Questionable results from asset audits of terminated pension plans and poor oversight of contractors hired by the Pension Benefit Guaranty Corp. have put the beleaguered agency back in an unwanted spotlight on Capitol Hill just as agency officials had hoped to convince legislators they were ready for more responsibility.
Problems with the firm the PBGC hired to calculate participant benefits calculations first came to light in a Nov. 30 report from the agency's independent inspector general, which found the pension insurer “seriously deficient” in the 2007 and 2008 audits of four terminated UAL Corp. plans. In an earlier report, released in March, Inspector General Rebecca Anne Batts discovered similar problems with the audit performed after the PBGC took over National Steel Corp.'s pension plans in 2003.
The bigger issue, Ms. Batts said in a telephone interview, is a “cultural problem” with the way the agency sets up and oversees contractors hired to perform audits of terminated plan assets, which are then used to determine benefits. Despite numerous reviews by both the agency and its inspector general, the “PBGC still hasn't invested in the expertise to get this right,” said Ms. Batts, who also criticized PBGC officials for lax oversight of contractors, especially Integrated Management Resources Group Inc. of Lanham, Md., the one involved in the United Airlines and National Steel calculations.
PBGC executives acknowledged the criticism and shortcomings, and pointed out that they already have begun major reforms. These include revisiting the plans in question and expediting any additional payments with interest, as well as hiring a management consultant to assess the entire benefits administration and payment department and instituting a new policy of requiring three levels of review for each plan valuation.
“It's really a top-to-bottom review of the whole benefits processing system,” Vince Snowbarger, deputy director of operations at the PBGC, said in an interview.