(Solution Download) 1 Discuss whether it is fair for executives to receive


1. Discuss whether it is fair for executives to receive larger retirement plans than employees in lower ranking jobs. With more money to invest, should they have more investment options, such as fixed income funds? Why or why not?
2. How, if at all, should employers help employees manage the risks of investing in defined contribution retirement plans?
3. Assume you work in the HR division of Walmart.
How would you communicate with employees about the performance of their retirement funds in a year when their value falls? How would you address the difference between employees' returns and executives' returns?

Blame it on the economy? In 2009, according to Boston College's Center on Retirement Research, the 401(k) retirement plans of 50 million employees lost a total of $1 trillion or more when the value of their investments took a dive. But while most employees were hit hard, executives at some companies were protected. Because the Internal Revenue Service limits the amount of contributions to 401(k) plans, employers set up supplemental plans for their higher-paid employees. At some companies, these plans include less-risky fixed-income funds that deliver returns even when stock funds are declining.
In some cases, the differences were dramatic. Walmart's 401(k) retirement plan lost 18 percent of its value in 2009. Some employees did worse; manager Jacqueline D'Andrea says she lost 60 percent of the value in her plan. In contrast, Walmart's CEO enjoyed a
$2.3 million gain in his supplemental retirement savings.
Other companies with dramatic differences include Comcast, where executives' deferred-compensation accounts rose 12 percent while employees' 401(k)s fell 29 percent, and McKesson, where executives enjoyed an 8 percent gain versus a 31 percent loss for employees.

 







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