Retirement Investment Plan on Track for Railroads

August 1, 2001 (PLANSPONSOR.com) - The House of Representatives voted 384 to 33 to pass a bill that would allow a portion of railroad pension funds to be invested in private securities.

The bill would authorize using the anticipated higher returns to boost benefits, while reducing payroll taxes for railroad workers. Safety provisions in the bill would raise these taxes if the increased rates of return did not occur.

About $15 billion in contributions from employees would become eligible for investment under the Railroad Retirement and Survivors’ Improvement Act, or H.R. 1140, affecting about a million workers, retirees and survivors.

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At present, railroad employees currently contribute a portion of their pay, equivalent to social security payments, tier 1, and an additional amount, tier 2, which goes into the equivalent of a private pension plan. The change would involve only the tier 2 contribution.

Other major changes to railroad retirement program include:

  • retirement at age 60 for employees with 30 years’ experience without reduced benefits,
  • more generous benefits for surviving spouses, and
  • a reduction in vesting requirements from 10 years to five years

The Senate must vote on the legislation before it could go to the White House, where concerns that it could violate President Bush ‘s principles for Social Security, and adversely affect the federal budget, abound.

Similar legislation stalled in the Senate last year after passing in the House. This year, supporters have lined up 72 co-sponsors in the Senate and are optimistic on the bills chances for passage.

– Camilla Klein            editors@plansponsor.com

Connecticut State CIO Disputes Dismissal

January 7, 2001 (PLANSPONSOR.com) - Former chief investment officer Tom Flanigan last week lashed out at the state treasurer who had abruptly fired him on December 12, according to The Hartford Courant.

It was the latest episode in the continuing saga of the State of Connecticut pension fund.

State Treasurer Denise Nappier fired him because he was standing in the way of opportunities for Nappier’s ‘friends and contacts’ to make money by managing fund assets, Flanigan wrote in a letter to the Investment Advisory Council that monitors the Treasurer’s office. Flanigan did not name Nappier’s friends in the letter, which was cited in the newspaper.

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The State Treasurer’s office strongly denied the accusations. “These wild allegations about the treasurer acting on behalf of friends and contacts [are] unsubstantiated” and are “not found in any document or any exchange – other than the fantasies that this letter represents,” deputy treasurer Howard Rifkin told The Hartford Courant. He said Nappier would seek a retraction.

When Nappier fired Flanigan, she cited differences over his approach to “communications and administrative process” in managing the $22 billion state employee pension fund.

The public conflict lays bare the continued troubles of the Connecticut state fund, which Nappier and Flanigan were supposed to reform in the wake of the bribery-and-kickback scandal surrounding Nappier’s predecessor, Paul Silvester.

See also:

Corruption: Stamp out public fund piracy — before the damage is done

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