Pension Benefit Guaranty Corporation's Financial Statements and Multiemployer Insurance Program Study

An audit of the Pension Benefit Guaranty Corporation's (PBGC) financial statements covered the 37-month period from establishment of PBGC through September 30, 1977. Preliminary financial statements for fiscal year 1977 were materially misstated, and the GAO opinion on revised statements still required qualification because of methods used in estimating the reserve for guaranteed benefits and uncertainties in the outcome of pending litigation. The PBGC computer-based accounting system was not adequate to develop financial statements. Because of serious problems, GAO will continue its audit efforts at PBGC. The Employee Retirement Income Security Act of 1974 established an insurance program to guarantee the payment of certain benefits to participants of multiemployer-sponsored defined benefit pension plans and mandated PBGC to study and report on financial effects of plan termination insurance coverage and the alternatives available to ensure adequate program financing and proper benefit coverage. Its report stated that cost estimates of current and alternative program provisions were uncertain but can be used for comparative evaluations of alternatives. The high degree of uncertainty in the estimates makes it difficult to rely on them for comparing costs and making decisions.