Russell Offers Solution for Pensions to Manage
Interest Rate Movements
March 17, 2009 (PLANSPONSOR.com) - Russell
Investments has introduced an Interest Rate Management
solution to help its institutional clients manage the risk
associated with the mismatch of a defined benefit plan's
assets and liabilities caused by interest rate
movements.
The strategy, which seeks to hedge interest rate
exposure by blending several diversified fixed-income
products into a single account, has become especially
compelling because of the current spreads in the long
corporate bond market, Russell said in a press
release.
Last year, Russell began communicating with its
clients on the opportunities offered in the current fixed
income market, noting that nearly all pension funds are
both short duration and short credit relative to their
liabilities. Russell explained that over long
periods, both of these short positions represent a
positive risk and a negative expected return. By
lengthening duration and increasing credit exposure, risk
can be reduced while long-term expected return is
increased.
“While some are relying on basic hedging
strategies with swaps and Treasuries to address the
interest rate concern, the approach Russell has taken is
to match and customize appropriate amounts of bonds to
the specific liability of the client.” said Lisa
Schneider, Director, Client Service, in the press
release.
Releases Signed by Former Employees Do Not Bar ERISA
Claims
March 16, 2009 (PLANSPONSOR.com) - The U.S. District
Court for the District of Idaho has found that a release and
waiver signed by former service station employees may have
been obtained questionably by the employer.
The court first noted that Fearless Farris Service
Stations did not consult with any legal advisers when
establishing or maintaining their Deferred Compensation
Plan, and that the only documents evidencing the plan
were certain letters and memoranda distributed to
participants over the years, or in some cases placed in
company files. There was no summary plan description ever
distributed to participants as required by the Employee
Retirement Income Security Act (ERISA), which the court
said could mean the former employees released claims they
did not know they possessed.
In his opinion, Chief U.S. District Judge B. Lynn
Winmill said questions of fact also remain as to whether
the releases were obtained as the result of
misrepresentations about the former employees’ legal
rights. Specifically, according to Winmill, there is a
question whether Fearless improperly induced the former
employees to sign the releases by suggesting that the
ERISA plan had been legally terminated, and that Fearless
had no financial obligation to them.
In addition, the court questioned whether money
given to the employees in exchange for their signed
releases – $30,000 to one and $3,000 to the other – was
adequate. “The record indicates that their potential
benefits under the Plan significantly outweighed the
compensation they received in exchange for the
releases,” Winmill wrote.
Fearless had asked the court for summary judgment
in its favor since the release and waivers signed by the
former employees said they would not pursue any actions
against the company, including ERISA actions. The court
denied Fearless’ motion for summary judgment.
Since Fearless did not supply summary plan
descriptions and also led participants to believe it had
no financial obligation to them because the plan was
terminated, the court said the six-year statute of
limitations rather than the three-year statute applies to
the case and rejected Fearless’ argument that the former
participants were time-barred from bringing the
suit.
The Deferred Compensation Plan improperly set up by
Fearless guaranteed participants an annuity upon
retirement and beneficiaries an annuity in cases where
the participant died before retiring. Fearless sold its
operations to another employer and employees were told at
that time that the plan was terminated.
Each employee who separated from service was given
a release and waiver to sign that among other things,
said they would not pursue any legal actions against the
employer, including ERISA actions.
The case is
Brasley v. Fearless Farris Service Stations
Inc.,D. Idaho, No. CV-08-173-S-BLW, 3/9/09.