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Pension Benefit Guaranty Corporation: Statutory Limitation on Administrative Expenses Does Not Provide Meaningful Control

GAO-03-301 Published: Feb 28, 2003. Publicly Released: Mar 31, 2003.
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Highlights

Concerned about the increasing proportion of the Pension Benefit Guaranty Corporation's (PBGC) operational and administrative budget that is outside the annual administrative expense limitation, the Ranking Minority Member of the Senate Special Committee on Aging asked GAO to review PBGC's (1) application of the limitations set forth in its appropriations in developing its budget estimates and (2) methodology for allocating and reporting its operational and administrative expenses falling under the statutory limitation.

Recommendations

Matter for Congressional Consideration

Matter Status Comments
With only about 5 percent of total operating and administrative costs falling under the limitation in fiscal year 2002, the statutory limitaion on administrative expenses offers little opportunity for controlling operational and administrative expenses. Because the limitation no longer serves as a meaningful control over PBGC's administrative activities and expenses, Congress may wish to consider whether or to what extent to continue to use the administrative expense limitation as a tool for overseeing PBGC's activities. Congress could choose to more clearly define PBGC's administrative expense limitation, which would improve the limitation's use as an oversight tool during the normal congressional appropriations process. A more clearly defined expense limitation could result in a larger share of PBGC's expenses falling under the limitation. On the other hand, Congress may decide to eliminate the administrative expense limitation for PBGC altogether.
Closed – Implemented
In 2004, Congress passed P.L. 108-199 (enacted 1/23/04) which eliminated the distinction between PBGC's limitation and non-limitation administrative expenses.

Recommendations for Executive Action

Agency Affected Recommendation Status
Pension Benefit Guaranty Corporation In order to provide cost information to assist Congress in its oversight of PBGC's expenses and for congressional decision making about whether or to what extent it should continue to use an expense limitation in its oversight of PBGC, PBGC's Executive Director should employ a systematic review, including both quantitative and qualitative measures, to develop a methodology for assigning the direct expenses related to its major categories of activities.
Closed – Implemented
PBGC undertook a complete redesign of its budget structure, which has been approved by OMB and Congress. PBGC's new budget methodology includes and requires a systematic review and identification of direct costs related to major categories of activities. Account line items are grouped into three activity categories: Pension Insurance; Pension Plan Termination; and Operational Support. Activities related to Pension Insurance and Pension Plan Terminations are considered direct costs.
Pension Benefit Guaranty Corporation In order to provide cost information to assist Congress in its oversight of PBGC's expenses and for congressional decision making about whether or to what extent it should continue to use an expense limitation in its oversight of PBGC, PBGC's Executive Director should develop a method of allocating indirect costs to each activity using a logical, reasonable, and consistent basis.
Closed – Implemented
Indirect costs are prorated between the direct costs of PBGC's activities. Activities related to Pension Insurance and Pension Plan Terminations are considered direct costs. All shared program support, administrative support and information technology infrastructure costs fall under Operational Support activities. Operational Support activities are prorated between Pension Insurance and Pension Plan Termination activities.
Pension Benefit Guaranty Corporation In order to provide a cost information to assist Congress in its oversight of PBGC's expenses and for congressional decision making about whether or to what extent it should determine continue to use an expense limitation in its oversight of PBGC, PBGC's Executive Director should develop a method for accounting for actual direct and indirect expenses for its major activities.
Closed – Implemented
This new structure provides the capacity for better accounting of direct costs associated with PBGC's two lines of business, and separately identifies shared program and other support costs.

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Topics

Appropriation limitationsAppropriated fundsBudget administrationBudget allowancesReporting requirementsAdministrative expensesRevolving fundsPension planExpenditure of fundsStatutory limitation