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WASHINGTON—The Pension Benefit Guaranty Corp.’s actuarial estimates suffer from a lack of quality control or review, according to a new audit from Rebecca Anne Batts, the agency’s inspector general.
Ms. Batts found “errors and inconsistencies” during an audit of the PBGC’s “Fiscal Year 2010 Annual Exposure Report,” which was issued Nov. 10. That report, about both multiemployer and single-employer plans covered by the PBGC, concluded that “unrealistically low” assumptions were part of a bigger problem caused by a lack of quality control and review that affects both multiemployer and single employer plans.
“To me, what’s important is that we found out that the (Policy Research and Analysis Department) doesn’t have a mechanism for quality control,” Ms. Batts said in an interview. Her office first looked at the 2010 report after receiving a whistle-blower complaint about valuations made for multiemployer payments.
Ms. Batts said that the upcoming fiscal year 2011 report as drafted also suffers from “poor quality review.”
Her office has given the PBGC 60 days to address the problems, including ways to ensure that actuarial data are accurate and supported by proper documentation.
Ms. Batts’ report credits PBGC officials for a “generally positive” response, including a commitment to improving the quality control process and agreeing to highlight any errors in the upcoming exposure report for fiscal year 2011. But the inspector general noted that “last year’s changed review process was still quite limited in scope and would not likely prevent the recurrence of errors.”
The audit was posted on the inspector general’s website last week.
The inaccuracies in the 2010 report were the result of “sloppy mistakes” made in the drafting process, according to a PBGC spokesman.
“While this carelessness is inexcusable, last year we put in place a quality assurance process to prevent such mistakes in the future,” he said. PBGC has also had outside experts review the modeling programs it uses to make estimates.
Hazel Bradford is a reporter for Pensions & Investments, a sister publication of Business Insurance.