WASHINGTON - The federal agency charged with backstopping pension benefits for 44-million Americans lost almost $5-billion from investments in stocks in the budget year that ended Sept. 30, the agency head acknowledged Friday.
The Pension Benefit Guarantee Corp. will lose 6 to 7 percent on its entire investment portfolio, director Charles Millard said. It lost a significantly higher percentage of its investments in equities.
But that won't jeopardize the agency's ability to pay retirees who depend on it, Millard reassured lawmakers.
The agency has assets of $68-billion and liabilities of $83-billion. Millard said that over the long term, a new policy of creating a more diversified portfolio of 45 percent stocks, 45 percent bonds and 10 percent in alternative investments will produce better returns that give the agency a 57 percent chance to climb out of its deficit hole within a decade.
But the stock market has taken a sharp dive this month, and those losses have yet to be reflected in the estimates.
Currently, its investment portfolio is about 70 percent fixed-income assets like Treasury bonds and 30 percent in equities. That's about the same as a year ago, when the agency posted a 7.2 percent gain on its investments.
"We did not make the shift yet," Millard said.
The Pension Benefit Guarantee Corp. is one of the government's largest corporations. It insures approximately 30,000 defined-benefit pension plans. Defined-benefit plans pay benefits based on years of service, salary levels and other factors. They are being increasingly replaced by 401(k)-style plans in which benefits depend on the employee's contributions.
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