In establishing its Special Financial Assistance Program designed to help struggling multiemployer pension plans, the Pension Benefit Guaranty Corp. did not create sufficient procedures or controls to ensure timely delivery of accurate SFA amounts to eligible plans, according to a report from Office of Inspector General for PBGC.
The PBGC did not formally assess and document fraud risks, sufficiently define risk tolerances, establish review procedures for exceptions, formalize final review procedures or design a control that would ensure timely review of SFA applications when establishing its SFA program, according to the report, which was published Feb. 24
Created by the American Rescue Plan Act that Democrats passed in March 2021, the program is designed to shore up struggling multiemployer pension plans through 2051.
The report outlined eight recommendations to improve the SFA program, and the PBGC concurred with the recommendations.
The recommendations for 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 require remediation; develop procedures to detect multiemployer plans that may manipulate ratios to qualify for SFA; create procedures for reviewing the impact of inflation on administrative expenses; and develop and document procedures for management reviews of the concurrence package for SFA applications.
The Office of the Inspector General for the PBGC said it evaluated the PBGC's response and planned actions to its report and determined that it met the intent of the recommendations. The PBGC plans to complete the recommendations by Sept. 30.
"PBGC concurs with the report's findings and recommendations," a PBGC spokesman said in an email. "Addressing these recommendations in a timely manner is an important priority for PBGC. We are always willing to work with the OIG to improve the implementation of the Special Financial Assistance Program."
Rep. Virginia Foxx, R-N.C., chairwoman of the House Education and the Workforce Committee, has been an outspoken critic of the SFA program since its inception.
"From the failure to conduct an adequate fraud risk assessment to the absence of certain internal controls to ensure the agency is not overspending, PBGC is not inspiring confidence over its use of taxpayer dollars," Ms. Foxx said in a statement. "Taxpayers are still footing the bill for the Biden administration's multi-billion-dollar bailout of multiemployer pension plans just two years ago, and the OIG's report is cause for yet more concern."
Under the SFA program, a multiemployer plan is eligible for assistance if it satisfies one of four criteria: it has been in critical and declining status in any plan year beginning in 2020 through 2022; it has had its benefits suspended as of March 11, 2021; it is in critical status, has a modified funding ratio below 40%, and has a ratio of active-to-inactive participants of less than 2-to-3; or it became insolvent after Dec. 16, 2014, but as of March 11, 2021, has not been terminated.
In December, the PBGC awarded the Teamsters Central States, Southeast & Southwest Areas Pension Fund, Chicago, $36 billion in SFA funds, by far the largest award in the program's history.
"The amount of this award is going to be life-changing for a lot of people," Thomas C. Nyhan, executive director of the Central States Pension Fund told Pensions & Investments earlier this year.