Comments on: A Lesson From the Crash of 2008

By: Mike Thompson

Mike Thompson — Tue, 21 Oct 2008 03:13:52 +0000

This new DOL rule for default investments has been personally painful to me. I left my 401(k) balance in my former employer’s plan. My Dec 07 investments were where I wanted them. I checked my account in Oct 08 for rebalancing and find the administrator had changed and I was placed in a retirement target fund which by the 3rd Qtr lost 25% vs a 3% loss if I was permitted to retain my investment balances. Lesson learned, don’t have accounts where others can tamper with.

By: Kenneth C. Detro

Kenneth C. Detro — Thu, 25 Sep 2008 16:15:26 +0000

I wondered at Mr. Zelinsky not recognising explicitly that the DOL was acting exactly in accordance with executive branch policy as expressed by pres. Bush during his first administration. His then agenda of dismantling the social security administration brayed a rather general dependance on the stock market, assuming that it could absorb the future needs of the working class. This to me at the time looked wildly foolish, resembling a test baloon designed to prove the naivete of the American public. In retrospect I admire Mr. zelinsky’s erudition and bringing this perspective to the fore.

Hat’s off to Mr. Zelinsky

By: Health Plan Law - ERISA Group Health Plan Administration » :: Paternalism In Retirement Savings

Thu, 25 Sep 2008 13:15:18 +0000

[...] Ed Zelinsky comments in this recent article on provisions in the Pension Protection Act of 2006 (PPA), directing the Secretary of Labor to [...]

By: Kim

Kim — Wed, 24 Sep 2008 21:06:25 +0000

While there is some truth to Mr. Zelinsky’s position he overlooks a related issue. Pre PPA most “default” investments were money market funds. Some of them were falling below a dollar per share last week as well, making them no better than the mutual funds he’s opposing.

As for the participant who “may sincerely and (from today’s perspective) rationally prefer to avoid the volatility associated with common stocks” all he or she has to do is make an active election.

By: Zelinsky on the 401(k) Lessons from the Crash of 2008 : Marquette University Law School Faculty Blog

Tue, 23 Sep 2008 22:23:21 +0000

[...] piece here from Ed Zelinsky (Cardozo) on the 401(k) aspect of the 2008 economic collapse from the Oxford University Press Blog: Even as we contemplate the financial carnage of the Crash of 2008, the federal government sends a [...]

By: Teresa Ghilarducci

Teresa Ghilarducci — Tue, 23 Sep 2008 20:48:01 +0000

Defined Benefit Pensions are Dead; Long Live DB Pensions

I appreciate Zelinsky calling like it is — the so-called 2006 Pension Protection Act and the DOL regulations privilege a faddish approach to investing which is overweighted towards stock. (Zelinsky calls it a “enshrining stock-based approach in the law.”)
Government paternalism, though is not the problem as Zelinsky characterizes it. He calls the government’s default option for automatic 401(k) contributions, “paternalism.” The problem actually is the government’s lack of caring. The Paulson – Bernacke plan proposes a bailout of the investment firms with very little new regulation and maintaining the same legal biases toward 401(k).
The government should do a lot more, I call for a democratic “paternalism.” Instead of giving investment banks a way out – the government is providing a market for their junk assets – it should be giving near retirees and retirees the option to clear the junk out of their accounts and transfer them to government guaranteed bonds. I describe these vehicles in my new book; they are called “Guaranteed Retirement Accounts.” Every worker would get $600 annually from the government in exchange for investing 5% of their pay every pay period to invest in a retirement account that the government would pay 3% indexed for inflation.
The government is now pursuing a misguided message – retirement security can be achieved through 401(k) accounts. What all workers need is access to the same investment vehicles that most public sector workers have, including all federal workers, and most unionized workers. All workers need a secure vehicle, like a defined benefit plan. All workers deserve to put their retirement dollars in a vehicle that guarantees a low–fee and safe return. If we swap tax breaks for 401(k) plans (70% got to the top 20% of wage earners) for a $600 contribution to a guaranteed account for all workers it would cost the government nothing and help the people who need help the most– unlike all the other proposals swirling around.

Teresa Ghilarducci, author of “When I’m Sixty-Four: The Plot Against Pensions and the Plan to Save Them.”