Mellon 401k

Is it time to level the playing field between the executive deferred compensation plans and 401K employees rates of return? In a recent WSJ, "For executives, Sure Thing-Retirement Plans", revealed the gap between the returns to execs from non-execs in their pension plan vehicle structures.

Jacqueline D'Andrea, a former Wal-Mart Stores, Inc. manager lost more than 60% of her 401K savings plan in 2009. Sales Wal-Mart accounts 401K is down 18% in comparison. However, executives at Wal-Mart has not experienced the same decline in their retirement account balances. Instead, they conducted a pre-negotiated, guaranteed 6.6% rate of return.

CEO of Wal-Mart, H. Lee Scott Jr., had gains of $ 2.3 million in a supplemental retirement savings, bringing its total savings of 46.7 million. "We are proud of the benefits we offer our hourly associates, including 401K and profit sharing contributions, premiums and discounts on merchandise," said a spokesman for Wal-Mart, which confirmed the return on figures of the plan.

The practice of guaranteeing fixed returns on savings executive and deferred compensation plans is not new. But it was largely unreported, under the radar, and generally unknown to the general public outside of business executives, HR professionals and brokers who sell these plans to businesses. Companies set up supplementary to higher employee can set aside more money for retirement.

These supplemental executive retirement plan investment options generally reflect the performance of mutual funds available in the 401K plan for their employees. For this reason, many managers and leaders who participated in the supplemental pension plans also suffered losses on their account balance in 2008.

To be fair, managers enrolled in these retirement plans at fixed rate of return to achieve a reduced rate of return when the stock market goes up more than their pre-determined rate, guaranteed return.

Executives at Illinois Tool Works, Inc., a manufacturer of fasteners and adhesives, the feedback received from 6.1% to 8.4% in 2008, yet employee 401K plans lost 25%. A spokesman said that in 2009, the average yield of employees 401K plans was 23% while the yield on the exec plan of deferred compensation was just 5.6%.

However, a gain of 12 to 14.5% over 2 years beats a loss of 2% over the same period every day in my book! Like most of us know, leverage steady gains over the long term create larger balances. And the differences between pure and non-exec exec account average balances of retirement accounts beyond belief .....

The average employee at Wal-Mart has recorded approximately $ 8,000 in his account of 401K. Wal-Mart Execs top of millions in their's ....

Do not think I'm bashing Wal-Mart for this practice, because the WSJ article reveals stories like Comcast Corp., Cummins Inc., and Bank of New York Mellon Corp. Fully a quarter of senior executives in large U.S. companies have registered further gains in their retirement savings plans of Directors in 2008, directly opposite of their employees experienced in the same period.

Thus, while we re-assess risk in the compensation practices of our company and programs, is not it time to remedy this disparity exacerbates the difference in the total remuneration for Directors and employees? Is it fair (or right) that employees assume full risk for stock market fluctuations in their retirement portfolio while top execs in the same company are guaranteed a fixed rate of return?

Intel Corp. does t.