Here is a GAO report prior to PBGC implementation of a new diversified investment strategy. And here is an article from the Boston Globe last August warning about potential problems with the new investment strategy the PBGC was about to undertake. Here is a Wall Street Journal Article in October of last year decrying the change in policy as the fund lost around 5 billion dollars. Finally here is another report today describing the detrimental effects this policy has had on the Agency.
It is sad to see that the previous Administration's proposed Social Security Initiative was turned into an experiment using PBGC funds. While it is understood that the fund needed more capital, there are many ways to go about it without endangering the last shred of hope of a pension for many Americans. One thought would be to increase the insurance premiums on Companies to reflect the actual potential risks, especially for single employer plans, of plan termination. Of course it is too late to enact this type of revenue generation tool now.
As we watch the debate raging in the country regarding the auto industry my concern is more underfunded plans will now be dumped on the PBGC because of upcoming bankruptcies. This combined with horrible investment strategies will possibly cripple the fund which would then require a taxpayer bailout. With the growing sentiment against bailouts what will be the outcome? It's hard to say, but I think we definitely need to keep an eye on the situation.
That's all for now,
Bob
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