KOHL: REPORT DEMONSTRATES NEED FOR STRONGER OVERSIGHT OF PENSION BENEFIT GUARANTY CORPORATION
WASHINGTON - Today U.S. Senator Herb Kohl (D-WI), Chairman of the Special Committee on Aging, reacted to a study released by the Center for Public Integrity (CPI) highlighting the various longstanding management and organizational problems facing the Pension Benefit Guaranty Corporation (PBGC). Over the past year, the Aging Committee has expressed concern over the PBGC's capability to fulfill its mission to insure the pensions of nearly 44 million Americans. The PBGC's Office of Inspector General (OIG) is currently in the process of conducting a Committee-requested audit of PBGC planning issues, scheduled to be completed soon.
"Our efforts to improve the oversight and governance of the PBGC cannot be taken seriously enough. The pensions of one in six Americans are potentially on the line. This report amplifies our call," said Kohl.
In July of 2009, Kohl was joined by Senators Michael Bennet (D-CO), Claire McCaskill (D-MO), and Russ Feingold (D-WI) in introducing legislation to significantly improve the governance and oversight structure of the PBGC. PBGC's governance structure was questioned in May, 2009, at a hearing held by the Special Committee on Aging , chaired by Senator Kohl.
The bill would strengthen the agency's oversight by expanding its membership to include public trustees, staggering its members' terms, and requiring it to meet four times a year. The bill will also ensure the PBGC Advisory Council, Inspector General, and General Counsel have full and direct access to the board. Finally, the bill will require the PBGC Director to recuse him or herself from potential conflicts of interest, to include any involvement with the agency's Technical Evaluation Panels.
In July, Brookings Institution released a paper highlighting the need for stronger governance of the PBGC. The U.S. Government Accountability Office (GAO) has also issued several reports calling for increased oversight, including Pension Benefit Guaranty Corporation: Need for Improved Oversight Persists and
A summary of the bill can be found below.
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The Pension Benefit Guaranty Corporation Governance Improvement Act
The Pension Benefit Guaranty Corporation (PBGC) insures the pensions of more than 44 million workers and retirees in over 29,000 employer-sponsored pension plans. Yet, according to the Government Accountability Office (GAO) and the PBGC's Office of Inspector General (OIG), the Corporation's governance structure has significant flaws that need correction.
The PBGC Governance Improvement Act will strengthen the board's ability to provide policy direction and oversight. This bill will:
- Expand the PBCG Board of Directors from 3 to 7 members
- The PBGC board is the smallest of any federal government corporation, composed of three members: the Secretaries of Labor, Treasury and Commerce. GAO has reported that historically these secretaries do not have the time or resources to direct and oversee PBGC. Conversely, other government corporations average 7.5 members. Adding public trustees on the board offers additional benefits. The bipartisan Greenspan Commission found "the presence of such public members would inspire more confidence in the investment procedure ... and would help to assure that the demographic and economic assumptions for the cost estimates of the future operations of the program would continue to be developed in an objective manner" when expanding the OASDI board.
- Stagger board terms to ensure experienced board members at all times
- Under the current structure, all three board positions, their representatives, and the PBGC director typically change with each administration, culminating in gaps in the board's institutional knowledge. By expanding the board with presidential appointees serving four year terms beginning in the second and fourth year of a presidential administration, this bill guarantees the board will have institutional knowledge.
- Require the board to meet at least four times a year
- The Board is currently not required to meet regularly, and since 1980, the Board has met only 21 times. In comparison, other government corporations' boards generally meet about five times per year. To provide effective policy direction and oversight, it is absolutely critical that the board meet regularly
- Give the advisory committee direct access to the board
- PBGC has an advisory committee charged with advising the corporation on its investment strategy, among other things. However, the advisory committee has not always had access to the Board, and the PBGC management has ignored many of its recommendations. To ensure that the advisory committee's recommendations are considered, this bill will require the advisory committee to meet with the Board at least once a year. The bill also gives the advisory committee the authority to examine and advise on issues independent from the director.
- Give the Inspector General and General Counsel direct access to the board
- This bill will require the Inspector General to report to the board, so that the PBGC Director cannot use their position to minimize concerns. Also, like other government corporations, this bill requires the General Counsel to report to the Board as well as the Director.
- Requires recusal from potential conflicts of interest by the PBGC Board and Director
- Prohibits the PBGC Board of Directors and Director from directly serving on procurement technical evaluation panels and disqualifies them from participating in any matter that may have or appear to have a conflict of interest.
