Former Detroit Treasurer and Two Others Convicted of Pension Fraud
(Wall Street Journal 12.08.2014)
Draper Man Indicted for 15 Counts of Mail Fraud for Allegedly Misapropriating $24 Million
Risks: What Is Your Employer Not Telling You?
A defined benefit plan/pension administrator should:
- Maximize investment return to support pension plan promises of distributions in the future.
- Balance investment return to risk of loss or volatility.
- Investments should be within the overseeing trustee/board’s direction or a policy.
- Ensuring the plan’s costs, fees, or other expenditures are transparent, communicated, and clear.
- Perform timely investment of employer contributions.
Pension: A Defined Benefit Plan
A defined benefit plan is an employer contribution only to a retirement plan or pension for employee benefit. There is a formula that takes into account the number of years worked and the employee’s salary. Regular pension payments begin typically at 65.
Pension = Annuity
For a pension to provide the benefit of a percentage of an employee’s salary, Pension Plans rely on timely employer contributions, wise investments, and time. Without proper management, Plans can run into what is called an “Unfunded Mandate” where the plan does not have adequate assets to cover the pension promises to employees and ultimately a reduction of benefits.
Who Manages or Administers Pension Plans?
Pension Board, Trustee, or Retirement Plan Manager could administer the Pension plan. These could be in-house or outsourced administrators. A well-managed plan is about managing investment risk. The market value of the investment and how steady or volatile that value grows or declines is the major concern.