By Suzanne Barlyn

Thu May 9, 2013 4:17pm EDT

n">(Reuters) - The top securities regulators on Thursday warned individual investors about pension purchasing companies that persuade retirees and military veterans to sign over pension checks in return for lump-sum payments, as regulatory concerns about the practice mount.

Individuals who receive monthly pension payments could be targets of salespeople offering an immediate lump sum in exchange for some or all of their future pension payments, the U.S. Securities and Exchange Commission and Financial Industry Regulatory Authority wrote in a joint alert.

Pension recipients who sign over their payments to so-called "factoring" or "pension advance" companies, will almost always receive lump-sum payments that are lower than the present value of their future income streams, the SEC and FINRA wrote. The companies also target individuals who are receiving payments for settlements of personal injury lawsuits, according to the regulators.

The investor alert follows a probe opened by New York's main banking regulator into pension advance companies. The state's Department of Financial Services, at the direction of New York Governor Andrew Cuomo, has subpoenaed 10 companies involved in the business, the governor said on Tuesday.

Cuomo accused the companies of "preying" on retirees and veterans by advancing sums that may actually be disguised, high-cost loans.

Individuals who are thinking about selling the rights to their pensions should consider the value of the lump-sum payment compared to the future income stream - a figure that most states require pension advance companies to disclose, the regulators wrote.

The deals also involve transaction costs, which can include everything from brokerage commissions to notary fees, according to the joint SEC-FINRA alert.

The SEC and FINRA also warned investors about buying the rights of someone else's pension or personal injury settlement.

Companies pushing such investments are advertising yields from 5.75 percent to 7.75 percent, the regulators said. That may be appealing in the current low interest-rate environment, but the securities can be expensive and difficult to sell, according to the alert.

(Reporting by Suzanne Barlyn; Additional reporting by Jonathan Stempel; Editing by Linda Stern and Chris Reese)

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Michael Madigan, speaker of the Illinois Representatives, listens to the State of the State address in the House Chambers of the Illinois State Capitol in Springfield, Illinois February 1, 2012.

Credit: Reuters/Sarah Conard

SPRINGFIELD, Illinois | Thu May 9, 2013 7:31pm EDT

SPRINGFIELD, Illinois (Reuters) - The Illinois Senate on Thursday passed a labor union-backed bill to reduce the state's nearly $100 billion unfunded public pension liability, giving lawmakers dealing with America's worst-funded state retirement system a second option.

The 40-16 vote in the Democrat-controlled chamber sends the measure to the House, which last week passed a more comprehensive pension fix pushed by Democratic House Speaker Michael Madigan. Democrat John Cullerton, the Senate president, is chief sponsor of the bill the Senate approved on Thursday.

It was unclear which plan would prevail or whether some combination of both might pass before the spring legislative session ends on May 31.

Even as the Senate debated its version of pension reform, Madigan in the House held a hearing focused on a proposal to shift the cost of paying pensions from the state to local school districts, universities and community colleges.

Some state lawmakers and school officials have raised concerns the move would result in higher tuition and property tax hikes.

"This is going to happen. There will be a new plan. School districts are going to pay the pension costs for teachers and the others," Madigan said, adding he will release his proposal next week.

Costs arising from pension underfunding, caused by years of skipping or skimping on payments, are threatening the delivery of core state services such as education and health care. The pension crisis has pushed Illinois' credit rating to the lowest level among the states.

Cullerton, the Senate president, is in no hurry to bring the House version of pension reform - Madigan's proposal - to a vote in the Senate, said Rikeesha Phelon, Cullerton's spokeswoman.

A bill similar to Madigan's was soundly defeated in March, Phelon noted. "We first need to know that the vote count has changed" before taking up the Madigan bill, she said.

Cullerton's plan, negotiated with union officials, offers current workers and retirees a choice in how reductions in pension or health benefits would affect them.

"We feel that this bill obviously has strong sound constitutional principles. Other versions of pension reform are risky, and we know there's going to be litigation for sure," Cullerton said during debate ahead of the vote.

Cullerton's bill, however, would only shave the unfunded liability by as much as $15.7 billion and bring the system to a 90 percent funded level in 30 years. Madigan's bill calls for unilateral changes in pension benefits that are expected to cut $30 billion from the liability and uses savings over time to fully fund the system by 2044.

Senate Republicans, who largely voted against the measure, argued that Cullerton's bill does not go far enough to shore up the sagging pension system for teachers outside of Chicago, higher education workers, lawmakers, and state employees.

"This bill doesn't do enough to change the trajectory of our pension funds and you will be back here reliving this nightmare," said State Senator Matt Murphy.

Cullerton has said Madigan's bill would save Illinois nothing if unions were to prevail in an expected court battle. Unions have threatened a lawsuit to test whether the measure violates state constitutional protections against diminishing or impairing public worker retirement benefits.

Groups representing retired teachers and state workers have threatened lawsuits to challenge Cullerton's plan, too, but legal observers say Cullerton's approach is less vulnerable to a challenge.

Under Cullerton's plan, current workers would be given choices involving changes in cost-of-living adjustments for pensions, higher contributions, and the use of future raises to determine pension payments. In return for any concessions they make, workers would have access to state-sponsored health care in retirement.

Incentives offered in the Cullerton plan - called "considerations" in pension parlance - are designed to persuade workers to accept reductions in their pension benefits. The tradeoff would address the constitutional ban on reduction of pension benefits because retirees would actively select a consideration in return for giving up part of their promised pension.

The Cullerton plan does have some similarities to Madigan's bill. Like that measure, it also requires the state to make timely and adequate pension contributions and also exempts pension changes from collective bargaining.

(Reporting By Joanne von Alroth, additional reporting by Karen Pierog in Chicago; Editing by Greg McCune, David Greising, Toni Reinhold and Carol Bishopric)

View the original article here

NEW YORK | Wed May 8, 2013 12:58pm EDT

NEW YORK (Reuters) - A second New York City pension fund has sold its holdings in firearm manufacturers in response to last year's school shooting in Connecticut, the city's top financial officer said on Wednesday.

The $45.7 billion New York City Employees' Retirement System divested its $16.3 million holdings in Alliant Techsystems Inc, Olin Corp, Sturm Ruger & Co, Sm & Wesson Holding Corp and Forjas Taurus SA, Comptroller John Liu said in statement.

The move follows a similar action by the city's teachers retirement system, which sold its gun holdings in February. And in January, CalSTRS, the California State Teachers' Retirement System, sold its investments in manufacturers of firearms and high-capacity ammunition clips.

"Our city's employees do not want their pension dollars supporting companies whose products tear apart families and shatter communities," Liu said.

U.S. teachers and public employees retirement funds began reviewing their investments in firearms makers after 20 children and six adults were shot dead at an elementary school in Newtown, Connecticut in December.

New York state's $150 billion public pension fund said in January that it will stop buying shares of publicly traded firearm manufacturers, including Sturm Ruger.

(Reporting by Edward Krudy; Editing by Kenneth Barry and Bernadette Baum)

View the original article here

Michael Madigan, speaker of the Illinois Representatives, listens to the State of the State address in the House Chambers of the Illinois State Capitol in Springfield, Illinois February 1, 2012.

Credit: Reuters/Sarah Conard

SPRINGFIELD, Illinois | Thu May 9, 2013 7:31pm EDT

SPRINGFIELD, Illinois (Reuters) - The Illinois Senate on Thursday passed a labor union-backed bill to reduce the state's nearly $100 billion unfunded public pension liability, giving lawmakers dealing with America's worst-funded state retirement system a second option.

The 40-16 vote in the Democrat-controlled chamber sends the measure to the House, which last week passed a more comprehensive pension fix pushed by Democratic House Speaker Michael Madigan. Democrat John Cullerton, the Senate president, is chief sponsor of the bill the Senate approved on Thursday.

It was unclear which plan would prevail or whether some combination of both might pass before the spring legislative session ends on May 31.

Even as the Senate debated its version of pension reform, Madigan in the House held a hearing focused on a proposal to shift the cost of paying pensions from the state to local school districts, universities and community colleges.

Some state lawmakers and school officials have raised concerns the move would result in higher tuition and property tax hikes.

"This is going to happen. There will be a new plan. School districts are going to pay the pension costs for teachers and the others," Madigan said, adding he will release his proposal next week.

Costs arising from pension underfunding, caused by years of skipping or skimping on payments, are threatening the delivery of core state services such as education and health care. The pension crisis has pushed Illinois' credit rating to the lowest level among the states.

Cullerton, the Senate president, is in no hurry to bring the House version of pension reform - Madigan's proposal - to a vote in the Senate, said Rikeesha Phelon, Cullerton's spokeswoman.

A bill similar to Madigan's was soundly defeated in March, Phelon noted. "We first need to know that the vote count has changed" before taking up the Madigan bill, she said.

Cullerton's plan, negotiated with union officials, offers current workers and retirees a choice in how reductions in pension or health benefits would affect them.

"We feel that this bill obviously has strong sound constitutional principles. Other versions of pension reform are risky, and we know there's going to be litigation for sure," Cullerton said during debate ahead of the vote.

Cullerton's bill, however, would only shave the unfunded liability by as much as $15.7 billion and bring the system to a 90 percent funded level in 30 years. Madigan's bill calls for unilateral changes in pension benefits that are expected to cut $30 billion from the liability and uses savings over time to fully fund the system by 2044.

Senate Republicans, who largely voted against the measure, argued that Cullerton's bill does not go far enough to shore up the sagging pension system for teachers outside of Chicago, higher education workers, lawmakers, and state employees.

"This bill doesn't do enough to change the trajectory of our pension funds and you will be back here reliving this nightmare," said State Senator Matt Murphy.

Cullerton has said Madigan's bill would save Illinois nothing if unions were to prevail in an expected court battle. Unions have threatened a lawsuit to test whether the measure violates state constitutional protections against diminishing or impairing public worker retirement benefits.

Groups representing retired teachers and state workers have threatened lawsuits to challenge Cullerton's plan, too, but legal observers say Cullerton's approach is less vulnerable to a challenge.

Under Cullerton's plan, current workers would be given choices involving changes in cost-of-living adjustments for pensions, higher contributions, and the use of future raises to determine pension payments. In return for any concessions they make, workers would have access to state-sponsored health care in retirement.

Incentives offered in the Cullerton plan - called "considerations" in pension parlance - are designed to persuade workers to accept reductions in their pension benefits. The tradeoff would address the constitutional ban on reduction of pension benefits because retirees would actively select a consideration in return for giving up part of their promised pension.

The Cullerton plan does have some similarities to Madigan's bill. Like that measure, it also requires the state to make timely and adequate pension contributions and also exempts pension changes from collective bargaining.

(Reporting By Joanne von Alroth, additional reporting by Karen Pierog in Chicago; Editing by Greg McCune, David Greising, Toni Reinhold and Carol Bishopric)

View the original article here

NEW YORK | Wed May 8, 2013 12:58pm EDT

NEW YORK (Reuters) - A second New York City pension fund has sold its holdings in firearm manufacturers in response to last year's school shooting in Connecticut, the city's top financial officer said on Wednesday.

The $45.7 billion New York City Employees' Retirement System divested its $16.3 million holdings in Alliant Techsystems Inc, Olin Corp, Sturm Ruger & Co, Sm & Wesson Holding Corp and Forjas Taurus SA, Comptroller John Liu said in statement.

The move follows a similar action by the city's teachers retirement system, which sold its gun holdings in February. And in January, CalSTRS, the California State Teachers' Retirement System, sold its investments in manufacturers of firearms and high-capacity ammunition clips.

"Our city's employees do not want their pension dollars supporting companies whose products tear apart families and shatter communities," Liu said.

U.S. teachers and public employees retirement funds began reviewing their investments in firearms makers after 20 children and six adults were shot dead at an elementary school in Newtown, Connecticut in December.

New York state's $150 billion public pension fund said in January that it will stop buying shares of publicly traded firearm manufacturers, including Sturm Ruger.

(Reporting by Edward Krudy; Editing by Kenneth Barry and Bernadette Baum)

View the original article here