Lawmakers Propose PBGC Restructuring
July 31, 2009 (PLANSPONSOR.com) - The nation's
private-sector pension insurer would be restructured under
legislation introduced in the U.S. Senate.
The legislation would stagger terms for members of the
Pension Benefit Guaranty Corporation's board, expand it
to seven members from three, and require it to meet four
times a year, Bloomberg reports. The bill also seeks to
ensure that those who oversee the PBGC have full access to
the board, and would require the agency's director to
recuse himself from potential conflicts of interest.
"Decisions made by PBGC management and a lack of
oversight and governance by previous PBGC board have
contributed to the agency's financial situation,"
said Senator Herb Kohl (D-Wisconsin), a sponsor of the
measure, in a statement. He added that the PBGC's
finances and structure need revamping as "several of
the country's largest automobile and manufacturing
companies are teetering on the edge of
bankruptcy."
In May, the PBGC reported a deficit of $33.5 billion,
triple that of six months earlier (see
PBGC Funding Gap Ballooning as Plan
Terminations Increase
), and then-acting director Vince Snowbarger anticipated it
would get worse as carmakers struggled (see
Outgoing Pension Insurer Director Cautions
about Carmaker Shortfalls
). Last week the agency took over the pension plan of
Delphi Corp. the auto-parts maker in bankruptcy since 2005
(see
Despite All Efforts, Delphi Plans Go to
PBGC
).
The agency is also facing increased scrutiny over
reports that former director Charles E.F. Millard had
inappropriate communication with eight of 16 Wall Street
firms that bid last year to manage $2.5 billion of the
agency's $48 billion (see
Millard Invokes Fifth Amendment Rights at
Senate Hearing
) as it implemented a new investment strategy (see
Solis Asks PBGC to Halt New Investment
Strategy
). Bloomberg reports that the PBGC on July 20 cancelled
contracts with BlackRock Inc., Goldman Sachs Group Inc. and
JPMorgan Chase & Co., which were selected by Millard to
manage $2.5 billion in private- equity and real estate
assets (see
Acting PBGC Head Recommends Dumping Money
Mgmt. Contracts
).
According to Bloomberg, Millard's attorney,
Stanley Brand, said in a statement on Thursday that
Millard sought to "implement a policy change to
secure the agency's future," and added: "He sought
advice from top professionals in a responsible and legal
manner. The choices that he, his colleagues and PBGC's
board of directors made were strictly on the
merits."
Rebecca Moore
editors@plansponsor.com