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PBGC Responds to GAO Report on Investment Policy Implementation

August 18, 2008

WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC), today issued the following response to "Implementation of New Investment Policy Will Need Stronger Board Oversight," a Government Accountability Office report for the U.S. Senate Committee on Finance and Committee on Health, Education, Labor and Pensions. The report examined the oversight of PBGC's investments by its Board of Directors and implementation of the new investment policy adopted by the Board in February 2008. [x22397.xml]

"The Board of Directors provides consistent and robust oversight of PBGC's investments. The current Board and its representatives have been deeply involved in the crafting of our new investment policy, and will continue to oversee its implementation," said PBGC Director Charles E.F. Millard.

"Other than some process-related criticisms, the GAO study confirms that the Board was correct to adopt the new diversified policy. Under all scenarios tested by the GAO, the new policy's level of risk--standard deviation--is consistent with the best practices of other large institutional investors.

"We agree with GAO's emphasis on the importance of continued measurement and mitigation of risk. That is why we have performed additional sensitivity analyses, and will do so going for ward. This policy's use of risk is prudent by any standard. Members of Congress have called for more diversification of PBGC's investments, and this policy is far more diversified than the previous policy. Most important, it addresses the greatest risk of all: The risk that the Corporation could some day fail in its commitment to the 1.3 million Americans who depend on it for retirement income."

The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits for about 44 million American workers and retirees participating in over 30,000 private-sector defined benefit pension plans.

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PBGC No. 08-43