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.”
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