U.S. Pension Insurance Agency Lost $3 Billion In Stock Investments
November 5, 2008
The downturn in the US economy is having a far-reaching and diverse effect. No clearer is this felt than by the US Pension Benefit Guaranty Corporation (PBGC). PBGC is a government-based agency that is responsible for insuring private-sector pension plans and for processing benefits if plans should happen to fail. As of its fiscal year end (August), PBGC lost an alarming $3 billion in investments.
US Representative George Miller announced the grim news in a recent San Francisco hearing. Miller is the head of the congressional committee that monitors PBGC.
The cause of the significant losses was due to the agencies stock holdings. Representative Miller stated that the agency had invested most of its funds in mortgage-backed securities. Those funds were the payments made on insurance premiums, which were paid by those employers that offer insured pension plans. PBGC makes money from its investments and any pension plans that is secures.
On a positive note, PBGC recently announced that it has acquired the pension plan of Pope & Talbot Inc., a Portland-based pulp and lumber company. The plan is underfunded and provides coverage to 1,370 works and retirees. The company’s plan has 92% coverage, with $57.5 million in assets available to cover $62.3 million in benefit liabilities. PBGC plans to assume control of the assets and use current insurance funds to pay the benefits that are guaranteed by the pension plans. The agency will effectively be responsible for paying approximately $3.7 million of the total $4.8 million in shortfall.
Despite it serious losses, PBGC looks to make a comeback. Yet, such sudden shifts in economic viability should not be taken lightly or casually disregarded. There are no total guarantees when it comes to the real world economic issues that American is dealing with. Both individuals and businesses are dealing with consequences. Some major companies have fallen under the burden of the ailing financial markets.
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