Barry S. Schermer in St. Louis issued an oral ruling Oct. 6 approving the request to terminate the plans, Mr. Doyle said, and also confirmed the company's reorganization plan, paving the way for Falcon Products to emerge from bankruptcy later this month. Jeffrey C. Krause, an attorney shareholder with the law firm Stutman Treister & Glatt representing Falcon Products, confirmed Judge Schermer determined it was appropriate to terminate the pension plans.
Watson Wyatt Worldwide acquires Davis Conder
WASHINGTON - Watson Wyatt Worldwide acquired Davis, Conder, Enderle & Sloan, a Chicago actuarial and retirement benefits consulting firm, according to a news release. DCE&S provides actuarial consulting services for corporate pension and retiree medical benefit programs, including plan design and administration.
The acquisition will add 29 retirement consultants and staff members, including 17 actuaries, to Watson Wyatt's staff in Chicago. All seven DCE&S principals will join Watson Wyatt. Alan Whalley, U.S. region manager at Watson Wyatt, and David Conder, president of DCE&S, could not be reached for comment by press time.
AEGON UK to restructure life, pensions business
EDINBURGH - AEGON UK will restructure its life and pensions business into two separate units, one for corporate clients and the other for individuals saving for retirement, said Lesley McPherson, spokeswoman. The firm is putting its two ``core customer groups and their needs'' at the center of AEGON UK's business strategy to ``enable us to develop new and attractive propositions that will reflect their changing requirements, and anticipate their future needs,'' said Otto Thoresen, AEGON UK CEO, in a news release.
AEGON Corporate will comprise the firm's corporate pension and employee benefits teams as well as the firm's Benefit Solutions group, which offers benefit statement and marketing software, and third-party pension administration business HS Administrative Services. Maurice Brunet was named director of AEGON Corporate. He was operations director of AEGON's life and pensions business, a position that will no longer exist under the new business structure, Ms. McPherson said.
AEGON Individual will combine AEGON UK's individual pension team, onshore and offshore life businesses and individual protection business. Peter Dornan, managing director of AEGON UK Distribution, will become director of AEGON Individual, which will be his primary focus. He will also retain his previous position, Ms. McPherson said.
PBGC takes over Huffy's underfunded pension plan
MIAMISBURG, Ohio - The PBGC took over the underfunded pension plan of Huffy Corp. The plan has $71.7 million in assets and $152.4 million in liabilities. The PBGC estimates it will be responsible for nearly all of the underfunding but might recover as much as $9 million from the company through its claim in bankruptcy court. Huffy terminated the plan on Aug. 31 and the PBGC became trustee on Oct. 4.
City, county plans beat states on funding ratios
SANTA MONICA, Calif. - City and county retirement systems had a combined funding ratio of 90% in 2004, up from 84% in 2003, according to Wilshire Associates' annual report on city and county pension plans. The 55 city and county pension plans that provided data had total assets of $154.3 billion and liabilities of $172.1 billion. The average funding ratio was 83%, and 73% of the plans were underfunded.
The city and county plans were better funded than 64 state retirement systems, which had an aggregate funding ratio of 81% in 2004, according to Wilshire's estimate. Pension plans for 332 S&P 500 companies had an estimated aggregate funding ratio of 92% in 2004.
City and county pension portfolios had a 66% average allocation to equities last year, including real estate and private equity, and a 34% allocation to fixed income, according to Wilshire. Wilshire estimated a long-term median return on city and county pension assets of 7.2% per year, 0.8 percentage points below the median actuarial interest rate assumption of 8%.