“Most people know that the PBGC pays benefits when plans fail, but we work just as hard to keep plans from failing in the first place,” said Gotbaum during a hearing by the Committee on Health, Education, Labor, & Pensions.
In his opening remarks, HELP Committee Chairman Tom Harkin (D-Iowa) said the future of the agency is at risk, pointing out its deficit rose again this year to $23 billion (see PBGC Reports $23B Deficit), and noting the agency has struggled over the years to develop and implement long-term strategies for success and contingency plans. Harkin also said the Inspector General recently released a report that raises serious concerns about whether PBGC would be able to cope with a sudden influx of pensions brought on by a new economic crisis.
He said the purpose of the hearing is to take a good look at best practices and see if there are some common sense improvements that can be made to modernize PBGC.
However, the agency’s annual report shows that in FY 2010, the PBGC worked with debtors and creditors to help 38 companies emerge from bankruptcy protection with their plans intact. The payoff, according to Gotbaum: about 250,000 workers and retirees continue to receive their full pension benefits, and about $4 billion in obligations were kept off the agency’s books.
Gotbaum also said the PBGC works to shore up plans before they get into financial trouble. Over FY 2010, the agency monitored more than 1,000 companies to identify transactions that could interfere with plan funding, and secured protections for the plans. Under pension law, when layoffs or plant closures threaten a plan’s funding status, the agency can move to obtain protection for the plans with a guarantee, posting of collateral or contribution to the plan. Over the past year, the PBGC secured an additional $250 million for participants in 20 pension plans.
Gotbaum said the agency’s $80 billion in assets provide ample resources to protect and insure the nation’s defined benefit plans for the foreseeable future. He also pointed out that for the past 36 years, the agency has stepped in to pay benefits, on time, every month without interruption when companies couldn’t fulfill their pension promises.Gotbaum’s testimony is here.