The Pension Benefit Guaranty Corporation (PBGC) insures the pensions of nearly 44 million private sector workers in over 30,000 employer-sponsored defined benefit pension plans. Established in 1974 as a self-financing government corporation, PBGC's primary responsibility is to insure, under statutory limits, the pension benefits of participants in covered private defined benefit plans. PBGC collects premiums from the sponsors of defined benefit pension plans and administers plans that are terminated for reasons such as plan insolvency or bankruptcy. In the event of a termination, PBGC assumes control of plan assets, determines plan benefit liabilities, and pays benefits as guaranteed by statute. In fiscal year 2006, about 612,000 plan participants and beneficiaries received $4.1 billion in benefit payments from PBGC. An additional 659,000 participants in plans already trusteed by the corporation will receive benefits from PBGC when they become eligible to retire. An increase in underfunded plan terminations in recent years increased the number of plan participants receiving and eligible for benefit payments. In 2005, PBGC reorganized, creating an additional legal department called the Office of the Chief Counsel, and placed this new office under the Chief Insurance Program Officer. The Chief Counsel was given the responsibility for overseeing legal issues pertaining to PBGC's core mission functions, such as negotiations involving terminations resulting from bankruptcies, while the General Counsel retained responsibility for such general law issues as ethics, procurement, and personnel law. Concerns have been raised, however, that this organizational change, a decentralization of legal functions, has affected the uniformity of PBGC's legal opinions, because there is no single chief legal officer ultimately responsible for overseeing all programmatic or regulatory issues. Because of these concerns, and in light of PBGC's growing workload, you asked us to examine the effect the reorganization of the corporation's legal functions into separate offices has had on PBGC's operations. Accordingly, we assessed whether the reorganization has (1) clearly defined the roles and responsibilities of PBGC's legal offices and (2) ensured that consistent legal advice is provided to the PBGC Director.
Recommendations for Executive Action
|Pension Benefit Guaranty Corporation||In order to promote clear lines of authority and the provision of consistent legal advice, the PBGC should provide for all legal functions to be overseen by a single chief legal officer with full authority to delineate the duties of each legal office and a direct reporting relationship to the Director.|