Candidates offer views on crucial pension issues

Democratic presidential nominee Sen. Barack Obama, D-Ill., believes participants in corporate pension plans should receive annual disclosures about the funds’ investments, including the performance of those investments and appropriate details about probable future investment strategies.

Mr. Obama called for full disclosure, saying “when companies fail to disclose their investments, the resulting lack of transparency can make it easier for fund managers to make imprudent or even fraudulent investment decisions.”

The statement was part of his response to a list of questions submitted to him and his opponent, Sen. John McCain, R-Ariz., by Pensions & Investments and 13 employee benefits groups. Mr. McCain, meanwhile, said Congress should not impose restrictions on investment activities for pension funds. He said it is the role of the government to “create a financial regulatory system that protects investors and markets so that we end up with a transparent and highly efficient market.”

Mr. McCain said these two goals “need not be at odds with one another.”

Response to the two candidates’ positions was mixed.

Some pundits said Mr. Obama’s idea could be self-defeating and burdensome.

“I hope that any reference to disclosing future strategies is intended to be incredibly generic,” said Richard Susko, partner in the New York law firm of Cleary, Gottlieb, Steen & Hamilton. “Otherwise, if you telegraph what you are going to do and you do it in size, others will beat you to it.”

Calls to Mr. Obama’s campaign for clarification were not returned by deadline.

William F. Quinn, chairman of American Beacon Advisors, Fort Worth, Texas, and the Committee on Investment of Employee Benefit Assets, Bethesda, Md., said requiring details about funds’ future investment strategies would be hard to disclose because pension funds respond differently as market conditions change.

“Its not something that you would be able to disclose, since it’s an unknown,” he said.

More troubling, Mr. Quinn said, is the amount of disclosure Mr. Obama’s plan would require to be provided to pension plan participants. That volume of information would more likely overwhelm participants, instead of being useful.

“We want transparency, but it needs to be relevant and meaningful transparency,” Mr. Quinn said. American Beacon had $57 billion under management as of Aug. 31. American Beacon provides investment advisory services for American Airlines’ $9.1 billion pension fund, $7.3 billion 401(k) plan and other employee benefit funds, as well as cash management for AMR Corp.

Diann Howland, vice president, legislative affairs at the American Benefits Council, Washington, said the disclosure Mr. Obama wants could be a huge undertaking for some plans with several investment managers. She also wondered how often information should be made available, given that funds are regularly moving investments around.

James Delaplane, a partner in the law firm of Davis & Harman LLP, Washington, said Mr. McCain’s answer was “pretty black and white, and something we haven’t heard from him before.”

J. Mark Iwry, a senior fellow at the Brookings Institute, Washington, said he was encouraged by both candidates’ knowledge of the Employee Retirement Income Security Act, noting there are not many members of Congress “who get this stuff.”

“Both are not endorsing any type of prohibitions about any classes of investments and are reaffirming the traditional view of investment philosophies in ERISA plans,” he said.

Mr. Iwry has advised the Obama campaign on retirement issues.

The questions were gathered and sent to the campaigns by Sam Gilbert, president of The Pension Forum and of United Plan Administrators, Westlake Village, Calif., a consulting firm. Mr. Gilbert has submitted an employee benefit questionnaire to presidential candidates since 1984.

Organizations that submitted questions were: the American Society of Pension Professionals & Actuaries; the National Small Business Association; Employers Council on Flexible Compensation; U.S. Chamber of Commerce; National Association for the Self-Employed; American Academy of Actuaries’ Pension Practice Council; National Association of Women Business Owners; Society of Professional Benefit Administrators; National Retail Federation; the National Institute of Pension Administrators; Profit Sharing/401(k) Council of America; Small Business Council of America; and the Pension Forum.

ASPPA, Arlington, Va., asked whether the candidates favored proposed legislation on so-called “auto-IRAs,” where employees sign up to have a portion of their paycheck automatically contributed to an individual retirement account. ASPPA supports proposals that would require companies that do not already provide a retirement plan to offer auto-IRAs.

Both candidates supported auto-IRAs in some form, with Mr. McCain saying auto-IRAs are a natural way employees of small businesses, which find it too expensive to provide a pension plan, can save for retirement.

“The goal is not to displace more and more company pensions, but rather that all workers have some way to easily save for retirement,” he said.

Mr. Obama’s plan requires employers who do not offer a retirement plan to automatically enroll employees in a direct-deposit IRA account, leaving employees the option to opt out if they sign a waiver.

The National Institute of Pension Administrators, Chicago, asked: “Under what circumstances would you propose and support a mandatory retirement savings plan, in addition to Social Security, for all working individuals?”

Mr. Obama said he would require large employers that choose not to sponsor a plan to allow employees to use the employer’s payroll system as a way to forward employees’ contributions to their own IRAs.

Mr. McCain said: “It is not appropriate for the federal government to mandate that all employers provide pension plans.”

For a full list of the questions and answers, please click here.

Contact Jennifer Byrd at [email protected]