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U.S. Pension Agency Has Lost $3 Billion in Stock Investments

By Betsy Miller Kittredge on 10-22-2008, 03:01 PM in

Chairman George Miller announced at a hearing today in San Francisco that the U.S. Pension Benefit Guaranty Corporation lost at least $3 billion in stock investments during the last fiscal year through August, and invested a significant portion of its funds in mortgage-backed securities. The losses were only partially offset by modest gains in other investment classes. It is likely that losses will be substantially worse after September results are reported.

The PBGC is a government agency that insures private-sector pension plans, manages failed pension plans and pays benefits to workers of those plans.

The head of the PBGC, Charles Millard, will testify before the House Education and Labor Committee on Friday regarding the agency's financial problems that may threaten the retirement security of millions of Americans.

"At a time when Americans' anxiety about their economic future is escalating, Millard's testimony is vital to better understand the financial situation of the nation's pension guarantor," said Chairman Miller. "Now is the time to gather all the information we need in order to rescue the economy and help workers and retirees."

According to a document obtained by the Education and Labor Committee and based on preliminary unaudited figures, the PBGC lost more than $3.1 billion in its trust fund related to the agency's stock investments for the first 11 months of its 2008 fiscal year. The PBGC trust fund invests pension assets in order to pay out benefits to workers whose pension plans were turned over to the agency.

The recent dramatic loss also comes in light of a new controversial investment policy the agency recently approved. The new policy would significantly shift PBGC assets from fixed-income securities, such as U.S. Treasuries, into more risky securities like real estate.

Millard recently testified before Congress recently that the new investment policy would not add any additional risk to the long-term stability of the trust fund.

The invitation to answer questions from Congress comes after the Millard rebuffed a committee subpoena in July that demanded the agency turn over documents regarding a report into the agency's mismanagement and lax governance practices.

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