MEMBER ALERT

Dear NIRS Member,

You may have read an article that ran in The New York Times on

March 9, 2010. Below please find the letter NIRS submitted

yesterday in response to the article. The letter also can be

dowloaded here.

We hope this is helpful as you respond to any stakeholder questions

or concerns about the article. Please let us know if you have

questions, comments, or if we can provide any assistance.

Best regards,

The National Institute on Retirement Security

NIRS RESPONDS TO THE NEW YORK TIMES

March 10, 2010

Letters to the Editor The New York Times 620 Eighth Avenue New York, NY 10018 To the Editor: The New York Times March 9th reporting on pensions missed the real story behind some interesting trends in pension investing. An accurate read of the data reveals the effects of broken Federal retirement policy and the resulting degradation of retirement security for millions of Americans. Data released quarterly by the Federal Reserve provides a comprehensive, independent look at pensions' investment allocation patterns. Contrary to claims made in the article, the data indicate that pension plans in both the corporate and public sectors have adjusted investments to reduce risk. Prior to 2007, private and public pensions invested about 60% of assets in stocks. By the third quarter 2009, both public and private plans pared back their equity holdings. This trend has been much more pronounced among corporate pension funds in recent years. Why? One has to look no further than to the passage of Federal pension legislation in 2006 that created an environment whereby hundreds of companies closed or "froze" their pensions. A frozen pension plan "ages" much more rapidly than an open plan - its population becomes more heavily weighted with retirees with each passing year. That means the plan needs to keep more of its funds liquid, since more money will be needed sooner to pay benefits. Thus, the logical investment pattern for a frozen plan is the same as a worker approaching retirement - move away from long-term investments like stocks in favor of short-term holdings like cash and bonds. But, a frozen plan and its asset allocation impose significant costs. Companies must forego the opportunity to earn better returns that could have been achieved with a more balanced portfolio-so it costs more to pay for benefits. But that's not all. Economists

and retirement experts agree that pension freezes have been disastrous for Americans' retirement security. The good news is that pension policy in the public sector has avoided this trap. Public pensions remain open to serve retired, active and newly hired workers like teachers, firefighters and police officers. As compared to frozen corporate plans, these public plans are better positioned to continue taking a long-term approach to investing because they have a healthy mix of younger workers, middle aged Americans, and retirees. So it's no surprise that these plans are taking a more measured approach to investing and are continuing to hold more balanced, diverse portfolios. Hopefully, future reporting will focus more closely on independent sources of data and the impacts of the overlying policy environment on pensions. In doing so, the real story behind the crumbling road to retirement for Americans will be revealed.

Sincerely,

Beth Almeida, Executive Director

Contact Information National Institute on Retirement Security info@nirsonline.org www.nirsonline.org 202.457.8190 Join our mailing list!