Your Pension Funds In Uncle Sam's Hands?

In response to Paul Craig Roberts' suggestion that the Labor Dept. advocates "economically targeted investing" in order to "divert" some of America's pension funds into "politically useful investments," let me assure your readers that there is absolutely no such effort under way ("Private nest eggs don't make public safety nets," Economic Viewpoint, Oct. 31).

As Roberts notes, the Employee Retirement Income Security Act of 1974 (ERISA) requires that pension-plan money be invested solely in the interest of participants and beneficiaries. Both the Labor Secretary and I are committed to enforcing ERISA vigorously.

Economically targeted investments (ETIs) provide pension funds with competitive, risk-adjusted rates of return. If an investment does not provide a competitive, risk-adjusted rate of return, it should not even be considered by a pension manager under ERISA. ETIs provide competitive returns as well as ancillary benefits such as affordable housing, infrastructure improvements, and job creation.

ERISA requires pension-plan officials to seek to maintain an investment portfolio that will maximize the plan's risk-adjusted rate of return. This means a plan may not, under any circumstances, make an investment that is expected to produce substandard financial returns, no matter how "socially useful."

Contrary to Roberts' suggestion, economically targeted investing was not created by the Clinton Administration. For more than a decade, under both Republican and Democratic Administrations, Labor has issued advisory opinions specifying that ETIs that provide a competitive risk-adjusted rate of return are consistent with both the spirit and the letter of ERISA. The Department's recent interpretive bulletin reiterated this longstanding position.

Finally, while Roberts cites the Kansas Public Employee Retirement System in order to conclude that ETIs do not earn competitive returns, he ignores many successes all over the country, such as the California Public Employees' Retirement System's single-family housing construction program, which achieved a 44% rate of return for its first project. Other successful ETI programs abound, including the AFL-CIO Housing Trust, Boilermaker Co-Generation Fund, and Excelsior Capital.

Olena Berg

Assistant Secretary for

Pension & Welfare Benefits

Labor Dept.


Roberts misstated both the policy of the Clinton Administration and my own views when he wrote of a supposed plan to tax pensions. Neither the Administration nor I has ever considered any such plan to "commandeer" the pensions of hard-working Americans.

Roberts bases his claims on an academic article I wrote prior to joining the Administration. The article has little relevance to my current position. The Treasury is committed to the serious business of developing policies that touch people's lives and is not engaged in academic research.

This Administration fully recognizes the importance of pension funds to the economic security of America's retirees. No plan such as the one mentioned in Roberts' column exists, and this Administration has no intention of considering one.

Alicia H. Munnell

Assistant Secretary

Treasury Dept.


Roberts described the efforts to direct pension funds into socially useful investments as "a scheme to divert pension money to economically targeted investments such as public housing." Roberts would have some believe that this is a "slick move" to plunder pension funds and dump them into risky investments.

In demonizing housing authorities, Roberts overlooks two facts: The Clinton proposals never suggested limiting investments to housing. Even if that were the proposal, just because some authorities are mismanaged, it does not mean all are mismanaged. In my region, we have five authorities. None is in financial trouble.

More-typical beneficiaries of the Clinton proposal would be the hundreds of community-investment organizations that are building housing, creating jobs, and saving neighborhoods. The last time I looked, their record of financial success was much better than the banks'. They also look good compared with thrift institutions that--instead of housing--invested in unneeded golf courses that went under, taking pension money with them.

James Upchurch

Executive Director

Western Maryland Interfaith

Housing Development Corp.

Frederick, Md.

Reich's issuing interpretive regulations that "allow" pension funds to invest in ETIs is designed to meet his political agenda, not to protect the welfare of millions of retirees--as the Labor Secretary is required to do under


It follows that the Labor Dept. will soon mandate that pension fund assets be put into ETIs. Labor has an abysmal record in protecting employee rights under both pension and welfare plans.

Leroy P. Gebhart

Brookfield, Ill.

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