Tame Inflation Trims Social Security COLAs

October 19, 2001 (PLANSPONSOR.com) - Older Americans will only get a 2.6% cost-of-living increase in their monthly Social Security checks next year ? a smaller amount than January?s hike because inflationary pressures have slowed during the past 12 months.

Acting Social Security Commissioner Larry G. Massanari said the increase, which will affect 50 million people, is tied to changes in the Consumer Price Index (CPI). The CPI is one of the government’s chief measures of inflation

The figure announced Friday lags the 3.5 percent hike that recipients started getting in January.

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For Social Security beneficiaries, the average monthly benefit amount for all retired workers will rise from $852 to $874. The maximum federal SSI monthly payment to an individual will rise from $531 to $545. For a couple, the maximum federal SSI payment will rise from $796 to $817.

Lower energy prices have helped inflation remain tame this year. In the first eight months of this year, consumer prices moved up at an annual 2.5% rate. That compared with 3.4% for all of 2000.

Some other changes that take affect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will jump to $84,900 from $80,400 in 2002

Court Reinstates City Pension Fund Best Execution Suit

August 7, 2002 (PLANSPONSOR.com) - A Florida appeals court reinstated a lawsuit by a Gainesville, Florida public employee pension plan against a former investment advisor for not getting "best execution" on the fund's stock trades.

The Florida First District Court of Appeal ruled that the Gainesville Consolidated Police Officers’ and Firefighters Retirement Plan could pursue its litigation against the former money manager, Montag & Caldwell. A trial judge had thrown out the city’s suit.

Gainesville’s suit charged that Montag never told city officials that it would execute the pension plan’s stock trades only after it had bought and sold hundreds of millions of dollars of stocks for Montag’s other institutional clients.

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Also, the city complained, Montag’s practice of buying large blocks of stocks effectively drove up the shares’ price. That meant, officials alleged, that the pension plan ended up paying more for stock shares than other Montag clients whose trades were attended to before Gainesville’s orders.

Finally, Gainesville said it lost money on the sell side as well. Montag’s block-selling practices effectively drove the share prices down so the pension fund ended up getting less when the money manager executed Gainesville’s sales, the city charged.

The Need for Verification

Robert Kay, head of Global Securities Consulting Services, a London and New York-based consulting firm specializing in execution management, said it would be unusual for a money manager to put one client at a disadvantage by virtue of its equity trading practices. But plan sponsors still have to be wary, he said.

“What it does throw up is that – clearly – trading blocks of equities is a complex business and it supports the view that plan sponsors need to have an ability to make sure that the trading that is done on their accounts is being done effectively,” Kay said. “If you don’t have a verification process, it is all too easy, whether (it is being done) deliberately or not, to find yourself disadvantaged.”

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