(Bloomberg) -- The 220 billion pound ($334 billion) hole in U.K. corporate pensions may push companies to cut dividends, damping the recovery in Europe’s largest stock market.
The 1.17 percentage point drop in corporate bond yields since October is forcing companies from BT Group Plc to BAE Systems Plc to set aside more cash for future obligations. London-based BT slashed its dividend by 89 percent last week to support a plan for more than 340,000 current and retired employees.
More will follow, adding to the biggest dividend reductions in Europe since at least 1997, according to data compiled by Paris-based Societe Generale SA and UBS AG in Zurich. U.K. companies are the most susceptible because English corporations typically run pension funds, unlike the rest of Europe, where the state is responsible for retirees.
“Pension managers are caught in the perfect storm,” said Chetan Ghosh at Investment Solutions Ltd. in London, which oversees more than $13.8 billion. “Bond yields are falling and stocks have not recovered from last year’s sell-off. This will increasingly be a problem through 2011.”
Dividend reductions would add pressure to share prices already battered by the global recession and the region’s first annual net gain in equity sales since 2005.
‘Under-Funded’
BT, the U.K.’s largest phone company, and BAE Systems, Europe’s biggest arms maker, rank with British Airways Plc and Dusseldorf, Germany-based ThyssenKrupp AG, Germany’s largest steelmaker, as having a “high risk” of using cash to shore up pensions, Societe Generale said in a report last month.
BAE Systems plans to contribute an additional 200 million pounds to help cover its U.K. pension deficit and $250 million for its U.S. plan. London-based British Airways, Europe’s third- largest airline, may have to set aside more money for its growing pension deficit, analysts at Paris-based brokerage Oddo Securities wrote in a March 6 report.
“Markets underestimate the extra funding needs for companies’ pension obligations,” said Claudia Panseri, a strategist at Societe Generale in Paris. “Unless the equity markets rebound significantly during 2009, pension funds will remain significantly underfunded, which will result in high contribution requirements in 2010 and 2011.”
Discount Rate
International accounting rules require pension plans to calculate the amount of money they need today to meet future payments. The total is increased or reduced by an amount proportional to yields on corporate bonds, reflecting what a company will earn in interest before benefits are due. The lower the yield, the more money must be pledged now.
The deficits are in part an unintended consequence of the Bank of England’s efforts to pull the country out of the steepest economic contraction in at least three decades. The central bank cut its benchmark interest rate to a record 0.5 percent and said it would spend as much as 125 billion pounds to buy debt securities in an attempt to push down borrowing costs. The U.K. economy shrank at a 1.9 percent rate in the first quarter, the biggest contraction since Margaret Thatcher came to power in 1979.
Yields on 15-year corporate bonds in pounds rated AA have dropped to 6.55 percent from 7.72 percent in October, according to Markit Group Ltd. The decline may continue, according to Mark Bon, a London-based fund manager who helps oversee about $750 million at Canada Life Ltd.
Worst Case
“Yields are still falling and it will become increasingly difficult to fund pensions,” Bon said. “The worst-case scenario is depressed equity markets and deflation which keeps interest rates very, very low for a long time.”
A Bank of England spokesman said the central bank hasn’t commented on the effect of lower yields on benefit plans.
Deficits for companies in the FTSE 350 Index almost doubled to 61 billion pounds in the first three months of 2009, according to Mercer Ltd., a consulting firm. The “technical” funding needs as reported by pension trustees, a more accurate indication of shortfalls, climbed to 220 billion pounds at the end of March, said Matt Collinson, a Birmingham, England-based consultant at Mercer.
European equity benchmarks have recouped their 2009 losses since early March on speculation the worst financial crisis in seven decades is easing. Britain’s FTSE 100 Index is down 1.9 percent for the year after rallying 24 percent since March 3. The measure has retreated 35 percent from a seven-year high in June 2007.
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Sunday, May 17, 2009
Thursday, May 14, 2009
Treasury says insurers to get TARP funds access
(Reuters) - The U.S. Treasury Department said on Thursday that four insurers had been approved for access to the government's bank bailout plan.
A Treasury spokesman said Hartford Financial, Prudential Financial Group, Lincoln National Corp and Prudential Financial Inc met requirements for access to the government's Capital Purchase Program.
Read more here
A Treasury spokesman said Hartford Financial, Prudential Financial Group, Lincoln National Corp and Prudential Financial Inc met requirements for access to the government's Capital Purchase Program.
Read more here
Wednesday, May 13, 2009
Ford walks tightrope amid industry downturn
(Reuters) - Ford Motor Co executives face stockholders on Thursday to detail the automaker's plans to complete a turnaround without resorting to U.S. government help and steer clear of the industry collapse now swallowing rivals General Motors Corp and Chrysler.
After a wild ride over the past year, Ford investors have seen the automaker's stock increase three-fold since mid-February as the company pressed ahead of its cross-town rivals with agreements to restructure its debt and cut its obligations to the United Auto Workers union.
Ford, the only U.S. carmaker not operating on emergency U.S. government loans, mortgaged itself to the hilt in late 2006 to amass cash for a turnaround that remains on track as Chrysler was forced into bankruptcy on April 30. GM could join Chrysler in Chapter 11 within weeks.
When Ford's top executives open the automaker's annual meeting in Wilmington, Delaware, they will be able to tell shareholders they have completed a debt restructuring and new union agreements.
"They got in early and they had the money and they didn't have to get the government involved and that gave them more time," Standard & Poor's equity analyst Efraim Levy said.
"Their retail share has stabilized, but they are not out of the woods yet," he said. "There is still risk for Ford."
Ford posted a company record net loss of $14.7 billion in 2008 and losses totaled $30 billion over the last three full years. It posted a first-quarter net loss of $1.43 billion.
Still, analysts see the Ford debt restructuring, the union agreements and the automaker's ability to issue more stock as signs that it could make it through the industry downturn and out the other side without seeking government emergency loans.
The automaker's stock closed at $4.96 Wednesday on the New York Stock Exchange, down about 40 percent from a year earlier.
Chief Executive Alan Mulally told reporters last week Ford's restructuring was on track and it had sufficient liquidity to complete its restructuring plan.
The automaker has said that it expects to be breakeven or profitable in 2011 under its restructuring forecast.
One of the agreements between Ford and the United Auto Workers reworked the funding of a trust for union retiree healthcare, a Voluntary Employee Beneficiary Association. Ford may now provide half of its obligation in stock instead of cash to preserve liquidity.
The VEBA funding plan requires shareholder approval at the annual meeting. Ford's deal with the UAW also provided contract changes to cut labor costs.
The annual meeting agenda has several shareholder rights initiatives, including an advisory vote on eliminating a preferred voting structure that has given the Ford family control of the company since it went public in 1956.
Under that structure, Ford family members hold a 40 percent voting interest through 70.9 million Class B shares, while the automaker had more than 2.3 billion common shares outstanding as of March 18, according to its proxy statement.
Read more here
After a wild ride over the past year, Ford investors have seen the automaker's stock increase three-fold since mid-February as the company pressed ahead of its cross-town rivals with agreements to restructure its debt and cut its obligations to the United Auto Workers union.
Ford, the only U.S. carmaker not operating on emergency U.S. government loans, mortgaged itself to the hilt in late 2006 to amass cash for a turnaround that remains on track as Chrysler was forced into bankruptcy on April 30. GM could join Chrysler in Chapter 11 within weeks.
When Ford's top executives open the automaker's annual meeting in Wilmington, Delaware, they will be able to tell shareholders they have completed a debt restructuring and new union agreements.
"They got in early and they had the money and they didn't have to get the government involved and that gave them more time," Standard & Poor's equity analyst Efraim Levy said.
"Their retail share has stabilized, but they are not out of the woods yet," he said. "There is still risk for Ford."
Ford posted a company record net loss of $14.7 billion in 2008 and losses totaled $30 billion over the last three full years. It posted a first-quarter net loss of $1.43 billion.
Still, analysts see the Ford debt restructuring, the union agreements and the automaker's ability to issue more stock as signs that it could make it through the industry downturn and out the other side without seeking government emergency loans.
The automaker's stock closed at $4.96 Wednesday on the New York Stock Exchange, down about 40 percent from a year earlier.
Chief Executive Alan Mulally told reporters last week Ford's restructuring was on track and it had sufficient liquidity to complete its restructuring plan.
The automaker has said that it expects to be breakeven or profitable in 2011 under its restructuring forecast.
One of the agreements between Ford and the United Auto Workers reworked the funding of a trust for union retiree healthcare, a Voluntary Employee Beneficiary Association. Ford may now provide half of its obligation in stock instead of cash to preserve liquidity.
The VEBA funding plan requires shareholder approval at the annual meeting. Ford's deal with the UAW also provided contract changes to cut labor costs.
The annual meeting agenda has several shareholder rights initiatives, including an advisory vote on eliminating a preferred voting structure that has given the Ford family control of the company since it went public in 1956.
Under that structure, Ford family members hold a 40 percent voting interest through 70.9 million Class B shares, while the automaker had more than 2.3 billion common shares outstanding as of March 18, according to its proxy statement.
Read more here
Tuesday, May 12, 2009
AIG Trustees Should Answer to Taxpayers, Not Fed, Towns Says
(Bloomberg) -- A House panel plans to ask trustees assigned to safeguard the U.S. government’s $182.5 billion investment in American International Group Inc. whether their supervision by the Federal Reserve Bank of New York serves taxpayers’ interests.
The trustees -- Jill Considine, Chester Feldberg and Douglas Foshee -- were appointed in January by the New York Fed, a private institution owned by member banks, which has the power to overturn some of their decisions and to remove them. Edolphus Towns, a New York Democrat who chairs the House Committee on Oversight and Reform that will hold hearings tomorrow, said he’s concerned that the interests of AIG’s customers and trading partners may outweigh those of taxpayers.
“As a $182.5 billion recipient of taxpayer dollars, AIG should no longer be able to operate in the dark,” said Towns in an e-mail. “The American people, who now own a major portion of this company, deserve clarification on core issues of the AIG bailout -- who exactly is in charge at AIG and who is protecting the taxpayer’s multibillion-dollar investment?”
AIG is the biggest recipient of government rescue funds. Whether it can repay the money may depend on actions by the trustees, some of which must be approved by the New York Fed. The New York-based insurer has received four bailouts valued at $182.5 billion since agreeing in September to turn over about an 80 percent stake in the company to the government.
AIG Counterparties
Peter Bakstansky, a spokesman for the trustees and a former spokesman for the New York Fed, said the three are “prepared to talk about” what they have been doing since their appointment when they testify. He said the trustees speak weekly with AIG management by telephone and meet monthly in person. He declined to give further details.
Deborah Kilroe, a spokeswoman for the New York Fed, declined to comment.
The insurer’s counterparties include firms connected to the New York Fed, such as Goldman Sachs Group Inc., which has received more than $8 billion of AIG’s bailout funds to settle credit-default swaps it had with the firm. Towns’s committee plans to ask the trustees and AIG Chief Executive Officer Edward Liddy, who is also scheduled to testify, why the company didn’t try to negotiate for payments of less than the full amount.
New York Fed President William Dudley worked until 2007 as Goldman Sachs’s chief economist. Stephen Friedman, who resigned as New York Fed chairman May 7, was once CEO of Goldman Sachs and supervised the search for Dudley.
Friedman resigned from his New York Fed post after the Wall Street Journal reported that he bought 37,300 shares of Goldman Sachs last year while seeking a waiver of Fed policy that would have precluded him from sitting on the Goldman Sachs board and being New York Fed chairman at the same time. The shares have since gained $3 million in value.
‘Widening Morass’
“These programs are drawing the Federal Reserve into a widening political morass and compromising Fed independence,” said William Poole, former president of the St. Louis Fed. The Fed lending programs “ought to have legislative authorization and ought to be run out of the Treasury or some other agency of the federal government.”
Goldman Sachs CEO Lloyd Blankfein rejected calls to remove Friedman. “He is a credit to our board,” Blankfein said last week at the firm’s annual meeting in New York. Friedman said he bought the shares “because I thought Goldman Sachs stock, under tangible net worth, was at a very attractive price.”
The New York Fed is one of 12 regional Federal Reserve banks and the one charged with monitoring capital markets. It is also managing $1.7 trillion of emergency lending programs. While the Fed’s Washington-based Board of Governors is a federal agency subject to the Freedom of Information Act and other government rules, the New York Fed and other regional banks maintain they are separate institutions, owned by their member banks, and not subject to federal restrictions.
Read more here
The trustees -- Jill Considine, Chester Feldberg and Douglas Foshee -- were appointed in January by the New York Fed, a private institution owned by member banks, which has the power to overturn some of their decisions and to remove them. Edolphus Towns, a New York Democrat who chairs the House Committee on Oversight and Reform that will hold hearings tomorrow, said he’s concerned that the interests of AIG’s customers and trading partners may outweigh those of taxpayers.
“As a $182.5 billion recipient of taxpayer dollars, AIG should no longer be able to operate in the dark,” said Towns in an e-mail. “The American people, who now own a major portion of this company, deserve clarification on core issues of the AIG bailout -- who exactly is in charge at AIG and who is protecting the taxpayer’s multibillion-dollar investment?”
AIG is the biggest recipient of government rescue funds. Whether it can repay the money may depend on actions by the trustees, some of which must be approved by the New York Fed. The New York-based insurer has received four bailouts valued at $182.5 billion since agreeing in September to turn over about an 80 percent stake in the company to the government.
AIG Counterparties
Peter Bakstansky, a spokesman for the trustees and a former spokesman for the New York Fed, said the three are “prepared to talk about” what they have been doing since their appointment when they testify. He said the trustees speak weekly with AIG management by telephone and meet monthly in person. He declined to give further details.
Deborah Kilroe, a spokeswoman for the New York Fed, declined to comment.
The insurer’s counterparties include firms connected to the New York Fed, such as Goldman Sachs Group Inc., which has received more than $8 billion of AIG’s bailout funds to settle credit-default swaps it had with the firm. Towns’s committee plans to ask the trustees and AIG Chief Executive Officer Edward Liddy, who is also scheduled to testify, why the company didn’t try to negotiate for payments of less than the full amount.
New York Fed President William Dudley worked until 2007 as Goldman Sachs’s chief economist. Stephen Friedman, who resigned as New York Fed chairman May 7, was once CEO of Goldman Sachs and supervised the search for Dudley.
Friedman resigned from his New York Fed post after the Wall Street Journal reported that he bought 37,300 shares of Goldman Sachs last year while seeking a waiver of Fed policy that would have precluded him from sitting on the Goldman Sachs board and being New York Fed chairman at the same time. The shares have since gained $3 million in value.
‘Widening Morass’
“These programs are drawing the Federal Reserve into a widening political morass and compromising Fed independence,” said William Poole, former president of the St. Louis Fed. The Fed lending programs “ought to have legislative authorization and ought to be run out of the Treasury or some other agency of the federal government.”
Goldman Sachs CEO Lloyd Blankfein rejected calls to remove Friedman. “He is a credit to our board,” Blankfein said last week at the firm’s annual meeting in New York. Friedman said he bought the shares “because I thought Goldman Sachs stock, under tangible net worth, was at a very attractive price.”
The New York Fed is one of 12 regional Federal Reserve banks and the one charged with monitoring capital markets. It is also managing $1.7 trillion of emergency lending programs. While the Fed’s Washington-based Board of Governors is a federal agency subject to the Freedom of Information Act and other government rules, the New York Fed and other regional banks maintain they are separate institutions, owned by their member banks, and not subject to federal restrictions.
Read more here
Monday, May 11, 2009
Rich May Be Australian Budget Target Amid Recession
(Bloomberg) -- Australian Treasurer Wayne Swan will tonight unveil a Robin Hood-style budget, slashing tax breaks and welfare-payments to high-income earners as he tries to contain a record deficit amid the global recession.
Swan will take away subsidies for the rich while protecting payments to lower-income earners, the aged and the unemployed in the budget, framed amid an economic slump that has cut tax revenue by more than A$200 billion ($153 billion), economists say. He releases the budget at 7:30 p.m. in Canberra.
The Labor government of Prime Minister Kevin Rudd will unveil a A$34 billion deficit in the year ending June 30, the first shortfall in seven years, as tax revenue from a commodities export boom dries up, according to the median of 16 economists surveyed by Bloomberg. Swan warned today there “will be tough decisions,” as he tries to limit debt in a budget the treasury department says won’t return to surplus until 2015-16.
“Swan will rob rich Peter to pay poor Paul,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. “The rivers of gold from the commodities boom flowing through the economy are well and truly over.”
The economists’ survey predicts Swan will also forecast budget deficits of A$58.5 billion in 2009-10 and A$60 billion in 2010-11. The economy will contract 0.3 percent in 2009-10, they forecast.
Treasury has said the government will have to borrow as much as A$200 billion through the bond market to fund deficits until 2015-16.
Tax Breaks
Swan has already signaled he will halve tax breaks for high-income earners contributing to pension funds and slash their government subsidy for private health insurance. At the same time, he’ll deliver extra help for families earning less than A$150,000 a year and increase payments to aged pensioners.
Still, income-tax cuts for people earning between A$80,000 and A$180,000 scheduled for the two years starting July 1 will go ahead. The cuts were part of A$23 billion in cuts announced in last year’s budget.
“Everybody in Australia has to do their bit and some people have the capacity to do a bit more,” Swan told reporters in Canberra today.
Swan’s imposts on high-income earners mirrors steps in the U.S. and the U.K.
Read more here
Swan will take away subsidies for the rich while protecting payments to lower-income earners, the aged and the unemployed in the budget, framed amid an economic slump that has cut tax revenue by more than A$200 billion ($153 billion), economists say. He releases the budget at 7:30 p.m. in Canberra.
The Labor government of Prime Minister Kevin Rudd will unveil a A$34 billion deficit in the year ending June 30, the first shortfall in seven years, as tax revenue from a commodities export boom dries up, according to the median of 16 economists surveyed by Bloomberg. Swan warned today there “will be tough decisions,” as he tries to limit debt in a budget the treasury department says won’t return to surplus until 2015-16.
“Swan will rob rich Peter to pay poor Paul,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. “The rivers of gold from the commodities boom flowing through the economy are well and truly over.”
The economists’ survey predicts Swan will also forecast budget deficits of A$58.5 billion in 2009-10 and A$60 billion in 2010-11. The economy will contract 0.3 percent in 2009-10, they forecast.
Treasury has said the government will have to borrow as much as A$200 billion through the bond market to fund deficits until 2015-16.
Tax Breaks
Swan has already signaled he will halve tax breaks for high-income earners contributing to pension funds and slash their government subsidy for private health insurance. At the same time, he’ll deliver extra help for families earning less than A$150,000 a year and increase payments to aged pensioners.
Still, income-tax cuts for people earning between A$80,000 and A$180,000 scheduled for the two years starting July 1 will go ahead. The cuts were part of A$23 billion in cuts announced in last year’s budget.
“Everybody in Australia has to do their bit and some people have the capacity to do a bit more,” Swan told reporters in Canberra today.
Swan’s imposts on high-income earners mirrors steps in the U.S. and the U.K.
Read more here
Thursday, May 7, 2009
Marchionne Picks Over U.S. Wreckage to Build European Car Group
(Bloomberg) -- Fiat SpA Chief Executive Officer Sergio Marchionne is setting out to build a pan-European car company from the rubble of the U.S. auto industry.
The car industry is in turmoil, and Marchionne, the 56-year-old deputy chairman of UBS AG, says he sees opportunity. He’s taking over Chrysler LLC after a U.S.-arranged bankruptcy and seeking to incorporate units owned by General Motors Corp., including three European brands, Opel, Vauxhall and Saab, and some Latin American operations.
“The sector produces 90 million vehicles against a demand of 60 million,” Marchionne said in an interview yesterday. “This overcapacity has to be managed and the American approach proved to be very efficient,” he said, referring to the U.S. administration’s readiness to lend $23.9 billion to Chrysler and GM on the condition that they cut costs.
Blending automakers to gain scale and geographic scope has been tried before. Chrysler and Daimler AG split up after a decade together. Carlos Ghosn “has had a hard time running Renault and Nissan,” as CEO of the allied automakers, said Tom Stallkamp, a former Chrysler president who is now a managing partner at Ripplewood Holdings LLC.
“Chrysler is going to be a full-time job in itself,” said Stallkamp, who warned that financing such a sprawling company will be difficult. “On paper, this probably makes sense, numbers wise, but it’s a cultural and logistical nightmare to make it all work.”
New CEO
For Marchionne and Turin, Italy-based Fiat, it’s a chance to save Chrysler, rescue Saab and pick up Opel to assemble a 6.8-million vehicle per year auto company.
“Chrysler is on track to re-emerge from bankruptcy in 60 days,” he said. “I will become Chrysler CEO after that.” The idea has been discussed in meetings with the Treasury, he said.
Saab is another matter. The Swedish carmaker sought protection from creditors Feb. 20 after General Motors Corp. said it would sever ties with the unit by 2010 as part of its own reorganization.
“Saab is an interesting opportunity, the brand is, however, too small for the auto mass market,” Marchionne said. “We could combine Saab with another brand. In the U.S., there’s a Saab dealership network. It would be a pity to give that up.”
He has said that a global auto group needs 5.5 million to 6 million vehicles annually to have the economies of scale to compete.
Read more here
The car industry is in turmoil, and Marchionne, the 56-year-old deputy chairman of UBS AG, says he sees opportunity. He’s taking over Chrysler LLC after a U.S.-arranged bankruptcy and seeking to incorporate units owned by General Motors Corp., including three European brands, Opel, Vauxhall and Saab, and some Latin American operations.
“The sector produces 90 million vehicles against a demand of 60 million,” Marchionne said in an interview yesterday. “This overcapacity has to be managed and the American approach proved to be very efficient,” he said, referring to the U.S. administration’s readiness to lend $23.9 billion to Chrysler and GM on the condition that they cut costs.
Blending automakers to gain scale and geographic scope has been tried before. Chrysler and Daimler AG split up after a decade together. Carlos Ghosn “has had a hard time running Renault and Nissan,” as CEO of the allied automakers, said Tom Stallkamp, a former Chrysler president who is now a managing partner at Ripplewood Holdings LLC.
“Chrysler is going to be a full-time job in itself,” said Stallkamp, who warned that financing such a sprawling company will be difficult. “On paper, this probably makes sense, numbers wise, but it’s a cultural and logistical nightmare to make it all work.”
New CEO
For Marchionne and Turin, Italy-based Fiat, it’s a chance to save Chrysler, rescue Saab and pick up Opel to assemble a 6.8-million vehicle per year auto company.
“Chrysler is on track to re-emerge from bankruptcy in 60 days,” he said. “I will become Chrysler CEO after that.” The idea has been discussed in meetings with the Treasury, he said.
Saab is another matter. The Swedish carmaker sought protection from creditors Feb. 20 after General Motors Corp. said it would sever ties with the unit by 2010 as part of its own reorganization.
“Saab is an interesting opportunity, the brand is, however, too small for the auto mass market,” Marchionne said. “We could combine Saab with another brand. In the U.S., there’s a Saab dealership network. It would be a pity to give that up.”
He has said that a global auto group needs 5.5 million to 6 million vehicles annually to have the economies of scale to compete.
Read more here
Wednesday, May 6, 2009
Putnam’s CEO to Propose Expansion of 401(k) Retirement Plans
(Bloomberg) -- Putnam Investments Chief Executive Officer Robert Reynolds plans to urge regulators and investment professionals today to expand workplace retirement plans and make them safer.
Reynolds, in the text of a speech set to be delivered in Washington, proposes mandatory 401(k) enrollment for workers whose employers offer the plan and bigger tax breaks for companies that match contributions. He will speak at an event organized by 401kWire.com, a retirement industry Web site.
The average retirement-account balance sank 30 percent to $58,000 in the two years ended Dec. 31, according to Hewitt Associates Inc., a Lincolnshire, Illinois-based benefits- consulting firm. Investors had $2.7 trillion in 401(k) accounts as of Sept. 30, according to the Washington-based Investment Company Institute, a trade group representing mutual funds.
“The multitrillion-dollar wave of wealth destruction that struck America’s markets in 2008 inflicted serious losses for retirement savings,” Reynolds said. “We need to act now to reboot the system and boost retirement savings.”
In February, Representative George Miller, a California Democrat and chairman of the House Education and Labor Committee, called 401(k)s “little more than a high-stakes crapshoot.”
A law passed in 2006 allowed 401(k) providers to automatically enroll new workers, forcing them to opt out if they desired. For the 30 percent of plans that switched from voluntary enrollment, participation rose to about 90 percent of employees from 60 percent, according to Boston-based Putnam.
Read more here
Reynolds, in the text of a speech set to be delivered in Washington, proposes mandatory 401(k) enrollment for workers whose employers offer the plan and bigger tax breaks for companies that match contributions. He will speak at an event organized by 401kWire.com, a retirement industry Web site.
The average retirement-account balance sank 30 percent to $58,000 in the two years ended Dec. 31, according to Hewitt Associates Inc., a Lincolnshire, Illinois-based benefits- consulting firm. Investors had $2.7 trillion in 401(k) accounts as of Sept. 30, according to the Washington-based Investment Company Institute, a trade group representing mutual funds.
“The multitrillion-dollar wave of wealth destruction that struck America’s markets in 2008 inflicted serious losses for retirement savings,” Reynolds said. “We need to act now to reboot the system and boost retirement savings.”
In February, Representative George Miller, a California Democrat and chairman of the House Education and Labor Committee, called 401(k)s “little more than a high-stakes crapshoot.”
A law passed in 2006 allowed 401(k) providers to automatically enroll new workers, forcing them to opt out if they desired. For the 30 percent of plans that switched from voluntary enrollment, participation rose to about 90 percent of employees from 60 percent, according to Boston-based Putnam.
Read more here
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