SEAN M. ANDERSON, University of Illinois College of Law
Email: seanimal@illinois.edu

The well-publicized implosion of Enron Corporation highlighted the dangers of 401(k) retirement plans' holding large amounts of stock in the employing company. Employee stock ownership plans (ESOPs) are a special form of retirement plan that invests primarily in employer stock. As such, ESOPs are even more dangerous for workers than Enron-style 401(k) plans. When an employer chooses an ESOP, workers are stuck with under-diversified retirement savings, which expose them to unnecessary levels of investment risk. In addition, an ESOP carries with it opportunities for company insiders to serve their own interests or those of the company at the expense of the workers who participate in the ESOP.

Despite these serious dangers, federal law allows and incentivizes ESOPs. Pro-ESOP advocates seek to justify ESOPs as being good for workers. They claim ESOPs are instruments of economic democratization, serving such ends as redistributing capital ownership, enhancing workers' job satisfaction and productivity, and improving compensation and job stability. There is, however, no solid evidence showing that ESOPs actually produce such effects. Even if ESOPs did benefit workers in some ways, it would be necessary to balance the benefits against the ills of under-diversification and inherent conflicts of interest.

In light of ESOPs' clear harms and, at best, speculative benefits, the author suggests a range of possible solutions, with the ideal being a complete ban on ownership of employer stock by tax-advantaged retirement plans, including both ESOPs and 401(k) plans.

RAQUEL MEYER ALEXANDER, University of Kansas - School of Business
Email: raquela@ku.edu
LEANN LUNA, University of Tennessee, Knoxville - College of Business Administration - Center for Business and Economic Research
Email: leann@utk.edu

We examine a new government-sponsored investment vehicle available only to individual investors, 529 college savings plans, to analyze consumers’ investment behavior after a significant change in disclosures of historical investment returns and tax benefits. We find evidence that disclosures affect investment decisions. After 529 plans voluntarily adopted more informative disclosures, 529 plan investors selected fewer plans offered only through broker-sold channels and increasingly chose plans based on past investment performance. We enhance the Fama-French model to perform a descriptive financial analysis of 529 plan offerings and find compelling evidence that 529 investors are constrained to invest in funds with return-eroding high fees. Nearly 20 percent of the portfolios have a statistically significant negative alpha, the measure of risk-adjusted excess return, while less than 1 percent have a statistically significant positive alpha. We discuss 529 plan oversight and potential implications for self-directed retirement savings and social security privatization.

MARTA LACHOWSKA, Stockholm University - Department of Economics
Email: Marta.Lachowska@sofi.su.se
ANNIKA E. SUNDÉN, Stockholm University - Swedish Institute for Social Research (SOFI)
Email: Annika.Sunden@sofi.su.se
ESKIL WADENSJO, Stockholm University - Swedish Institute for Social Research (SOFI), Institute for the Study of Labor (IZA), Stockholm University Linnaeus Center for Integration Studies (SULCIS)
Email: Eskil.Wadensjo@sofi.su.se

Phased retirement has been discussed as a means for increasing labour supply for people of older active age. The idea is that instead of leaving a full-time job early for full-time retirement, an employee should reduce the working time either in the same job or by changing jobs, and stay on in the labour market. In this paper we analyze the factors that influence the decision to take up a part-time pension and continue working at the same work place at reduced hours. We do this by using a unique data set from one employer in the governmental sector in Sweden, Stockholm University. The pension scheme is a special part-time pension scheme introduced for state employees in 2003. Employees 61 years and older can apply for a part-time pension up to the age of 65. The employers decide if they will accept or reject the application. They may also encourage employees to apply or discourage them from doing so. We have a data set covering all employees of the age groups who are eligible and a rich data set with information on the employees and also on the units (departments) who in practice decide if an application should be accepted or not. We find that both the effects on pension wealth of taking a part-time pension, and the economic situation of the department are important for the propensity for becoming a part-time pensioner. Also individual characteristics such as gender, age, earnings and occupation are important.

ARAVIND M.S., S. P. Jain Center of Management
Email: aravind.gdec08@spjain.org
BIKRAM PATTANAIK, S. P. Jain Center of Management
Email: bikram.gdec08@spjain.org

The recent financial turmoil has resulted in most of the wealth residing in the form of cash. An extensive research on the various types of funds, the amount of money which goes into each of them and their asset allocation will help us in understanding the fund management business in a broad sense and also in identifying the business opportunities that might arise once the financial turmoil is over. Various kinds of commonly known funds are pension funds, hedge funds, mutual funds, sovereign funds, private equity funds, etc. Depending on the kinds of investors, each fund can be classified as high risk, medium risk or a low risk one. When we delve further into each of the above funds, complexities arise since each of the above funds is quite broad. This research paper covers the analysis of pension funds and hedge funds. The main focus is on the analysis of these funds in terms of Geography, Assets Under Management (AUM), Asset Allocations, the strategies being followed and the changes happening due to the recent financial turmoil. The primary data has been collected by means of questionnaires, interviews and email correspondence with fund managers across different countries. The secondary data has been collected from different sources such as journals, newspapers, research reports and internet.

GREGORIO IMPAVIDO, International Monetary Fund (IMF), World Bank
Email: gimpavido@imf.org
IAN TOWER, International Monetary Fund (IMF)
Email: Itower@imf.org

This paper discusses the key sources of vulnerabilities for pension plans and insurance companies in light of the global financial crisis of 2008. It also discusses how these institutional investors transit shocks to the rest of the financial sector and economy. The crisis has re-ignited the policy debate on key issues such as: 1) the need for countercyclical funding and solvency rules; 2) the tradeoffs implied in marked based valuation rules; 3) the need to protect contributors towards retirement from excessive market volatility; 4) the need to strengthen group supervision for large complex financial institutions including insurance and pensions; and 5) the need to revisit the resolution and crisis management framework for insurance and pensions.

MARK J. KAMSTRA, York University - Schulich School of Business
Email: mkamstra@schulich.yorku.ca
ROBERT J. SHILLER, Yale University - Cowles Foundation, National Bureau of Economic Research (NBER), Yale University - International Center for Finance
Email: robert.shiller@yale.edu

We make the case for the U.S. government to issue a new security with a coupon tied to the United States’ current dollar GDP. This security might pay, for example, a coupon of one-trillionth of the GDP, and we propose the name 'Trill' be used to refer to this new security. This new debt instrument should be of great interest to the Government for its stabilizing influence on the budget (as coupon payments fall in a recession with declining tax revenues) and for its yield, based on our valuation. Standard asset pricing analysis also suggests that Trills would enable important new portfolio diversification strategies and, in contrast to available assets that protect relative standards of living in retirement, Trills would have virtually no counterparty risk. We believe there would be a lively appetite for the Trill from institutional investors, public and private pension funds, as well as the individual investor.

MAUREEN MORRIN, Rutgers University - Marketing
Email: mmorrin@camden.rutgers.edu
SUSAN BRONIARCZYK, affiliation not provided to SSRN
Email: Susan.Broniarczyk@mccombs.utexas.edu
JEFF INMAN, University of Pittsburgh - Marketing Group
Email: jinman@katz.pitt.edu

We report the results of a decision simulation conducted among 349 adults whose task was to invest in a hypothetical 401(k) retirement plan. We varied the number of mutual funds offered for investment and observed the effects on the incidence and extent of participation. The results indicate that larger fund assortments tend to reduce participation among women, but increase it among men. Implications and suggestions for future research are discussed.