“The Biggest Lump Of Money In The World” — the title of an NBC White Paper Documentary in 1985, when retirement assets exceeded $1 trillion.

Retirement assets in this country now exceed $23 trillion. The Defined Benefit and Defined Contribution world is comprised of public employee retirement plans, union retirement plans, private sector big business retirement plans, and private sector small business retirement plans, and IRAs.

Each segment has it own characteristics, yet all system segments may be able to participate in a program that would help fund societal needs while keeping up returns for participants and beneficiaries who are counting on the retirement income.

Last month, the United States Chamber of Commerce hosted a major Symposium entitled “Marrying the Investment Opportunities for Retirement Plans with the Capital Needs of Society”. The symposium looked at indebtedness issues of cities and states, which will explode under new accounting rules, and the investment needs of our society.

To meet coming challenges, the next step in bringing about such a marriage is looking at both real and perceived barriers, and then to determine how to overcome those barriers, with innovative, out of the box, thinking.

Can retirement assets be invested in such a way as to provide opportunities for investment returns to participants and beneficiaries of the retirement plan as well as provide needed funding for small business/job creation and critical infrastructure projects?

Such investments from retirement plans are legal and prudent under the Employee Retirement Income Security Act of 1974 (ERISA). The Department of Labor’s Prudence regulation issued in 1979, gave authority to small business investment.

Thus investing retirement funds for society’s gains are legal as a secondary consideration, so long as the investment is made for the exclusive benefit of the participants and beneficiaries of the plan.

Indeed, in response to The Pension Forum’s 1992 Presidential Candidate Employee Benefit Questionnaire about Retirement Plan investment into small business and the nation’s infrastructure needs, President George H. W. Bush wrote,  “To the extent that socially motivated investments do not compromise the economic balance of risk and return to the plan and are consistent with other requirements, they are not improper.”

Small businesses, as defined by the Small Business Administration (500 Employees or less) comprise 
99.7 percent of U.S. employer firms. Yet, small business loans from retirement plan assets are not measured by any government agency or private sector entity, and bank loans are down significantly exceeding $700 Billion in 2008 to under $600 Billion in 2013. (See attached)  Venture Capital funds roughly 1300 new deals a year, nationwide.

What the numbers above are telling us is that we are not allocating sufficient financial resources to small business/job creation, unless our intent is to create a stagnant society. Big business used to be our national job generator, that is no longer the case. In order to grow jobs, we need to develop an economy of entrepreneurs. Those entrepreneurs will need a variety of financing techniques and sources, retirement funds can certainly play a role. We must examine the barriers to retirement fund investment, and create methods to overcome those barriers.

High frequency trading of publicly held securities has its place, so does investment in small business/job producing entities. We seem to have accentuated the former and diminished the later

Very little retirement fund investment in infrastructure can be found in this country. Yet, by its nature, infrastructure investment is suited best to long term investors. Large retirement plans by their nature are long term investment vehicles. All plans need enough liquidity to pay benefits, as needed.

We can invest in companies that are in the wider infrastructure industry, but direct investment is rare. Several years ago, Pension & Investments (Magazine) calculated only $8 Billion of retirement funds invested in infrastructure needs in this country, which has grown slightly in recent surveys.

As we proceed to examine barriers and methods to overcome those barriers, we must keep in mind we are talking about your retirement money and mine. None of us want to sacrifice any of our retirement income to high minded goals.  Please let me repeat, the only way this works is if the risk/reward characteristics are for the exclusive benefit of the participants and beneficiaries of the plan.

Investments have risks. My clients lost nearly half their retirement funds in 2008 and 2009.

The risk underlying the financial crises still exists and to some observers has increased. Could there be a repeat, the answer is yes.

What this piece advocates is the wisdom of diversification of  our investments into longer term productive investments as part of a well balanced investment portfolio..

For more on detail on this idea you can contact me at:  samplan@aol.com