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Report Charges PBGC With Risky Investment Strategies

The new policy, adopted in February, significantly raised the PBGC’s allocations to equities and alternative investments to eliminate its $14 billion deficit.

August 19, 2008
Related Topics: Retirement/Pensions, Benefit Design and Communication, Policies and Procedures, Latest News
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The Government Accountability Office, as expected, issued a report Monday, August 18, that said the Pension Benefit Guaranty Corp.’s new investment policy is riskier than the agency previously acknowledged.

The report also called for increased monitoring of investments by the PBGC board of directors.

The new policy, adopted in February, significantly raised the PBGC’s allocations to equities and alternative investments to eliminate its $14 billion deficit.

“More investment risk translates into additional risk for taxpayers, and if the additional risk isn’t mitigated through adequate diversification, it could be disastrous,” Sen. Chuck Grassley, R-Iowa, said in a news release. Grassley and Sen. Max Baucus, D-Montana, requested the GAO report.

PBGC Director Charles E.F. Millard defended the new policy, saying in a news release that the risk was “consistent with the best practices of other large institutional investors.”

Millard added that in all the scenarios the GAO analyzed, the new asset allocation outperforms the old.

“Other than some process-related criticisms, the GAO study confirms that the board was correct to adopt the new diversified policy,” Millard said.

Filed by Jennifer Byrd of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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