GAO Calls for More PBGC Reporting Transparancy

April 26, 2006 ( - While there is little disagreement that the nation's continuing fiscal problems with traditional private sector defined benefit pension plans has taken a toll on the nation's private pension insurer, it may be tough to know how much of a toll it takes.

A new Government Accountability Office (GAO) report released Wednesday said that the uncertainty is because pension experts, analysts, and industry association representatives have concerns about the transparency of the Pension Benefit Guaranty Corporation’s (PBGC) reports of financial effects of terminated pension plans on the agency’s deficit (See PBGC Answers Questions on Reported Deficit ).

GAO auditors also picked up public concerns that the agency was not more forthcoming about the methodology it employs to determine the interest rate its uses to calculate its liabilities. “Specifically, these parties told us the fact that PBCG does not widely disclose the interest rate methodology contributes to ambiguity about PBGC’s assumptions and means that these parties are unable to fully assess PBGC’s financial condition,” GAO researchers wrote .

The GAO acknowledged that the PBGC has improved the transparency of the information it discloses about its financial condition, but pension experts, financial analysts, and others believe that additional improvements are still needed. For example, the GAO acknowledged, the PBGC has recently taken steps to include more information about its methodology for determining probable pension insurance claims in its annual reports and make more detailed information on its financial condition available on its Web site.

Part of the problem, the auditors asserted, is that the PBGC and public companies have different practices for disclosing details about liability settlements – including probable losses – that arise from the differences between PBGC’s responsibilities and disclosure policies and the Security and Exchange Commission’s (SEC) requirements for public companies.

When reporting information on liability settlements, public companies are required to follow the standards set forth by SEC requirements, while PBGC, which is not subject to SEC requirements, follows its own set of policies and procedures. GAO found that PBGC’s disclosure practices regarding probable losses are more comparable to those of the Federal Deposit Insurance Corporation (FDIC).

To improve the transparency of the information PBGC discloses about its financial condition, GAO recommends that the agency disclose in its press releases whether a newly terminated plan was already included in the PBGC’s published deficit, and make its interest rate methodology more widely available to the public.

The report is here .