Where's Junior? S. Brunswick Wants to Know

Mr. Kalet is a discering observer ... (0.00 / 0)

and he does a very fine job editing my home-town's newspaper of record.

I can only hope that people who think not supporting Menendez for Senate is somehow going to protect their all-too-vulnerable-already families will look just beyond their self-applied blinders at "Keansian" economics. Preserving Social Security -- not just its 'promise' -- will protect an awful lot of people's children in the future. I have always shuddered to think what would happen if too much of worker's retirement incomes were put into play in the stock market.

Ken Lay was a crook (and broke, too - you know how many indigent ex-CEOs die at vacation homes outside of Aspen each year, right?) -- but Enron employees who had nothing in their portfolio but Enron stock were idiots, according to any normal standard of 'prudent man' investing. (Most say never more than 10% in your employer's stock).

Yeah, they're victims, but I'm blaming them anyway, 'cause 'trees don't grow to the sky,' as someone wiser than me once said. If they'de cashed out earlier, they would have that house in Aspen, too, but greed is a powerful motivator. (And I'M still waiting for 12,500 on the Dow -- hello, Ralph Acampora!)

I got dot-bombed and took a bath in 2001, too, but at LEAST I never owned a single share of AT&T stock -- placing cash bets on your sole source of income isn't very bright, 'cause if it all goes to hell, you get it in the neck twice!

Giving the average American his or her entire Social Security contribution back to invest as they see fit would yield some number of successful, happy retirees, and a far greater number of unsuccessful, indigent, no-vacation-home-near-Aspen day-tradin' losers, with the vast majority bulk in between, not much better or worse off than they would have been under the existing system, as SS provides a pretty good return on investment -- the longer you live, the better your yield, and if you die early, well, you don't need the money anymore and it IS good for the rest of us, actuarially speaking, of course.

And what becomes of the day-tradin' losers? Do we bail them out, find 'em a comfy steam grate, line them up against the wall, or what? Thank goodness (or, maybe, Republican economic policy) that Trenton at least has churches with soup kitchens ... my faith will sustain me ...

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by: denniscmcgrath @ Fri Jul 07, 2006 at 13:35:24 PM UTC

Crazy logic. (0.00 / 0)

Most Enron employees lost their entire pensions, which was entirely invested in Enron stock.  This pension decision was made by the company and employees had no control over it.  Blaming the Enron employees for a decision over which they had no control is both heartless and baseless. 

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by: princetonblue @ Fri Jul 07, 2006 at 16:21:46 PM UTC

[ Parent ]

My error (0.00 / 0)

I assumed they were loading their 401(k) with company stock. And actually, I believe that's true. But certainly they are not responsible for the manageent of their pension.

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by: denniscmcgrath @ Fri Jul 07, 2006 at 16:25:58 PM UTC

[ Parent ]

401(k) loading (0.00 / 0)

I used to do benefits communications for a telecom company, and the story I heard about Enron was that the PTBs there blatently encouraged their employees to load up their 401(k)s with company stock, through newsletters, all-employee broadcasts, etc.  Many people did so, because they felt the information was coming from a trusted source.  So while they individuals may have technically made the decision to invest, it is not entirely fair to blame them after the fact.

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by: RedDesert @ Fri Jul 07, 2006 at 16:40:29 PM UTC

[ Parent ]

Enron (0.00 / 0)

I may be incorrect with respect to Enron, but almost all companies fund their matching part of a 401k contribution or the funding of the pension plan entirely with company stock.  The reason is because it costs the company nothing in the short term.  Generally, there are also rules about what the employees contribution can be invested in.  For my father's company, the policy was (upto the Enron debacle), that if the employee's contribution was going to be matched by the company, then the employee's contribution had to be used to buy the company's stock.

Since Enron, there have been some federal laws passed to make pensions more diverse. 

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by: princetonblue @ Fri Jul 07, 2006 at 16:57:55 PM UTC

[ Parent ]

My last comment on the topic (0.00 / 0)

Having reread my original comment, I can see how you might have misconstrued ‘pension’ to mean ‘portfolio,’ which is what I wrote – I said nothing about pensions, so let’s not be to hasty in damning me to hell as heartless. My point about those who plunked every last 401(k) buck into Enron stock stands: see this Money-CNN story from 2001 from 2001 for details.

Did Enron illegally block its employees from selling company stock in 401(k) accounts when the bottom fell out? Probably … but, again, my point was, sell when you’ve already made 1000% profit, don’t stick around thinking that if you’re up to 1400% you’re going to keep growing forever. That’s very imprudent, and either foolish or greedy (or both).

Now, about Enron pensions … The investment of pension funds in the securities of a sponsoring employer is specifically addressed by ERISA. ERISA generally requires that pension plan assets be managed prudently and that portfolios be diversified in order to limit the possibility of large losses. Indeed, under ERISA, traditional “defined benefit” pension plans are generally allowed to invest no more than 10 percent of their assets in employer securities and real property.

I’m not sure what exactly happened to Enron’s traditional “defined benefit” pension plan, but I can check the Pension Guarantee board website and see if Enron’s tanked and if the governmentis now administering the remainder. But again, the point is … traditional pensions, which must be prudently managed, can contain not more than 10% of a company’s stock or other assets. So, 10% company stock in your 401(k), and 10% company stock in your pension, and having your salary coming from that same well, suggests that you need to limit your total exposure to this single risk.

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by: denniscmcgrath @ Fri Jul 07, 2006 at 17:20:48 PM UTC

Ooops! One more on Enron's Pension Status ... (0.00 / 0)

Okay, one more word ... The ‘traditional’ Enron defiend benefit pension plan, not the 401(k) defined contribution plan … so far as I can see, it’s underfunded but salvageable per the PBGC and all benefits promised can be paid (per the PBGC) if the $13+ billion in the plan is preserved from any added malfeasance …

FOR IMMEDIATE RELEASE
June 03, 2004
PBGC Public Affairs, 202-326-4040
PBGC Takes Step to Protect Participants in Enron's Underfunded Defined Benefit Pension Plans
WASHINGTON—The Pension Benefit Guaranty Corp. announced today that to protect the participants in the underfunded pension plans of Enron Corp., the agency is initiating an action that it hopes will preserve all the benefits that Enron promised to its workers.
"The procedural step PBGC is taking today is designed to ensure that enough money remains available to fully protect the pensions of Enron's workers and retirees," said PBGC Executive Director Bradley D. Belt. "Acting now preserves assets that Enron can use to pay a private insurance company to take over its pension plans, which would provide full benefits and preserve the option to receive lump-sum payments."
By filing its notice of determination to terminate four of Enron's defined benefit pension plans, the PBGC matures its claim against the company for the underfunding in those plans, preserving assets that would otherwise flow from the bankrupt company to other creditors. The four plans, which have roughly 17,000 participants, are the Enron Corp. Cash Balance Plan, Garden State Paper Pension Plan, Enron Financial Services Pension Plan, and San Juan Gas Company Pension Plan.
The confirmation hearing for Enron's plan of reorganization begins today. The reorganization plan makes inadequate provision for either maintaining the Enron defined benefit pension plans or placing the pension obligations with a private sector insurance company. After confirmation, the plans would be left behind with a liquidating trust that is paying out all of its assets to other creditors.
Under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), the PBGC has a claim for joint and several liability against all of a plan sponsor's controlled group members. Once Enron's plan of reorganization is confirmed, the controlled group will be broken and PBGC's ability to recover funds will be severely impaired. By acting now, the ability to secure a full recovery from the controlled group's roughly $13.8 billion in value is strengthened.
"We know there are sufficient assets to settle the pension obligations in a way that preserves full benefits, and we need to act to ensure that those assets do not go out the door," Belt said. "We hope we don't have to take over these pension plans, and we remain committed to working with all stakeholders to ensure an outcome that serves the interests of participants."

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by: denniscmcgrath @ Fri Jul 07, 2006 at 17:31:17 PM UTC

[ Parent ]

Thanks for the correction (0.00 / 0)

I'm amazed to hear that Enron's defined-benefits pension plan was ultimately fully funded.  It wasn't finalized until July '05 (there's an announcement on the Enron site), but ultimately all the defined-benefit plans were funded by selling other assets.  It's hard to believe that ultimately, the employees of Enron got better treated in this respect than those of United, Delphi, ...

Regarding the 401ks,  there are still far too many roadblocks in how they are administered (such as diversification) for employees to bear the responsibility for the failure of these plans.  Employees should not be expected to be pension experts, especially if they don't have much choice in how their 401k contributions are used.

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by: princetonblue @ Fri Jul 07, 2006 at 18:27:28 PM UTC

[ Parent ]

Re (0.00 / 0)

Damn you to Hell.  You're heartless.

HAHAHAHAHA

XT

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by: Thurman Hart @ Fri Jul 07, 2006 at 17:36:08 PM UTC

[ Parent ]

Right, Exactly (0.00 / 0)

My original point was that privatizing Social Security would probably produce much the same result as can be observed in many employees' 401(k) investment behavior, e.g., Enron's employees.

I don't think most people are incapable of understanding some fundamental investing rules, but I do think greed can overwhelm common sense -- been there, done that myself. Yeah, Enron's employees were strongly encouraged to buy company stock by trusted advisors -- and some of those same shills and shysters will be ready to help you manage your private Social Security investments, if they and you get the chance.

That's WHY retaining a defined retirement benefit plan such as Social Security is so important -- it's the safety net that lets you take some calculated risks with your other savings. If you fail, you'll be eating hot dogs and not steak in retirement, but you will be eating.

Not investing all your money in the same place your salary comes from seems like a fairly simple rule to live by to me, but then again I was raised by a expert in the defined pension field.

After I researched the issues, I called my dad just to share with him what I was doing instead of my job today. He just LOVES this stuff. (He doesn't know where Jimmy Hoffa is buried, but he did figure out where the Central States Teamsters Pension fund went, way back in the 1960s ... )

I am pleased to hear the the Enron employees will get their pensions -- it's not what they deserve, which is their jobs back in an ethically run company, but it IS better than nothing.

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by: denniscmcgrath @ Fri Jul 07, 2006 at 18:53:25 PM UTC

Re (0.00 / 0)

Ok, maybe you have a little bit of heart.  I'll only damn you to the upper layers of Hell.

The fact of the matter is that we don't need to turn Soc. Sec. into an investment account - everyone (ok, maybe one or two people - literally, one or two) can set up a 401(k) or IRA.  Those are supposed to be vehicles for wealth building and retirement.  Social Security is not, never has been, never should be.  It isn't designed for that purpose at all.

Here's an idea to fund Soc. Sec. - cut the tax rate to 12% and lift the ceiling from roughly $90,000 to $1 million.

Booyah! Money, money, money, money - MONEY!

Silly old Bush, he thinks he's a pooh bear chasing a honey tree.

XT

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by: Thurman Hart @ Fri Jul 07, 2006 at 18:57:45 PM UTC

[ Parent ]