Pension Pulse

Jordan Weissmann of the Atlantic reports, Disability Insurance: America's $124 Billion Secret Welfare Program (h/t, Suzanne Bishopric): Imagine for a moment that Congress woke up one morning, realized that the United States was suffering from a paralyzing long-term unemployment crisis , and, in a moment of progressive pique, decided to create a welfare program aimed at middle-aged, blue-collar workers. The one thing everybody could probably agree on is that it should help all those jobless 50-somethings find employment, right? Well, as NPR's Planet Money argues in an eye-opening story , it turns out there already is a "de facto welfare program" for those struggling Americans. The problem is, instead of getting the unemployed back on their feet, it pays them to give up work for good. I'm talking about Social Security's disability insurance program, which over 20 years has quietly morphed into one of the largest, yet least talked about, pieces of...

Jason Hsu of Research Affiliates wrote an interesting research comment, Does Blame Predict Performance? : As an econometrician and a fund-of-funds portfolio manager, I spend much time researching quantifiable metrics to help me identify managers who can outperform consistently. There is, in fact, a rich body of literature exploring different manager selection criteria. Academic papers have considered portfolio manager attributes, such as tenure, the CFA designation, advanced degrees, and even SAT scores; they have also examined fund characteristics, such as portfolio turnover, expense ratios, and assets under management. Practitioners, especially investment consultants, have additionally focused on more nuanced and qualitative elements such as investment philosophy, compensation scheme, turnover of key professionals, ownership structure, and succession planning. Ironically, perhaps, most people have given up on the hope that past positive alpha can predict future outperformanc...

Jim Middlemiss of Canadian Lawyer Magazine reports, Bracing for the pension time bomb : Fred Headon and the in-house labour law team at Air Canada have learned more about pension law in the last 18 months than most lawyers will learn in a career. Over the last decade, Canada’s national airline has been steadily hit with a series of economic hardships — from the New York terrorist attacks in 2001 to the SARS crisis in 2003 and the credit crunch in 2008 — which decimated air travel and led to a series of restructurings. During 2011 and 2012, Canada’s national airline was locked in bargaining and arbitration with its unions, which Headon, assistant general counsel, labour and employment law, says “had a major pension component.” The company sponsors a number of defined-benefit and defined-contribution pension plans, which were a major sticking point. Under a DB plan, the employer guarantees a set pension and is on the hook for any shortfall, making it riskier than a DC plan, wh...

Kevin Roose of the NYT reports, Are Pension Funds Getting Smart About Passive Investments? : Pensions & Investments ran a story yesterday about how the California Public Employees' Retirement System is considering moving to an all-passive portfolio . You probably didn't read it, because stories about pensions are boring. But this story only looked boring. In fact, it was probably the most important Wall Street development you'll read this week. It's an undeniably good sign for people who care about the retirement funds of teachers, firefighters, and other public-sector employees. And it should strike terror into the heart of every hedge-fund manager and private-equity executive in midtown. The backstory is that, for many years, public pension funds have had a love affair with so-called "active investments" — basically, hedge funds, venture capital funds, private-equity funds, mutual funds, and assorted other outside money managers who charge a fe...

Joseph F. Coughlin, director of the Massachusetts Institute of Technology AgeLab , wrote a comment on the Big Think blog, Is Retirement History? (h/t, Suzanne Bishopric): Associated Press reports that two Americans are somehow still receiving Civil War veterans’ benefits . Although I’m guessing that a good deal of the media coverage devoted to this discovery will deal with the long-term economic costs of war, I’m fascinated for another reason: the Union Army plan was the first major, federal-level pension program in the United States. Today, as we wonder whether we’ll be able to continue to afford Social Security and Medicare in the decades to come, it’s astounding to discover that the original American entitlement program is still alive, and still paying out. For those of us not currently reaping Civil War benefits, a little background: the Union Army pension originally covered those injured in battle, and in the late 1800s the program expanded to include veterans who became d...