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.

In August 2008, the Internal Revenue Service blocked third-party pension buyouts by stating that the transfer of a pension plan to an “unrelated taxpayer,” without the transfer of significant business assets, would violate an Internal Revenue Code rule that a pension plan be operated for the exclusive benefit of a sponsor’s employees, the officials write.

If third-party buyouts were permitted, surviving employers might end up facing new kinds of conflicts with the pension plan owners, and those conflicts could hurt plan participants, the officials write.

“One’s evaluation of buyouts may depend on the degree to which DB plans are defined by the employer-employee relationship, and not just on the monetary value of the benefits,” the officials write.

In addition, because the third-party buyers would want the lower-risk plans, it “seems unlikely that the buyouts would help rescue the riskiest plans or reduce PBGC’s overall risk significantly,” the officials write.

Moreover, if a buyer concentrated more than one plan from a sponsor or industry under one roof, “this could increase the magnitude of future losses to PBGC and participants should that sponsor or industry find itself in financial distress,” the officials write.

A copy of the report is available here.