Thursday, April 26, 2007
Mercer HR Services announced that Mary Tinebra, who has played an integral role in the growth of the firm’s outsourcing business, has been appointed Global Leader of Sales and Alliances. Sean Andersen has joined Mercer HR Services as the Leader of Organizational Effectiveness Practices, and Joe Mehringer (formerly of Hewitt Associates) has joined as the Total Retirement Product Manager.
Jay Rising is the new president of HRO. He succeeds Julie Gordon, who has served as acting president. He most recently served as president of field operations at RightNow Technologies, a customer experience software company. Prior to that, he spent nearly ten years at ADP.
Julie Gordon was appointed to the new position of president of client & market leadership. In her new role, she will oversee Hewitt's overall client relationship strategy, with particular focus on its largest clients, most of which use both Hewitt's consulting and outsourcing services.
Steven Fein has been appointed to the newly created position of sales and product strategy leader ... Rohail Khan will continue as leader of operations.http://www.hewittassociates.com/Intl/NA/en-US/AboutHewitt/Newsroom/PressReleaseDetail.aspx?cid=3996
Not that you'd know this from Mr. Crist's approval ratings, which remain in the stratosphere thanks in part to his populist turn bashing insurance companies. The Republican campaigned last year on promises to do something about his state's property-insurance premiums, which have climbed in the wake of some recent nasty hurricanes. Economists know that these rising costs are necessary, and in time beneficial, because insurers must build reserves against the more frequent storms hitting ever-more-populated coastal areas.
But Mr. Crist is a man on a poll-driven mission and his line has been that greedy insurers are ripping off his constituents. In January he convinced the Republican legislature to pass a "reform" designed to lower the price of insurance by making the state a larger player in the market and undercutting private insurers. The new law allows state-run Citizen's Property Insurance -- intended to be an insurer of last resort -- to compete directly with private companies.
This exercise in Cuban economics is already gutting Florida's once-competitive insurance market. Private insurers know the law will artificially depress rates, forcing some to operate at a loss. Many have responded by cancelling policies, prompting Governor Crist to issue an "emergency" order freezing premiums and barring cancellations. Yet even this hasn't stopped the bleeding.
USAA last week became the latest to significantly restrict the number of new policies it issues in the state, and to drop 27,000 second-home policies. This follows pullbacks from AllState, State Farm, Nationwide and others. The storms and new regulation have also forced some insurers out of business, leaving thousands of policyholders with no coverage and fewer options for getting it.
Large numbers of homeowners are now turning to Citizen's, which itself is only able to offer lower premiums because of its implicit taxpayer guarantee, and because its actuarial assumptions reside in la-la land. Citizen's likes to say it will have $8 billion with which to pay claims, but it rarely notes that much of this is a line of credit. Between such credit and its bonding authority, what Citizen's really has is the potential to rack up huge liabilities that will have to be paid by someone when the next storm surge comes ashore.
Most likely, that someone will be all Florida homeowners, who, in the event of a Citizen's collapse, will be on the hook for large assessments. This tax is likely to be levied on every homeowner, including those who don't live in areas at high risk for storm damage. Another option would be for the state to provide a bailout, putting all taxpayers on the hook. The risk of a taxpayer bailout is also high for the state's hurricane fund: The new law doubled its risk-bearing capacity to $32 billion in business, thus allowing insurers to purchase reinsurance at cheaper rates than on the open market. However, the fund has only $1 billion in cash on hand, and thus no way to cover its new business if disaster strikes -- short of dunning taxpayers.
In sum, what Mr. Crist has done is concentrate the risk of future hurricane losses within his own state government, rather than spreading it around the world through the insurance industry. This is astonishing, given that the Sunshine State accounts for 27% of all hurricane-exposed property in the U.S., worth some $2 trillion. After Katrina, private insurers paid more than $40 billion to 1.7 million policyholders in Florida. But the state government and its taxpayers may end up paying for the next big one largely by themselves.
At least other states are learning from the Florida meltdown. Rather than create state competitors to the private market, Mississippi and South Carolina have taken steps to expand their markets of last resort. Louisiana's Governor and insurance regulator have talked openly of the need to rebuild the private insurance market, rather than transfer risk to taxpayers. Even the liberal Atlantic Coast states, usually the first to turn to new regulations, have largely rejected attempts to socialize their storm risk.
For now, many Floridians are thrilled that their rates are falling and so the Governor is popular. He recently asked for new legislation to give Citizen's even more power to compete with private underwriters. However, Mr. Crist and his fellow Republicans had better hope that predictions of more frequent hurricanes are wrong. Because when they hit, and taxpayers discover there's no such thing as free insurance, what could get blown away is their governing majority.
Tuesday, April 24, 2007
Thursday, April 12, 2007
Workers expressed a level of confidence in their retirement-readiness that didn't jibe with reality. For instance, 24% of workers who said they were "very confident" about their financial security in retirement are not currently saving for retirement, and 43% of "very confident" workers have less than $50,000 in savings.
Only 60% of workers are currently saving for retirement; and only 66% say either they or their spouse have saved for retirement, according to the study. Not surprisingly, younger workers were more likely than older workers to have a smaller retirement nest egg; 68% of workers younger than 35 had total savings and investments less than $25,000, compared to 31% of workers older than 55.
The hearing, by the Senate Budget and Appropriations Committee, was called in response to a report in The New York Times last week that described how New Jersey has diverted hundreds of millions of dollars that should have gone into its pension fund, using unorthodox steps authorized by governors from both parties over a number of years. In response to the article, Gov. Jon Corzine has said that the state will change certain accounting procedures. He has also asked the state attorney general to investigate, with outside actuarial help, whether tax requirements, securities laws or other rules have been violated. The attorney general, Stuart Rabner, will have to walk a careful line in such an inquiry, however. He is currently representing the State of New Jersey in lawsuits, filed by several employee groups, that accuse the state of failing to fund workers’ pensions lawfully. In those cases he is arguing that the state has acted legally.
The office of the attorney general has also said in audited financial statements that the state’s pension plans are “qualified” as tax-preferred plans. Normally, only the IRS can issue a ruling that a pension plan is qualified, after reviewing it to make sure it complies with the tax code. But New Jersey’s annual reports state that its pension plans are qualified “based on a 1986 declaration of the attorney general of the State of New Jersey.” The IRS said it had no record that New Jersey had ever requested to have its pension plans qualified. “Just because the attorney general says it’s qualified does not mean it meets the requirements of the Internal Revenue Code,” said Andy Zuckerman, director of employee plans, rulings and agreements at the IRS.
In the hearing, the state treasurer, Bradley Abelow, tried to calm the senators’ deepest concerns about potential legal and financial problems facing the pension fund. But at the same time, he argued that their complaints of being kept in the dark were unfounded. “The financial position of the system’s funds is transparent, and stated in various publications in accordance with the required accounting standards,” he said. He brought a list of places where information about the pension fund was available, including annual actuarial reports and monthly updates to each plan’s board of trustees.
But Sen. Barbara Buono (D - Middlesex County) said that was not enough. “There is not full disclosure to the Legislature,” she said, “perhaps not intentionally.” Sen. Buono also said she thought many of her fellow legislators had failed to live up to their responsibility to understand the implications of what they vote on.
Some senators wondered whether any of the outside professionals helping with the pension fund were at fault, expressing confusion about the roles played by actuaries, auditors, lawyers and others. “If you’re paying someone who is consistently giving us bad advice, why do we continue to pay them?” Sen. Turner asked. “Many times, you can find the financial people to give you the advice you want, so that you can do the things you want.” She said she wanted to know, for example, who had prepared bond offering statements that wrongly showed that the state had made hundreds of millions of dollars’ worth of pension contributions in years when it had really contributed nothing.
Frederick Beaver, director of the Division of Pensions and Benefits, defended the outside actuaries. He recalled that when he joined the division in 2003, people had been asking the actuarial consultants whether they could “push the envelope” and save more money by diverting pension contributions. The actuaries advised against it, he said.
Saturday, April 07, 2007
This is particularly interesting since Fidelity is one of the big players in the outsourcing market for companies that have traditional pension plans.