PROTECTING BENEFITS

Despite having to contend with the largest termination in its history and an unprecedented number of new people to whom it owes guaranteed benefits, PBGC continued to deliver pension checks on time. The Corporation also responded to additional requests for financial assistance under its multiemployer program.

Single-Employer Program

Through its single-employer program, PBGC oversees terminations of fully funded plans and guarantees payment of basic pension benefits when underfunded plans must be terminated. The single-employer program covers about 34.4 million workers and retirees in about 31,000 plans.

During 2002 the Corporation processed or began processing the termination of 157 underfunded plans, the vast majority of which were involuntary terminations by PBGC. In most cases termination was necessary because the sponsoring employer had gone out of business. Terminations processed during the year included the largest plans in PBGC’s 28-year history—four plans formerly sponsored by the LTV Steel Corporation, which covered nearly 83,000 workers and retirees. However, the year was marked by many other large terminations as well, including those of Anchor Glass Container Corporation (14,000 workers and retirees), Polaroid Corporation (11,000 workers and retirees), Harvard Industries (9,100 workers and retirees), Reliance Insurance Company (8,700 workers and retirees), Durango Apparel (7,000 workers and retirees), and Payless Cashways (6,500 workers and retirees).

After a plan terminates, PBGC becomes trustee of the plan and administers benefits. In 2002, PBGC became trustee of 144 terminated single-employer plans covering 187,000 people. This was the largest number of new beneficiaries absorbed in one year by the insurance program since PBGC’s creation in 1974, and more than double the previous record set just one year earlier.

By the end of the year, PBGC was responsible for a total of 3,087 trusteed plans, including 10 multiemployer plans. An additional 45 terminated single-employer plans were pending trusteeship as the year ended.

The surge in trusteed plans led to a similar increase in the frequency of the Corporation’s meetings with large groups of participants from newly trusteed plans. PBGC regularly meets with such groups to address their concerns and explain the pension insurance program. PBGC held 90 such information sessions across the country in 2002, attended by more than 11,000 plan participants. This was by far the largest number of participant meetings held in one year.

Benefit Processing: By the end of the year, PBGC was responsible for the current and future pension benefits of nearly 800,000 participants from single-employer and multiemployer plans. These included about 345,000 people who received benefit payments totaling more than $1.5 billion for the year. This was half again as much as the previous record amount, paid in 2001.

In spite of the influx of new people owed guaranteed benefits, and the associated demand for new benefit determinations, PBGC achieved a record level of productivity. During 2002, the Corporation issued more than 81,700 benefit determinations, exceeding 60,000 determinations for the eighth straight year and setting a new record for determinations issued in a single year.

PBGC routinely pays benefits in estimated amounts until final determinations are completed. Ninety-two percent of PBGC’s final benefit determinations during 2002 were within 10 percent of the estimated benefit provided earlier to participants, exceeding the Corporation’s goal for accuracy under its five-year strategic plan.

Appeals Processing: PBGC’s Appeals Board reviews appeals of certain PBGC determinations. Most of the appeals are from people disputing PBGC’s determination of their benefit entitlement. As in other years, less than two percent of PBGC’s benefit determinations in 2002 were appealed. During the year, the Appeals Board received 1,235 appeals and decided 1,858 cases, reducing its open case inventory by nearly 20 percent. One aspect of the Corporation’s appeals re-engineering process involved allocating additional resources to resolving backlogged appeals cases—this effort contributed 359 of the 1,858 cases decided during the year. In addition, a revised appeals brochure, which PBGC sends with its benefit determination letters, now clearly explains that appellants must provide specific grounds for an appeal. Other re-engineering activities are in various stages of development and implementation to meet a corporate goal of processing appeals on average within six months after receipt.

Standard Terminations of Fully Funded Plans: The decline in the number of standard pension plan terminations continued, with only 1,214 submitted to PBGC in 2002 as compared to the 1,565 submitted in the prior year. About three-fourths of the fully funded plans terminated in 2002 had 50 or fewer participants.

As a result of the continued high level of compliance with the legal requirements for standard terminations and PBGC’s flexible approach to resolving administrative errors, only two terminations had to be canceled for failure to comply with legal requirements.

PBGC audits a statistically significant number of completed standard terminations to confirm compliance with the law and proper payment of benefits. These audits generally have found few and relatively small errors in benefit payments, which plan administrators are required to correct. The errors arise primarily from use of incorrect interest-rate assumptions in valuing lump-sum distributions to plan participants. Due to PBGC’s audits in 2002, more than 1,600 participants (about 1.2 percent of all participants in audited plans) received more than $2.3 million of additional benefits.

Pension Search Program: PBGC’s Pension Search Program consists of three separate, coordinated efforts to locate missing people owed a pension by a terminated defined benefit plan. Historically, PBGC has conducted extensive searches for people missing from underfunded pension plans for which the Corporation has taken responsibility. Since January 1996 PBGC also has provided a “missing participants clearinghouse” to assist employers terminating fully funded plans; if an employer is unable to locate a former employee, PBGC will accept payment for the benefit and continue searching for the person to allow the employer to complete the termination. As a last means of finding people who have not been found in all previous searches by either their former employer or by PBGC, the Corporation has maintained a Pension Search listing on the Internet since December 1996. These efforts have helped PBGC locate thousands of people who were unaware they were owed a pension benefit.

During the fiscal year, 278 companies asked the clearinghouse to find 5,744 missing participants. Some 4,598 of these people were due benefit amounts totaling more than $8.5 million, which their former employers transferred to PBGC for payment. The other 1,146 missing people were covered by insurance annuity contracts that will pay their benefits when they are found. PBGC was able to find addresses for 4,543 missing people in the clearinghouse. The remaining people, if not found through follow-up searches, will be added to PBGC’s Internet listing. In addition, during the year PBGC paid 1,844 people found through the clearinghouse a total of about $6.8 million in benefits. PBGC generally pays benefits only after it is able to fully verify the identity and address of the people it has located.

Additionally, the Pension Search listing on the Internet helped PBGC find 3,191 other people who were owed about $19.7 million. Over the past six years, the program has helped PBGC locate about 14,000 people owed about $58 million from terminated plans. As of the end of the year, the total Internet list, which included people PBGC was unable to find through the clearinghouse, included another 13,300 people still to be found who were owed $46 million in pension benefits. The Internet listing is found at www.pbgc.gov/search.

Workforce Planning

Following a review in 2001 of PBGC’s staffing patterns, use of contractors, future workforce projections, and related issues, the National Academy for Public Administration designed a systematic six-step model for linking PBGC’s workforce planning with strategic planning and the assessment of needed skills. The six steps consist of forecasting strategic direction, assessing business environment, assessing human capital, determining gaps between current competencies and future needs, developing solutions/strategies to address the gaps, and developing an implementation plan. (NAPA is a not-for-profit, nonpartisan organization chartered by the Congress to improve government operations.) NAPA’s model became the foundation of PBGC’s workforce planning efforts.

The seven initial participants in PBGC’s pilot succession management program, “Leaders Growing Leaders,” volunteered to serve as a Workforce Planning Team. (LGL is a special program PBGC initiated in 2001 to develop a diverse pool of candidates qualified to compete for PBGC leadership vacancies over the next five to 10 years.) Thus, the workforce planning project provided an immediate opportunity for the people viewed as PBGC’s future leaders to begin thinking strategically about the Corporation’s future.

The team spent 2002 evaluating the key skills and capabilities among PBGC’s current staff and those likely to be required in the future, and determining the gaps between current competencies and anticipated future needs. The team submitted their findings and initial suggestions for addressing the gaps at the end of the year. The next steps in the process call for PBGC to develop solutions and strategies to meet workforce needs and then implement these solutions in the months ahead.

Multiemployer Program

The multiemployer program, which covers about 9.5 million workers and retirees in about 1,650 insured plans, is funded and administered separately from the single-employer program and differs from the single-employer program in several significant ways. The multiemployer program covers only collectively bargained plans involving two or more unrelated employers. For such plans, the event triggering PBGC’s guarantee is the inability of a covered plan to pay benefits when due at the guaranteed level, rather than plan termination as required under the single-employer program. PBGC provides financial assistance through loans to insolvent plans to enable them to pay guaranteed benefits. Once begun, these loans generally continue year after year until the plan no longer needs assistance or has paid all promised benefits.

Financial Assistance: The multiemployer program received two new requests for financial assistance during 2002. These requests raised to 31 the total number of plans that have received financial assistance from PBGC, out of the 1,650 insured plans. Since 1980 PBGC has provided assistance with a total value of approximately $159 million net of repaid amounts. During the year, 23 plans received financial assistance totaling about $5 million.

Back to Annual Report Index | Back to WWW.PBGC.GOV | PDF version of PBGC's 2002 Annual Report