PBGC Participant and Plan Sponsor Advocate Calls for Change

The Pension Benefit Guaranty Corporation needs transformational change, says the agency’s Participant and Plan Sponsor Advocate in an annual report.

In “2019 Annual Report of the Participant and Plan Sponsor Advocate,” Constance Donovan calls for changes that she argues would better enable the PBGC to fulfill its mission and address the needs of those whom it exists to serve.

Donovan notes that every day, the PBGC “flawlessly” performs “thousands of routine transactions.” “This,” she says, “is reflected in PBGC’s excellent customer satisfaction scores which are among the highest in the federal government.”

Despite that positive record, Donovan also says that “work remains to be done as there are still participants and plan sponsors who face challenges when dealing with the agency.” She says that her office “normally does not receive assistance requests from participants on standard and ministerial types of matters,” but has experienced a substantial increase in the volume of participants seeking assistance after facing roadblocks when navigating through the agency on issues that should be routine.” Donovan says that they “often involve a breakdown of a process or procedure or an unsatisfactory interaction with the Office of Benefits Administration’s (OBA) various Field Benefit Administration offices.”

Donovan writes that participants and plan sponsors describe many of the same problems that previous annual Advocate reports detailed, such as lack of:

• timeliness in resolving participant and plan sponsor matters;
• transparency in communicating reasons for a decision denying a participant’s benefit;
• transparency in negotiations with plan sponsors;
• effective coordination among and between PBGC departments, which she says contributes to confusion and delays in resolving plan sponsor and participant disputes with the agency; and
• finality and certainty regarding when the PBGC considers a case to be “closed” or “final,” which Donovan also says often costs plan sponsors and participants a great deal many years later.

Donovan adds that when she asks how much an ongoing case has cost the PBGC, agency personnel tell her that they do not know. “That alone should drive change in the agency’s policies and practices because PBGC exists through funding by plan sponsor premium payments,” she writes.

Further, Donovan argues that longstanding, lingering disputes can end up costing the agency a great deal. “It is striking to see disputes that start out as financially insignificant, but unresolved over long periods of time lead to costs that grow exponentially for the agency, the plan sponsor, and/or the participant,” she says.

Transformational Change

Donovan notes that the PBGC “has made strides with its handling of complex cases, particularly for potentially omitted participants (POPs) seeking entitlement to a benefit.” She says that this improvement is largely attributable to the consolidation of the review of POPs cases into the OBA, which was done late in 2018.

Despite those developments, Donovan writes that just as the 2018 Advocate’s report had said, the PBGC still needs transformational change. She writes that many of the PBGC’s longstanding practices and procedures came about in response to a particular case or problem, and that “It is now time for transformational change which involves reexamining outdated practices and procedures in light of the changing defined benefit landscape.”

Among the changes Donovan calls for are:

• cost-benefit analysis, which, she says, “is a basic financial risk assessment that should be an integral part of all cases”;
• inventory of outstanding overpayment cases to ensure that the PBGC has responded to all communications;
• establishment and formalization of the process for handling overpayment cases; and
• communications that provide more detailed information about overpayments, including an accounting of the dates of each overpayment and why it occurred.

Donovan acknowledges that significant change “takes time and can be challenging.” Nonetheless, she argues, “This transformational change is possible, particularly with leadership from our new Director who comes to us with experience in creating and building a business.”

About the Report

The PBGC is required by law to prepare and submit this annual report, which discusses the activities of the Office of the PBGC Participant and Plan Sponsor Advocate. It is submitted to two Senate committees: Health, Education, Labor and Pensions, as well as Finance. It also is submitted to two House committees: Education and Labor, as well as Ways & Means.