PBGC Participant and Plan Sponsor Advocate Issues 2017 Report

By John Iekel • January 03, 2018 • 0 Comments
The Pension Benefit Guaranty Corporation (PBGC)’s Participant and Plan Sponsor Advocate, Constance Donovan, has sent the report on the activities of her office in 2017 to Congress. The report highlights its activities concerning participant claims, multiemployer plans, plan sponsor issues and pension de-risking.

The PBGC Participant and Plan Sponsor Advocate is required to provide an annual report to the Senate Finance and Health, Education, Labor, and Pensions Committees, as well as the House Education and the Workforce and Ways & Means Committees.

Participant Claims. The report says that the office has made “striking” progress in its willingness to look at participant claims differently and in a way that challenges “conventional thinking and years of institutional practice that have guided the corporation’s interactions with participants seeking a benefit.”

Multiemployer Plans. The report says that participants in troubled multiemployer plans who contact the office with questions about the Multiemployer Pension Reform Act “are deeply troubled because they paid into a retirement system with the expectation of a secure retirement in their senior years” and that many worked in occupations that hurt their long-term health, which in turn limits their future employment options. It adds that “the multiemployer pension plan crisis presents a great opportunity for parties to unite in a bipartisan manner to consider options for retirement security for our American workers who labored under and contributed to a promise for a secure retirement in their senior years.”

Plan Sponsor Issues. The office reports that during 2017, sponsors of plans serving not-for-profits, small businesses and larger companies contacted it for assistance in resolving disputes with the PBGC. It says that they “had remarkably similar observations about their dealings” with the PBGC, and noted lack of:

  • ease in doing business with PBGC;

  • transparency and certainty in PBGC’s actions;

  • timeliness;

  • substantive discussion to facilitate prompt settlement; and

  • effective coordination and cohesion among various PBGC departments.

The report also details “bold and promising initiatives adopted by PBGC to address some of these weaknesses” and says that the PBGC’s “willingness to address longstanding shortcomings raised by plan sponsors is attributable to PBGC’s leadership team.”

Legislative Changes. The report says that there are some legislative changes to the office’s statutory duties that are worth considering. “The Office of the Advocate can best serve its statutory mission through independence and a modest increase in headcount that allows the office to hire an administrative assistant and another Associate Advocate to help with the significant increase in participant and plan sponsor demand for our services. The additional headcount can also assist the office’s activities to add more quantitative studies of interest to participants and plan sponsors,” she adds.

Donovan also says that legislative changes that clarify the independence of the Office of the Advocate would enhance its credibility with participants and plan sponsors.

Transformational Change. The report also calls for transformational change “to address the systemic and policy issues” and that to guide this change, it could be constructive to consider the following operating principles:

  • Participants and plan sponsors have the right to quality service, including prompt, courteous, and professional exchanges between PBGC and the participant or plan sponsor.

  • Participants and plan sponsors have the right to be informed of PBGC’s reasoning and concerns about the participant’s claim or the plan sponsor’s business transaction or problem.

  • Plan sponsors have the right to pay no more than necessary into the plan to satisfy the plan sponsor’s funding obligations under the Internal Revenue Code and ERISA, except in unusual circumstances.

  • Participants have the right to receive their benefit without requiring the participant to provide decades-old tax returns in the absence of PBGC-required documentation.

  • Participants and plan sponsors have the right to be heard and challenge PBGC’s assumptions through substantive discussion and meaningful discourse.

  • Participants and plan sponsors have the right to finality and the prompt resolution of their case.