Posted on Friday, April 3, 2009 - by Henry Walter
HOW SAFE IS the FIXED INCOME FUND? An Update.
Last October we posted a Bulletin on this subject. To retrieve that article click on October 2008 in the Bulletin Archive on the right, and then click on the title under Wednesday, October 22, 2008.

In the article we noted that all investments entail risk, that the lack of transparency makes it difficult to assess risk, and that we were concerned that issuers providing wraps could withdraw from the business or have financial problems, among other issues. We also suggested that having all your eggs in one basket was not a prudent approach to investing.

In a recent issue of the Wall Street Journal (March 26, 2009), Eleanor Laise, in an article titled “Stable Funds in Your 401(k) May Not Be” discusses some of the issues facing investors in such funds. We strongly recommend you read this article if you have an interest in the topic. Your local library probably subscribes to the Wall Street Journal, or you can Google the title of the article.

Here are a few of the issues covered in this excellent article.

To smooth out fluctuations, stable value funds utilize “wraps” or contracts with banks and insurance companies. But many banks and insurance companies are growing reluctant to provide these “wrap” contracts. AIG is a big player in the wrap business. Although Kodak does not utilize AIG, as far as we know, insurance companies used by Kodak are not immune to financial problems.

A key measure of the health of a stable-value fund is the market-to-book ratio. Investors typically buy and sell at the book value. But the actual market value of the fund’s holdings fluctuates. The lower the market-to-book ratio, the more dependent investors are on the financial strength of the wrap providers. According to the Hueler Companies (www.hueler.com), which tracks such things, the average stable-value fund at the end of 2007 had a ratio of 99%, and at the end of 2008, 95%. Not a good trend. As Ms. Laise points out, stable-value funds whose underlying holdings are trading at depressed levels are especially vulnerable to layoffs and bankruptcies, which can lead to mass withdrawals.

For questions or additional information on this blog entry, please contact us.

Posted on Friday, April 3, 2009 - by Henry Walter
Kodak Pension Fund
Preliminary information (based on the writer’s individual research) indicates that as of December 31, 2008, the value of Kodak’s pension fund was down 29% from last year. The fair value of plan assets on 12/31/07 was $7.1 billion and on 12/31/08 was $5.0 billion.

In spite of the drop in the value of the plan’s assets, Kodak U.S. plans were over funded by $496 million at the end of 2008. Whether they remain over funded depends on how the financial markets perform in 2009. As we write this on March 28th, 2009, the S&P 500 is off 9.7% year-to-date, so it is likely that the fair value of the plan’s assets as of that date is less than $5.0 billion.

Here is a summary of the status of the pension fund subject to confirmation when the EK Annual Report is published:



According to Pensions & Investments, a trade publication (www.pionline.com), and based on company filings with the SEC (10K etc.), Eastman Kodak will “reassess” the asset allocation of its U.S. defined benefits plans and conduct an asset-liability study early in the year. The committee that oversees the plan met in the fourth quarter of 2008 to re-evaluate “certain portfolio positions relative to current market conditions”.

The bottom line is that it appears that the pensions of retirees and future retirees continue to be fully protected, at least for now. A prolonged recession or a depression could change things, but the Pension Benefit Guaranty Corporation (PBGC) is still in business as a safety net, and it is highly unlikely that Congress would not step forward should PBGC run out of money to rescue pension funds in trouble. Currently, the PBGC’s annual maximum benefit is $54,000 for a single life annuity beginning at age 65.

For questions or additional information on this blog entry, please contact us.

Posted on Wednesday, April 1, 2009 - by Henry Walter
Long Term Care Seminars
To our friends and clients:

In recent weeks we have received many requests for information on the topic of Long Term Care Insurance. Do I want it? Do I need it? How important is it? While we would love to be able to provide a single, satisfactory answer to each of these and other similar questions, we know that things are never quite as simple as they seem.

With that in mind, we have created a series of informational workshops to address the critical issues involved in deciding whether long term care insurance should be a part of your overall financial plan. After you have had a chance to consider the important questions, you should be much better prepared to provide your own answers.

If you have found yourselves wondering about long term care issues in these stressful economic and financial times, this may be just the right opportunity for you to get answers to your questions, and up-to-date information on concerns that matter to you. Please join us.

Long Term Care - Informational Workshops

When: Thursday, April 30, 2009 1:00 p.m.
Tuesday, May 12, 2009 6:00 p.m.
Wednesday, May 13, 2009 9:00 a.m.

Where: Ensemble Financial Services
179 Sully’s Trail (first floor meeting room)
Pittsford, NY 14534

Discussion Topics:

● Cost of care – The actual costs both locally and nationally of long-term health care services.

● Medicare – How it works, when it will pay for my long-term care needs.

● Medicaid – What are the new rules governing spend down requirements?
How do I qualify? Does it affect my level of care?

● Asset Transfers – To children or a trust? Does it make sense for me?
What are the recent changes to the law?

• Long-Term Care Insurance – What it covers. How to design a plan that best meets my needs. What to look for in an insurance company. How to evaluate various policies and contract
provisions.

• New Tax Law – Tax-deductibility of LTC insurance. NYS Tax credits.

Please respond by email to seminars@highfallsadvisors.com or call Bonnie Cordy at 585-935-5300 Ext. 111 to reserve your seat.

For questions or additional information on this blog entry, please contact us.