DoL Easing Asset-Backed Investment Requirements

October 25, 2000 ( - Pension plans will soon be able to invest in lower-rated asset-backed bonds, according to Ivan Strasfeld, director of exemptions at the Department of Labor.

The proposal would modify restrictions imposed by the Employee Retirement Income Security Act (ERISA), allowing private pension plans to buy bonds rated as low as “BBB-” backed by mortgage, auto, manufactured housing and home-equity loans. According to Bloomberg, there are about $100 billion of these instruments outstanding.

Previously, these investments were generally seen as too risky. Investors now say lower-rated asset-backed securities have proven to be at least as safe as the stocks and junk bonds pension plans can buy.

The Labor Department expects to publish and enact changes proposed in August in the next week or so, according to Bloomberg. The proposal, which had been posted for a 45-day comment period, would be retroactive to August 23.

Three comments were received during the notice period, none of them “earth-shattering” according to the DoL’s Strasfeld.

– Nevin Adams