Financial Condition of the Pension Benefit Guaranty Corporation

GAO discussed the Pension Benefit Guaranty Corporation's (PBGC) financial position. GAO noted that: (1) although PBGC cash flow is currently sufficient to meet its current benefit obligations, its deficit is large and threatens to become larger because of increasing plan underfunding by companies; (2) proposed legislation would limit future liabilities, but does not address the current deficit; (3) the Administration also proposed that potential costs budgeting be changed to an accrual basis to facilitate monitoring and planning for the program; (4) proposed funding standards will lead to larger contribution requirements, which would increase the federal deficit in the short term; (5) the proposed legislation could cause inequitable treatment of participants in different types of plans; (6) proposed legislation would clarify and improve PBGC priority in bankruptcy, and provide for the continued payment of contributions while a plan sponsor is in bankruptcy, which may adversely affect other creditors; (7) increased use of PBGC authority to terminate certain plans and to increase premiums on underfunded plans would strengthen its financial position; (8) PBGC has weak internal controls and financial system deficiencies, which make its liability estimates unreliable; and (9) PBGC efforts to collect revenues owed it have been inadequate, but it has begun taking steps to improve collections.