Monday, March 29, 2010

Are TIPS a Good Hedge Against Inflation

Source: FRB of Boston

TIPS Scorecard: Are TIPS Accomplishing What They Were Supposed to Accomplish? Can They Be Improved?

Public Policy Discussion Paper No. 09-8
by Michelle L. Barnes, Zvi Bodie, Robert K. Triest, and J. Christina Wang

In September 1997, the U.S. Treasury developed the TIPS market in order to achieve three important policy objectives: (1) to provide consumers with a class of assets that allows for hedging against real interest rate risk, (2) to provide holders of nominal contracts a means of hedging against inflation risk, and (3) to provide everyone with a reliable indicator of the term structure of expected inflation. This paper evaluates progress toward the achievement of these objectives and analyzes prospective ways to better meet these objectives in the future, by, for example, extending the maturity of TIPS and/or the use of inflation indexes suited to particular geographic regions or demographics. We conclude by arguing that while it is tempting to consider completing markets by introducing more TIPS‐like securities indexed to inflation rates more tailored to particular demographics, our analysis suggests that TIPS indexed to CPI do, in fact, facilitate good synthetic hedges against unexpected changes in inflation for many different investors, since the various inflation measures are very highly correlated. We do, however, argue for extending the maturity of TIPS.

Full-text paper pdf


Census Bureau Reports State and Local Public Employee Retirement Systems Assets Drop Nearly $180 Billion in 2008

Source: Census Bureau

The nation’s state and local government employee retirement systems totaled $3.2 trillion in holdings and assets in 2008, a loss of $178.8 billion, according to new data released by the U.S. Census Bureau.

     These data come from the 2008 State and Local Government Employee Retirement Systems Survey, which provides an annual look at the financial activity of the nation’s state and local public employee retirement systems, including cash and security investment holdings, receipts and payments.

Saturday, March 27, 2010

KFF Summary of Health Reform Law

The Kaiser Family Foundation has provided a nice summary of the changes brought about by the Patient Protection and Affordable Care Act.

This interactive side-by-side provides detailed, up-to-date summaries of the new health reform law, the reconciliation bill and other comprehensive reform proposals put forward during the year-long reform debate. In the health reform debate, many proposals for overhauling our health care system have been advanced The online tool allows users to compare the law and other plans with one another across key characteristics. In addition to the summaries offered here, the Foundation also has prepared detailed descriptions of the Medicare and Medicaid provisions, and a summary of the coverage provisions in the law and other legislation.

Read more.

Wednesday, March 24, 2010

DOL COBRA Premium Reduction Fact Sheet

Source: Department of Labor

COBRA Premium Reduction

U.S. Department of Labor
Employee Benefits Security Administration
March 16, 2010

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended by the Department of Defense Appropriations Act (2010 DOD Act) on December 19, 2009 and the Temporary Extension Act of 2010 (TEA) on March 2, 2010, provides for premium reductions for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums; the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment. The involuntary termination must generally occur during the period that began September 1, 2008 and ends on March 31, 2010. However, TEA also provides that an involuntary termination of employment is a qualifying event for purposes of ARRA if the involuntary termination:

  • occurs on or after March 2, 2010 and no later than March 31, 2010; and

  • follows a qualifying event that was a reduction of hours that occurred at any time from September 1, 2008 through March 31, 2010.

Read more.

Tuesday, March 23, 2010

FRB Issues New Gift Card Rules

Source: FRB Release Date: November 16, 2009

For immediate release

The Federal Reserve Board on Monday announced proposed rules that would restrict the fees and expiration dates that may apply to gift cards. The rules would protect consumers from certain unexpected costs and would require that gift card terms and conditions be clearly stated.

The proposed rules would prohibit dormancy, inactivity, and service fees on gift cards unless: (1) there has been at least one year of inactivity on the certificate or card; (2) no more than one such fee is charged per month; and (3) the consumer is given clear and conspicuous disclosures about the fees. Expiration dates for funds underlying gift cards must be at least five years after the date of issuance, or five years after the date when funds were last loaded.

The Board's proposed rules generally cover retail gift cards, which can be used to buy goods or services at a single merchant or affiliated group of merchants, and network-branded gift cards, which are redeemable at any merchant that accepts the card brand.

The proposed rules are issued under Regulation E (Electronic Fund Transfers) to implement the gift card provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009.

The Board's notice is attached. Comments on the proposal must be submitted within 30 days after publication in the Federal Register, which is expected shortly.

Federal Register notice: HTML | 200 KB PDF

Highlights document (18 KB PDF)

WSJ: Summary of Patient Protection And Affordable Care Act

Link: Wall Street Journal

Reuters: Summary of Major Tax Provisions in Health Care Bill

Link: Reuters

Friday, March 19, 2010

Live Longer, Work Longer

Source: EBRI

Employment Status of Workers Ages 55 or Older, 1987-2008’ and ‘Tracking Health Insurance Coverage by Month: Trends in Employment-Based Coverage Among Workers, and Access to Coverage Among Uninsured Workers’

March 2010, Vol. 31, No. 3
Paperback, 16 pp.
PDF, 930 kb
Employee Benefit Research Institute, 2010

Download Notes PDF pdf

Executive Summary

Employment Status of Workers Ages 55 or Older, 1987-2008

OLDER WORKERS STAYING IN THE WORK FORCE LONGER: A growing percentage of older Americans are in the labor force: The percentage of those ages 55 or older in the labor force increased from 29.4 percent in 1993 to 39.4 percent in 2008. For those ages 65–69, the percentage increased from 18.4 percent in 1985 to 30.7 percent in 2006. These trends mark a significant change in behavior for individuals in these age groups, and are likely driven by their need to obtain affordable employment-based health insurance and to accumulate retirement savings.

MORE PART-TIME WORK: While older workers working full time, full year increased steadily from 1993–2007, that trend ended with the recession year of 2008. While members of the older population were more likely to work in 2008, they were less likely to be working full time, full year in 2008 after consistent increases through 2007.



Monday, March 15, 2010

Credit Card “Convenience” Checks

Source: FDIC Consumer News

Blank Checks from Your Credit Card Issuer Carry Risks and Costs

Those blank "convenience checks" from your credit card company offer a quick way to write yourself a loan, pay bills or transfer other loans to your credit card account. But be aware that the use of a convenience check is a "cash advance" that comes with high costs and other potential pitfalls.

Read more.

CRS Report on Mandatory Flood Insurance

Source: Congressional Research Reports

CRS — Mandatory Flood Insurance Purchase in Remapped Residual Risk Areas Behind Levees
Tuesday, March 9th, 2010

This report examines the amount of flood insurance that must be purchased (and retained) on loans secured by real property located in federally designated special flood hazard areas (SFHAs). It is written in response to three situations: (1) the Federal Emergency Management Agency’s remapping efforts that include verifying the status of all levees as providing protection against a 100-year flood, which are currently depicted on Flood Insurance Rate Maps, and widespread concerns among homeowners about new requirements to purchase flood insurance should the levee become decertified; (2) uncertainty as to whether the mandatory amount of flood insurance should be equal to the assessed value of the insured residential structure or the unpaid principal balance (UPB) of the mortgage loan; and (3) concerns that homeowners may be inappropriately asked to purchase an amount of flood insurance that is several times the value of the actual property. This report will be updated as events warrant.

Read more.

LifeLock Settles FTC Suit

Source: FTC

LifeLock Will Pay $12 Million to Settle Charges by the FTC and 35 States That Identity Theft Prevention and Data Security Claims Were False

LifeLock, Inc. has agreed to pay $11 million to the Federal Trade Commission and $1 million to a group of 35 state attorneys general to settle charges that the company used false claims to promote its identity theft protection services, which it widely advertised by displaying the CEO’s Social Security number on the side of a truck.

In one of the largest FTC-state coordinated settlements on record, LifeLock and its principals will be barred from making deceptive claims and required to take more stringent measures to safeguard the personal information they collect from customers.

Read more.

Rand: No-Fault Insurance Fails Goals

Source: Rand Corporation

No-Fault Automobile Insurance's Fall from Popularity Caused by Increased Medical Costs

No-fault automobile insurance, once seen as a way to limit court costs and lower premiums, has declined in popularity among both insurers and consumers because it largely has failed to accomplish either goal, according to a new study issued today by the RAND Corporation.

While no-fault insurance was intended to lower the cost of compensating people involved in automobile accidents by taking most cases out of the court system, it actually increased costs because medical claims rose sharply instead, according to the study.

Read more.

Saturday, March 13, 2010

EBRI Data Book Update (March 2010)

Source: Employee Benefit Research Institute

  • The EBRI Databook on Employee Benefits includes data from dozens of sources to provide a comprehensive analysis of how the employee benefits system works, who and what its various functions affect, and its relationship with the U.S. economy.
  • The EBRI Databook includes over 400 tables and charts presenting vital statistics on the employee benefit system.
  • Topics include the retirement income system; employer-sponsored benefit plans; government programs such as Social Security, Medicare, and Medicaid; health insurance; and labor force and demographic trends.
  • Tables and charts are supplemented by explanatory text to provide detailed information on the entire range of employee benefit programs and work force related issues.

Read More.

EBRI Issues 2010 Retirement Confidence Survey

Source: Employee Benefit Research Institute

The 2010 Retirement Confidence Survey: Confidence Stabilizing, But Preparations Continue to Erode

March 2010
EBRI Issue Brief #340
Employee Benefit Research Institute, 2010

Download Issue Brief PDF pdf

MORE PEOPLE HAVE NO SAVINGS AT ALL: An increased percentage of workers report they have virtually no savings and investments. Among RCS workers providing this type of information, 27 percent say they have less than $1,000 in savings (up from 20 percent in 2009). In total, more than half of workers (54 percent) report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000 (Fig. 14, pg. 16).

CLUELESS ABOUT SAVINGS GOALS: Many workers continue to be unaware of how much they need to save for retirement. Less than half of workers (46 percent) report they and/or their spouse have tried to calculate how much money they will need to have saved for a comfortable retirement by the time they retire (Fig. 23, pg. 22).

Monday, March 8, 2010

FDIC Video: Overview on Deposit Insurance Coverage

Video here.
PowerPoint Presentation here

Is Mind Reading Inside Information?

Source: SEC New Release

SEC Charges Nationally Known Psychic in Multi-Million Dollar Securities Fraud


Washington, D.C., March 4, 2010 — The Securities and Exchange Commission today charged a self-proclaimed psychic who fraudulently raised $6 million after telling investors he could predict stock market highs and lows.

According to the SEC's complaint, Morton began soliciting investors around the summer of 2006 by telling them that he would use his psychic expertise to provide investment guidance to his investing team. In one newsletter to potential investors, Morton falsely stated: "I have called ALL the highs and lows of the market giving EXACT DATES for rises and crashes over the last 14 years." Morton used his monthly newsletter, his Web site, his appearances on a nationally syndicated radio show, and appearances at public events to promote his psychic abilities. Morton made numerous materially false representations relating to his psychic abilities in order to solicit investors for the Delphi Investment Group.

Read more.

Saturday, March 6, 2010

Comparing Non-group and Employer Sponsored Health Insurance

Comparison of Expenditures in Nongroup and Employer-Sponsored Insurance: 2004-2007
March 2010

This survey by the Kaiser Family Foundation finds that premiums on non-group health insurance are lower than on employer sponsored health insurance. The difference may be explained by the differences in coverage, copayments and health status. Non-group policies cover fewer services and require larger copayments. The non-group insured are also in better health.

Read more.

Friday, March 5, 2010

Bankruptcy Filings Up in 2009

Source: U.S. Courts News Release

Bankruptcy Filings Up In Calendar Year 2009

March 2, 2010 — Bankruptcy filings in the federal courts rose 31.9 percent in calendar year 2009, according to data released today by the Administrative Office of the U.S. Courts. The number of bankruptcies filed in the twelve-month period ending December 31, 2009, totaled 1,473,675, up from 1,117,641 bankruptcies filed in CY 2008.

Read more.

Wednesday, March 3, 2010

Real Estate Forecasts by City

CBS MoneyWatch provides housing price forecasts by metropolitan area. These are proprietary estimates compiled by a financial services firm. Given these uncertain times the reality may be very different.

Read more.

Uninsured Health Care Costs From Age 65

This brief from the Center for Retirement Research at Boston College estimates that the present value of expected uninsured lifetime health care costs for a typical age 65 married couple is $197,000. Moreover, there is a good probability that costs will considerably exceed that amount.

Source: Center for Retirement Research at Boston College

What is the Distribution of Lifetime Health Care Costs from Age 65?

by Anthony Webb and Natalia Zhivan


Medical and long-term care costs represent a substantial uninsured risk for most retired households.  In 2007, spending on Medicare premiums and co-payments among married couples age 65 and over averaged $7,600.  But such statistics are of limited value to households trying to determine how much to set aside for health care costs in retirement or how to manage wealth decumulation during retirement.  Households care not only about average costs, but also about the risk of incurring unusually high costs.  Furthermore, calculations of the distribution of health care costs incurred by households in any particular year tell us little about lifetime risk unless we also know the extent to which the same individuals are incurring high health care costs every year.

This brief outlines the findings of new research that calculates the distribution of lifetime health care costs.  The research shows that the expected present value of lifetime uninsured health care costs for a typical married couple age 65 is about $197,000 – including insurance premiums, out-of-pocket costs, and home health costs and excluding nursing home care.  But a typical household has a 5-percent risk that the present value of its lifetime uninsured health care costs will exceed $311,000.  And when nursing home costs are included, the amount for a typical couple increases from $197,000 to $260,000, with a 5-percent risk of exceeding $570,000.  Even at the peak of the stock market in 2007, less than 15 percent of households approaching retirement had accumulated that much in total financial assets, much less financial assets available for health care costs.

For full brief

For related Working Paper

Tuesday, March 2, 2010

New DOT Site for Aviation Complaints

Source: DOT

DOT Unveils Improved Aviation Consumer and Enforcement Website

            Air travelers will find it easier to file complaints with the U.S. Department of Transportation (DOT) about airline service, compare the historical on-time and baggage mishandling records of airlines, and find helpful tips about air travel thanks to a redesigned, more user-friendly aviation consumer web site unveiled today by the Department.  The web site can be found at .

            “This updated web site is part of our ongoing effort to improve resources for consumers and ensure that airline passengers are treated fairly when they fly,”
U.S. Transportation Secretary Ray LaHood said.  “We want to make it as easy as possible for consumers to find the information they need to make their air travel experience as smooth and hassle-free as possible.”

            The improved site contains useful information about the Department’s complaint handling system for consumers who experience air travel service problems, including a web form that consumers can use to file a complaint with DOT about airline service.

            The site also offers guidance regarding aviation rules and statutes, advice concerning airlines that have stopped operating or filed for bankruptcy protection, and travel tips and publications related to air travel, such as the Air Travel Consumer Report, Fly-Rights and the annual report on disability-related air travel complaints.

            It also features easy-to-navigate links to all of the Department’s information for air travelers, as well as links to other agency web sites with useful material for air travelers.  The public will also find it easier to obtain enforcement orders, rules and guidance pertaining to a wide array of subjects such as baggage, fare advertising, refunds, overbooking, disability and flight delays.

The website is also available in Spanish. An individual can access the Spanish website from the English site by simply clicking the word “Spanish” on the homepage.

“It is important that the growing number of Spanish speakers in our nation and flying on U.S. airlines have access to information about their rights as air travelers,” said Secretary LaHood.

FTC Issues Report of 2009 Top Consumer Complaints

Source: FTC Release: 2/24/2010

The Federal Trade Commission today released a report listing top complaints consumers filed with the agency in 2009. It shows that while identity theft remains the top complaint category, identity theft complaints declined 5 percentage points from 2008.

The FTC is releasing a new animated video showing how people can file a complaint, and offers examples of what complaints the FTC handles. To watch the video, visit (also available in Spanish at

The report breaks out complaint data on a state-by-state basis and also contains data about the 50 metropolitan areas reporting the highest per capita incidence of fraud and other complaints. In addition, the 50 metropolitan areas reporting the highest incidence of identity theft are noted.

The top complaints were:


A complete list of complaints can be found at:

See also Consumer Sentinel Network Fact Book (101 pages; PDF) Numerous details, tables, and charts. Statistics everywhere. Essential for consumer collections. Legal collections might also want to have a copy.

Monday, March 1, 2010

Mutual Funds and Transactions Costs

The WSJ in the “Hidden Costs of Mutual Funds” discusses how trading and transactions costs are not included in the expense, the standard measure of how costly it is to own a mutual fund. The article is based on a study by Richard W. Kopcke, Francis M. Vitagliano, and Zhenya S. Karamcheva from the Center for Retirement Research at Boston College.

Fees and Trading Costs of Equity Mutual Funds in 401(k) Plans and Potential Savings from ETFS and Commingled Trusts

by Richard W. Kopcke, Francis M. Vitagliano, and Zhenya S. KaramchevaNovember 2009


Source: Executive Summary

As the role of 401(k) and similar defined-contribution plans continues to expand in our retirement system, participants in these plans are paying more of the cost of financing their retirement income. This study examines the fees and trading costs for domestic equity mutual funds held in defined-contribution pension plans during the five years from 2004 through 2008. It finds that mutual funds have provided valuable investment options for 401(k)-type plans. On average, the domestic equity funds examined in this study paid, net of all fees and transaction costs, returns that were competitive with market returns given the funds’ exposure to market risks. Nevertheless, the design and pricing of these funds cost the average participant 0.70 of a percentage point or more in annual returns. Much of this toll can be attributed to trading costs, which can be reduced by shifting the investment options from mutual funds to ETFs or commingled trusts that hold ETFs.

Read Study

Pension Fund Managers Focus on Risk

Source: MetLife Press Release


Second Annual MetLife U.S. Pension Risk Behavior Index StudySM Shows a “Democratization” of Pension Risk Factors and Greater Attention Paid to Liability-Related Risks

New York, NY, February 23, 2010 — What a difference a year makes. Against the backdrop of one of the most volatile market environments in recent memory, risk management priorities for the largest U.S. defined benefit (DB) pension plans have expanded significantly in the last twelve months. According to MetLife’s second annual U.S. Pension Risk Behavior Index StudySM, a survey of 166 corporate plan sponsors from among the 1,000 largest U.S. defined benefit (DB) pension plans, plan sponsors are now taking a much broader view of the 18 investment, liability and business risks to which their plans are exposed. As a result, most plan sponsors believe that they’re doing a better job implementing risk management measures this year than they did last. Despite a broadened view and greater self-ascribed success, the gap between the risk factors plan sponsors identify as “important” — and their reported “success” at managing those risk factors — has widened considerably.

Download Study