Congressman George Miller (D-California), senior Democrat on the House Committee on Education and the Workforce, and Senator Edward Kennedy (D-Massachusetts), chairman of the Senate Health, Education, Labor and Pensions Committee, have penned a letter asking the Pension and Welfare Benefits Administration (PWBA) and the Benefits Tax Counsel to disclose how they will ensure that employees receive their full pension benefits.
‘Retirement and security should not be antonyms. But when thousands of Enron employees are robbed of their pensions and the nation’s cash balance plans are cheating workers out of hard-earned retirement savings, that is exactly the message sent,’ said Representative Miller. ‘Rapid action must be taken now to protect employee nest-eggs and return confidence in guaranteed retirement security.’
Need to Knows
Specifically, by May 23 the legislators wanted:
- to know enforcement actions taken or anticipated by the PWBA to protect participants’ benefits in cash balance pension plans
- to know specific enforcement actions contemplated by the PWBA against the 13 plans with forfeitures identified by the Inspector General
- to know steps that PWBA is taking or anticipates taking to develop guidance for pension plan administrators in calculating participants’ accrued benefits in cash balance pension plans.
- copies of any Department of Labor legal opinions concerning its ability to contact pension plans to ensure the accuracy of pension plan calculations.
- copies of any communications between PWBA and the Department of Treasury or the Internal Revenue Service on the matter
Senator James Jeffords (I-Vermont), Senator Tom Harkin (D-Iowa) and Representative Robert Andrews (D-New Jersey) also signed the request.
The request comes in the wake of a report of 60 cash balance plans by the Labor Department’s Inspector General that found 13 that had been shortchanging participants.
That report said that those 13 plans failed to pay workers who left employment before normal retirement age the benefits to which they were legally entitled – underpayments that added up to about $17 million a year, the report estimated.
However, the OIG went on to extrapolate from those findings to estimate that workers whose benefits are in cash balance plans ‘may be underpaid between $85 million and $199 million annually.’ Those numbers were based on the application of the sample finding to an estimated 300-700 traditional defined benefit plans converted to cash balance plans since the mid-1980s, affecting over 8 million workers and involving pension assets of more than $334 billion.
The PWBA questioned the breadth of the audit team’s sampling methodology and the accuracy of its assumptions. OIG defended its audit, ‘despite the lack of a statistical approach,’ noting that ‘Under any sampling or targeting method, statistical or judgmental, this is a disturbing finding.’