Letting for-profit companies take over troubled pension plans would do little to help the Pension Benefit Guaranty Corp., U.S. Government Accountability Office officials argue.
Barbara Bovbjerg, a GAO director, and Joseph Appelbaum, a GAO chief actuary, prepared a report on “third-party defined benefit pension plan buyouts” for House Ways and Means Committee leaders and others with an interest in the topic.
Traditionally, the GAO officials write, employers have shut down pension plans voluntarily by buying group annuities from insurers, to have the insurers make the required benefits payments, or by paying benefits to participants in some other form.
In other cases, the Pension Benefit Guaranty Corp., the pension guaranty agency, takes control of pension plans from troubled employers.
Now, the officials write, some independent companies are talking about buying moderately underfunded pension plans from employers, and having the employers pay the buyers to compensate for the underfunding.
The new plan owners would try to improve plan efficiency and investment performance and pay out plan benefits, without the direct involvement of the PBGC.
In most cases, the third-party buyers would mainly be interested in plans that had at least 80% of the estimated necessary funding level, the GAO officials write.