W.Va. teachers hope to return to defined benefit retirement plan

An article in my hometown paper caught my eye which concerned a group of West Virginia teachers who had once participated in the State’s Defined Benefit Plan and who were convinced to convert to Defined Contribution Plan, which after joining became dissatisfied with the plan—most are now trying to return to their former Benefit Plan. I couldn’t help but wonder if this could be a harbinger for the NMI government’s defined contribution retirement plan.

I discussed the reason for the dissatisfaction with the contribution plan on the part of some of the teachers with Mr. David Haney, executive director of the West Virginia Teacher’s Association. I was told that many of the teachers felt that the required monitoring of their own retirement contribution in a DCP was more difficult and involved than previously thought. They recognized the requirement for rather sophisticated (and timely) knowledge of the stock market, their 401ks, IRAs and other investments.

I then thought about such difficulties as possibly relating to the NMI considering the date and time difference between the NMI and say, brokers in New York at the NYSE or in California and the impact for good or ill when timing is critical in urgent buy or sell situations as related to the individual management of a person’s stock portfolios. Of course, investments in Asian markets would not have the same “time sensitive” urgency when one wants to individually buy or sell based on immediate market conditions at the time. Google “stock market risks and rewards” for more information.

Consider that as a result of the International Date Line between Hawaii and the Mariana Islands. As a consequence of this geographic meridian, at no time do normal business hours on the United States east coast coincide with those of the Northern Marianas. Indeed, telephone communication from the U.S. west coast and Hawaii, when conducted during normal business hours and work days, can only take place 4 days a week or between Monday and Thursday (in the US) and Tuesday to Friday (on the islands). This could be a real handicap for those wanting to manage their own investment in Wall Street’s stock market. While it’s true one could always turn investment decisions over to an investment advisor, there is a cost involved for such management of a person’s money—that advice isn’t free.

As the chief investment economist for J.& W. Seligman, Douglas Peta observed, “We know there is a lot of paper out there that we can’t trust. We don’t know exactly who owns it and how much. And we don’t know how they are valuing it.” A sobering statement.

To get some appreciation of the amount of money one will need in retirement the following should be considered:

-Social Security life tables will provide an estimate as to how long one is (statistically) likely to live after retirement;

-Each individual should decide on how much money will be necessary to sustain one’s reasonable self-defined lifestyle;

-All estimates should consider the loss in purchasing power as a result of inflation (see the NMI consumer price index for these data).

The U.S. government, in an attempt to assist private businesses with their employee retirement plans, enacted the Pension Protection Act of 2006. This law concerned private companies only—not government pension plans.

Information on this action can be “Googled.”

The president of the W.Va. Education Association was quoted as saying, “Estimates ran nine to one in favor of transferring” (back to the defined benefit plan).

Apparently, according to the article, West Virginia “lawmakers provided for the voluntary switchovers (back to the benefit plan) after fielding complaints that TCD accounts (Time Certified Deposits) weren’t yielding enough returns for retirement” (from the contribution plan).

The article continued, “Blame has ranged from negligent oversight by individual enrollees (in the defined contribution plan) and shoddy advice from state-hired consultants to the inherent risks of playing the stock market.”

As I mentioned in my op-ed piece in the Saipan Tribune on May 19, 2006 titled: Pension Plans and Investment Sophistication (Retirement Risks, Regrets & Rewards – A Personal Observation), “This is where investment sophistication come into play. Bear in mind if investing is so easy, why do so many people lose in the stock market?”

For a few reasons, check out http://www.sec.gov/answers/daytrading.htm

Those interested in the West Virginia experience could contact Mr. Haney at (304) 346-5315. E mail dhaney@nea.org.

Sources: “Teacher Pension Transfer Plan”, The Charleston Gazette, May 5, 2008, page 3A and “Teacher’s Defined Contribution, Membership Balance and Return Analyses For Experience July 1, 2005 thru June 30, 2006”, W, Va. Education Association, Fax. (304) 346-4325

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I would be remiss if I did not mention and applaud the recent action by the Superior Court not to dismiss the Fund’s lawsuit which seeks payment of $119 million due the Fund from the central government. What I found shocking was the government’s attempt to get out of its obligation to pay the Fund what is rightly due the members by the very act of going to court and attempting to prove that the Fund didn’t have sufficient facts to support their case against the government. This was simply ludicrous on the part of the central government and in my opinion dishonest. It’s the type of action one might expect to witness in some banana republic, not a U.S. Commonwealth.

The very audacity of the administration in going to court in the first place to argue that the Fund had not satisfied the requirements for a writ of mandamus simply flies in the face of integrity. For those who may not be familiar with the legal term, in this instance the Latin term mandamus or “command” is an order from the Superior Court to a government entity (in this case the administration) to do some specific act, which it is obliged to do under law, namely, in this instance, pay the Fund what it owes. And this is what the central government tried to avoid!

The arrogance displayed by such an effort directed against the members of the Fund, all loyal past and present employees, is disgusting in the extreme.

I ask you, as a member of the Fund, what do you think of the government’s thwarted action designed to once again stiff the Fund?