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State employees warily eyeing their stock plan

Posted January 22, 2008 10:00 pm

Adriana Colindres

Rich Meyerholz and Teresa Sobery both are worried about the plunging stock market's impact on money they've socked away in the deferred compensation plan that is part of their state employee benefits package.

But they have different ideas about what, if anything, they should do.

"Sure, I'm concerned, but our money is in funds, and they are managed," said Sobery, who reviews contracts at the Illinois Department of Public Health. "Right now is not the time to get out."

Sobery, who has participated in the "deferred comp" plan for about seven years, is thinking about moving her future distributions into less volatile funds.

"But I will probably leave what I've got where it is," she said.

However, Meyerholz, an information systems analyst for the Capital Development Board, is considering "maybe stopping investing for a while."

"It doesn't sound real promising right now," he said.

He has participated in the plan for the past six or seven months, but has not recently reviewed how well his funds are performing.

"I'm scared to," he said.

As described on the Illinois Department of Central Management Services' Web site, the state employee deferred compensation plan is a supplemental tax-deferred retirement plan. It is similar to 401(k) plans available to employees in the private sector.

The deferred compensation program offers more than a dozen stock funds, bond funds and money market funds. It also offers "retirement funds" that target specific retirement dates set at five-year intervals - from 2005 to 2055.

Deferrals and any earnings accumulate until an employee leaves his or her state job, dies or "incurs unforeseeable financial hardship," the CMS Web site states.

The federal government taxes the money once an employee begins taking distributions.

In the past year, stock funds have taken more of a beating than the bond or money market funds that are available to state workers through the deferred compensation plan.

The Ariel Fund, for instance, closed Friday at $39.76 - more than $12 less than on the same date in 2007.

Another stock fund, Fidelity Puritan Fund, closed at $17.71 last Friday. A year earlier, it closed at $19.99.

A third offering, Northern Small Cap Value Fund, closed Friday at $12.44, almost $4 lower than in January 2007.

Meanwhile, the T. Rowe Price New Income Fund, a bond fund, closed Friday at $9.17, compared to $8.90 on Jan. 18, 2007.

Another bond fund, Vanguard Total Bond Market Index Fund, closed Friday at $10.31, compared to $9.97 a year ago.

Robert Mandeville, a state government retiree who was budget director from 1976 to 1990 in Gov. James Thompson's administration, said state employees who are still on the job shouldn't worry too much about volatility in the stock market.

"They're in for the long term, and the Dow has always returned to its previous high in the past," he said. "And it probably will do this again."

Adriana Colindres can be reached at (217) 782-6292.

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