Pension Benefit Guaranty Corp. Director Joshua Gotbaum disclosed Friday that he is stepping down next month after four years as head of the federal pension insurance agency.
“It is time for me to move on, and next month I will do so. We now have three children in college, and I promised my wife that this year I would return to the private sector,” he wrote in a note distributed to PBGC staffers.
In his four-year tenure, the longest of any PBGC director, Mr. Gotbaum's greatest accomplishment is widely recognized as being the hard and ultimately successful stance he took in 2012 when then-financially troubled American Airlines moved to terminate and shift to the PBGC four massively underfunded pension plans.
Mr. Gotbaum fought the move, saying at the time that American had not proven that it could no longer afford to fund the plans, which had more than 130,000 participants.
That hard line paid off when one month after saying that it intended to fold the plans, the airline said it would freeze them instead.
Agency avoided biggest loss ever
That reversal saved the PBGC from what would have been its biggest loss ever: According to preliminary PBGC estimates, the four plans had about $8.3 billion in assets and about $18.5 billion in promised benefits.
At the time, the PBGC said if the plans were to fold, the agency would be liable for about $17 billion in benefits, resulting in an $8.7 billion loss to the agency, significantly higher than what was and still is its biggest loss: its 2005 takeover of four United Airlines pension plans, which resulted in a loss to the agency of more than $7 billion.
Mr. Gotbaum drew praise for other efforts as well, including a 2013 rule that reduced certain reporting requirements for plan sponsors and reduced to once a year from twice a year the number of times plan sponsors have to pay PBGC premiums.
But big challenges remain. The agency's premium base continues to shrink as more employers freeze and terminate defined benefit plans in favor of defined contribution plans, such as 401(k) plans.
In addition, this agency's multiemployer insurance program is in danger of collapse. Earlier this year, the agency said 175 plans are in such bad shape that they will run out of funds to pay benefits, and will need PBGC assistance to pay benefits.
The cost of that PBGC rescue: nearly $10 billion, or about five times more than what the agency has in its multiemployer insurance fund.
The PBGC's multiemployer insurance “is in danger of insolvency,” Mr. Gotbaum wrote in his resignation note.
Mr. Gotbaum did not disclose where he intends to work after leaving the agency. Before joining the agency in 2010, he was an operating partner at private equity firm Blue Wolf Capital Management L.L.C. in New York.
Until Mr. Gotbaum's successor is named and is confirmed by the Senate, PBGC Chief Management Officer Alice Maroni will serve as acting director.