Why So Many Accountants Are Quitting

Link: https://www.wsj.com/articles/why-so-many-accountants-are-quitting-11672236016?st=c72oscxvc5a7nzk&reflink=share_mobilewebshare

Excerpt:

More than 300,000 U.S. accountants and auditors have left their jobs in the past two years, a 17% decline, and the dwindling number of college students coming into the field can’t fill the gap. 

The exodus is driven by deeper workplace shifts than baby-boomer retirements. Young professionals in the 25- to 34-year-old range and midcareer professionals between the ages of 45 and 54 also departed in high numbers starting in 2019, according to the Bureau of Labor Statistics. Recruiters who have been luring experienced accountants into new roles say they are often moving into jobs in finance and technology.

The huge gap between companies that need accountants and trained professionals has led to salary bumps and more temporary workers joining the sector. Still, neither development will fix the fundamental talent pipeline problem: Many college students don’t want to work in accounting. Even those who majored in it.

Author(s): Lindsay Ellis

Publication Date: 28 Dec 2022

Publication Site: WSJ

Market Rout Sends State and City Pension Funds to Worst Year Since 2009

Link: https://www.wsj.com/articles/market-rout-sends-state-and-city-pension-funds-to-worst-year-since-2009-11660009928?st=sooa4lma1xq9ff4&reflink=desktopwebshare_permalink&fbclid=IwAR0CC7k-F2J_IblLDjSODS1iDZuRxzuGk1-4Bgwtc_AQ0d4AajP00toEQH8

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Public pension plans lost a median 7.9% in the year ended June 30, according to Wilshire Trust Universe Comparison Service data released Tuesday, their worst annual performance since 2009 and a fresh sign of the chronic financial stress facing governments and retirement savers. 

Much of the damage occurred in April, May and June, when global markets came under intense pressure driven by concerns about inflationhigh stock valuations and a broad retreat from speculative investments including cryptocurrencies. Funds that manage the retirement savings of teachers, firefighters and police officers returned a median minus 8.9% for that three-month period, their worst quarterly performance since the early months of the global pandemic.

Author(s): Heather Gillers

Publication Date: 9 Aug 2022

Publication Site: WSJ

Billionaire Ken Griffin Sues IRS Over Leak Exposing Taxes Paid By 25 Richest Americans

Link: https://www.thewealthadvisor.com/article/billionaire-ken-griffin-sues-irs-over-leak-exposing-taxes-paid-25-richest-americans

Excerpt:

Hedge fund billionaire Ken Griffin, who founded and helms trading powerhouse Citadel, has sued the Internal Revenue Service and Treasury Department for alleged negligence in maintaining safeguards for confidential tax returns after a bombshell report last year cited a trove of IRS data in a series of articles detailing the incomes and taxes paid by some of the world’s richest people.

KEY FACTS

In a federal suit filed with the Southern District of Florida, Griffin alleged the IRS has “willfully and intentionally” failed to establish adequate safeguards to protect confidential tax return information after nonprofit news outlet ProPublica published an article citing the data in June 2021 and then followed up with several pieces, including some targeting Griffin’s political lobbying.

The suit, first reported by Wall Street Journal, claims the disclosure of Griffin’s tax return information to ProPublica was not “requested by the taxpayer,” and as a result entitles the billionaire to punitive damages totaling at least $1,000 per unlawful disclosure and attorneys’ fees, according to a section of the tax code.

It is a felony for a federal employee to leak a tax return or information about a tax return, but the source of the data remains unknown despite some lawmakers claiming there “is little doubt” the confidential information “came from inside the IRS;” the IRS and Justice Department have stated they are investigating the leak, but no formal charges have been filed.

Author(s): Jonathan Ponciano

Publication Date: 13 Dec 2022

Publication Site: The Wealth Advisor, Forbes

CPI Report Shows U.S. Inflation Eased in November

Link: https://www.wsj.com/articles/us-inflation-november-2022-consumer-price-index-11670883405

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The Labor Department on Tuesday said that its consumer-price index climbed 7.1% in November from a year ago, down sharply from 7.7% in October—building on a trend of moderating price increases since June’s 9.1% peak.

Core CPI, which excludes volatile energy and food prices, rose 6% in November from a year ago, easing from a 6.3% gain in October. September’s 6.6% increase was the biggest jump since August 1982.

Author(s): Gwynn Guilford

Publication Date: 13 Dec 2022

Publication Site: WSJ

Covid’s Drag on the Workforce Proves Persistent. ‘It Sets Us Back.’

Link: https://www.wsj.com/articles/covid-workforce-absenteeism-productivity-economy-labor-11667831493

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Two-and-a-half years after Covid-19 emerged, reported infections are way down, pandemic restrictions are practically gone and life in many respects is approaching normal. The labor force, however, is not.

Researchers say the virus is having a persistent effect, keeping millions out of work and reducing the productivity and hours of millions more, disrupting business operations and raising costs.

In the average month this year, nearly 630,000 more workers missed at least a week of work because of illness than in the years before the pandemic, according to Labor Department data. That is a reduction in workers equal to about 0.4 percent of the labor force, a significant amount in a tight labor market. That share is up about 0.1 percentage point from the same period last year, the data show.

….

Another half a million workers have dropped out of the labor force due to lingering effects from previous Covid infections, according to research by economists Gopi Shah Goda of Stanford University and Evan J. Soltas at the Massachusetts Institute of Technology. In a Census Bureau survey in October, 1.1 million people said they hadn’t worked the week before because they were concerned about contracting or spreading the virus.

The resulting labor shortages are contributing to upward pressure on wages and inflation, one reason the Fed delivered its fourth consecutive 0.75 percentage point interest rate increase last Wednesday. On Friday, the Labor Department reported brisk job growth in October, but health-related absences remained elevated and the labor force contracted slightly.

Author(s): Gwynn Guilford and Lauren Weber

Publication Date: 7 Nov 2022

Publication Site: WSJ

Social Security Needs Saving Again

Link: https://www.wsj.com/articles/social-security-needs-saving-again-retirement-planning-wages-earnings-benefits-eligible-savings-11654631767?mod=opinion_lead_pos5

Excerpt:

— Raise the full retirement age further. Starting in 2028, it would go up by one month every half-year until it reaches 68 1/2 in nine years. That means that in 101 years (1935-2036) the full retirement age would have risen 3 1/2 years — far less than the increase in average life span over the same period.

— Raise the early eligibility age. Since the 1960s, all workers have had the option of retiring at 62 with benefits reduced by around 25%. Most retirees now claim Social Security at 62, and the rising full retirement age strengthens the incentive to do so. Once it’s at 67, holding out for higher payments will mean giving up five years’ worth of benefits — a three-year gap will have widened to five.

If my first reform were enacted, the gap would grow further, to an irresistible 6 1/2 years. So Congress should return to the three-year gap by raising the early eligibility age to 65 1/2 as soon as possible.

— Change the way benefits are calculated for new recipients. At a 1983 White House Rose Garden ceremony, I sat next to a Senate member of the Social Security Reform Commission. I told him, “You can fix Social Security by not indexing the bend points for five years.” His response: “What the hell are bend points?”

Bend points determine how much your initial Social Security check will be. First they take the 35 years of your highest income. Thirty-five years ago, you were a junior employee and the dollar didn’t go as far. So each year’s wages are adjusted for inflation to compute an average monthly wage in today’s dollars.

Using the present rules, assume you’re retiring in 2022 and your average inflation-adjusted monthly wage is $6,572. Your first check would be $2,628.96 — 90% of the first $1,024 (or $921.60), plus 32% from $1,024 to $6,172 (or 1,647.36), plus 15% in excess of $6,172 (or $60).

The bend points are $1,024 and $6,172. They were $230 and $1,388 in 1982, when I wrote my constituent newsletter. The growth in benefits could be constrained by indexing the bend points every other year rather than annually for six to 10 years. In addition, the initial benefit should be based on 38 years of wages rather than 35, since Americans not only live longer but work longer, and the inflation-adjusted average wage should be discounted by 5%.

— Slow the growth of benefits for new and existing beneficiaries alike by changing the basis on which they’re indexed for inflation. All indexing of Social Security now uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. Economists agree that the Chained CPI is the most accurate inflation index available. Between 2000 and 2020, the Chained CPI was around 0.3 percentage point lower each year than the CPI-W. The government uses Chained CPI to index income-tax brackets and the higher CPI-W to calculate government outlays, including Social Security cost-of-living adjustments — which leads both taxes and spending to rise more quickly.

— Withhold some Social Security COLAs from higher-income retirees. Those who report income of more than $60,000 (a threshold that itself would rise with inflation) from sources other than Social Security could be denied the COLA every other year for up to six years.

— Give the COLA not annually but every 14 or 15 months using the 12 months of lowest inflation.

— Tax Social Security income for higher-bracket taxpayers, and give them the option to forgo all or part of their monthly payment. The forgone amount could be deducted as a charitable contribution. In high-income-tax states, forgoing Social Security payments would incur little or no cost. Skeptics may be surprised by how many Americans will forgo a part of their monthly checks to assure the system’s solvency for their grandchildren. The election to forgo would be reversible annually.

— Raise the payroll tax by 0.1% of wages every other year — half from withholding, half for the employer’s contribution — for 20 years, a total tax increase of 1%.

Author(s): Rudy Boschwitz

Publication Date: 7 June 2022

Publication Site: WSJ

Rising Rates Make Life Insurance Funded With Debt More Costly

Link: https://www.wsj.com/articles/rising-rates-make-life-insurance-funded-with-debt-more-costly-11663849907?st

Excerpt:

Rising interest rates and a falling stock market are putting new pressure on a popular strategy of borrowing to fund the purchase of multimillion-dollar life-insurance policies.

Even before rates started to rise, consumers were being forced to make big payments when strategies failed to deliver the promised returns. Many sued their agents and insurers.

So-called premium financing has been around for decades. It was mostly used by the super rich to fund large policies that act as tax shelters and offer death benefits worth tens of millions of dollars. When interest rates hit zero, many more people borrowed to fund their policies.

The lawsuits claim that agents misled them about the strategy’s risks. The policies are supposed to generate enough income to repay the loans, which can also be repaid through the death benefit. People often take out one- to five-year loans, with interest rates that reset annually. They also face risk of loans not being renewed.

….

In court filings, the agents and insurers, Pacific Life and Lincoln National, deny the allegations, which include misrepresentation. Chad Weaver, an attorney for Wayne L. Weaver, one of the agents, said “the premium-financing strategy was implemented after numerous meetings and disclosures, and was completely consistent with [Mr. Marenzi’s] objectives and financial situation at the time of purchase.”

….

Insurers don’t release information on the use of premium financing. The Life Product Review, an industry publication, said a 2021 survey of about 60% of the premium-financing market identified $800 million of loans at those firms to pay for policies taken out in 2020.

Author(s): Leslie Scism

Publication Date: 22 Sept 2022

Publication Site: WSJ

Covid-19 Illnesses Are Keeping at Least 500,000 Workers Out of U.S. Labor Force, Study Says

Link: https://www.wsj.com/articles/covid-19-illnesses-are-keeping-at-least-500-000-workers-out-of-u-s-labor-force-study-says-11662955321

Excerpt:

Illness caused by Covid-19 shrank the U.S. labor force by around 500,000 people, a hit that is likely to persist if the virus continues to sicken workers at current rates, according to a new study released Monday.

Millions of people left the labor force — the number of people working or looking for work — during the pandemic for various reasons, including retirement, lack of child care and fear of Covid. The total size of the labor force reached 164.7 million people in August, exceeding the February 2020 prepandemic level for the first time. The labor force would have 500,000 more members if not for the people sickened by Covid, according to the study’s authors, economists Gopi Shah Goda of Stanford University and Evan J. Soltas at the Massachusetts Institute of Technology.

“If we stay where we are with Covid infection rates going forward, we expect that 500,000-person loss to persist until either exposure goes down or severity goes down,” said Mr. Soltas. That assumes that some of those previously sickened eventually return to work.

Author(s): Gwynn Guilford

Publication Date: 12 Sept 2022

Publication Site: WSJ

The Government Pension Reckoning Cometh

Link: https://www.wsj.com/articles/the-government-pension-reckoning-cometh-equable-institute-report-11660084312?st=j8a7o7efyyvjtdp&reflink=article_email_share&utm_source=Wirepoints+Newsletter&utm_campaign=24f39fc2e0-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_895ee9abf9-24f39fc2e0-30506353#new_tab

Excerpt:

The California Public Employees’ Retirement System reported a negative 6.1% return for the year, which includes a 21.3% positive return on private equity and 24.1% return on real estate as reported through the second quarter of 2022. What will happen if real-estate prices start to fall and some leveraged private-equity buyouts go south amid rising interest rates?

Collective-bargaining agreements limit how much workers must contribute to their pensions, so taxpayers are required to make up for investment losses. Employer retirement contributions—that is, taxpayers—make up 20% of government worker compensation. That amount has soared over the past decade as pension funds tried to make up for losses during the 2008-2009 financial panic.

A recent report by the Equable Institute found that state and local pension plans now are only 77.9% funded on average, which is about the same as in 2008. But some like Chicago’s are less than 40%. Advice to taxpayers in Illinois: Run.

Author(s): WSJ Editorial Board

Publication Date: 9 Aug 2022

Publication Site: WSJ

Job Switchers Are Earning a Lot More Than Those Who Stay

Link: https://www.wsj.com/articles/inflation-switch-jobs-more-money-fed-atlanta-data-11658699425

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The pay difference between those who stay and those who changed jobs is growing, according to the Federal Reserve Bank of Atlanta. Job stayers, or people who stayed in their job for the past three months, increased their wages by about 4.7% as of June 2022. Meanwhile, those who switched jobs received a raise of 6.4%. The gap is the largest in two decades.

Workers are facing fast-rising prices on gas, groceries, rent and other essentials. Even in a tight labor market, many workers aren’t getting a large enough pay increase at their current job to keep up with inflation, say workers and economists who study the labor market. As a result, some Americans are reconsidering expenses they once considered affordable, while many also are looking for a new job with a bigger paycheck to keep up.

Prof. Yongseok Shin, an economics professor at Washington University in St. Louis, says inflation and the ability to get higher wages by changing companies are pushing many to move on. Some 47 million Americans have changed jobs in the past year, according to the Bureau of Labor Statistics. “I think the workers are paying a lot more attention,” said Prof. Shin. “They are comparing their wage growth with the headline inflation numbers.”

Author(s): Julia Carpenter

Publication Date: 25 Jul 2022

Publication Site: WSJ

Think You’ve Never Had Covid-19? Think Again

Link: https://www.wsj.com/articles/think-youve-never-had-covid-19-think-again-11658741403

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Dr. Ding is a member of a shrinking club of people who are pretty sure they have never been infected with SARS-CoV-2, the virus that causes Covid-19. Geneticists and immunologists are studying factors that might protect people from infection, and learning why some are predisposed to more severe Covid-19 disease.

For many, the explanation is likely that they have in fact been infected with the virus at some point without realizing it, said Susan Kline, professor of medicine at the University of Minnesota Medical School. About 40% of confirmed Covid-19 cases are asymptomatic, according to a meta-analysis published in December in the Journal of the American Medical Association.

More than two years into the pandemic, most people worldwide have likely been infected with the virus at least once, epidemiologists said. Some 58% of people in the U.S. had contracted Covid-19 through February, the Centers for Disease Control and Prevention has estimated. Since then, a persistent wave driven by offshoots of the infectious Omicron variant has kept daily known cases in the U.S. above 100,000 for weeks.

Yet some people haven’t gotten sick or tested positive.

Author(s): Julie Wernau

Publication Date: 25 Jul 2022

Publication Site: WSJ

Biden’s ESG Tax on Your Retirement Fund

Link: https://www.wsj.com/articles/bidens-esg-tax-on-your-retirement-fund-pension-planning-regulation-climate-change-investment-returns-portfolios-11658245467?st=4e8f8bvbqr4vurf&reflink=desktopwebshare_permalink

Excerpt:

BlackRock CEO Larry Fink wrote in 2020 that “sustainable investing is the strongest foundation for client portfolios.” Al Gore said in 2021 that “you don’t have to trade values for value. Green can enhance returns.” These claims haven’t aged well: ESG (environmental, social and governance) funds have trailed the market since the beginning of the year and are badly underperforming the sectors they shun, including oil, gas and coal.

That may spur retirement fund managers to reconsider their commitments to ESG funds. But new ESG-favoring regulations may come to the rescue. Last year the U.S. Labor Department proposed a regulation that would tell retirement-fund managers to consider ESG factors such as “climate change” and “collateral benefits other than investment returns” when investing employees’ money.

This would encourage America’s perpetually underfunded pension plans to invest in politically correct but unproven ESG strategies. It would also violate retirees’ basic right to have their money invested solely to advance their financial interests.

….

The new regulation may also expose fiduciaries who don’t consider ESG factors to lawsuits. Already, activist shareholders are pursuing litigation against public companies that don’t take ESG-approved steps. NortonLifeLock was sued for allegedly breaching its fiduciary duties by telling investors it was committed to “diversity” when it had no racial minorities on its board. Exxon was sued for allegedly misleading investors by failing to disclose the likely effect of climate change on its bottom line. To date, courts have generally found that no reasonable investor would make investment decisions based on board diversity or, as one judge put it, “speculative assumptions of costs that may be incurred 20+ or 30+ years in the future.”

Author(s): Vivek Ramaswamy and Alex Acosta

Publication Date: 19 Jul 2022

Publication Site: WSJ