Pension Plans:

Fiduciary Violations in Terminated Underfunded Plans

HRD-91-87: Published: May 13, 1991. Publicly Released: Jul 1, 1991.

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Pursuant to a congressional request, GAO reviewed fund abuses in pension plans for which the Pension Benefit Guaranty Corporation (PBGC) assumed responsibility, focusing on: (1) the extent to which such abuses occurred; (2) whether PBGC identified the abuses; and (3) the adequacy of PBGC actions in pursuing legal remedies, including recovering misused funds.

GAO found that: (1) fiduciaries' fund abuses totalled about $9.2 million and occurred in over 25 percent of the 40 plans it reviewed; (2) a sponsor of three plans was responsible for $7.5 million of the misused funds; (3) most of the abuses concerned the making of prohibited loans or the owners using such loans for personal expenses; (4) for some plans, PBGC was alerted to plan participants' possible misuse of funds; (5) in most of the other cases PBGC staff identified abuse when inquiring into the plans' status or reviewing financial data; (6) PBGC took reasonable actions to recover the misused funds, given its untimely involvement with most plans; (7) contrary to legal requirements, four plan administrators did not notify PBGC when certain events occurred; (8) because PBGC learned of those events much later, it was not able to recover $1.4 million in prohibited loans; (9) in four other plans, PBGC and a government agency learned of the misuse of $7.8 million in time to obtain a restitution agreement on three plans and partial recovery on the other; (10) PBGC was developing procedures to implement legislation authorizing it to fine plan administrators up to $1000 per day for notification requirement noncompliance; and (11) PBGC believed that the penalty provision would result in better compliance.

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