Two influential House Republicans are pressing the Pension Benefit Guaranty Corp. for information on its response to a risk advisory warning of potential improper payments within the agency’s Special Financial Assistance Program designed to help struggling multiemployer pension plans.
“Forcing American taxpayers to send billions of additional dollars in potentially improper SFA payments is a very serious issue that PBGC should not take lightly and which we do not take lightly,” wrote Rep. Virginia Foxx, R-N.C., chairwoman of the House Education and the Workforce Committee, and Rep. Bob Good, R-Va., chairman of the Health, Employment, Labor and Pensions Subcommittee, in a letter sent Thursday to PBGC Director Gordon Hartogensis. “PBGC’s response is inadequate, and the American public deserves a thorough explanation.”
In December, the Office of Inspector General for the PBGC made public a September risk advisory informing the PBGC that the OIG had requested a legal opinion from the Government Accountability Office on the agency’s authority to bifurcate the interest rate for projecting investment returns on the assets that plans use in their SFA applications.
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.
Following comments on a July 2021 interim final rule with guidelines for multiemployer plans applying for SFA, the PBGC in July issued a final rule that allowed plans to bifurcate the interest rate used in requesting SFA, as well as made other adjustments in how an interest rate limit might be determined for projecting investment returns on SFA provided assets, the risk advisory noted.
The OIG advisory said the GAO will issue an opinion on the matter. A GAO spokesman confirmed in an email that the agency received the request and will be issuing a decision on it, but did not have a scheduled time frame for issuance.
“If PBGC approves SFA applications using aspects of the final rule that are currently under review by GAO, PBGC faces both a risk of improper payments and a reputational risk,” the OIG risk advisory said. “Given these two risks, PBGC should consider contingency plans and an assessment of its options in dealing with the plan applications that rely on the final rule’s bifurcated interest rate that GAO is assessing.”
The PBGC on Thursday morning said it had not received the letter and referred Pensions & Investments to a December statement. At that time, the PBGC and its board said they “strongly feel” that the final rule “was appropriately constructed to achieve the core statutory directive to provide severely underfunded multiemployer pension plans with sufficient assets to pay benefits through 2051. We will of course continue to cooperate and answer any questions on any issues raised by our oversight community.”
But for Ms. Foxx and Mr. Good, two longtime opponents to the SFA program, the PBGC’s response has been inadequate.
“It appears PBGC is ignoring the serious nature of the risk advisory by continuing to approve supplemented SFA applications without a contingency plan if the agency is found to be making improper payments,” the lawmakers wrote.
They are seeking further information and requested a response from Mr. Hartogensis by May 4 on four questions:
- Has PBGC developed, or is it in the process of developing, a contingency plan taking into consideration potential outcomes from a future GAO decision?
- If GAO finds that PBGC’s final rule resulted in improper payments, how does the agency plan to rectify the misuse of taxpayer dollars?
- Since the OIG issued the risk advisory, has PBGC evaluated the reputational risk to the agency of continuing to process and approve supplemented applications for SFA under the terms of the final rule?
- As suggested by the OIG, has PBGC implemented operational changes to minimize PBGC’s adverse exposures and undesired outcomes? If so, what are they? If not, please provide an explanation of why no action has been taken.