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Official Media Statement: Vectren Retirement Benefits Legal Matter

first_img Official Media Statement: Vectren Retirement Benefits Legal MatterOn March 12, 2015, a lawsuit was filed by 17 current or former Vectren employees, all of whom were also former non-bargaining unit employees of Southern Indiana Gas and Electric Company, Inc. (“SIGECO”). The employees assert, among other things, that nearly 15 years ago they were not provided full and sufficient information to make an informed decision when choosing whether to have their retirement benefits calculated under their current benefit formula or an alternative formula.SIGECO became a Vectren subsidiary in 2000. Shortly thereafter, the SIGECO retirement plan for non-bargaining unit employees (“SIGECO plan”) was merged into the Vectren Combined Non-bargaining Retirement Plan. Before the plan merger, participants in the SIGECO plan, including the employees filing suit, were given the option of having their future benefits calculated under the existing SIGECO plan formula or through Vectren’s cash balance plan formula, which included an increased level of company contributions into the employee’s 401(k) plan. Of approximately 365 eligible participants, around 160, including the 17 employees filing suit, chose the new cash balance formula, which was a competitive, market-based plan that, unlike the SIGECO plan, offered portability should the employee choose to leave the company prior to retirement age. In the 15 years since the choice was made, two recessions and historically low interest rates have resulted in lower benefits under the cash balance formula.As Plan administrator, Vectren fully investigated the employees’ claims and confirmed that before making their election, participants were provided with detailed written information about their options, and this information warned them that estimates included with the information were based on stated assumptions and not a guarantee of future benefits. The information demonstrated that an employee who intended to remain with the company until at least age 55 likely fared better under the SIGECO plan formula. In addition, in-person informational sessions were held to allow participants to ask questions regarding their choices. Participants were also encouraged to seek independent financial advice as to the best choice for them. Finally, participants who chose the cash balance formula had to do so by signing a form indicating their desire to opt into the cash balance formula. This same process and information led roughly 205 participants to stay with the existing SIGECO plan formula.Vectren appreciates that the individuals who filed this suit may regret their decision to opt into the cash balance formula in light of economic conditions over the last 15 years. However, in its role as Plan administrator, it found no basis for allowing those employees to avoid the consequences of their choice and intends to defend this suit accordingly. While Vectren remains committed to providing the competitive compensation and benefits needed to attract and retain our high-quality workforce, we cannot control the consequences of the economy. We look forward to resolving this issue and moving forward in a positive manner with all parties involved.FacebookTwitterCopy LinkEmailSharelast_img read more

CEE roundup: Russia, Poland, Czech Republic

first_imgThe targeted companies include Rosneft, the largely state-owned oil giant, whose investment programmes include the strategic development of the country’s Arctic oil fields.Rosneft was recently given leave to seek financial assistance from the National Wealth Fund, and others are set to follow.The RUB3.1trn fund, financed by oil revenues, was set up partly to finance future state pension deficits.These are being exacerbated by a shrinking working-age population, a low but politically sacrosanct retirement age (60 years for men, 55 for women) and, most recently, by the annexation of Crimea, which adds further pensioners to the system.In other news, Poland’s second-pillar pension fund (OFE) system also faces further predations, with the so-called “slider” now in effect.Under the slider, OFE assets of those citizens with 10 or fewer years left to retirement are being transferred incrementally to the Polish Social Security Institution (ZUS).Poland’s Finance Ministry recently announced that the transfers would amount to PLN4.7bn (€1.1bn) in 2014 and PLN3.8bn in 2015.The package of reforms, including the removal of all government bonds in February, has shrunk net assets from PLN296bn at the end of January 2014 to PLN147bn by end-July, according to the latest data from the Polish Financial Supervision Authority.For the pension management companies, the only current source of new contributions, aside from those switching from rival funds, are new entrants to the workforce.However, this cohort has been indifferent to the second pillar, with only one in 10 choosing to join this year.The Constitutional Tribunal has yet to rule on aspects of the reform law.In late August, it received another submission, from Poland’s Human Rights Ombudsman.Lastly, in the neighbouring Czech Republic, the pension reforms introduced by the previous government continue to unravel.While the newly introduced second pillar is set to be abolished, the new third pillar is set for massive consolidation.The new third pillar replaced one-size-fits-all “transformed” funds with “participation” funds.Licensed pension companies can offer, alongside a compulsory conservative fund, programmes with a range of risk profiles.One of the legal requirements was that each of the new non-compulsory funds accumulated a minimum CZK50m (€1.8m) in capitalisation within two years of being licensed by the Czech National Bank. In total, 33 funds have been licensed, but around 60% of the membership has opted for conservative structures, leaving many of the riskier funds undercapitalised and the eight providers set to merge their less popular offerings. Russia’s second-pillar mandatory system faces another year of withheld contributions, with the monies going instead to the first-pillar Pension Fund of the Russian Federation (PFR).However, the PFR’s gain enabled the government to reduce transfers to the Fund from the state budget for 2014, and again in 2015.Finance minister Anton Siluanov has announced that next year the state will save some RUB309bn (€6.2bn), of which some RUB100bn will be diverted to a newly created anti-crisis fund to aid those companies affected by EU and US sanctions in the wake of Russia’s support of separatist rebels in Ukraine.The Ukrainian crisis has longer-term implications for future state pensions.last_img read more

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