August, 2010

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Article Index

Lifetime Income Options for Participants in Retirement Plans
Article by: Tom C. Schock

The Departments of Labor and Treasury (the “Agencies”) have been reviewing the rules under the Employee Retirement Income Security Act (ERISA) and plan qualification rules under the Internal Revenue Code to determine whether and, if so, how the Agencies could or should enhance – by regulation or otherwise – the retirement security of participants in employer sponsored retirement plans by facilitating access to income arrangements designed to provide a lifetime stream of income after retirement.


A Long and Winding Road from Food Packaging to Nuclear Waste Disposal
Article by: Justin Dorsey

The Manhattan Project.  1944.  The Department of Defense needs to safely manufacture and transport dangerous nuclear reactive materials in top-secret.  And to do so, it needs a robot.  What industry uses robots?  At the time, none.  Maybe the closest is food processing. 


Automating Flow Controls Saves Water and Money
Article by: MnTAP

Washing processes are important steps in many manufacturing operations. Rinsing parts and equipment often results in high water consumption, costing money to purchase the water and pay for treatment and discharge of used water. Automating equipment to control flow can minimize water use in wash processes, helping companies save money.


MN Economic Outlook
Article by: Dr. Ernest Goss

For the month of July 2010, reported August 2, 2010. As in recent months, Minnesota’s leading economic indicator, based on a survey of supply managers, points to advancing economic conditions ahead.


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Lifetime Income Options for Participants in Retirement Plans

The Departments of Labor and Treasury (the “Agencies”) have been reviewing the rules under the Employee Retirement Income Security Act (ERISA) and plan qualification rules under the Internal Revenue Code to determine whether and, if so, how the Agencies could or should enhance – by regulation or otherwise – the retirement security of participants in employer sponsored retirement plans by facilitating access to income arrangements designed to provide a lifetime stream of income after retirement.

Heretofore, retirement security has been provided to many workers via defined benefit pension plans sponsored by employers. However, Department of Labor data clearly shows a  trend away from these plans toward sponsorship of defined contribution plans – commonly referred to as 401k plans.

While defined contribution plans have some strengths relative to defined benefit plans, participants in defined contribution plans bear risk because there is no promise by the sponsor as to the adequacy of the account balance and income stream that will be available following retirement. Moreover, while defined benefit plans are generally required to make annuities available to participants, 401k and other defined contribution plans typically make only lump sum distributions available.

Accordingly, with the trend away from defined benefit to defined contribution 401k and other, similar plans, including the associated trend away from annuities toward lump sum distributions, employees are not only at risk for the adequacy of their savings at the time of retirement, but also for ensuring that their savings will last throughout their retirement years and, in many cases, the remaining lifetimes of their spouses and dependents.

In addition to longevity risk, participants in defined contribution plans also face investment risk – how to invest, declines in value, etc. And inflation risk – diminished purchasing power – which can be substantial over time. Moreover, given what has happened within the past couple of  years to account values those who have recently retired or are near to retirement now face / will face how to generate enough income to pay their bills.

While it is quite likely the government will be promulgating some form of regulation requiring defined contribution plan sponsors to provide access to lifetime income arrangements, it will be necessary to also to include a “safe harbor” to their fiduciary liabilities. Most sponsors are perfectly willing to provide information and/or options to help their plan participants make informed choices. However, they will not do so without knowing how it can be done safely.

It should be understood these lifetime income arrangements and/or options will be a plan feature offered by third party providers – insurance and/or mutual fund companies – and not the obligation of the employer/sponsor.

Tom C. Schock is a tax accountant and financial advisor with Gwizdala & Associates – Accountants & Advisors. He can be contacted at 651-772-2202 or tom@tenforty.com.

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A Long and Winding Road from Food Packaging to Nuclear Waste Disposal

The Manhattan Project.  1944.  The Department of Defense needs to safely manufacture and transport dangerous nuclear reactive materials in top-secret.  And to do so, it needs a robot.  What industry uses robots?  At the time, none.  Maybe the closest is food processing. 

The DoD approaches General Mills.  Actually, it drafts General Mills – which in turn assigns three young engineers to oversee the project: Don Melton, Karl Neumeier and Glenn Rose.  They’re up to the task and design a way to safely, and remotely transport the dangerous materials through the manufacturing/assembly process.  After the war, the nuclear arms race takes off and there is growing demand for the safe handling of nuclear materials.  Private industry enters the scene and begins to envision – and then build – nuclear powered electric generating plants. General Mills’ hazardous materials handling division lives on – until 1961.  Then, it encourages the three engineers to leave General Mills and establish their own firm.  To help them, it will let them take their proprietary designs and will let them buy the tools in their department at a generous discount.  It doesn’t hurt that Minneapolis investors are eager for new investments with the recent success of companies like Control Data.  PaR – Programmed and Remote – Systems is born as a public company.

Like every journey, the road thereafter had its own set of speedways – and bumps.  Early on, the two- tracked (military and industrial) nuclear industry was go-go, until Three Mile Island in 1979 had a definite dampening effect.  For PaR, the result was a series of corporate permutations – each with the goal of diversifying the outlets for PaR’s robotic expertise.  To that end, in 1981 it was acquired by a large global manufacturer of semi-conductor automation equipment  divested in 1986 to a Finnish ship builder, taken private through a leveraged buy-out in 1993 and in 2003 sold its division that provides material handling inside commercial nuclear power electrical generation plants to Westinghouse. 

What does PaR look like today?  Well, the starting point is that true to its origin it designs and manufactures robotics. It takes a moment to appreciate what makes a robot.  Ultimately, a robot is different from an automated tooling device because it is teachable.  It can be taught to see or sense changes in material – and adapt to those changes.  Those changes come in different mediums.  An obvious medium is the material itself.  For instance, a curved, composite, wet (e.g. holds fuel) wing section found on fighter aircraft and the resulting need to be able to drill on highly contoured surfaces and sense thickness of materials and proximity to cavities.  A less obvious medium is mechanical and machining errors that can dramatically amplify the effect of degrading the accuracy of the tooling process.  Today's most sophisticated tools and robots can position along six (6) different axes.  But, each axis is susceptible to both linear and rotational errors.  Take for instance a movement along a straight line.  There is the potential for going too far – or not far enough; or moving from side to side along the way; or up/down but also rotate, just as waves in the water pitch and roll ships.  The longer the tool the greater this amplification.  In all, each axis has six (6) different ways in which it can go awry.  And they compound themselves so that a tool operating on six different axis can mis-perform forty (40) different ways.  Obviously the result can be disastrous.  If PaR’s core capabilities were reduced to just one example – it would be its success at solving for “Mechanical Error Compensation.”  That success puts it in very rare company and provides for a steady – and growing – book of business.

Today PaR services a broad line of industries including defense, hazardous material management, aerospace, medical device manufacturing, lab automation, specialized heavy equipment handling, and industrial manufacturing.  PaR's Chief Technology Officer, Albert Sturm, is particularly excited about its Nacelle Drilling Cell which is critical in the production of the new Joint Strike Fighter F-35 for the Department of Defense.  Essentially, it reverses the manufacturing order by suspending the robot on an overhead tracked gantry system and moving the robot itself down the manufacturing line.  What makes it possible is PaR’s proprietary Mechanical Error Compensation MEC® technology.  The result is that there is essentially no limitation on how long or wide the manufacturing cell can be, or whether there are one or thirteen different cells with different tooling requirements in each, nor how geometrically diverse the material is in each of the cells. 

Another new area that he is excited about is nuclear waste vitrification.  As Sturm says, “Much of the legacy waste mostly generated during the cold war arms race is stored in underground tanks in a semi-liquid state.  Obviously, leakage is a big concern.  Vitrification is the process by which contaminated waste is melted, then encapsulated in molten glass and thereby converted when it cools into a solid substance.  The result is a much more stable medium for long term safe storage.  The challenge of course is to figure out a way to do all of that remotely, robotically – even to the extent of anticipating that repairs on the robots in these ‘hot-cells’ will need to be performed by other robots.”

Ultimately, business is good for PaR.  Today it has two major manufacturing sites – one in Minnesota and one in Georgia, and seven other sales, service and engineering facilities.  PaR is currently experiencing expansion in both Europe, with the opening of offices in the UK, and the Far East.  When asked about the influence of the Manufacturers Alliance, Albert says, “Like the Manufacturers Alliance we depend heavily on our sub-contractor ‘peers.’  That is, what we have found over time that works best for us is peer-collaboration between us and our network of local fabricators.  Ours is a challenging business because we are essentially asked to develop one-of-a-kind prototypes that can be used in actual production.  Often what we need has never been built before.  So, we have adopted a process of what we call ‘minimum information drawings’.  Essentially, that means that we look to our peer-partners to infer the dimensions themselves from solid modeling.  Obviously trust and communication are essential to that process.  We have had great success with it.”                            

Justin Dorsey, Director of Sales & Marketing, Advanced Capital Group located at 50 South Sixth Street, #975 Minneapolis, MN 55402. call (612) 230-3009, email jdorsey@acgbiz.com, or visit www.acgbiz.com.

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Automating Flow Controls Saves Water and Money

Washing processes are important steps in many manufacturing operations. Rinsing parts and equipment often results in high water consumption, costing money to purchase the water and pay for treatment and discharge of used water. Automating equipment to control flow can minimize water use in wash processes, helping companies save money.

Federal Cartridge Company, Anoka

Federal Cartridge Company has been manufacturing small arms ammunition for over 80 years. The company is a wholly-owned subsidiary of ATK, Alliant Techsystems, based in Eden Prairie, Minnesota. Small arms ammunition manufacturing involves a number of mostly automated metalworking operations that require washing and rinsing between processes to remove oily materials and debris from the parts. Prior to investigating the wash and rinse systems, the company could not rely on those systems as they required frequent maintenance. In order to increase production capacity, water use needed to be reduced. Federal Cartridge hosted an intern from the Minnesota Technical Assistance Program (MnTAP) to help identify ways to reduce water use.

Incentive for Change

Four types of machines in the facility account for nearly 20% of the plant’s total effluent. The intern examined each of these types of machines to determine why they were using excessive amounts of water.

The Sinterite machine, used to anneal and wash metals between manufacturing processes, experienced frequent buildups, which caused operators to bypass the water use controls and use a continuous high flow of water. Three Salem machines, which originally had water conservation technology built into them, also experienced troubles, mostly with the hard water used at Federal Cartridge. When the valves broke down, operators added a hose to the rinse tank and left it running continuously. The Ransohoff machine, used to wash lead bullets with a heated aqueous wash followed by a rinse, was controlled by a manual ball valve and flowed continuously at approximately one gallon per minute. Federal Cartridge also uses two Colt washers, continuously flowing approximately one gallon per minute, that clean brass during various stages of the manufacturing process.

Implemented Recommendations

The MnTAP intern recommended automating the water flow control in each machine with a timer and mechanical ball valve system. In the Sinterite machine, the ball valve system adds a small fixed amount of fresh water to the rinse tank. The ball valve has functioned without failure for three years and has resulted in a 98% reduction in water use at this operation. A limit switch was added to the valve control already existing on the Salem machines. This turns water off when no parts are being processed, which has resulted in a 60% annual reduction of the water used by these machines. The Ransohoff machine was adjusted to a rinse flow of five minutes an hour, reducing water use 91%. Controls were installed on the Colt washers, which reduced the operation’s water consumption by over 80% annually.

Results

At the recommendation of the MnTAP intern, Federal Cartridge permanently installed rinse control on four washer systems at a cost of $2,040. Each project had a payback of six months or less and resulted in a 10% reduction of annual total plant discharge and a total savings of $22,300 per year.

Automating Your Water Flow Controls

Water conservation through automation may be an important measure for you to explore at your facility. Consider automating processes that consume water instead of manually controlling flow or continuously running water. Automation may help your company conserve water, reduce effluent discharge, and save money. MnTAP, at the University of Minnesota, specializes in offering technical assistance to help Minnesota businesses prevent pollution, reduce energy and water use, and save money.

MnTAP has a variety of technical assistance services available to help Minnesota businesses implement industry-tailored solutions that maximize resource efficiency, prevent pollution, increase energy efficiency, and reduce costs. Contact MnTAP at 612.624.1300 or mntap@umn.edu for more information.

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MN Economic Outlook

For the month of July 2010, reported August 2, 2010. As in recent months, Minnesota’s leading economic indicator, based on a survey of supply managers, points to advancing economic conditions ahead.

The July Business Conditions Index dipped slightly to 64.4 from June’s 65.5.  This was the 12th straight month that Minnesota's index was above growth neutral. Components of the overall index for July were new orders at 64.6, production, or sales, at 65.9, delivery lead time at 60.8, inventories at 63.6, and employment at 67.1. “Economic signals from businesses across the state remain positive. Manufacturers, both durable and nondurable, are reporting healthy growth in business. This expansion has spilled over into the rest of the state economy. As a result, I expect second half job growth in Minnesota to match annualized growth of 2.0 percent in the first half,” said Goss.   

Dr. Ernest Goss of Creighton University, used the same methodology as The National Association of Purchasing Management to compile this information. An index number greater than 50 percent indicates an expansionary economy, and an index under 50 percent forecast a sluggish economy, for the next three to six months.

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