Monday, March 29, 2004

Envoy Plan Services Bought By Keenan & Associates

Envoy Plan Services will officially be owned by Keenan & Associates beginning April 1st (this is not an April Fools Joke). Envoy has entered into an agreement to be purchased by Keenan and has already moved it's operations to the Keenan office in San Clemente. The move should not affect operations and should be a good fit for Keenan. Robert Hornaday wills stay with company and become a Sr. Vice President at Keenan.

Recent developments have put the kibosh on the method Envoy was charging for its services. Envoy now earns it's revenue via fees charged to the districts it serves, a welcome development (more on this in the next Teachers Advocate). I will keep you updated as to how things will change and how they will affect you.

Till next time.....


Thursday, March 04, 2004

Loophole closes, Mandatory notice to begin in 2005

HR 743 was signed by the President on March 2nd (2004) and closes the last day loophole that educators used to avoid the Government Pension Offset (for details see my website). It also required that employers whose employees don't pay into Social Security (read School Districts) must provide written notice to all new employees and have them sign a statement acknowledging that they understand the GPO & WEP and its affects, this must be in place by January 1st, 2005.

While the NEA and AFT are fighting for outright repeal of the provisions it is clear by the passage of this legislation that nobody is really listening. I suspect a lot of congressmen and women are giving lipservice to these provisions, but in reality they know they can't support them because the cost is too high and social security is already in trouble. Don't expect a repeal anytime soon, don't plan on recieving social security - if you does get repealed, then guess what - You will have some extra money in retirement, just don't count on it!


Monday, March 01, 2004

The Coming Fall of the Pension Plan

The trend in the private sector has been away from provided employees a pension plan, or Defined Benefit plan. A Defined Benefit plan is one in which an employer agrees to pay the employee a set amount of money at retirement for the rest of that employees life (in essence, the benefit amount is defined). There is usually a formula to figure out what the actual benefit will be. These plans are very expensive and all the risk is taken by the employer, not the employee. A DB plan also favors workers who are long time employees and retire later in life (after age 60). The plan that these companies are moving over to is called a Defined Contribution plan (DC) and in most cases is funded through a 401(k). In a 401(k) the employee assumes the investment duty and is responsible for funding his/her own retirement. The risk is thereby shifted from the employer to the employee. Over the past few years I have been predicting that the trend in the private sector will begin moving to the public sector (government). Over the past year we have heard governors, mayors, and legislatures all float trial balloons to gauge peoples reaction. The reaction has usually been extremely negative from workers, but more positive from taxpayers (who ultimately pay for a portion of the benefit). While no government plans that I am aware have made the switch (except for Florida, but it wasn't a complete switch, just another option), it is only a matter of time. Daniel Weintraub, a writer for the Sacramento Bee proposed just such a plan this weekend in his column. Many people believe Social Security should be switched from a DB to a DC plan funded with private accounts. When governments start seeing the money they could save by eliminating the higher cost DB plans they will begin salivating - it will take a long time, perhaps a decade or two, but eventually they will wear down the unions and convince the taxpayers that the a DC plan is the way to go. Keep in mind that I am not advocating for, or against either plan, just keeping you aware of the trends and how I see them playing out. For those of you in a DB plan, don't worry, usually a switch is made only for new hires. I have been to meetings with Unions on this issue and they are vehemently against the idea of DC plans, they want to keep the DB plans - so expect them to continue to fight for that benefit. As for me, I would rather have a DC plan with a generous match than a DB plan - but remember, I know what I am doing - I am trained in this area - most people aren't. Most people cannot invest on their own successfully, so perhaps the answer is something like what Florida has done - give the workers a choice of either the DB or the DC. Only time will tell, but remember where you heard it from first!!

Till Next Time....