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February 05, 1996 12:00 AM

LETTERS TO THE EDITOR;ROBERT RUBIN'S 'ROBBERY';VARIABLE ANNUITIES

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    Robert Rubin's 'robbery'I am the executive director of the Federal Retirement Thrift Investment Board, and, as such, managing fiduciary of the Federal Employees' Thrift and Savings Plan, about which you editorialized in your Nov. 27 issue ("Rubin's 'robbery'*"). In the wake of Treasury Secretary Robert Rubin's "robbery," readers of your editorial may be shocked to learn that the "victims" lost - and Secretary Rubin "robbed" - exactly nothing. Your editorial mischaracterized the secretary's action, and erroneously compared it with that of a "fictional CFO" violating a fiduciary duty to his company's pension plan beneficiaries.

    First, the fiduciary responsibilities for plan investments are discharged by me and the board's five private-sector members. Congress created this structure in setting up the Thrift Savings Plan in 1986. The named fiduciaries have always been, and will continue to be, vigilant in protecting the interests of the participants and beneficiaries.

    Second, plan participants with investments in the Government Securities Investment (G) Fund can be reassured that their money although not now invested in interest-bearing Treasury obligations, remains on account with the Treasury, and as such are equally a direct obligation of the U.S. government, backed by its full faith and credit. No sounder debtor exists, despite your editorial writer's inexplicable suggestion that the very source of money might somehow "go bankrupt."

    Because federal law provides for a "make-whole" of the interest otherwise foregone by the G Fund (when the debt limit is finally increased, as it inevitably will be), the G Fund continues to accrue interest in the identical amounts as if it were invested. This law, which has been invoked four other times when Treasury securities could not be issued because of debt limit constraints, is hardly a mere "promise" by Mr. Rubin. Optimally, Treasury obligations issued to the G Fund would be exempted from any public debt limit constraints. Congress did not choose to do that, but in its enactment of the "make-whole" provision it did the functional equivalent.

    Roger W. Mehle

    Executive director

    Federal Retirement Thrift

    Investment Board

    Washington

    We read with interest your Nov. 27 Opinion Page column, "Overselling of variable annuities" and we are pleased you are covering this important part of the market. My company has been direct marketing variable annuities since 1987, and our sales place us among the largest providers of non-qualified annuities.

    As a direct writer of variable annuities, we believe it is extremely important to help our customers make appropriate investment choices. We pay particular attention to determining the suitability of an annuity for each customer and we provide the tools needed to make this investment decision.

    For example, Fidelity AnnuityMatch is a worksheet designed to help investors decide: how much money to consider putting into taxable vehicles, like mutual funds; and how much money, if any, to consider allocating to tax-deferred vehicles, like variable annuities. Partly as a result of these efforts, less than 5% of our individual annuity sales relate to a qualified plan.

    These direct consumer education programs are much more effective than restricting consumer choice and opportunity by, as might be suggested, raising minimums to prevent inappropriate choice by lower income individuals. Our customer feedback indicates they are satisfied with the investment decisions they've made for the long term. They also tell us they can rely on our products and people to deliver an array of investment choices and services.

    Richard C. Murphy

    Senior vice presidentActuarial & finance

    Fidelity Investments Life Insurance Co.

    Boston

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