) for $34.95. The subprime mess has put a black mark on any investment with "mortgage-backed" in its name. But former Fidelity Investments bond manager Kevin Grant says some of the best bargains are in mortgage-backed securities with no connection to the subprime market. By sticking to high-quality issues backed by Fannie Mae (FNM
) and other government-sponsored entities, Grant is finding yields around 6%, with the potential for price increases as the market calms down. Investors can get in on the action through Grant's Cypress Sharpridge Investments, a real estate investment trust going public this month that concentrates on mortgage-backed securities. Read more in "Bargains in Mortgage Land" at the Investing Insights blog on BusinessWeek.com. Close to half of companies with defined-benefit pension plans let retiring employees take a lump-sum distribution instead of a monthly check. When given that choice, nearly everyone takes the cash. But a federal law that goes into effect in 2008 may limit many companies' ability to offer those one-time payments.
Starting next year, companies won't be able to make lump-sum distributions if their pension plans are more than 40% underfunded. (Congress is considering a bill to postpone the change until at least 2009.) For companies using a calendar year, the change will begin on Apr. 1. Those that are 20% to 40% underfunded will be permitted to offer lump sums on only up to half of the benefits employees have accrued.
Is your plan likely to land on the no- or partial-distribution list? The pension data available on Form 5500--filed with the Labor Dept. and available from HR departments--are generally outdated by the time they're released. The disclosures in companies' 10-Ks are also of limited use, since they rely on a different formula to calculate pension funding than the new law requires. Still, "it can give you a rough estimate," says Marjorie Martin, a vice-president at Aon Consulting Worldwide.
Your employer may not even know right now whether it will be able to offer the distributions. Companies still have a few months to cough up the cash to get their pension plans into better shape. Even relatively healthy plans that are as much as 90% funded may find they're restricted unless they can get an actuary to certify their results by Apr. 1. If the delay in certification continues past Oct. 1, a plan would be temporarily deemed below the 60% threshold, and lump sums would be off-limits until certification is granted.