1. Pension Plans • A fund established for the eventual payment of retirement benefits.

2. Retirement Resources • Public Pension Plans • Private Pension Plans • Personal Savings

3. Defined Contribution Defined Benefit Cash Balance Public Corporate Union Individual Pension Plan Categories

4. DB vs DC Assets

5. Pension Fund Assets

6. Essential Pension Fund Questions • “To fund or not to fund?” • Individual account control or centralized professional portfolio ? • What are the expense and investment risk/return implications?

7. Plan Portfolio Defined Annuity or Lump Sum Defined Benefit Plan • Contributions aretransformedto a defined benefit – the plan sponsor bears investment risk

8. Defined Contribution Plan • Individual accounts – employee bears investment risk

9. Uneven Returns in DC Plan • Who rescues the employee with very poor returns?

10. Social Security • There is no investment balance – direct wealth transfer from workers to retirees

11. Defined Benefit Plan • + Provides annuity income (self-insured) • + Low expenses • + Supported by diversified portfolio • + Sponsor bears investment risk • - Not portable • - Not inflation-protected • - Can encourage early retirement • - Employees at risk for sponsor default (the PBGC guarantee is not complete)

12. Defined Contribution Plan • + Portable • + Employee can select investments • + Sponsor can quantify cost • - Does not produce annuity income • - Laggards left behind • - Expenses, expenses, expenses

13. Social Security • + Provides annuity income • + Inflation protected • + Covers unfortunate workers • - NOT FUNDED – implied Treasury return • - Demographics turning ugly

14. Management of Pension Funds • Plan Sponsors • Consulting Firms • Actuarial • Investment • Investment Management Firms

15. Regulation • Employee Retirement Income Security Act (ERISA) of 1974 • Funding standards • Fiduciary standards • Minimum vesting standards • Insurance program (PBGC)

16. Retirement Planning • Loss of public confidence in Social Security • Shift from defined benefit pension plans to defined contribution pension plans • IRAs • Various types of personal savings

17. Future of Social Security • Investing a portion of the Social Security portfolio in non-Treasury assets. • Privatizing a portion of an individual’s retirement assets.

18. Germany Public Pension System Aging Population Pension Reform Private Pension Funds Japan Public and Corporate Pension Program Aging Population Defined Benefit Plan Defined Contribution Plan Pension Funds Around the World