At the HELP Committee Hearing “PBGC: Is Stronger Management And Oversight Needed?”
“I would like to thank everyone for being here for the second hearing in a series focusing on retirement security in America. Today, we are going to take a hard look at the management and administration of the Pension Benefit Guaranty Corporation and see if we need to take steps to modernize the agency.
“In this climate of uncertainty, PBGC’s role is more important than ever. The Great Recession has taken a toll on workers all over the country. I talk to people every day that are struggling just to make ends meet. They have to worry constantly about putting food on their tables and roofs over their heads. The last thing families should have to lose sleep over in times like these is whether their employers will be able to pay pension benefits.
“That is why PBGC was created. It provides workers with a safety net so they can rest assured that, even if their company’s pension plan fails, they will get a retirement benefit. 44 million American workers and their families rely on PBGC to insure their hard-earned pensions. The agency is responsible for making sure $467 million in benefits get to 801,000 retirees every month, and that responsibility is growing. Last year alone, PBGC assumed responsibility for the pensions of 109,000 people. But for PBGC, those are individuals and families that would have been left with next to nothing.
“Unfortunately, the future of this valuable agency is at risk. PBGC’s deficit rose again this year, hitting $23 billion, and the agency is still grappling with the fallout from the recession. Moreover, PBGC’s annual report indicates that there is a very real chance that some very large plans could become insolvent in the near future. That would increase PBGC’s deficit tenfold and pose a significant administrative burden.
“In light of such challenges, strong and effective leadership is crucial for PBGC’s future viability. However, the agency has struggled over the years to develop and implement long-term strategies for success and contingency plans. In fact, the Inspector General just 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.
“PBGC has also been needlessly distracted by scandals such as those under former director Charles Millard. Mr. Millard’s inappropriate contacts with vendors and bad decisions jeopardized the security of PBGC and cast a dark shadow over the agency during one of the worst economic crises in our nation's history. Worse yet, Mr. Millard eroded the public’s trust in the agency and in the defined benefit pension system as a whole.
“We are certainly starting to see some positive changes under Josh Gotbaum's leadership, but we need to examine whether the agency has structural problems that the director alone cannot solve. For example, the board of directors – which is supposed to help guide the agency through tough times – has often been disengaged, acting as little more than a rubber stamp. Even during the height of the recent economic crisis, when the agency was most at risk, the board barely met. It was similarly absent when the indiscretions of Mr. Millard began to come to light because the Secretaries of Labor, Treasury and Commerce had not yet been confirmed.
“It is high-time that we take a good look at best practices and see if there are some common sense improvements that can be made to modernize PBGC. Senator Kohl has already put some ideas on the table, and I commend him for that.
“This is a matter on which I hope we can put aside partisanship and work collaboratively to improve PBGC and strengthen America’s pension system. Today’s hearing is an important step toward that goal. The obstacles facing PBGC and the defined benefit pension system are certainly significant, but they are not insurmountable. Working together, we can find creative solutions to bolster a pension system on which families all over America can continue to rely.
“I thank all of you for being here today to discuss this important issue.”