As the Pension Benefit Guarantee Corp.’s (PBGC) deficit continues to swell, reaching $23 billion, the Senate Health, Education, Labor and Pensions (HELP) Committee convened a hearing on Dec. 1 to mull whether the PBGC needs stronger management and oversight.
In his opening remarks at the hearing, Sen. Tom Harkin, D-Iowa, chairman of the HELP Committee, said that “unfortunately, the future of this valuable agency is at risk.” Besides its huge deficit, which rose again this year, “the agency is still grappling with the fallout from the recession,” he said. “Moreover, PBGC’s annual report indicates that there is a very real chance that some very large plans could become insolvent in the near future. That would increase PBGC’s deficit tenfold and pose a significant administrative burden.”
Facing such challenges, Harkin continued, “strong and effective leadership is crucial for PBGC’s future viability.” However, he continued, “the agency has struggled over the years to develop and implement long-term strategies for success and contingency plans.” A recent Inspector General report, he said, “raised serious concerns about whether PBGC would be able to cope with a sudden influx of pensions brought on by a new economic crisis.”
On a related note, the Department of Labor’s Employee Benefits Security Administration (EBSA) recently released a proposed ruleto implement the annual funding notice requirement that defined benefit pension plans must report to the Pension Benefit Guarantee Corp. (PBGC).
The proposed regulation, EBSA says, requires administrators of all defined benefit plans that are subject to Title IV of ERISA to provide an annual funding notice to the Pension Benefit Guarantee Corp. (PBGC), each plan participant and beneficiary, each labor organization representing such participants or beneficiaries and, in the case of a multi-employer plan, to each employer that has an obligation to contribute to the plan. “Prior to implementation of the Pension Protection Act,” EBSA says, “only multi-employer plans were required to disclose any funding information.”
According to EBSA, an estimated 29,500 plans covering approximately 44 million participants and beneficiaries are subject to these disclosure requirements.