State watchdog highlights weaknesses of PBGC in multi-employer assistance program

In creating its Special Financial Assistance Program to help struggling multi-employer pension plans, Pension Benefit Guaranty Corp. has not put in place sufficient procedures or controls to ensure that accurate SFA amounts are delivered to eligible plans on time, according to a report from the Office of the Inspector General of Pensions. PBGK.

PBGC has not formally assessed or documented fraud risks, adequately defined risk tolerances, established exception review procedures, formalized final review procedures, or developed controls to ensure that SFA applications are considered in a timely manner when establishing its SFA program, according to the report. , which was published on February 24

Created under the American Rescue Plan Act, which was passed by Democrats in March 2021, the program is designed to support multi-employer retirement plans through 2051.

The report made eight recommendations for improving the SFA program, and the PBGC agreed with these recommendations.

Recommendations to the PBGC include directing the Office of Negotiations and Restructuring to conduct a fraud risk assessment for the SFA program and develop mitigation strategies for those risks that need to be addressed; develop procedures to identify multi-employer plans that may be manipulating rates to qualify for an SFA; establish procedures to analyze the impact of inflation on administrative costs; and develop and document management review procedures for the alignment package for SFA applications.

The Office of the Inspector General of the PBGC said it had evaluated the PBGC’s response and planned actions to its report and determined that it served the purpose of the recommendations. The PBGC plans to finalize the recommendations by September 30th.

“PBGC concurs with the report’s findings and recommendations,” a PBGC spokesperson said in an email. “The timely implementation of these recommendations is an important priority for the PBGC. We are always ready to work with OIG to improve the implementation of the Special Financial Assistance Program.”

Rep. Virginia Fox, RN.C., chair of the House Committee on Education and Workforce, has been openly critical of the SFA program from the start.

“From the inability to conduct an adequate fraud risk assessment to the lack of specific internal controls to ensure the agency does not overspend, PBGC does not inspire confidence in its use of taxpayer dollars,” Ms. Fox said in a statement. “Taxpayers are still paying the bill for the Biden administration’s multi-billion dollar bailout for multi-employer pension plans just two years ago, and the OIG report is even more worrisome.”

Under the SFA program, a multi-employer plan is eligible for assistance if it meets one of four criteria: it was in a critical and deteriorating condition in any plan year from 2020 to 2022; his benefits were suspended as of March 11, 2021; it is in critical condition, has a modified funding ratio below 40%, and has an active to inactive participant ratio of less than 2 to 3; or it became insolvent after December 16, 2014, but as of March 11, 2021 it has not been terminated.

In December, PBGC awarded the Teamsters Central States, Southeast & Southwest Areas Pension Fund in Chicago $36 billion in SFA funds, the largest award in the program’s history to date.

“The amount of this award will change the lives of many people,” Thomas Nyhan, chief executive of the Central States Pension Fund, said earlier this year.

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