By: Jack Olson

Jack Olson — Thu, 04 Oct 2012 13:12:50 +0000

The text of the law calls the plan a “cash balance” defined benefit plan. According to the Employee Benefits Security Administration, which is a division of the federal Department of Labor, the employer bears sole financial risk and financial responsibility for paying the benefits(Frequently Asked Questions, http://www.dol.gov/ebsa). Hence, the money must be invested conservatively; both the DOL website and the law refer to the T-bill. According to http://www.treasury.gov/, 52-week T-bills are currently paying 0.15% annual interest. That’s scarcely a rate of return to get excited about, especially since U.S. Treasury bonds are no longer rated AAA. It’s also about one-tenth as much as the rise in the Consumer Price Index from Aug 2011 to Aug 2012 (Bureau of Labor Statistics). The sneaky negative option enrollment, which would be an illegal unauthorized transaction if done by a bank or any other financial institution, is bad enough. Tricking people into investing is an encroachment on their liberty, but this law tricks them into buying an investment with a negative real return.

By: Jack Olson

Jack Olson — Thu, 04 Oct 2012 12:49:11 +0000

What I don’t see in the news reports or even in the bill Brown signed is the terms under which the employee gets access to his money. Most 401k accounts are cashed out when the employee changes jobs, regardless of the taxes and penalties this incurs. That isn’t a heavy expense because most 401k accounts are small, but it defeats the purpose of 401k’s. If California workers are able to cash out these new retirement savings plans when they change jobs, won’t that defeat the purpose of the new law?

Comments on: A CALPERS power grab for private pensions?

By: Jack Olson

By: Jack Olson