The Markets May 8, 2009

Calif. Transportation Firm Suspends 401(k) Match

A California transportation, freight, and logistics company has become the latest employer to suspend its 401(k) match.
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Pacer Inc., of Concord, California, said it was putting into place a broad cost-cutting effort as a result of the recession. “The continued steep decline in the economy and further deterioration of our stock price during the first quarter contributed to both the first quarterly earnings loss in Pacer’s history and to the non-cash impairment write-off. We are vigorously implementing financial and commercial measures designed to turn these financial results around,” said Brian Kane, chief financial officer of Pacer, in a news release.

Among the steps being taken, in addition to suspending the match for 2009:

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  • cutting 140 jobs
  • pay cuts for all employees
  • suspension of merit increases for 2009
  • reductions in capital spending
  • suspension of the quarterly dividend
  • elimination of any non-critical spending.

The efficiency drive comes as Pacer suffered its first-ever quarterly loss of $177.4 million on revenues of $358 million.

“We obviously had a very, very difficult first quarter,” Michael Uremovich, Pacer’s chief executive officer, said during a conference call to discuss the results. “A number of things hit us at once. But we are acting aggressively and remain confident about our prospects.”

In Practice May 8, 2009

Considerations for Retiring Abroad

If a client wants to retire abroad, it is not as easy as packing a suitcase.
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Cheryl Spielman, partner in Ernst & Young’s Human Capital practice, spoke with PLANADVISER.com and offered some insight about retiring in another country.

Of course, tax considerations are one large concern. If retirees do not give up their U.S. citizenship or green card status, they still have an obligation to file a tax return in the U.S., Spielman said. If a client thinks retiring in a low-tax jurisdiction will help them, it might not, she added.

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Pensions and 401(k)s add another layer of considerations for people who wish to retire abroad. “What they need to understand is, how do my pensions get taxed in the location where I’m retiring?” Spielman said, noting it differs on a country by country basis. There could be a special tax treaty between the country that’s giving the pension and the foreign location.

The tax concerns might be why Spielman said retiring abroad is not something happening in waves. Several hundred retirees each year renounce citizenship. “It’s not something you see people doing in mass amounts at all,” she said. In 2008, 231 American citizens renounced citizenship (although not necessarily retirees), which was down from 470 in 2007, according to Ernst & Young, citing IRS statistics.

For those who do wish to retire in another country, family ties can often be a draw. Also, some people just fall in love with a country while visiting or working abroad. “At the same time, we have seen non-U.S. individuals consciously make the decision where they want to retire because of the tax environments,” she said. For instance, Switzerland has long been hailed for its favorable tax environment.

The annual Global Retirement Index, published by International Living, ranked Mexico as the most affordable place to retire, followed by Ecuador, Panama, Uruguay, and Italy. (The U.S. is ranked number 21.) The index does not mention consideration of retirement benefits, although it does say it takes into account “government provisions that make moving to and living in each country easier and more affordable for foreigners,” such as property tax rates.

So far, the U.S. has not been a bad place to retire, which might explain why droves of people are not retiring abroad, Spielman explained. But that could change. “I think we’re first going to see a shift after taxes get much higher,” she said. “We’ll probably see people make different decisions.”


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