Porter suggested that PBGC and the business community need to communicate more effectively about why employers are fleeing the defined benefit plan system and why they are freezing their plans.
As an example, Porter noted that the PBGC recently proposed regulations regarding various corporate transactions, including the shutdown of operations. These proposed regulations would reverse longstanding PBGC written policy and would impose potentially enormous liabilities with respect to routine transactions that involve no layoffs or shutdowns and pose no threat to the PBGC. Porter said companies will find it extremely difficult to continue sponsoring defined benefit pension plans if their routine business transactions trigger large liabilities unrelated to any risk to the PBGC.
Porter also noted that the PBGC has not joined in the broad bipartisan support over the past two years for defined benefit pension plan funding relief. “Congress has wisely recognized that pension funding relief legislation is critical not only to saving jobs, but also to saving pensions by forestalling the termination of underfunded plans and thereby protecting the PBGC as well. However, the PBGC itself has resisted the efforts to help companies recover from the economic downturn and smooth out the extraordinary losses suffered by the plans,” Porter said.
Porter contended a true insurance company would balance its insurance business needs against the needs of its customers, and an insurance company’s products would be designed to dynamically meet the changing needs of its customers. “We believe that enhanced communication with the plan sponsor community is needed in order for the PBGC to function more like an insurance company in these respects,” he said.
According to the testimony before the Senate Health, Education, Labor and Pensions Committee, the American Benefits Council believes there should be a continuing and open dialogue with the PBGC about:
- The PBGC’s economic modeling system, which has been actively used in public policy debates but has not been made available for public discussion;
- The PBGC’s investment policy, which ABC’s believe should be based on a diversified portfolio; and
- The PBGC’s assumptions underlying its reported deficit.
Porter’s testimony is here.