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Old 12-05-2007, 01:34 PM   #21
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Originally Posted by jazz4cash View Post
I agree with Martha, Devon does seem to be taking additional fiduciary risk....everyone is hearing 'Target Funds' without maybe considering what's in the funds.

They're investing in thier own DB plan among other things:

Devon's target-date funds will consist of low-cost investments in its $614million defined-benefit pension plan, including alternative investments such as real estate investment trusts and inflation-indexed securities.
At first, I was confused when reading the underlined passage above, so I emailed the author [Anne Tergesen] for help. Basically, the funds being used in the DB and DC plans are the same, but the allocations between the funds are different. For example, the according to DVN's last 10-K, it's pension assets were 80% stock/20% bonds, while the target funds will have different allocations of the same underlying funds.

But how is this as increased fiduciary risk over the previous 401(k) choices?

hth,
Alec
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Old 12-05-2007, 05:20 PM   #22
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At first, I was confused when reading the underlined passage above, so I emailed the author [Anne Tergesen] for help. Basically, the funds being used in the DB and DC plans are the same, but the allocations between the funds are different. For example, the according to DVN's last 10-K, it's pension assets were 80% stock/20% bonds, while the target funds will have different allocations of the same underlying funds.

But how is this as increased fiduciary risk over the previous 401(k) choices?

hth,
Alec
This seems very similar to co-ercing employees to invest in company stock and other investments selected by some company management group. At first I 'assumed' the target funds being used would be some known public mutual fund of the target retirement variety...Fidelity was mentioned, but I believe they are only serving an advisor role. I don't know what the former 401k choices were. Many companies now discourage employees from loading up on company stock (anti-Enron). For example, my MegaCorp ex-employer eliminated thier requirement to allocate xx percentage plus the match to company stock to reduce employees dependance on MegaCorp and they offered both DB and DC plans to
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Old 12-06-2007, 10:58 AM   #23
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This seems very similar to co-ercing employees to invest in company stock and other investments selected by some company management group. At first I 'assumed' the target funds being used would be some known public mutual fund of the target retirement variety...Fidelity was mentioned, but I believe they are only serving an advisor role. I don't know what the former 401k choices were. Many companies now discourage employees from loading up on company stock (anti-Enron). For example, my MegaCorp ex-employer eliminated thier requirement to allocate xx percentage plus the match to company stock to reduce employees dependance on MegaCorp and they offered both DB and DC plans to
Actually, there's no coercion here. The company is replacing its defined benefit (80/20 stock) and the accompanying requirement to hold funds in its financials.

Bottom-line: they've replaced their pension plan with a 401K -- but are enrolling employees and providing them with 1 choice for investments.

Could be a win-win. The employee gets funds for retirement that probably aren't any more lucrative than a defined benefit, but! They can take it with them when they change jobs. The employer has one choice to make with limited adminstrative cost, and no pension liability.

-- Rita
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