Underfunded Plans Threaten PBGC
T-HRD-93-2: Published: Feb 4, 1993. Publicly Released: Feb 4, 1993.
GAO discussed problems facing the Pension Benefit Guaranty Corporation (PBGC), focusing on management reforms, modification of pension funding rules, and changes in the insurance premium structure. GAO noted that: (1) weaknesses in internal controls and financial systems have undermined PBGC ability to administer the pension insurance program; (2) PBGC efforts to identify and collect delinquent and underpaid premiums and related interest and penalties have been inadequate; (3) the PBGC computerized accounting system has not been fully operational since 1988; (4) PBGC has established a comprehensive management control review program to help managers establish and maintain internal controls and financial systems, assess their operating effectiveness, and address weaknesses; (5) the deficit in the PBGC single-employer insurance fund has resulted primarily from plans terminating without sufficient funds to pay guaranteed benefits, and a premium structure that does not provide enough revenue to cover losses; (6) while PBGC currently has a positive cash flow, its long-term prospects are unclear; (7) unfunded plan liabilities for terminated plans exceeded those reported by the plans; (8) more than 25 percent of the current PBGC deficit may be attributable to shutdown benefits from steel industry plans; (9) sponsors experiencing financial difficulties take actions that increase the risk to PBGC; and (10) the premium structure and minimum funding standards limit PBGC ability to control the risks underfunded plans pose.