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Private Pensions: Opportunities Exist to Further Improve the Transparency of PBGC's Financial Disclosures

GAO-06-429 Published: Mar 27, 2006. Publicly Released: Apr 26, 2006.
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The Pension Benefit Guaranty Corporation's (PBGC) single-employer insurance program insures the pension benefits of over 34 million participants in almost 29,000 private sector defined benefit pension plans. The increase in PBGC's probable claims has raised questions about PBGC's monitoring and financial disclosure practices, including whether the information that PBGC discloses is sufficient for interested parties to understand the effect on PBGC's financial condition. GAO examined (1) the steps that PBGC takes to monitor and ensure the accuracy of its probable claims, (2) how PBGC's financial liability reporting compares with those of publicly traded companies, and (3) the steps PBGC has taken to improve the transparency of its financial reporting and whether additional improvement is needed.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Pension Benefit Guaranty Corporation We recognize that PBGC believes that there are reasons for withholding certain information about its probable claims. As we reported, PBGC does not disclose the names and liability amounts for newly terminated plans that were classified as probable claims because of its concerns of compromising PBGC's position during litigation and negatively affecting the economic health of plan sponsors. However, PBGC could better describe the impact of new claims on its reported net financial position when announcing new plan terminations in its press releases. Therefore, PBGC should consider disclosing, in its press releases, whether a newly terminated plan was classified as a probable and already included in its reported deficit in its annual financial statement.
Closed – Implemented
PBGC stated that GAO's report correctly noted that there are limitations on the nature and type of information PBGC is able to disclose. Therefore, it now notes in media releases whether or not reserves have previously been made relating to the termination of the subject company's defined benefit plans.
Pension Benefit Guaranty Corporation To improve the transparency of the interest rate assumptions PBGC uses to calculate its liabilities, PBGC should make its interest rate methodology more widely available to the public. In doing so, PBGC should considering making this information available on its Web site.
Closed – Implemented
In March 2006 PBGC stated that its interest factor methodology has been made publicly available through presentations to professional conferences and industry associations, as well as through meetings with interested analysts. However, it said it would post additional details regarding its interest methodology on its Web site, consistent with GAO's recommendation. As of August 2006, this information was posted on PBGC's web site.

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Accounting standardsClaims processingData integrityFederal corporationsFinancial disclosureFinancial managementFinancial management systemsMonitoringPension claimsPensionsReporting requirementsRisk managementSystems analysisTransparency