Summary
As the insurer of over 29,000 private sector defined benefit plans, the Pension Benefit Guaranty Corporation (PBGC) may be required to assume responsibility for the plans of a growing number of companies filing bankruptcy due to the recession. Concerns about PBGC's benefit determination process, reductions in benefits due to guarantee limits, and workers' retirement security overall led the chairmen and ranking members of the Senate Health, Education, Labor, and Pensions Committee and the Senate Finance Committee, among others, to ask GAO to study: (1) how long it takes PBGC to make benefit determinations; (2) the extent of overpayments on retirees' benefits; (3) how well PBGC communicates with participants; and (4) the timeliness and accessibility of the appeals process. To conduct this study, GAO reviewed PBGC policies and procedures, analyzed automated data and case files, and interviewed PBGC officials and certain associations, participants, and their representatives from among those most affected by the process.
GAO's review of plans terminated with insufficient funds and trusteed by PBGC during fiscal years 2000 through 2008 revealed that a small number of complex plans--especially those with large numbers of participants affected by limits on guaranteed benefit amounts--accounted for most cases with lengthy delays and overpayments. Processing times. PBGC completed most participants' benefit determinations in less than 3 years, but required more time--up to 9 years--to process determinations for complex plans and plans with missing data. Nearly three-quarters of the lengthiest processing times were associated with individuals in just 10 of the 1,089 plans reviewed. Although PBGC has taken steps to shorten this process, its initiatives do not address the longest delays. Overpayments. Although many participants are affected by sizable benefit reductions, the vast majority are not affected by overpayments. Moreover, nearly two-thirds of overpayments involved participants in just 10 plans. In cases with overpayments, PBGC's policy generally requires participants' benefits to be reduced by no more than 10 percent until the amount owed is repaid, but due to participants' ages, the full amount often is never recouped. Communication. PBGC has made efforts to improve communication, but key correspondence often did not meet the needs of those in complex plans. For example, when the process was lengthy, PBGC did not communicate with some participants for several years. When the benefit calculation was complicated, PBGC did not provide explanations that could be understood without further information or assistance. Appeals. Since restructuring the appeals process in 2003, PBGC has reduced the average amount of time needed to decide an appeal by almost a year. However, the agency does not readily provide key information that would be helpful to participants in deciding whether to pursue an appeal.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director:
Team:
Phone:
Barbara D. Bovbjerg
Government Accountability Office: Education, Workforce, and Income Security
(202) 512-5491
Recommendations for Executive Action
Recommendation: To improve PBGC's benefit determination process, a more strategic approach is needed to prepare for and manage the calculation of benefit amounts and communications with participants in cases involving large, complex plans. PBGC should set goals for timeliness and monitor the progress made in finalizing benefit determinations for large, complex plans separately from other plans.
Agency Affected: Pension Benefit Guaranty Corporation
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve PBGC's benefit determination process, a more strategic approach is needed to prepare for and manage the calculation of benefit amounts and communications with participants in cases involving large, complex plans. To reduce the number and size of overpayments in large, complex plans, PBGC should prioritize the calculation of estimated benefits for retirees subject to the guarantee limits and adjust estimates, as needed, throughout the benefit determination process. To reduce increased overpayments due to appeals, PBGC should prioritize the processing of appeals for those already receiving benefits and should consider implementing the final benefit determination for retirees during the appeals process.
Agency Affected: Pension Benefit Guaranty Corporation
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve PBGC's benefit determination process, a more strategic approach is needed to prepare for and manage the calculation of benefit amounts and communications with participants in cases involving large, complex plans. PBGC should develop improved procedures for adapting and reviewing letters to participants in large, complex plans, such as by (1) providing more specific information in letters to participants who receive benefit reductions describing which limits were applied and why; (2) ensuring all letters to participants involving benefit reductions are reviewed for accuracy and coherence before being sent; and (3) establishing processes to more frequently communicate with participants who are experiencing delays in receiving final benefits determinations.
Agency Affected: Pension Benefit Guaranty Corporation
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve PBGC's benefit determination process, a more strategic approach is needed to prepare for and manage the calculation of benefit amounts and communications with participants in cases involving large, complex plans. PBGC should provide information or resources to help participants in large, complex plans better understand their benefit calculations and also to avoid any unnecessary appeals. Specifically, PBGC's benefit determination letters should provide information, such as how participants can obtain additional information by using the Freedom of Information Act or other resources.
Agency Affected: Pension Benefit Guaranty Corporation
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
