PBGC may have counted deceased participants in approving multiemployer aid – report

The Pension Benefit Guaranty Corp. has approved Special Financial Assistance Program applications that may have included deceased participants in the terminated vested populations, resulting in an overpayment of SFA funds, according to a report from Office of Inspector General for PBGC.

The PBGC did not consider available information, such as results of a death audit performed by its multiemployer program division, in its review of applications, the OIG report released March 22 found. Also, for certain plans, additional application requirements were not sufficient to identify deceased terminated vested populations and reduce the associated SFA amounts, the OIG report noted.

As a result, the report estimates that approximately $6 million in possible improper payments were made to four of the five plans reviewed.

Created by the American Rescue Plan Act that Democrats passed in March 2021, the SFA Program is designed to shore up struggling multiemployer pension plans through 2051.

The report outlined six recommendations to improve the quality of SFA estimates and approvals, and the PBGC concurred with the recommendations.

"We commend PBGC on agreeing with our recommendations and working to protect taxpayer dollars," the OIG said in its report. "We do encourage PBGC management to complete the recommendations as soon as possible, given the short lifetime of the application and payment process for the program."

The recommendations for the PBGC include directing the Office of Negotiations and Restructuring to update the review procedures for insolvent plans who apply for SFA and determine where corroborating information could be used to determine if deceased participants are included in the SFA calculations; enhance the application instructions to include detailed guidance on how deceased participants should be handled by plans and supporting information to be submitted; and revise procedures to include steps to ensure deceased participants are excluded from SFA calculations.

A PBGC spokeswoman said in an email that the agency has worked diligently to implement the SFA Program by issuing regulations and guidance, developing internal controls to mitigate risks, processing SFA applications in accordance with the standards set under the law and by keeping stakeholders, the public and Congress informed.

"We remain committed to ensuring the successful implementation of the SFA Program, which ensures that millions of workers, retirees, and their families receive the pension benefits they earned through many years of hard work," the spokeswoman said. "We will coordinate with the OIG as appropriate to further strengthen the stewardship of the SFA Program."

The Office of the Inspector General for the PBGC released a separate report last month with recommendations to improve the SFA program after it found the PBGC did not create sufficient procedures or controls to ensure timely delivery of accurate SFA amounts to eligible plans.

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.