From the Journal Star.com:
The rapidly deteriorating financial health of the federal agency that guarantees 44 million Americans' pensions is raising alarms in Congress.
The Pension Benefit Guaranty Corp. deficit was $33.5 billion in the red at the end of March, triple its deficit six months earlier.
The recession threatens to add to the strain on the corporation by pushing more companies into bankruptcy and leaving the struggling agency responsible for their pensions.
For example, the agency faces a potential tidal wave of claims from Chrysler and General Motors, whose pension plans are underfunded by an estimated $29 billion, the Government Accountability Office said.
If the PBGC’s condition continues to deteriorate, the government could come under pressure to shore it up with taxpayer funds, the GAO said in testimony to the Senate’s Special Committee on Aging.
“The Committee has grave concerns about the agency’s viability,” said Sen. Herb Kohl, D-Wis., the committee’s chairman.
The agency does not insure 401(k) plans, but its fate is important not only to the workers covered by more than 29,000 employer-sponsored benefit pension plans but to all taxpayers who could be asked to foot the bill on a bailout if the agency ever becomes insolvent.
Despite the deficit, the PBGC will be able to meet its obligations to pensioners for many years, acting PBGC director Vincent Snowbarger told the panel. That’s because the payments it owes are not due all at once; they are spread over the beneficiaries’ lifetimes, Snowbarger explained.
Finances aside, the GAO is concerned that the PBGC could have trouble simply handling the added work. The agency suffers from weaknesses in its management and governance, the GAO’s Barbara Bovbjerg, who oversees workforce and income security issues, said in a statement to the committee.
A recent report by the agency’s inspector general alleged that Charles Millard, a former PBGC director, had improper contacts with big Wall Street firms while they were bidding on contracts to help manage PBGC investments. Millard allegedly asked an executive at the financial firm BlackRock how to tailor a contract requirement to winnow the field of bidders. In addition, he allegedly received help with a job search from an executive at another bidder, Goldman Sachs.
Kohl and the agency’s acting director recommended that the contracts, worth a total of $100 million, be canceled.
Millard, who served under President George W. Bush, declined to answer questions at a hearing last week, invoking his Fifth Amendment right not to give testimony that might incriminate himself.
Millard previously asserted that he complied with all legal and ethical obligations. “I acted in what I believed to be the best interests of the PBGC to implement desperately needed reforms of PBGC investment policy,” Millard said in a letter to the inspector general.
