Products March 20, 2006

Vanguard Introduces New Target Funds

March 20, 2006 (PLANSPONSOR.com) - The Vanguard Group has announced plans to add five new Target Retirement Funds and change the funds' asset allocation models.
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A Vanguard news release said it plans to add funds focusing on target retirement dates of 2010, 2020, 2030, 2040, and 2050.

The company asserted the new funds will complement its existing six target offerings. The Vanguard Target funds are broadly diversified “fund-of-funds” that gradually reduce stock exposure and increase bond exposure as the targeted retirement date approaches.

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“Shareholders are attracted to the simplicity and convenience of having a professionally managed, diversified portfolio of stocks and bonds in a single fund,” Vanguard CEO John Brennan, said in the news release. “The introduction of five new funds will enable investors to select a fund that more closely matches their investment time horizon.”

Brennan also announced in the news release that the company is changing the Target Retirement Funds’ asset allocation models.

The existing funds’ current asset allocation path will now provide increased exposure to equities over a longer period of time. The result will be a larger equity allocation of roughly 10 to 20 percentage points, depending on the fund. For example, the Target Retirement 2035 Fund will change its equity allocation to 90% from its current 75%, according to Vanguard.

Also, Vanguard Emerging Markets Stock Index Fund will be added to each of the funds (representing roughly 1% to 2.5% of assets), further diversifying their exposure to international markets.

Vanguard European Stock Index Fund and Vanguard Pacific Stock Index Fund will be added to the Target Retirement 2005 and Income Funds. In aggregate, international stocks will represent 10% of the 2005 Fund and 6% of the Income Fund.

Using methodology developed by Vanguard’s Investment Counseling and Research Group, assets in Vanguard Target Retirement Funds are invested in a combination of the following Vanguard mutual funds:

  • Vanguard Total Stock Market Index Fund,
  • Vanguard European Stock Index Fund,
  • Vanguard Pacific Stock Index Fund,
  • Vanguard Emerging Market Stock Index Fund,
  • Vanguard Total Bond Market Index Fund,
  • Vanguard Inflation-Protected Securities Fund, and
  • Vanguard Prime Money Market Fund.

The five new Target Retirement Funds, which will require a minimum initial investment of $3,000 for taxable and IRA accounts, are expected to have low expense ratios, Vanguard said.

Benefits March 17, 2006

San Diego's Aguirre Demands Court Roll Back Pensions

March 17, 2006 (PLANSPONSOR.com) - San Diego City Attorney Michael Aguirre has asked a California judge to invalidate pension benefits granted in 1996 and 2002.
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His latest attempt to fight the pension benefits is the result of an “unprecedented, all-out effort on the part of the city attorney’s office,” Aguirre said, according to a San Diego Daily Transcript news report.

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Since taking office more than a year ago, Aguirre has been trying to force City Council members to repeal the benefits granted as part of Manager’s Proposal I and Manager’s Proposal II. The new court filing included statements by city employees requesting their participation in the program be rescinded (See SD Attorney Aguirre Again Suggests Pension Credit Sellback ).

Aguirre is trying to set aside an estimated $700 million in pension benefits: the DROP (Deferred Retirement Option Plan) program; benefits purchased at a substantial discount; increases voted on in September 2000, which retroactively increased the per year accumulation to 3.5%, retroactive benefits that were created in 1996; and a retroactive increase for the city attorney in 2001.

In the filing, Aguirre claims pension board members along with other city officials entered into a series of agreements in 1996 and 2002 without providing same-year funding sources.

“In each instance,” the complaint states, “one or more officials were financially interested in these contract schemes, under which they agreed to allow the city to underfund its contributions to the retirement system in exchange for increases in their personal pension benefits.”

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