Social Security and retirement is a big issue for neo-cons and neo-liberals. It seems they do not think we saved enoug for retirement. In fact-----they say seniors are aging into a few tens of thousands or less in savings for retirement and scold us for being spendthrifts throughout our working lives. Now, neo-liberals are pushing yet another republicans policy----this time meant to end Social Security------private investment plans taken from paychecks just as payroll taxes are and invested in the stock market. Remember, the American people have lost trillions of dollars in retirement and personal wealth through massive corporate fraud and not because they were loose with money! Home equity, pensions, Social Security and Medicare Trusts raided------
that's where our retirement went. As you see below, each citizen is owed a few hundreds of thousands of dollars in corporate fraud. Yet, politicians running as democrats seem to think the fraud needs to stay with the corporations stealing it and you and I must do without. They are telling us WE NEED TO BE MORE RESPONSIBLE FOR OUR SAVINGS.
That is what privatized savings accounts are all about. Rather than have payroll deductions taken from our paychecks and sent to Social Security Trust, these payroll deductions will go into a stock market retirement account. Heather Mizeur takes it further by saying we need to do this on the state level as well. Mayor Rawlings-Blake of Baltimore through public pensions into the stock market as 401Ks-----and all these pols know that the stock market is systemically fraudulent and steals any value accumulated from these retirement accounts.
A DEMOCRAT WOULD NEVER SEEK TO THROW RETIREMENT ACCOUNTS INTO A SYSTEMICALLY FRAUDULENT FINANCIAL MARKET. NEO-LIBERALS WORK FOR WEALTH AND PROFIT.
Please look under my Social Security section to see that this Trust is healthy for decades as Reagan tripled payroll tax deductions so the baby boomers retirements would be covered. It has simply been raided and we need it back.
As with State Health Systems that have as a goal of ending Medicare and Medicaid.....this policy of creating private retirement accounts taken out of paychecks and placed into the stock market is the same structure for ending Social Security. Rather than be voluntary, these payroll deductions will become mandatory and take the place of payroll deductions going into the Social Security Trust. So, rather than strengthening Social Security by removing the cap on high incomes or adding a 1% increase to payroll taxes to secure the health of the program------neo-liberals are dismantling it.
THIS IS WHAT HEATHER MIZEUR'S PLAN BELOW HAS AS A GOAL. BROWN AND GANSLER WILL DO THE SAME THING. IT IS A REPUBLICAN PLAN FOR ENDING SOCIAL SECURITY.
Look below to see how successful state and federal savings accounts have been------public pension funds are rife with fraud. 1/2 of value of public and private pensions were lost to massive fraud when pension managers deliberately pulled pensions out of the then safety of bonds and through them into the crashing stock market in 2007. THIS WAS DELIBERATE FRAUD AND PUBLIC MALFEASANCE. Not one word is spoken of these frauds against our retirements and no attempt at justice in returning those lost retirement funds in Maryland. So, not only should a democratic candidate be shouting for recovery of massive pension fraud and the rebuilding of oversight and accountability over these funds------but the union leaders who knew this was happening should have shouted and should be taking all of this fraud to court. EVERYONE IN MARYLAND IS SILENT ABOUT 1/2 OF VALUE OF PENSIONS BEING STOLEN THROUGH FRAUD. Rather, they are telling us we were negligent in how much we saved.
ANY PLAN THAT SEEKS TO PLACE PUBLIC MONEY IN A SYSTEMICALLY CRIMINAL STOCK MARKET IS A SLAP IN THE AMERICAN PEOPLE'S FACE!
Provide a Secure Retirement for All Marylanders
After working for their entire lives, Marylanders deserve a secure and dignified retirement. Under our current system, too many workers face an uncertain future. By establishing a state-run savings option, we can make it easier and more affordable for Marylanders to save for a secure retirement.
Read Heather's plan to create a state-run retirement savings fund.
Below you see another neo-liberal planning for the end of Social Security since the Trust has been raided of trillions of dollars and massive corporate fraud of tens of trillions of dollars is off-shored without any recovery. Obama is using his Executive office to bypass Congress to create the same privatized version of payroll deductions into stock market plans. Now, the Congressional leadership can pretend it had no voice in this----and yet it does-----do you hear your pols shouting that this is a privatization scheme meant to end Social Security? Not a word in Maryland.
Below they make it sound so safe and easy to have money deducted from your paycheck and placed into a 'protected' investment in the stock market. OH REALLY???????
myRA: Helping Millions of Americans Save for Retirement
David HudsonFebruary 11, 2014
05:20 PM EDT Share This Post Let’s do more to help Americans save for retirement. Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k)s. That’s why ... I will direct the Treasury to create a new way for working Americans to start their own retirement savings: myRA.
— President Barack Obama, State of the Union, January 28, 2014
The most secure retirement requires a three-legged stool that includes Social Security, savings, and pensions. Although Social Security will remain a guaranteed benefit all Americans can rely on, about half of American workers, and 75 percent of part-time workers, lack access to employer-sponsored retirement plans like 401(k)s.
These plans are usually the most effective means of saving for retirement. That’s why President Obama announced in his State of the Union address that he is directing the Department of the Treasury to create "myRA" -- a safe, simple, and affordable "starter" retirement savings account that will ultimately help millions of Americans begin to prepare for retirement.
What is myRA? myRA is a new type of savings account for Americans who don’t have access to an employer-sponsored retirement savings plan. Workers who sign up will be able to have a portion of their paycheck directly deposited into their myRA automatically every payday.
What are the benefits of myRA?
It’s simple: Contributions as low as $5 can be made through easy-to-use payroll deductions. Savers can keep the same myRA when changing jobs, and can also roll the balance over to a private-sector retirement account at any time. Savers will also be able to withdraw their contributions tax free at any time.
It’s safe: Contributions to the account are invested in a Treasury security, which means it will be backed by the full faith and credit of the United States. myRA’s feature government-backed principal protection, so the account balance will never decrease in value, and will earn the same interest rate that is available to federal employees for their retirement savings.
It’s affordable: There are no fees, and workers can enroll in the program with a minimum contribution of $25, and add to their savings through regular direct deposits as low as $5 each payday.
How do workers sign up for myRA? By the end of 2014, workers whose employers choose to participate in an initial myRA pilot program will be able to sign up online. Employers will neither administer the accounts nor contribute to them, but will send the direct deposit to each participating employee’s myRA.
Other proposals to help Americans save for retirement: In addition to myRA, the President will work with Congress on two other proposals to help Americans save for their retirement.
Auto-IRA Since half of all American workers lack access to employer-sponsored retirement plans, the onus is often on individuals to set up an IRA. Whereas 90% of workers automatically enrolled in a 401(k) plan through their employer make contributions, fewer than 10% of workers eligible to contribute to an IRA voluntarily do so.
The President’s budget will propose to establish automatic enrollment in IRAs (or “Auto-IRAs”) for employees without access to an employer-sponsored savings plan. Employers that do not provide a workplace savings plan would have to connect their employees with a payroll-deduction IRA. This proposal could provide access to one-quarter of U.S. workers.
Removing inefficient retirement tax breaks for the wealthy Current retirement tax subsidies disproportionately benefit higher-income households, many of whom would have saved with or without incentives. About two-thirds of tax benefits for retirement saving go to the top 20% of earners, with one-third going to the top 5%.
The President has proposed to limit the benefits of tax breaks, including retirement tax preferences, for high-income households to a maximum of 28% of the value of the deduction or exemption. The President has also proposed to limit contributions to tax-preferred savings accounts once balances are about $3.2 million – large enough to fund a reasonable pension in retirement.
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This article is great in showing that this attack on our retirements was deliberate and everyone knew it was happening. Whether pension plans looted or Social Security Trusts sent to the US Treasury to be imploded with debt from massive corporate fraud......the intent to loot our savings was ongoing through Reagan/Clinton and now Bush/Obama.
WE CAN STRENGTHEN SOCIAL SECURITY BY SIMPLY MAKING A FEW SIMPLE POLICY ADJUSTMENTS AND GET THE FUNDS BACK INTO THE TRUSTS......THIS WOULD MAKE IT HEALTHY FOR THE LONG-TERM.
We can protect pensions by reinstating Rule of Law in Maryland and rebuilding oversight and accountability over pension management and by creating State Public banks to give people a safe place to place their savings.
Edward "Ted" Siedle Contributor Follow I cover pension, money management and securities industry practices.
Investing 10/07/2010 @ 11:02AM 8,381 views
401ks: America's Biggest Investment Fraud Was Foreseen and Preventable
Calling these workplace mainstays a “retirement plan” ought to be a crime.
On September 10, 2008 my brokerage firm issued a satirical voluntary recall of most of the nation’s 401k plans. Our firm had not sold any 401k products but the intent was to draw attention to the inherent flaws in these investment products. It was simple enough to draft the recall. We used a U.S. Consumer Product Safety Commission recall press release as our model and we asked consumers to immediately take the recalled 401k plan products to their employers or the manufacturers of these products for full refund.
While humorous, our recall was not intended as a joke.
Why did we issue the recall? Because at that point in time (in 2008), it was apparent to even the most die-hard supporters of defined contribution plans that the great 401k experiment commencing in the early 1980s, had catastrophically failed. While the market recovered significantly since then, with average account balances hovering at perhaps $50,000 for older workers it is still apparent that 401ks will not provide for anyone’s retirement security.
Over the past decade, my firm had issued a series of increasingly stern warnings regarding the nation’s failed 401k system. See, for example, at benchmarkalert.com: 401ks: Far More Dangerous Than IRAs (March 2001); An End To 401ks (February 2002); 401k Abuses: The Mutual Fund Industry’s Next Nightmare (July 2004); Explaining Poorly Designed 401ks (January 2005); An Extreme Makeover Due for Defined Contribution Plans (June 2007); and Challenges to 401ks Continue (February 2008).
As a former attorney with the SEC regulating mutual funds and later in-house counsel to one of the largest mutual fund complexes, it had long been clear to me (and frankly many other industry insiders) that 401k investors were doomed.
Why were they doomed? Regulators and employers were unconcerned about pervasive conflicts of interest; excessive, hidden fees and wrongdoing that resulted in billions being skimmed from 401k accounts. Lack of adequate employer contributions further ensured that there was simply no way there would be enough in 401ks to fund participants’ retirement goals. But that didn’t stop regulators, employers and the mutual fund industry from touting 401ks as “retirement plans” to unsuspecting workers. Fraud of this magnitude, involving trillions, makes Madoff look like chicken feed.
What is less apparent even today is that the failure of 401ks was foreseeable decades ago and well-known to both employers and investment industry insiders.
For example, a 2008 Annual Survey of 401k Plan Sponsors by Deloitte Consulting (conducted before the market meltdown) found that 80% of employers believed that 401ks were effective in recruiting employees but only 13% believed that the 401k plans they offered would provide retirement security for their workers. In other words, employers understood that offering a plan that purported to provide for workers’ retirement security, without obligating the employer to pay retirement benefits, was helpful in building their businesses. However, employers privately acknowledged that these 401k plans were not sufficient to provide for workers’ retirement. For 30 years employers chose not to share this little secret with the workers.
Two profound features of the 2008 market meltdown, both of which continue to plague the nation, were the housing bubble and the failure of 401ks. Remarkably, unlike the housing bubble which has been discussed exhaustedly, the dismal failure of 401ks as a retirement vehicle has received little attention. No meaningful regulatory reforms have been enacted. There have been no investigative panels or committees convened and no one has been held accountable. Nothing has changed—except that now it is clear that many older Americans will sink into poverty once they are unable to work.
In my opinion, which I have shared with the SEC, it ought to be illegal to call a 401k plan a “retirement plan” and those parties who promoted them as retirement plans should be held accountable.
Most of the blame for this foreseeable disaster lies with the Department of Labor for failing to implement a regulatory scheme that was appropriate for 401ks and instead choosing to defer to the mutual fund and other financial services industries. For example, the DOL could have decades ago held that retail mutual funds failed to meet the higher standards applicable to 401ks under ERISA, the federal statute governing these plans. Had the DOL required the mutual fund industry to create special “fiduciary class shares” with lower fees (to reflect the lower expenses related to marketing to such plans) and had the DOL prohibited other harmful industry practices within 401ks, such as soft dollar trading and revenue sharing, then the nation’s 401k investors would have accumulated at least an additional 1% per year for the past 30 years.
I estimate appropriate regulation would have resulted in workers having approximately 50% more in their 401ks – money that is sorely needed today. Instead, billions were skimmed for decades from workers retirement accounts by the financial services industry while the watchdogs slept.
Given that over 92% of defined contribution plans have less than $5 million in assets and have no full-time employee with investment expertise responsible solely for the plan, the DOL has long known that an overwhelming majority of sponsors rely exclusively upon providers for turnkey solutions to plan needs. Since it is impossible to educate all these small plan sponsors regarding the nuances of plan design, costs, etc., the only way the 401k system could have worked was to prohibit the financial services industry from selling retail garbage to 401k sponsors and investors.
The DOL should have focused upon effective regulation of the parties perpetrating and profiting from the abuses, as opposed to educating the victims. The notion that smaller employers and workers will become skilled in plan design, asset allocation and portfolio management was always preposterous. Yet that was the DOL plan. Now that DOL’s regulatory approach has failed, will it change? Doubtful. Judge the DOL on “results,” and the agency gets an “F.”
Worse still over the years as it became increasingly apparent that 401ks were failing to live up to their promise DOL assured employers that their plan “results” did not matter. All that mattered to DOL was that employers followed the agency’s byzantine policies and procedures regarding “process” (largely drafted by industry) even if the financial outcome to workers was horrendous.
What did it matter if employees loaded up on employer stock, as long as the employer could show that other (better) alternatives were offered within the plan that the employee neglected to select (due to a misguided sense of loyalty)? A vigilant regulator would have prohibited or limited employer stock from 401k plans since employees are already dependent upon the employer company for their current incomes and, as a result, company stock does not offer adequate diversification. Instead the DOL concluded that company stock presumptively is permissible in a 401k, despite the obvious conflict of interest present.
There are countless other examples of how the DOL and other regulators failed to protect participants in the nation’s 401k plans. In early 2009 my firm issued a definitive research report, Secrets of the 401k Industry: How Employers and Mutual Fund Advisers Prospered as Workers’ Dreams of Retirement Security Evaporated which documented that industry practices have played a significant role in creating the defined contribution retirement plan crisis the nation faces today.
We are on the precipice of the greatest retirement crisis in the history of the world. In the decade to come, we will witness millions of elderly Americans slipping into poverty. Too frail to work, too poor to retire will become the “new normal” for elderly Americans.
The catastrophic failure of 401k defined contribution plans and the resulting crisis was foreseen and preventable, resulting from inadequate regulatory oversight and unchecked industry greed. There is still time to help the Baby Boomers recover and save younger workers from this nightmare. However unless we acknowledge the mistakes of the past and make appropriate changes we cannot restore the dream of a secure retirement for America’s workers. Join with me in calling for an investigation into the causes of the spectacular failure of 401ks, the cruelest hoax ever played upon the nation’s workers.
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Whether Social Security disability or Medicare disability this economic stagnation is forcing the American people to tap into their life's savings to simply make ends meet. If you fight for Social Security disability you will decrease your lifelong retirement payments substantially. So, someone scheduled to receive $2500 a month in Social Security will receive only $1400 if they go onto Social Security disability no matter how long. YOU HAVE LOST HALF THE VALUE OF YOUR RETIREMENT BY GOING TO SOCIAL SECURITY DISABILITY. People are often claiming depression and mental health issues to tap into these because unemployment has ended and the economy is deliberately kept stagnant just so the American people will exhaust all their retirement resources and wealth that would have gone to children.
IT IS DELIBERATE FOLKS!
Below you see people actually cashing in on pensions early losing over half of value to banks in fees and fines. If we had a domestic economy we would not be held hostage for jobs by global corporations simply expanding and earning profits overseas. THIS GLOBAL MARKET POLICY IS KILLING THE AMERICAN WAY OF LIFE. TRANS PACIFIC TRADE PACT WILL MAKE THE US A THIRD WORLD COUNTRY.
Is pension liberation really fraud?
February 20, 2014 By Jim Atkins inShare
Consumer watchdogs and financial regulators are in a frenzy over trying to stop pension liberation and have labelled the practice as fraud – but is it really?
Pension liberation is when retirement savers access their funds before their 55th birthday – the earliest date from which the money is available without tax penalties.
Although The Pensions Regulator has won a case outlawing specific pension liberation schemes as fraud, the judge stopped short of declaring all pension liberation as fraud.
This has left the pension industry in a quandary because drawing a pension early may be foolish from an investor’s standpoint, it is not illegal.
Anyone who unlocks a pension before they are 55 years old faces paying the liberation firm a massive fee of anything up to a reported 33% of the fund, plus a 55% tax penalty to HM Revenue & Customs (HMRC).
Unlocking a pension The likelihood is that anyone considering pension liberation is probably in dire financial straits and needs the cash for personal reasons, so the fees and fines are worrying but a necessary evil.
So why are the regulators, HMRC and the pension industry so keen on stopping pension liberation?
In a recent article in trade paper The Actuarial Post, Margaret Snowden, who chairs an industry working party trying to compile a code of conduct to stamp out pension liberation says: “Pension liberation is legal, but some advisers do cheat savers out of their pensions.
“Accessing a pension before the saver is 55 is not illegal, providing any tax penalties are paid, but in the worst cases some people have seen their funds stolen.”
Around 40 cases are before the Financial Ombudsman complaining that pension providers have unnecessarily held up fund transfers to suspected pension liberation outfits.
Changing the rules The industry expects the ombudsman to rule in favour of the complainants for the precise reasons Snowden explained in her article – pension liberation is not illegal.
So, the consensus is pension liberation is not a wise course of action because of the costs and penalties involved, and the fact that savings destined to fund a comfortable retirement are spent in other ways long before they are needed to pay pension benefits.
Although weeding out the fraudsters and scoundrels is more than desirable, someone has to ask what all the fuss is about.
The opponents say they are unsure about how much pension money has been liberated – but put the figure at around £420 million to £600 million. However, that does not break the money down to the amount siphoned off by fraudsters or the sum going to retirement savers.
For the campaign to succeed, pension providers and regulators should stop trying to plug a leak, but perhaps look at changing the rules to let savers get their hands on their money when they need it.
After all, figures from recent surveys suggest a third of workers have no pension, and part of that reasoning is locking up cash for tens of years when you might need it is a real concern for many people.
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Maryland has just as much fraud in its public pension system but you do not hear a word-----either from politicians calling themselves democrats or from the labor unions who should be protecting their members wealth. THERE WAS MASSIVE FRAUD IN MARYLAND PENSION SYSTEMS AND NO ONE IS SAYING A THING! Instead, we are being told we need to save more and forget about all those pension and home equity losses from fraud.
Simply rebuilding oversight and accountability will bring back pension and personal wealth and stop the systemic fleecing of our savings and wealth! STOP ALLOWING THEM TO MAKE MARYLAND CITIZENS EASY PREY FOR CORPORATE FRAUD AND GOVERNMENT CORRUPTION!
They will highlight the few cases of workers defrauding the system with false claims to these pension funds, but there are billions of dollars stolen by Wall Street and government corruption.
I want to emphasize here that Cuomo was the New York Attorney General when all this fraud was happening just as Doug Gansler is now. So, this article making Cuomo look like he is getting tough with systemic fraud of our pension system is A HOOT. He enabled the fraud by having no public justice agencies overseeing these transactions. Also note that Maryland is just as rife with pension fraud even as neo-liberals are pushing to cut pensions right and left because they are 'underfunded'.......ma
Friday, May 1, 2009
Systemic Fraud at Public Pension Funds?
New York's Attorney General Andrew M. Cuomo said on Friday that his office was issuing more than 100 new subpoenas to investment firms and intermediaries who brokered deals with public pension funds, in the latest expansion of his corruption investigation: Mr. Cuomo said a preliminary review by his office found that as many as half of the intermediaries in pension fund transactions in New York State and New York City were not properly licensed and registered with a broker-dealer, as required by federal securities laws. Failing to register could violate both federal securities laws and the Martin Act, a sweeping state securities law.
“The troubling pattern of unlicensed agents highlights yet another systemic weakness in New York’s pension fund, creating a situation which is fraught with peril and prone to abuse,” Mr. Cuomo said in a statement.
He also conferred with the offices of 35 other attorneys general Friday afternoon by teleconference. The pension corruption inquiry has raised questions about public investment practices in other states, in particular New Mexico and California.
Afterward, Mr. Cuomo said the group had “decided to create a multistate task force to explore pension fund abuse.”
Mr. Cuomo’s office has been working with the Securities and Exchange Commission, which is conducting a parallel investigation. Federal investigators are also reviewing public investment transactions in New Mexico, and the S.E.C. is reviewing pension transactions in California.
Among the firms being scrutinized in the latest round of Mr. Cuomo’s inquiry is Wetherly Capital Group, according to people with knowledge of the inquiry. Investigators are scrutinizing whether employees of Wetherly and other firms were properly licensed when they arranged deals with pension funds in New York.
Wetherly is a Los Angeles-based placement agent firm run by Dan Weinstein, a prominent Democratic fund-raiser. In a statement, Wetherly said it was fully registered with the Financial Industry Regulatory Authority and the S.E.C.
Wetherly has come under scrutiny in California for paying a firm affiliated with Hank Morris, a top aide to Alan G. Hevesi, the former New York State comptroller, as part of an investment deal it brokered for Calpers, the giant California pension fund.
Another California firm being scrutinized in the latest round of the investigation is Gold Bridge Capital, which has acted as a placement agent on at least one deal involving the New York State pension fund.
The inquiries by Mr. Cuomo and the S.E.C., under way for two years, have focused on the millions of dollars that friends, relatives and aides of Mr. Hevesi’s gained by selling access to the $122 billion New York State pension fund. Mr. Morris and David Loglisci, another former top aide to Mr. Hevesi, have been indicted on a variety of corruption-related fraud charges, and Raymond B. Harding, the former head of the state Liberal Party, has also been charged in the case. All three have pleaded not guilty. Mr. Hevesi has not been charged.
The inquiries took on more national relevance on Thursday when Mr. Cuomo charged a top consultant to pension funds around the country, Saul Meyer, with a fraud-related felony. Mr. Meyer and his firm, Aldus Equity, which is based in Dallas, were also charged in a civil complaint by the S.E.C. Both Mr. Meyer and Aldus denied wrongdoing.
The new phase of the inquiry focuses on lobbyists, political consultants and others who brokered deals between investment firms and the New York pension funds but were not properly registered to do so.
In a preliminary investigation, Mr. Cuomo’s office found that from 2003 to 2006 — the period when Mr. Hevesi was comptroller — 22 of the 45 intermediaries used in deals at the state pension fund were not registered. In the New York City pension funds, 17 of 41 intermediaries were unregistered in deals from 2003 to this year, a review found.
While acknowledging that there could be exceptions, Mr. Cuomo said during a separate teleconference with reporters on Friday, “If you’re brokering a security, you need to be regulated.”
Thomas P. DiNapoli, the New York State comptroller, and William C. Thompson Jr., the New York City comptroller, both said this week that they would move to ban placement agents from deals with their pension funds.
Mr. Cuomo also highlighted a shortcoming in state lobbying rules, which do not require lobbyists to register with the state’s Commission on Public Integrity when they appear before the state comptroller.
The increased scrutiny on placement agents in recent years has led to concerns that lobbyists and political consultants are trying to find ways to perform similar services without registering as placement agents.
In 2007, Mr. DiNapoli met with the chief partner of the private equity firm InterMedia Partners, Leo J. Hindery Jr., and Roberto Ramirez, a lobbyist and former colleague of Mr. DiNapoli’s from the Assembly. The goal for the meeting was to convince the state comptroller’s office to increase its investment with InterMedia, which it later did. A spokesman for Mr. Ramirez has said he was not paid by InterMedia and appeared only as a friend of Mr. Hindery’s.
Mr. Cuomo would not say which lobbyists or consultants were being scrutinized, but said the intersection of unregistered agents and the pension fund was potentially “the Wild West of government relations.”Mr. Cuomo also said that pension kickbacks are a national problem:
New York state's criminal probe of kickbacks paid by companies eager to manage its $122 billion state pension fund has exposed "a national network of actors" whose schemes are ongoing, state Attorney General Andrew Cuomo said on Thursday. "This is all across the nation, and it's continuing today," the Democratic attorney general said on a conference call.
The probe, which began two years ago, has fixed the spotlight on the use of placement agents hired by investment firms to open the doors of the New York State Common Retirement Fund. Cuomo said he is also is scrutinizing lawyers and lobbyists.
The investigation is another effort to stamp out graft and the practice of "pay to play," which involves giving gifts or campaign donations to win public contracts. So far the probe has looked into the web of relationships and business contracts involving money managers, politicians and pension officials spanning the country from New York City and the state capital, Albany, to Texas, New Mexico and California.
On Thursday, the U.S. Securities and Exchange Commission, which is working with Cuomo, charged that Dallas-based Aldus Equity Partners won New York pension business because of "its willingness to illegally line the pockets of others."
The state pension fund had aimed to hire more women and minority-owned investment firms and had begun talks with one. But Aldus was chosen, Cuomo said, when the minority-owned firm "allegedly refused to pay kickbacks to Morris and another associate."
Aldus, a private equity firm, says it manages over $5 billion, and the probe already has cost Aldus clients in New Mexico and New York. Cuomo said Aldus also is active in Louisiana, Oklahoma, Texas, California, and New York City.
ANOTHER VIEW OF GIVE AND TAKE
Both Cuomo and the SEC charged that Saul Meyer, an Aldus founder, paid about $320,000 to a shell company owned by Henry Morris, a top fund-raiser for New York's former state comptroller. This led the New York state pension fund's then-chief investment officer, David Loglisci, to invest $375 million with Aldus from 2004 to 2006.
Demonstrating the power that Morris wielded over pension investments, Cuomo said Morris told a Meyer intermediary: "Tell that little peanut of a man that I can take business away as easily as I provided (it)."
Lawyers for Morris and Loglisci, who were indicted in March, say they are innocent.
On Thursday, Meyer was charged with a state securities felony and released on $200,000 bail. His lawyer Paul Shechtman said: "Time and evidence will show that Saul Meyer did nothing wrong."
Aldus knew that Morris was "working both sides of the deal," Cuomo said, by marketing funds for investments in the Aldus/NY Emerging Fund in which Morris had a 35 percent stake.
Aldus Equity lawyer Matthew Orwig faulted the SEC for acting before finishing its probe, calling the threatened legal action "appalling and careless with the law and with people's reputations." Aldus partners said they were disappointed by the "unexpected legal developments."
Aldus could face more legal peril. The New York state pension fund is weighing legal remedies against Aldus and Meyer after ending its investment with the firm. New York City pensions could cut ties with the firm, while New Mexico's governor called on the state Education Board to drop its contract with Aldus a day after ordering the state investment officer to do so.
Cuomo said that while Meyer was seeking more business with New York's pension fund, he helped Daniel Hevesi, a son of Alan Hevesi, the former state comptroller whose oversight of the state pension fund is being probed, earn a $250,000 fee on a New Mexico pension deal.
Alan Hevesi's lawyer Bradley Simon has said the former comptroller "has not been charged with any misconduct with respect to mismanagement of the New York state pension fund."
Bloomberg reports that L.A. pension is baffled by fees paid to firm in probe:
Los Angeles retirement plan managers say they’re baffled over fees paid by Quadrangle Group LLC to a key player named in New York’s pension fund kickback probe for helping the private equity firm land work in California. Quadrangle paid Searle & Co. $150,000 in connection with the Los Angeles Department of Fire and Police Pensions fund’s $10 million investment with the New York firm, which was co- founded by Steven Rattner before President Barack Obama appointed him to oversee the auto industry rescue.
Searle employed Hank Morris, a political adviser accused by New York State Attorney General Andrew Cuomo and the U.S. Securities and Exchange Commission of using the Greenwich, Connecticut, brokerage to collect “sham” placement fees from firms that manage New York pension plan money.
After the SEC this month said Quadrangle paid Morris a “finders fee” related to a New York pension fund investment, Quadrangle told the Los Angeles fund that it also had paid placement fees to him for work there. The Los Angeles fund publicly disclosed the fee April 24.
“We don’t know how or why a placement fee related to our investment in Quadrangle was made,” Michael Perez, the general manager of the Los Angeles pension, said in written responses to questions from Bloomberg News.
‘Shocked’ at News
Perez said the fund’s investment in Quadrangle was arranged through Pension Consulting Alliance Inc., which evaluates investments on its behalf. Allan Emkin, that company’s founder and managing director of its Los Angeles office, said it didn’t have any contact with Searle or Morris and worked directly with Quadrangle. Emkin said he had been unaware that Searle was paid a fee in connection with the deal.
“We were shocked when we heard about it,” Emkin said in a telephone interview.
Morris, who faces a civil SEC complaint and criminal charges by Cuomo, has denied wrongdoing. Quadrangle and Rattner haven’t been charged. Adam Miller, a spokesman for Quadrangle, declined to comment. Searle referred calls to Peter Anderson, an attorney, who didn’t respond to requests for comment.
The SEC has asked the Los Angeles fund and two of its board members for information about investment decisions and firms tied to the New York probe.
Cuomo said today that New York was formalizing agreements to coordinate its investigation with authorities in California, as well as with Connecticut, Illinois and New Mexico.
Los Angeles Connection
“We are disclosing a national network of actors, who often acted in concert,” Cuomo said. “They collaborated, they often partnered and victimized states and taxpayers all across the country.”
The SEC and Cuomo today charged Saul Meyer, the managing partner of one of the firms in the New York probe, Aldus Equity Partners, with paying Morris to secure investment business with New York. Aldus has served for more than a year as a private equity consultant to the Los Angeles pension fund. Meyer met with the fund’s board at least once, city records show.
Morris, the one-time chief fundraiser and political adviser to former New York City Comptroller Alan Hevesi, has been charged by the SEC with collecting $15 million in kickbacks from money managers doing business with New York’s pension fund. The SEC says the kickbacks were masked as placement fees and that he “rarely, if ever” provided legitimate services.
Quadrangle hired Morris as a placement agent before winning a $100 million investment from New York, the SEC said in an April 15 complaint. The firm paid Searle $1.125 million, and 95 percent of that went to Morris, the SEC said.
The Los Angeles pension approved investments in 10 private equity funds linked to the New York investigation, according to an April 2 memo to the board. Two of the investments were later canceled. Aldus Equity Partners, which was drawn into the New York probe, also advised the fund on private equity investments.
I have already written about the Mother of all stealth scams. Nothing like a huge financial crisis to bring out all the cockroaches. This hardly surprises me and remember my dire warning: Madoff was the tip of the iceberg. There will be many more fraudsters that will get nabbed in the next few years.
Just how systemic is fraud in the financial industry and at public pension funds? We don't know, but when you mix greedy placement agents with public pension fund managers who control billions, the potential for kickbacks is huge.
What can pension funds do to stop abuse before it happens? First, they should segregate duties so the person(s) making the investment has to pass through several checks, including an internal auditor, before the decision is cleared. Importantly, there should also be clear segregation of duties between those making the investment decisions and the finance professionals valuing them.
Second, pension funds need to beef their whistleblower policies so people are encouraged to report abuse. This is one of the most effective ways to stop fraud. Maybe there should be a direct link between public pension fund employees and the state's Attorney General's office or the provincial or federal Auditor General's office.
Third, have your fraud procedures verified by a certified fraud examiner (read more on CFEs by clicking here). This should include someone who scrutinizes travel/meal/entertainment expenses to make sure there is no abuse going on when some hedge fund or private equity manager is trying to woo a pension fund manager to invest with them.
Fourth, there should be tight rules governing the relationships between investment managers and the funds they invest with. If you are investing billions with Fund Z, then you should not be allowed to go work for them for a period of five years after you leave a public pension fund. This is just common sense, but you'd be surprised how common sense often falls by the wayside.
Fifth, all board decisions should be made public so they are open to scrutiny. Several of the large U.S. state plans already do this. For example, Alaska's Permanent Fund publishes its board schedule, their minutes and their consultants on their website.
Finally, on the legal front, I would ban all placement agents and place tight rules on pension consultants who recommend funds to pension funds. Do not underestimate the abusive practices of pension consultants and the potential for fraud with them. They are the gatekeepers at most U.S. pension plans.
It truly is the Wild West out there, but I am glad to see the Attorney General of New York is pursuing the pension probe and trying to clean up public pension funds.
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This is the sad state of affairs as people desperate to survive this stagnant economy look to pensions and Social Security Disability. As you see below all of this is draining these accounts for people who really are disabled. People do not need extended unemployment-----THEY NEED TO REBUILD A DOMESTIC ECONOMY OF SMALL AND REGIONAL BUSINESSES AND END THIS GLOBAL MARKET ECONOMY. The booms and busts will never allow for wealth accumulation and the global size of corporations will not allow for accountability.
STOP ALLOWING THE NEO-LIBERALS PUSHING THESE GLOBAL MARKETS BE THE ONLY ONES RUNNING AND GIVEN ELECTION COVERAGE. THIS IS WHAT IS HAPPENING IN MARYLAND AND BROWN,. GANSLER, AND MIZEUR WILL ALL MAINTAIN THE STATUS QUO WITH DISMANTLING PUBLIC JUSTICE AND FEEDING GLOBAL CORPORATIONS.
What you see below is a plan to extend disability payments by tapping Social Security Trusts essentially hastening the depletion of funds in the Trust. These people should not be on disability-----they should have jobs!
CBO - The Coming Raid on Social Security
Submitted by Bruce Krasting on 02/10/2013 12:30 -0400
inShare2
Every politician in America knows that Social Security (SS) is a third rail. Any Pol who tries to mess with the country's largest and most popular entitlement program is going to have the likes of the AARP coming after them. It's not possible to win an election on a platform that advocates cutting back SS.
With that in mind, I find it interesting to report that a very credible source is now predicting that Obama AND Congress will take action over the next 24 months that will substantially undermine both the long and short-term health of SS. The legislative raid on SS will certainly total in the hundreds of billions, it could top $1T over the next fifteen years.
So who is this "credible source"? And just how is this raid going to happen? The source of this information is the Congressional Budget Office (CBO); the following is how it will play out:
SS consists of two different pieces. The Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). Both entities have their own Trust Funds (TF). OASI has a big TF that will, in theory, allow for SS retirement benefits to be paid for another 15+ years. On the other hand, the DI fund will run completely dry during the 1stQ of 2016. By current law, the DI benefits must be cut across-the-board by 30% on the day that the DI TF is exhausted.
This would mean that 11 million people (most of whom are very sick) would get slammed from one day to the next. There is no one in D.C. who wants this to happen. I don't think the American public wants this outcome either. So what are the fixes?
1) Increase income taxes on +$250k of income to pay for the DI shortfall. Maybe, but this will not happen with the current Republican controlled House.
2) Increase Payroll taxes to cover the DI shortfall. I see zero political support for a permanent Payroll tax increase.
3) Cut benefits by 30%. This would be insane - it will not happen with Obama running the show.
4) Kick the can down the road and raid the OASI TF for the annual shortfalls at DI.
Of course #4 is the path that will be taken. #s 1, 2 and 3 are not politically feasible. I have been wondering what will happen with the DI conundrum. I was surprised to see that the CBO spelled out what will happen in its report on the Budget and Economy - SS Trust Funds. The report has this footnote:
CBO projects that the DI trust fund will be exhausted during fiscal year 2016. Under current law, the Commissioner of Social Security may not pay benefits in excess of the available balances in a trust fund, borrow money for a trust fund, or transfer money from one trust fund to another. However, following rules in the Deficit Control Act of 1985 (section 257(b)), CBO's baseline assumes that the Commissioner will pay DI benefits in full even after the trust fund is exhausted.
The "loophole" to drain the OASI insurance is already law - so Congress doesn't have to do anything to raid the retirement fund. The "do nothing" plan is always the best option in D.C.
The footnote goes on to provide an estimate for the size of the raid:
For illustrative purposes, below are the cumulative shortfalls in the DI trust fund beginning in 2016. Those shortfalls do not include interest expenses.
DI Trust Fund Cumulative Shortfall
($s in Billions)
2016 -15
2017 -55
2018 -94
2019 -133
2020 -173
2021 -215
2022 -260
2023 -307
Wow! At this rate the raid tops $1T in 2029. This is is a big dent in a Trust Fund of $2.8T.
There is an import "tell" from the CBO. In the footnotes it highlights the fact that there is a discrepancy, and uses this an excuse to avoid establishing an adjusted end date for the OASI Trust Fund. (It's not a complicated calculation)
What CBO fails to state is that the raid on OASI will result in a significant reduction in the End Date for the retirement Fund. In its report to Congress last year SS forecast that the Retirement fund would be exhausted in 2033. The DI drain (and other negative revisions by CBO) will bring the End Date to below 2030 in the upcoming SS report to Congress. That would be a very significant development. CBO does not want to be the one who puts a new date "out there". To me, this was a cop-out by the CBO.
Given that discrepancy between the trust funds' operation and the baseline's assumption, CBO is not providing DI or combined trust fund totals for the year of exhaustion and thereafter.
The timing of this story is interesting. The question in my mind is will the "fix" come before or after the bi-election. If Obama was a gambler, and he believed the Democrats could re-take the House in 2014, then he might defer action on DI until 2015. This scenario creates the opportunity for option #1, a tax on the rich to supplement DI. Of course that is gambling, and there would be a very small window of time to push through a new income tax to save DI.
Then there is the Republicans. Do they want to push this before, or after 11/2014? I could argue both ways, but in the end, it gets back to the fact that no one wants to "do" anything with SS. It's better to do "nothing"; that makes #4 the most likely outcome.
I hope that some of the big Defenders of SS pick up on the information from the CBO regarding the coming raid on the retirement fund. This is a huge constituency (60m beneficiaries - 150m contributors - every politician in the country - all of the Press). If that group catches on to what is about to happen to the retirement fund, there will be a great chorus of, "Don't you dare touch my money!"
I'm trying to stir the pot on this one. I want DI's terminal condition to come onto the table sooner versus later. I'm hoping that if and when it does come up for discussion, it opens the door on the broader issue of what the hell America is doing with entitlements. Basically, I'm trying to pick a big fight. For the good of the country, wish me luck.
that's where our retirement went. As you see below, each citizen is owed a few hundreds of thousands of dollars in corporate fraud. Yet, politicians running as democrats seem to think the fraud needs to stay with the corporations stealing it and you and I must do without. They are telling us WE NEED TO BE MORE RESPONSIBLE FOR OUR SAVINGS.
That is what privatized savings accounts are all about. Rather than have payroll deductions taken from our paychecks and sent to Social Security Trust, these payroll deductions will go into a stock market retirement account. Heather Mizeur takes it further by saying we need to do this on the state level as well. Mayor Rawlings-Blake of Baltimore through public pensions into the stock market as 401Ks-----and all these pols know that the stock market is systemically fraudulent and steals any value accumulated from these retirement accounts.
A DEMOCRAT WOULD NEVER SEEK TO THROW RETIREMENT ACCOUNTS INTO A SYSTEMICALLY FRAUDULENT FINANCIAL MARKET. NEO-LIBERALS WORK FOR WEALTH AND PROFIT.
Please look under my Social Security section to see that this Trust is healthy for decades as Reagan tripled payroll tax deductions so the baby boomers retirements would be covered. It has simply been raided and we need it back.
As with State Health Systems that have as a goal of ending Medicare and Medicaid.....this policy of creating private retirement accounts taken out of paychecks and placed into the stock market is the same structure for ending Social Security. Rather than be voluntary, these payroll deductions will become mandatory and take the place of payroll deductions going into the Social Security Trust. So, rather than strengthening Social Security by removing the cap on high incomes or adding a 1% increase to payroll taxes to secure the health of the program------neo-liberals are dismantling it.
THIS IS WHAT HEATHER MIZEUR'S PLAN BELOW HAS AS A GOAL. BROWN AND GANSLER WILL DO THE SAME THING. IT IS A REPUBLICAN PLAN FOR ENDING SOCIAL SECURITY.
Look below to see how successful state and federal savings accounts have been------public pension funds are rife with fraud. 1/2 of value of public and private pensions were lost to massive fraud when pension managers deliberately pulled pensions out of the then safety of bonds and through them into the crashing stock market in 2007. THIS WAS DELIBERATE FRAUD AND PUBLIC MALFEASANCE. Not one word is spoken of these frauds against our retirements and no attempt at justice in returning those lost retirement funds in Maryland. So, not only should a democratic candidate be shouting for recovery of massive pension fraud and the rebuilding of oversight and accountability over these funds------but the union leaders who knew this was happening should have shouted and should be taking all of this fraud to court. EVERYONE IN MARYLAND IS SILENT ABOUT 1/2 OF VALUE OF PENSIONS BEING STOLEN THROUGH FRAUD. Rather, they are telling us we were negligent in how much we saved.
ANY PLAN THAT SEEKS TO PLACE PUBLIC MONEY IN A SYSTEMICALLY CRIMINAL STOCK MARKET IS A SLAP IN THE AMERICAN PEOPLE'S FACE!
Provide a Secure Retirement for All Marylanders
After working for their entire lives, Marylanders deserve a secure and dignified retirement. Under our current system, too many workers face an uncertain future. By establishing a state-run savings option, we can make it easier and more affordable for Marylanders to save for a secure retirement.
Read Heather's plan to create a state-run retirement savings fund.
Below you see another neo-liberal planning for the end of Social Security since the Trust has been raided of trillions of dollars and massive corporate fraud of tens of trillions of dollars is off-shored without any recovery. Obama is using his Executive office to bypass Congress to create the same privatized version of payroll deductions into stock market plans. Now, the Congressional leadership can pretend it had no voice in this----and yet it does-----do you hear your pols shouting that this is a privatization scheme meant to end Social Security? Not a word in Maryland.
Below they make it sound so safe and easy to have money deducted from your paycheck and placed into a 'protected' investment in the stock market. OH REALLY???????
myRA: Helping Millions of Americans Save for Retirement
David HudsonFebruary 11, 2014
05:20 PM EDT Share This Post Let’s do more to help Americans save for retirement. Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k)s. That’s why ... I will direct the Treasury to create a new way for working Americans to start their own retirement savings: myRA.
— President Barack Obama, State of the Union, January 28, 2014
The most secure retirement requires a three-legged stool that includes Social Security, savings, and pensions. Although Social Security will remain a guaranteed benefit all Americans can rely on, about half of American workers, and 75 percent of part-time workers, lack access to employer-sponsored retirement plans like 401(k)s.
These plans are usually the most effective means of saving for retirement. That’s why President Obama announced in his State of the Union address that he is directing the Department of the Treasury to create "myRA" -- a safe, simple, and affordable "starter" retirement savings account that will ultimately help millions of Americans begin to prepare for retirement.
What is myRA? myRA is a new type of savings account for Americans who don’t have access to an employer-sponsored retirement savings plan. Workers who sign up will be able to have a portion of their paycheck directly deposited into their myRA automatically every payday.
What are the benefits of myRA?
It’s simple: Contributions as low as $5 can be made through easy-to-use payroll deductions. Savers can keep the same myRA when changing jobs, and can also roll the balance over to a private-sector retirement account at any time. Savers will also be able to withdraw their contributions tax free at any time.
It’s safe: Contributions to the account are invested in a Treasury security, which means it will be backed by the full faith and credit of the United States. myRA’s feature government-backed principal protection, so the account balance will never decrease in value, and will earn the same interest rate that is available to federal employees for their retirement savings.
It’s affordable: There are no fees, and workers can enroll in the program with a minimum contribution of $25, and add to their savings through regular direct deposits as low as $5 each payday.
How do workers sign up for myRA? By the end of 2014, workers whose employers choose to participate in an initial myRA pilot program will be able to sign up online. Employers will neither administer the accounts nor contribute to them, but will send the direct deposit to each participating employee’s myRA.
Other proposals to help Americans save for retirement: In addition to myRA, the President will work with Congress on two other proposals to help Americans save for their retirement.
Auto-IRA Since half of all American workers lack access to employer-sponsored retirement plans, the onus is often on individuals to set up an IRA. Whereas 90% of workers automatically enrolled in a 401(k) plan through their employer make contributions, fewer than 10% of workers eligible to contribute to an IRA voluntarily do so.
The President’s budget will propose to establish automatic enrollment in IRAs (or “Auto-IRAs”) for employees without access to an employer-sponsored savings plan. Employers that do not provide a workplace savings plan would have to connect their employees with a payroll-deduction IRA. This proposal could provide access to one-quarter of U.S. workers.
Removing inefficient retirement tax breaks for the wealthy Current retirement tax subsidies disproportionately benefit higher-income households, many of whom would have saved with or without incentives. About two-thirds of tax benefits for retirement saving go to the top 20% of earners, with one-third going to the top 5%.
The President has proposed to limit the benefits of tax breaks, including retirement tax preferences, for high-income households to a maximum of 28% of the value of the deduction or exemption. The President has also proposed to limit contributions to tax-preferred savings accounts once balances are about $3.2 million – large enough to fund a reasonable pension in retirement.
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This article is great in showing that this attack on our retirements was deliberate and everyone knew it was happening. Whether pension plans looted or Social Security Trusts sent to the US Treasury to be imploded with debt from massive corporate fraud......the intent to loot our savings was ongoing through Reagan/Clinton and now Bush/Obama.
WE CAN STRENGTHEN SOCIAL SECURITY BY SIMPLY MAKING A FEW SIMPLE POLICY ADJUSTMENTS AND GET THE FUNDS BACK INTO THE TRUSTS......THIS WOULD MAKE IT HEALTHY FOR THE LONG-TERM.
We can protect pensions by reinstating Rule of Law in Maryland and rebuilding oversight and accountability over pension management and by creating State Public banks to give people a safe place to place their savings.
Edward "Ted" Siedle Contributor Follow I cover pension, money management and securities industry practices.
Investing 10/07/2010 @ 11:02AM 8,381 views
401ks: America's Biggest Investment Fraud Was Foreseen and Preventable
Calling these workplace mainstays a “retirement plan” ought to be a crime.
On September 10, 2008 my brokerage firm issued a satirical voluntary recall of most of the nation’s 401k plans. Our firm had not sold any 401k products but the intent was to draw attention to the inherent flaws in these investment products. It was simple enough to draft the recall. We used a U.S. Consumer Product Safety Commission recall press release as our model and we asked consumers to immediately take the recalled 401k plan products to their employers or the manufacturers of these products for full refund.
While humorous, our recall was not intended as a joke.
Why did we issue the recall? Because at that point in time (in 2008), it was apparent to even the most die-hard supporters of defined contribution plans that the great 401k experiment commencing in the early 1980s, had catastrophically failed. While the market recovered significantly since then, with average account balances hovering at perhaps $50,000 for older workers it is still apparent that 401ks will not provide for anyone’s retirement security.
Over the past decade, my firm had issued a series of increasingly stern warnings regarding the nation’s failed 401k system. See, for example, at benchmarkalert.com: 401ks: Far More Dangerous Than IRAs (March 2001); An End To 401ks (February 2002); 401k Abuses: The Mutual Fund Industry’s Next Nightmare (July 2004); Explaining Poorly Designed 401ks (January 2005); An Extreme Makeover Due for Defined Contribution Plans (June 2007); and Challenges to 401ks Continue (February 2008).
As a former attorney with the SEC regulating mutual funds and later in-house counsel to one of the largest mutual fund complexes, it had long been clear to me (and frankly many other industry insiders) that 401k investors were doomed.
Why were they doomed? Regulators and employers were unconcerned about pervasive conflicts of interest; excessive, hidden fees and wrongdoing that resulted in billions being skimmed from 401k accounts. Lack of adequate employer contributions further ensured that there was simply no way there would be enough in 401ks to fund participants’ retirement goals. But that didn’t stop regulators, employers and the mutual fund industry from touting 401ks as “retirement plans” to unsuspecting workers. Fraud of this magnitude, involving trillions, makes Madoff look like chicken feed.
What is less apparent even today is that the failure of 401ks was foreseeable decades ago and well-known to both employers and investment industry insiders.
For example, a 2008 Annual Survey of 401k Plan Sponsors by Deloitte Consulting (conducted before the market meltdown) found that 80% of employers believed that 401ks were effective in recruiting employees but only 13% believed that the 401k plans they offered would provide retirement security for their workers. In other words, employers understood that offering a plan that purported to provide for workers’ retirement security, without obligating the employer to pay retirement benefits, was helpful in building their businesses. However, employers privately acknowledged that these 401k plans were not sufficient to provide for workers’ retirement. For 30 years employers chose not to share this little secret with the workers.
Two profound features of the 2008 market meltdown, both of which continue to plague the nation, were the housing bubble and the failure of 401ks. Remarkably, unlike the housing bubble which has been discussed exhaustedly, the dismal failure of 401ks as a retirement vehicle has received little attention. No meaningful regulatory reforms have been enacted. There have been no investigative panels or committees convened and no one has been held accountable. Nothing has changed—except that now it is clear that many older Americans will sink into poverty once they are unable to work.
In my opinion, which I have shared with the SEC, it ought to be illegal to call a 401k plan a “retirement plan” and those parties who promoted them as retirement plans should be held accountable.
Most of the blame for this foreseeable disaster lies with the Department of Labor for failing to implement a regulatory scheme that was appropriate for 401ks and instead choosing to defer to the mutual fund and other financial services industries. For example, the DOL could have decades ago held that retail mutual funds failed to meet the higher standards applicable to 401ks under ERISA, the federal statute governing these plans. Had the DOL required the mutual fund industry to create special “fiduciary class shares” with lower fees (to reflect the lower expenses related to marketing to such plans) and had the DOL prohibited other harmful industry practices within 401ks, such as soft dollar trading and revenue sharing, then the nation’s 401k investors would have accumulated at least an additional 1% per year for the past 30 years.
I estimate appropriate regulation would have resulted in workers having approximately 50% more in their 401ks – money that is sorely needed today. Instead, billions were skimmed for decades from workers retirement accounts by the financial services industry while the watchdogs slept.
Given that over 92% of defined contribution plans have less than $5 million in assets and have no full-time employee with investment expertise responsible solely for the plan, the DOL has long known that an overwhelming majority of sponsors rely exclusively upon providers for turnkey solutions to plan needs. Since it is impossible to educate all these small plan sponsors regarding the nuances of plan design, costs, etc., the only way the 401k system could have worked was to prohibit the financial services industry from selling retail garbage to 401k sponsors and investors.
The DOL should have focused upon effective regulation of the parties perpetrating and profiting from the abuses, as opposed to educating the victims. The notion that smaller employers and workers will become skilled in plan design, asset allocation and portfolio management was always preposterous. Yet that was the DOL plan. Now that DOL’s regulatory approach has failed, will it change? Doubtful. Judge the DOL on “results,” and the agency gets an “F.”
Worse still over the years as it became increasingly apparent that 401ks were failing to live up to their promise DOL assured employers that their plan “results” did not matter. All that mattered to DOL was that employers followed the agency’s byzantine policies and procedures regarding “process” (largely drafted by industry) even if the financial outcome to workers was horrendous.
What did it matter if employees loaded up on employer stock, as long as the employer could show that other (better) alternatives were offered within the plan that the employee neglected to select (due to a misguided sense of loyalty)? A vigilant regulator would have prohibited or limited employer stock from 401k plans since employees are already dependent upon the employer company for their current incomes and, as a result, company stock does not offer adequate diversification. Instead the DOL concluded that company stock presumptively is permissible in a 401k, despite the obvious conflict of interest present.
There are countless other examples of how the DOL and other regulators failed to protect participants in the nation’s 401k plans. In early 2009 my firm issued a definitive research report, Secrets of the 401k Industry: How Employers and Mutual Fund Advisers Prospered as Workers’ Dreams of Retirement Security Evaporated which documented that industry practices have played a significant role in creating the defined contribution retirement plan crisis the nation faces today.
We are on the precipice of the greatest retirement crisis in the history of the world. In the decade to come, we will witness millions of elderly Americans slipping into poverty. Too frail to work, too poor to retire will become the “new normal” for elderly Americans.
The catastrophic failure of 401k defined contribution plans and the resulting crisis was foreseen and preventable, resulting from inadequate regulatory oversight and unchecked industry greed. There is still time to help the Baby Boomers recover and save younger workers from this nightmare. However unless we acknowledge the mistakes of the past and make appropriate changes we cannot restore the dream of a secure retirement for America’s workers. Join with me in calling for an investigation into the causes of the spectacular failure of 401ks, the cruelest hoax ever played upon the nation’s workers.
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Whether Social Security disability or Medicare disability this economic stagnation is forcing the American people to tap into their life's savings to simply make ends meet. If you fight for Social Security disability you will decrease your lifelong retirement payments substantially. So, someone scheduled to receive $2500 a month in Social Security will receive only $1400 if they go onto Social Security disability no matter how long. YOU HAVE LOST HALF THE VALUE OF YOUR RETIREMENT BY GOING TO SOCIAL SECURITY DISABILITY. People are often claiming depression and mental health issues to tap into these because unemployment has ended and the economy is deliberately kept stagnant just so the American people will exhaust all their retirement resources and wealth that would have gone to children.
IT IS DELIBERATE FOLKS!
Below you see people actually cashing in on pensions early losing over half of value to banks in fees and fines. If we had a domestic economy we would not be held hostage for jobs by global corporations simply expanding and earning profits overseas. THIS GLOBAL MARKET POLICY IS KILLING THE AMERICAN WAY OF LIFE. TRANS PACIFIC TRADE PACT WILL MAKE THE US A THIRD WORLD COUNTRY.
Is pension liberation really fraud?
February 20, 2014 By Jim Atkins inShare
Consumer watchdogs and financial regulators are in a frenzy over trying to stop pension liberation and have labelled the practice as fraud – but is it really?
Pension liberation is when retirement savers access their funds before their 55th birthday – the earliest date from which the money is available without tax penalties.
Although The Pensions Regulator has won a case outlawing specific pension liberation schemes as fraud, the judge stopped short of declaring all pension liberation as fraud.
This has left the pension industry in a quandary because drawing a pension early may be foolish from an investor’s standpoint, it is not illegal.
Anyone who unlocks a pension before they are 55 years old faces paying the liberation firm a massive fee of anything up to a reported 33% of the fund, plus a 55% tax penalty to HM Revenue & Customs (HMRC).
Unlocking a pension The likelihood is that anyone considering pension liberation is probably in dire financial straits and needs the cash for personal reasons, so the fees and fines are worrying but a necessary evil.
So why are the regulators, HMRC and the pension industry so keen on stopping pension liberation?
In a recent article in trade paper The Actuarial Post, Margaret Snowden, who chairs an industry working party trying to compile a code of conduct to stamp out pension liberation says: “Pension liberation is legal, but some advisers do cheat savers out of their pensions.
“Accessing a pension before the saver is 55 is not illegal, providing any tax penalties are paid, but in the worst cases some people have seen their funds stolen.”
Around 40 cases are before the Financial Ombudsman complaining that pension providers have unnecessarily held up fund transfers to suspected pension liberation outfits.
Changing the rules The industry expects the ombudsman to rule in favour of the complainants for the precise reasons Snowden explained in her article – pension liberation is not illegal.
So, the consensus is pension liberation is not a wise course of action because of the costs and penalties involved, and the fact that savings destined to fund a comfortable retirement are spent in other ways long before they are needed to pay pension benefits.
Although weeding out the fraudsters and scoundrels is more than desirable, someone has to ask what all the fuss is about.
The opponents say they are unsure about how much pension money has been liberated – but put the figure at around £420 million to £600 million. However, that does not break the money down to the amount siphoned off by fraudsters or the sum going to retirement savers.
For the campaign to succeed, pension providers and regulators should stop trying to plug a leak, but perhaps look at changing the rules to let savers get their hands on their money when they need it.
After all, figures from recent surveys suggest a third of workers have no pension, and part of that reasoning is locking up cash for tens of years when you might need it is a real concern for many people.
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Maryland has just as much fraud in its public pension system but you do not hear a word-----either from politicians calling themselves democrats or from the labor unions who should be protecting their members wealth. THERE WAS MASSIVE FRAUD IN MARYLAND PENSION SYSTEMS AND NO ONE IS SAYING A THING! Instead, we are being told we need to save more and forget about all those pension and home equity losses from fraud.
Simply rebuilding oversight and accountability will bring back pension and personal wealth and stop the systemic fleecing of our savings and wealth! STOP ALLOWING THEM TO MAKE MARYLAND CITIZENS EASY PREY FOR CORPORATE FRAUD AND GOVERNMENT CORRUPTION!
They will highlight the few cases of workers defrauding the system with false claims to these pension funds, but there are billions of dollars stolen by Wall Street and government corruption.
I want to emphasize here that Cuomo was the New York Attorney General when all this fraud was happening just as Doug Gansler is now. So, this article making Cuomo look like he is getting tough with systemic fraud of our pension system is A HOOT. He enabled the fraud by having no public justice agencies overseeing these transactions. Also note that Maryland is just as rife with pension fraud even as neo-liberals are pushing to cut pensions right and left because they are 'underfunded'.......ma
Friday, May 1, 2009
Systemic Fraud at Public Pension Funds?
New York's Attorney General Andrew M. Cuomo said on Friday that his office was issuing more than 100 new subpoenas to investment firms and intermediaries who brokered deals with public pension funds, in the latest expansion of his corruption investigation: Mr. Cuomo said a preliminary review by his office found that as many as half of the intermediaries in pension fund transactions in New York State and New York City were not properly licensed and registered with a broker-dealer, as required by federal securities laws. Failing to register could violate both federal securities laws and the Martin Act, a sweeping state securities law.
“The troubling pattern of unlicensed agents highlights yet another systemic weakness in New York’s pension fund, creating a situation which is fraught with peril and prone to abuse,” Mr. Cuomo said in a statement.
He also conferred with the offices of 35 other attorneys general Friday afternoon by teleconference. The pension corruption inquiry has raised questions about public investment practices in other states, in particular New Mexico and California.
Afterward, Mr. Cuomo said the group had “decided to create a multistate task force to explore pension fund abuse.”
Mr. Cuomo’s office has been working with the Securities and Exchange Commission, which is conducting a parallel investigation. Federal investigators are also reviewing public investment transactions in New Mexico, and the S.E.C. is reviewing pension transactions in California.
Among the firms being scrutinized in the latest round of Mr. Cuomo’s inquiry is Wetherly Capital Group, according to people with knowledge of the inquiry. Investigators are scrutinizing whether employees of Wetherly and other firms were properly licensed when they arranged deals with pension funds in New York.
Wetherly is a Los Angeles-based placement agent firm run by Dan Weinstein, a prominent Democratic fund-raiser. In a statement, Wetherly said it was fully registered with the Financial Industry Regulatory Authority and the S.E.C.
Wetherly has come under scrutiny in California for paying a firm affiliated with Hank Morris, a top aide to Alan G. Hevesi, the former New York State comptroller, as part of an investment deal it brokered for Calpers, the giant California pension fund.
Another California firm being scrutinized in the latest round of the investigation is Gold Bridge Capital, which has acted as a placement agent on at least one deal involving the New York State pension fund.
The inquiries by Mr. Cuomo and the S.E.C., under way for two years, have focused on the millions of dollars that friends, relatives and aides of Mr. Hevesi’s gained by selling access to the $122 billion New York State pension fund. Mr. Morris and David Loglisci, another former top aide to Mr. Hevesi, have been indicted on a variety of corruption-related fraud charges, and Raymond B. Harding, the former head of the state Liberal Party, has also been charged in the case. All three have pleaded not guilty. Mr. Hevesi has not been charged.
The inquiries took on more national relevance on Thursday when Mr. Cuomo charged a top consultant to pension funds around the country, Saul Meyer, with a fraud-related felony. Mr. Meyer and his firm, Aldus Equity, which is based in Dallas, were also charged in a civil complaint by the S.E.C. Both Mr. Meyer and Aldus denied wrongdoing.
The new phase of the inquiry focuses on lobbyists, political consultants and others who brokered deals between investment firms and the New York pension funds but were not properly registered to do so.
In a preliminary investigation, Mr. Cuomo’s office found that from 2003 to 2006 — the period when Mr. Hevesi was comptroller — 22 of the 45 intermediaries used in deals at the state pension fund were not registered. In the New York City pension funds, 17 of 41 intermediaries were unregistered in deals from 2003 to this year, a review found.
While acknowledging that there could be exceptions, Mr. Cuomo said during a separate teleconference with reporters on Friday, “If you’re brokering a security, you need to be regulated.”
Thomas P. DiNapoli, the New York State comptroller, and William C. Thompson Jr., the New York City comptroller, both said this week that they would move to ban placement agents from deals with their pension funds.
Mr. Cuomo also highlighted a shortcoming in state lobbying rules, which do not require lobbyists to register with the state’s Commission on Public Integrity when they appear before the state comptroller.
The increased scrutiny on placement agents in recent years has led to concerns that lobbyists and political consultants are trying to find ways to perform similar services without registering as placement agents.
In 2007, Mr. DiNapoli met with the chief partner of the private equity firm InterMedia Partners, Leo J. Hindery Jr., and Roberto Ramirez, a lobbyist and former colleague of Mr. DiNapoli’s from the Assembly. The goal for the meeting was to convince the state comptroller’s office to increase its investment with InterMedia, which it later did. A spokesman for Mr. Ramirez has said he was not paid by InterMedia and appeared only as a friend of Mr. Hindery’s.
Mr. Cuomo would not say which lobbyists or consultants were being scrutinized, but said the intersection of unregistered agents and the pension fund was potentially “the Wild West of government relations.”Mr. Cuomo also said that pension kickbacks are a national problem:
New York state's criminal probe of kickbacks paid by companies eager to manage its $122 billion state pension fund has exposed "a national network of actors" whose schemes are ongoing, state Attorney General Andrew Cuomo said on Thursday. "This is all across the nation, and it's continuing today," the Democratic attorney general said on a conference call.
The probe, which began two years ago, has fixed the spotlight on the use of placement agents hired by investment firms to open the doors of the New York State Common Retirement Fund. Cuomo said he is also is scrutinizing lawyers and lobbyists.
The investigation is another effort to stamp out graft and the practice of "pay to play," which involves giving gifts or campaign donations to win public contracts. So far the probe has looked into the web of relationships and business contracts involving money managers, politicians and pension officials spanning the country from New York City and the state capital, Albany, to Texas, New Mexico and California.
On Thursday, the U.S. Securities and Exchange Commission, which is working with Cuomo, charged that Dallas-based Aldus Equity Partners won New York pension business because of "its willingness to illegally line the pockets of others."
The state pension fund had aimed to hire more women and minority-owned investment firms and had begun talks with one. But Aldus was chosen, Cuomo said, when the minority-owned firm "allegedly refused to pay kickbacks to Morris and another associate."
Aldus, a private equity firm, says it manages over $5 billion, and the probe already has cost Aldus clients in New Mexico and New York. Cuomo said Aldus also is active in Louisiana, Oklahoma, Texas, California, and New York City.
ANOTHER VIEW OF GIVE AND TAKE
Both Cuomo and the SEC charged that Saul Meyer, an Aldus founder, paid about $320,000 to a shell company owned by Henry Morris, a top fund-raiser for New York's former state comptroller. This led the New York state pension fund's then-chief investment officer, David Loglisci, to invest $375 million with Aldus from 2004 to 2006.
Demonstrating the power that Morris wielded over pension investments, Cuomo said Morris told a Meyer intermediary: "Tell that little peanut of a man that I can take business away as easily as I provided (it)."
Lawyers for Morris and Loglisci, who were indicted in March, say they are innocent.
On Thursday, Meyer was charged with a state securities felony and released on $200,000 bail. His lawyer Paul Shechtman said: "Time and evidence will show that Saul Meyer did nothing wrong."
Aldus knew that Morris was "working both sides of the deal," Cuomo said, by marketing funds for investments in the Aldus/NY Emerging Fund in which Morris had a 35 percent stake.
Aldus Equity lawyer Matthew Orwig faulted the SEC for acting before finishing its probe, calling the threatened legal action "appalling and careless with the law and with people's reputations." Aldus partners said they were disappointed by the "unexpected legal developments."
Aldus could face more legal peril. The New York state pension fund is weighing legal remedies against Aldus and Meyer after ending its investment with the firm. New York City pensions could cut ties with the firm, while New Mexico's governor called on the state Education Board to drop its contract with Aldus a day after ordering the state investment officer to do so.
Cuomo said that while Meyer was seeking more business with New York's pension fund, he helped Daniel Hevesi, a son of Alan Hevesi, the former state comptroller whose oversight of the state pension fund is being probed, earn a $250,000 fee on a New Mexico pension deal.
Alan Hevesi's lawyer Bradley Simon has said the former comptroller "has not been charged with any misconduct with respect to mismanagement of the New York state pension fund."
Bloomberg reports that L.A. pension is baffled by fees paid to firm in probe:
Los Angeles retirement plan managers say they’re baffled over fees paid by Quadrangle Group LLC to a key player named in New York’s pension fund kickback probe for helping the private equity firm land work in California. Quadrangle paid Searle & Co. $150,000 in connection with the Los Angeles Department of Fire and Police Pensions fund’s $10 million investment with the New York firm, which was co- founded by Steven Rattner before President Barack Obama appointed him to oversee the auto industry rescue.
Searle employed Hank Morris, a political adviser accused by New York State Attorney General Andrew Cuomo and the U.S. Securities and Exchange Commission of using the Greenwich, Connecticut, brokerage to collect “sham” placement fees from firms that manage New York pension plan money.
After the SEC this month said Quadrangle paid Morris a “finders fee” related to a New York pension fund investment, Quadrangle told the Los Angeles fund that it also had paid placement fees to him for work there. The Los Angeles fund publicly disclosed the fee April 24.
“We don’t know how or why a placement fee related to our investment in Quadrangle was made,” Michael Perez, the general manager of the Los Angeles pension, said in written responses to questions from Bloomberg News.
‘Shocked’ at News
Perez said the fund’s investment in Quadrangle was arranged through Pension Consulting Alliance Inc., which evaluates investments on its behalf. Allan Emkin, that company’s founder and managing director of its Los Angeles office, said it didn’t have any contact with Searle or Morris and worked directly with Quadrangle. Emkin said he had been unaware that Searle was paid a fee in connection with the deal.
“We were shocked when we heard about it,” Emkin said in a telephone interview.
Morris, who faces a civil SEC complaint and criminal charges by Cuomo, has denied wrongdoing. Quadrangle and Rattner haven’t been charged. Adam Miller, a spokesman for Quadrangle, declined to comment. Searle referred calls to Peter Anderson, an attorney, who didn’t respond to requests for comment.
The SEC has asked the Los Angeles fund and two of its board members for information about investment decisions and firms tied to the New York probe.
Cuomo said today that New York was formalizing agreements to coordinate its investigation with authorities in California, as well as with Connecticut, Illinois and New Mexico.
Los Angeles Connection
“We are disclosing a national network of actors, who often acted in concert,” Cuomo said. “They collaborated, they often partnered and victimized states and taxpayers all across the country.”
The SEC and Cuomo today charged Saul Meyer, the managing partner of one of the firms in the New York probe, Aldus Equity Partners, with paying Morris to secure investment business with New York. Aldus has served for more than a year as a private equity consultant to the Los Angeles pension fund. Meyer met with the fund’s board at least once, city records show.
Morris, the one-time chief fundraiser and political adviser to former New York City Comptroller Alan Hevesi, has been charged by the SEC with collecting $15 million in kickbacks from money managers doing business with New York’s pension fund. The SEC says the kickbacks were masked as placement fees and that he “rarely, if ever” provided legitimate services.
Quadrangle hired Morris as a placement agent before winning a $100 million investment from New York, the SEC said in an April 15 complaint. The firm paid Searle $1.125 million, and 95 percent of that went to Morris, the SEC said.
The Los Angeles pension approved investments in 10 private equity funds linked to the New York investigation, according to an April 2 memo to the board. Two of the investments were later canceled. Aldus Equity Partners, which was drawn into the New York probe, also advised the fund on private equity investments.
I have already written about the Mother of all stealth scams. Nothing like a huge financial crisis to bring out all the cockroaches. This hardly surprises me and remember my dire warning: Madoff was the tip of the iceberg. There will be many more fraudsters that will get nabbed in the next few years.
Just how systemic is fraud in the financial industry and at public pension funds? We don't know, but when you mix greedy placement agents with public pension fund managers who control billions, the potential for kickbacks is huge.
What can pension funds do to stop abuse before it happens? First, they should segregate duties so the person(s) making the investment has to pass through several checks, including an internal auditor, before the decision is cleared. Importantly, there should also be clear segregation of duties between those making the investment decisions and the finance professionals valuing them.
Second, pension funds need to beef their whistleblower policies so people are encouraged to report abuse. This is one of the most effective ways to stop fraud. Maybe there should be a direct link between public pension fund employees and the state's Attorney General's office or the provincial or federal Auditor General's office.
Third, have your fraud procedures verified by a certified fraud examiner (read more on CFEs by clicking here). This should include someone who scrutinizes travel/meal/entertainment expenses to make sure there is no abuse going on when some hedge fund or private equity manager is trying to woo a pension fund manager to invest with them.
Fourth, there should be tight rules governing the relationships between investment managers and the funds they invest with. If you are investing billions with Fund Z, then you should not be allowed to go work for them for a period of five years after you leave a public pension fund. This is just common sense, but you'd be surprised how common sense often falls by the wayside.
Fifth, all board decisions should be made public so they are open to scrutiny. Several of the large U.S. state plans already do this. For example, Alaska's Permanent Fund publishes its board schedule, their minutes and their consultants on their website.
Finally, on the legal front, I would ban all placement agents and place tight rules on pension consultants who recommend funds to pension funds. Do not underestimate the abusive practices of pension consultants and the potential for fraud with them. They are the gatekeepers at most U.S. pension plans.
It truly is the Wild West out there, but I am glad to see the Attorney General of New York is pursuing the pension probe and trying to clean up public pension funds.
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This is the sad state of affairs as people desperate to survive this stagnant economy look to pensions and Social Security Disability. As you see below all of this is draining these accounts for people who really are disabled. People do not need extended unemployment-----THEY NEED TO REBUILD A DOMESTIC ECONOMY OF SMALL AND REGIONAL BUSINESSES AND END THIS GLOBAL MARKET ECONOMY. The booms and busts will never allow for wealth accumulation and the global size of corporations will not allow for accountability.
STOP ALLOWING THE NEO-LIBERALS PUSHING THESE GLOBAL MARKETS BE THE ONLY ONES RUNNING AND GIVEN ELECTION COVERAGE. THIS IS WHAT IS HAPPENING IN MARYLAND AND BROWN,. GANSLER, AND MIZEUR WILL ALL MAINTAIN THE STATUS QUO WITH DISMANTLING PUBLIC JUSTICE AND FEEDING GLOBAL CORPORATIONS.
What you see below is a plan to extend disability payments by tapping Social Security Trusts essentially hastening the depletion of funds in the Trust. These people should not be on disability-----they should have jobs!
CBO - The Coming Raid on Social Security
Submitted by Bruce Krasting on 02/10/2013 12:30 -0400
inShare2
Every politician in America knows that Social Security (SS) is a third rail. Any Pol who tries to mess with the country's largest and most popular entitlement program is going to have the likes of the AARP coming after them. It's not possible to win an election on a platform that advocates cutting back SS.
With that in mind, I find it interesting to report that a very credible source is now predicting that Obama AND Congress will take action over the next 24 months that will substantially undermine both the long and short-term health of SS. The legislative raid on SS will certainly total in the hundreds of billions, it could top $1T over the next fifteen years.
So who is this "credible source"? And just how is this raid going to happen? The source of this information is the Congressional Budget Office (CBO); the following is how it will play out:
SS consists of two different pieces. The Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). Both entities have their own Trust Funds (TF). OASI has a big TF that will, in theory, allow for SS retirement benefits to be paid for another 15+ years. On the other hand, the DI fund will run completely dry during the 1stQ of 2016. By current law, the DI benefits must be cut across-the-board by 30% on the day that the DI TF is exhausted.
This would mean that 11 million people (most of whom are very sick) would get slammed from one day to the next. There is no one in D.C. who wants this to happen. I don't think the American public wants this outcome either. So what are the fixes?
1) Increase income taxes on +$250k of income to pay for the DI shortfall. Maybe, but this will not happen with the current Republican controlled House.
2) Increase Payroll taxes to cover the DI shortfall. I see zero political support for a permanent Payroll tax increase.
3) Cut benefits by 30%. This would be insane - it will not happen with Obama running the show.
4) Kick the can down the road and raid the OASI TF for the annual shortfalls at DI.
Of course #4 is the path that will be taken. #s 1, 2 and 3 are not politically feasible. I have been wondering what will happen with the DI conundrum. I was surprised to see that the CBO spelled out what will happen in its report on the Budget and Economy - SS Trust Funds. The report has this footnote:
CBO projects that the DI trust fund will be exhausted during fiscal year 2016. Under current law, the Commissioner of Social Security may not pay benefits in excess of the available balances in a trust fund, borrow money for a trust fund, or transfer money from one trust fund to another. However, following rules in the Deficit Control Act of 1985 (section 257(b)), CBO's baseline assumes that the Commissioner will pay DI benefits in full even after the trust fund is exhausted.
The "loophole" to drain the OASI insurance is already law - so Congress doesn't have to do anything to raid the retirement fund. The "do nothing" plan is always the best option in D.C.
The footnote goes on to provide an estimate for the size of the raid:
For illustrative purposes, below are the cumulative shortfalls in the DI trust fund beginning in 2016. Those shortfalls do not include interest expenses.
DI Trust Fund Cumulative Shortfall
($s in Billions)
2016 -15
2017 -55
2018 -94
2019 -133
2020 -173
2021 -215
2022 -260
2023 -307
Wow! At this rate the raid tops $1T in 2029. This is is a big dent in a Trust Fund of $2.8T.
There is an import "tell" from the CBO. In the footnotes it highlights the fact that there is a discrepancy, and uses this an excuse to avoid establishing an adjusted end date for the OASI Trust Fund. (It's not a complicated calculation)
What CBO fails to state is that the raid on OASI will result in a significant reduction in the End Date for the retirement Fund. In its report to Congress last year SS forecast that the Retirement fund would be exhausted in 2033. The DI drain (and other negative revisions by CBO) will bring the End Date to below 2030 in the upcoming SS report to Congress. That would be a very significant development. CBO does not want to be the one who puts a new date "out there". To me, this was a cop-out by the CBO.
Given that discrepancy between the trust funds' operation and the baseline's assumption, CBO is not providing DI or combined trust fund totals for the year of exhaustion and thereafter.
The timing of this story is interesting. The question in my mind is will the "fix" come before or after the bi-election. If Obama was a gambler, and he believed the Democrats could re-take the House in 2014, then he might defer action on DI until 2015. This scenario creates the opportunity for option #1, a tax on the rich to supplement DI. Of course that is gambling, and there would be a very small window of time to push through a new income tax to save DI.
Then there is the Republicans. Do they want to push this before, or after 11/2014? I could argue both ways, but in the end, it gets back to the fact that no one wants to "do" anything with SS. It's better to do "nothing"; that makes #4 the most likely outcome.
I hope that some of the big Defenders of SS pick up on the information from the CBO regarding the coming raid on the retirement fund. This is a huge constituency (60m beneficiaries - 150m contributors - every politician in the country - all of the Press). If that group catches on to what is about to happen to the retirement fund, there will be a great chorus of, "Don't you dare touch my money!"
I'm trying to stir the pot on this one. I want DI's terminal condition to come onto the table sooner versus later. I'm hoping that if and when it does come up for discussion, it opens the door on the broader issue of what the hell America is doing with entitlements. Basically, I'm trying to pick a big fight. For the good of the country, wish me luck.
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