The U.S. Government Accountability Office (GAO) asserted thePension Benefit Guaranty Corporation (PBGC)has improved on building systems to handle smaller and less complicated plans seized from employers, but has only put in plans for the giant retirement programs that are “less than strategic.”
GAO investigators found that the PBGC works up most participants’ benefit findings in less than 36 months but has taken up to nine years on some cases. Nearly three-quarters of the lengthiest processing times were associated with individuals in just 10 of the 1,089 plans reviewed. The agency’s actions to date “do not address the longest delays,” the GAO said.
“The hope of freeing up staff to handle complex plans by processing others more quickly will probably not be sufficient by itself for tackling difficult plans in the near future,” the GAO said. “Absent a calculated effort to anticipate and plan for such terminations, the heretofore modest number of beneficiaries caught in a protracted process could, indeed, grow in the next few years.”
The agency also did not properly communicate with some participants for several years or provide benefits estimations that were readily understandable, according to the GAO. In addition, the report said that while PBGC has reduced the average amount of time needed to decide an appeal by almost a year, it still does not readily provide key information that would be helpful to participants in deciding whether to pursue an appeal.
Uncertainty and Anxiety
The GAO investigators said improved PBGC processes would help ease the uncertainty and anxiety now felt by members of seized plans.
“This means acting as quickly and as efficiently as possible to value and allocate plan assets; to expedite the calculation of estimated benefits to reflect guarantee limits, as well as final benefit amounts; and to keep plan participants well-informed throughout the benefit determination process,” the report indicated. “Workers and retirees in terminated plans who stand to lose as much as one-half or more of their long-anticipated retirement income will likely have to make painful financial adjustments, and due consideration in helping to ease that pain is warranted.”
The GAO indicated the PBGC needs to improve communications with participants. "Clearer and more frequent communication with plan participants, including quicker and responsible adjustments to estimated benefits, more information about how their benefits are calculated, and where to find help if they wish to appeal, would better manage expectations, help people plan for their future, avoid unnecessary appeals, and earn good will in a trying time for all," the Office said in its report.
Specifically, the GAO's recommendations included that PBGC should develop improved procedures for adapting and reviewing letters to participants in large, complex plans, such as by:
- providing more specific information in letters to participants who receive benefit reductions, describing which limits were applied and why;
- making sure all letters to participants involving benefit reductions are reviewed for accuracy and coherence before being sent; and
- establishing processes to more frequently communicate with participants who are experiencing delays in receiving final benefits determinations.
The GAO report is available here .
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