Joshua Gotbaum, the director of the Pension Benefit Guarantee Corporation, announced his resignation Friday, signaling the end to a sometimes-tumultuous tenure that included the imposition of higher premiums designed to preserve the pensions of millions of Americans.
“Of course I have mixed emotions about leaving,” Gotbaum said in a letter to his coworkers. “I love working at and with PBGC.”
“PBGC’s analysis and creativity will be essential if multiemployer plans are to be saved,” he wrote. “Public policy continues to encourage companies to shun lifetime income in favor of lump sum payments. And PBGC itself remains financially unsound and our multiemployer program is in danger of insolvency.”
“Nonetheless, there will always be unfinished challenges. Making the change now will guarantee a new director two full years in which to work — and PBGC now has a full career leadership team that can carry on these efforts.”
President Obama appointed Gotbaum to head the insurer of the nation’s private defined benefit plans in 2010.
It’s time, he writes, for him to move on but with mixed emotions about leaving. Gotbaum most notably led an initiative that helped save the defined benefits of American Airline’s employees.
News of his resignation came just days after the PBGC announced a moratorium on the enforcement of ERISA 4062(e) regulation cases until the end of the year. The regulation grants the PBGC the authority to levy fees against defined benefit plans when a company ceases operations at a facility through a shutdown or sale, and when 20 percent of the workers in a plan lose their jobs.
Business interests were critical of the PBGC’s handing of such cases. In the past seven years, the PBGC has used 4062(e) to protect pensions covering 180,000 people in 35 states, it said.
His departure comes at a time when private pensions are returning to health but when many multiemployer plans remain vulnerable.
Late last month, the PBGC announced that the condition of single employer pensions had greatly improved, and that projected deficits were expected to narrow dramatically in the next few years, thanks in large part to controversial premium increases shouldered by plan sponsors.
The prognosis was not nearly as positive for many of the nation’s 1,400 multiemployer plans, in which multiple employers in the same industry typically contribute to a single pension fund and where the premiums are much smaller. In fact, it’s rather bleak for about 10 percent of participants in these pooled plans; the PBGC is projecting insolvencies affecting 1.5 million multiemployer beneficiaries are “more likely and more imminent.”
The potential loss of billions of dollars in participant benefits isn’t the only issue casting a cloud over the PBGC.
Key provisions of the 2006 Pension Protection Act are set to expire at the end of December. The PBGC has been lobbying Congress in hopes of persuading it to extend many of the act’s most critical provisions.
Gotbaum, in an interview with our sister site, BenefitsPro, last week, said his primary concern was not the deficits looming over the PBGC, but ultimately, “whether or not Americans will have pensions to retire on.”
His tenure, he said in his resignation announcement, will come to an end next month.