Bennet Pushes to Protect the Pensions of Nearly 480,000 Coloradans As Pension Benefit Guaranty Corporation Comes Under Further Scrutiny

Recent Government Reports Show PBGC Has Significant Structural Flaws That Hinder Its Ability to Properly Insure the Pensions of Coloradans

Bennet Pushes Legislation to Significantly Improve the Governance and Oversight Structure of the PBGC

Washington, DC - Michael Bennet, U.S. Senator for Colorado, today pushed to significantly improve the governance and oversight structure of the federal government's Pension Benefit Guaranty Corporation (PBGC). In recent months, questions have arisen concerning the PBGC's capability to fulfill its mission to insure the pensions of nearly 44 million Americans, including 480,000 Coloradans.

To protect the pensions of hundreds of thousands of Coloradans, Bennet today joined others in introducing legislation to significantly improve the governance and oversight structure of the federal government's Pension Benefit Guaranty Corporation (PBGC).

"The 480,000 Coloradans who have pensions vested in the PBGC have worked hard their whole lives on the promise that they will be able to retire comfortably and with dignity," Bennet said. "This legislation will ensure government oversight and accountability, and put safeguards in place to prevent misconduct. At a time when so many have been hit hard by the economic downturn, it just makes sense to protect what Americans have earned."

PBGC's governance structure was questioned in May at a hearing held by the Special Committee on Aging, chaired by Senator Kohl. In recent months, allegations of mismanagement by the agency's former director, Charles E.F. Millard have heightened. With little oversight or approval from the agency's board, Millard was able to deviate from PBGC's conservative investment strategy just before the market downturn last year. In addition, it has been alleged that Millard improperly influenced the procurement process surrounding the restructuring of the Corporation's investments, according to a report released by the PBGC Inspector General.

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 bill, which was introduced by Senator Herb Kohl and cosponsored by Bennet and Senators Claire McCaskill and Russ Feingold, will strengthen the agency's oversight by expanding its membership, 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. Yesterday, Brookings Institution released a paper highlighting the need for stronger governance of the PBGC.

A summary of the bill can be found below.

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"Restructuring the Pension Benefit Guaranty Corporation's Board," Brookings Institution, July 29, 2009

"How Firms Wooed a U.S. Agency With Billions to Invest," The New York Times, July 29, 2009

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. The PBGC Board also does not have any standing committees as a result of its small size, unlike Fortune 1000 companies that have at least two committees. Other government corporations average 1.6 board committees and large public pensions average 3.4 board committees.
  • 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 has not met since February 2008 despite the onset of the recession and the potential pension liability of the troubled auto industry. Since 1980, the Board has met only 20 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 charge 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.