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Senators seek GAO analysis of PBGC


WASHINGTON--The chairman of the Senate Finance Committee and the panel's ranking minority member have asked the Government Accountability Office to analyze whether the Pension Benefit Guaranty Corp. has sufficient resources to meet the demands on it.

Committee Chairman Charles Grassley, R-Iowa, and Sen. Max Baucus, D-Mont., in a letter released Tuesday said federal legislators want to be sure that the PBGC is structured properly to meet unprecedented administrative challenges.

In a letter to David Walker, who heads the GAO, the two senators noted that the PBGC in fiscal 2005 paid out $3.7 billion in benefits to 698,000 participants in plans the agency has taken over. That's a huge increase from fiscal 2000, when the PBGC paid out $900 million in benefits to 243,000 participants.

Additionally, assets in pension plans taken over by the PBGC in that same five-year period have increased to $56 billion from $21 billion.

Those increases have come as the PBGC has been hit in the past few years with the biggest losses in its history, as a result of taking over massively underfunded pension plans sponsored by failed steelmakers LTV Corp. and Bethlehem Steel Corp., as well as plans sponsored by United Airlines and US Airways Group Inc. Those losses have helped swell the deficit of the PBGC--which is funded by premiums paid by employers with defined benefit plans and by investment income earned on assets in plans the agency has taken over--to nearly $23 billion.

Questions the senators have asked the GAO to analyze include:

  • Does the PBGC have the most appropriate administrative structure? The PBGC is a private federal corporation headed by the secretaries of the Labor, Commerce and Treasury departments.

  • Does the PBGC's pay scale allow it to attract the financial, actuarial and legal staff it needs?

  • Has the PBGC's move away from equities in its portfolio affected its financial health and ability to pay future benefits?

Sens. Grassley and Baucus have asked the PBGC to provide preliminary information early next year, the first year under a provision in pension funding reform legislation enacted in August that the PBGC's top position--executive director--is subject to Senate confirmation. The position is currently vacant following the resignation earlier this year of Bradley Belt.

A PBGC spokesman said the agency is "ready to cooperate with any review that GAO undertakes to answer this congressional inquiry."