The Corporation’s 2008-2013 Strategic Plan provides the framework to guide achievement of its mission and identifies the priorities for addressing challenges that lie ahead. The strategic plan is founded on three principal goals:
- Safeguard the federal pension insurance system for the benefit of participants, plan sponsors, and other stakeholders;
- Provide exceptional service to customers and stakeholders; and
- Exercise effective and efficient stewardship of PBGC resources.
PBGC serves a variety of customers and stakeholders with an interest in a strong and effective pension system. Customers and stakeholders include beneficiaries in terminated pension plans, participants in ongoing pension plans that PBGC insures, the employers that pay premiums, and the lawmakers and policymakers who oversee the federal insurance program.
PBGC strategically allocates its resources to programs and activities that support achievement of its mission and goals. The Corporation monitors pension plan activities to mitigate pension risk and evaluates its service to customers and stakeholders. Performance measures help PBGC gauge the effectiveness of its strategies to improve the pension insurance program.
This annual performance report provides information on PBGC’s performance and progress in achieving the strategic goals outlined in the strategic plan. Performance results for FY 2008 are detailed below. These items meet the annual reporting requirement of the Government Performance and Results Act.
Overview of PBGC’s Performance Measures
PBGC made significant strides toward improving the pension insurance program in 2008. PBGC:
- Finalized regulations implementing the premium reform provisions of the Pension Protection Act and the Deficit Reduction Act;
- Strengthened the information security program; and
- Exceeded performance measure targets in some areas. A summary of the performance measures, targets and results are listed in Chart 1.
Chart 1: PBGC Performance Measures, Targets and Results
Performance Measure |
2008 Target |
2008 Results |
Baseline |
Goal 1: Safeguard the federal pension insurance system for the benefits of participants, plan sponsors, and other stakeholders |
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|---|---|---|---|
Commit to eliminate PBGC's deficit and account better for PBGC's expected losses, in order that workers and retirees can expect to receive qualified benefit payments from PBGC for the defined benefit pension plans that PBGC assumes |
Produce report on options for eliminating deficit |
Report drafted; will be produced when current information can be included |
|
Goal 2: Provide exceptional service to customers and stakeholders |
|||
Customer Satisfaction score for premium filers |
69 |
72 |
Baseline result |
Customer Satisfaction score for retirees receiving benefits from PBGC |
85 |
89 |
Baseline result |
Customer Satisfaction score for trusteed plan participant callers |
80 |
81 |
Baseline result |
Average time (in years) between trusteeship and benefit determination issuance |
3.0 years |
3.3 years |
Baseline result in 2008: 3.3 |
Goal 3: Exercise effective and efficient stewardship of PBGC resources |
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Annual Administrative cost per participant in PBGC trusteed plans at year end |
$191 |
$207 |
Baseline result in 2004: $219 |
*Baseline year established in the first year PBGC initiated the measure or in the year of a survey method change
ACHIEVING PERFORMANCE GOALS
Safeguard the Pension Insurance System for the Benefit of Participants, Plan Sponsors, and other Stakeholders
Congress enacted the Deficit Reduction Act of 2005 and the Pension Protection Act in 2006, both of which contained provisions to strengthen the pension insurance system. PBGC set an aggressive schedule for implementation of the premium reforms introduced in those acts. At the end of March 2008, PBGC had published final regulations that change the flat-rate premium and implement the variable-rate premium provisions of DRA and PPA.
To safeguard the pension insurance system and protect workers’ retirement benefits, PBGC employs an active program of plan monitoring, negotiation, and litigation. These proactive measures minimize risk and limit exposure to losses from plan termination. The result is a healthier pension insurance program for plan participants and sponsors.
Single-Employer Insurance Program: During 2008, PBGC worked to mitigate risks faced by plan participants and the pension insurance program in several important cases. For example, PBGC’s action in Delphi’s ongoing bankruptcy helped to improve the security of benefits for Delphi’s workers and retirees and substantially reduce the risk of loss faced by the insurance program. Under a court-approved agreement, Delphi will transfer up to $3.4 billion in net pension liabilities from its hourly plan to the hourly plan of General Motors, Delphi’s former parent. The first segment of that transfer was made on September 29, 2008, and had the effect of reducing the Corporation’s exposure to Delphi by $1.7 billion. The remaining amount will be transferred upon Delphi’s emergence from bankruptcy. As part of its ongoing efforts to emerge from bankruptcy, Delphi must obtain court approval of a revised plan of reorganization and raise new capital. The pension transfer improves retirement security for over 64,000 participants in Delphi’s hourly plan and contributes substantially to Delphi’s restructuring. Also during fiscal year 2008, PBGC expanded its efforts to negotiate additional protections for underfunded plans in certain corporate downsizing events. PBGC negotiated five settlements that provide for additional pension contributions and other protections totaling $125 million, which will help to secure the benefits of over 13,000 participants.
During the year, PBGC succeeded in working with several major companies to continue their defined benefit pension plans as they emerged from bankruptcy reorganization. These included auto parts suppliers Dana Corporation with 53,000 participants, Federal Mogul Corporation with 33,000 participants, and Dura Automotive with 4,300 participants. Each of these companies made contributions required by ERISA during bankruptcy and kept their plans intact. PBGC obtained another significant victory in the bankruptcy court case of In re Rhodes, Inc. The court ruled in favor of PBGC on the method for determining the amount of PBGC’s claim for pension underfunding in bankruptcy. The decision will help safeguard the insurance program by giving PBGC an important precedent for receiving a fair share of bankruptcy recoveries. Chart 2 depicts some of the safeguarding activities over the past four years.
Chart 2: Safeguarding Activities |
Activity |
2008 |
2007 |
2006 |
2005 |
Plans Monitored |
3,393 |
3,630 |
3,712 |
4,152 |
|---|---|---|---|---|
Bankruptcy Cases |
561 |
493 |
487 |
350 |
Multiemployer Insurance Program: PBGC’s efforts to mitigate risk and limit exposure to losses also include the multiemployer insurance program. For example, during 2008 PBGC staff worked with employer and union representatives to craft new funding and employer guarantee commitments designed to protect benefits under the Teamsters Local 863 Fund. This action will help to avoid a claim of approximately $250 million against PBGC’s multiemployer insurance program and strengthen benefit security for nearly 6,000 participants. Also in the multiemployer area, PBGC facilitated the close-out of five small multiemployer plans that were receiving or expected to receive future financial assistance payments from PBGC. The plans either merged with other multiemployer plans or purchased annuities from private sector insurers for the participants. These small plan close-outs are part of an ongoing effort to reduce plan administrative costs borne by PBGC's multiemployer program.
Provide Exceptional Service to Customers and Stakeholders
PBGC uses the American Customer Satisfaction Index (ACSI) survey methodology to monitor its progress in meeting the needs and expectations of its customers and stakeholders, evaluating the effectiveness of its services to customers, and making targeted improvements. In 2008, PBGC’s ACSI scores rose in surveys of retirees, participant callers, and premium filers, continuing an upward trend in
these areas. Chart 3 below provides a history of PBGC ACSI results and targets.
Chart 3: Customer Satisfaction Survey Results 2002-2008
- Retiree satisfaction: Retirees receiving benefits from the PBGC continued to show an overall high level of satisfaction with its services, scoring PBGC a record high of 89. This score exceeded the 88 scored last year, where PBGC scored among the highest in government for providing benefit services. In 2008 retirees communicated they were particularly pleased with improvements made in the timeliness of correspondence. PBGC uses customer feedback to target use of its resources in making continuous improvements in its services.
- Participant Caller satisfaction: The ACSI score for participant callers to the Customer Contact Center was 81, up three points from 2007 and exceeding the 2008 target of 80. This improved satisfaction can be attributed to increased training of Contact Center staff to ensure callers receive high-quality service and to additional focus on customer navigation of the automated phone system. PBGC is in the process of competing and awarding several contracts that directly impact participants. Our aim is to maintain the current high level of service we provide as we go through the transition and implementation of these contracts over the next few years.
- Premium Filer Satisfaction: The ACSI score for premium filers was 72, up 2 points from last year's record high of 70. This increase may be attributable to providing information to practitioners through two new avenues—a free online subscription service and frequently asked questions (FAQs) on the Web site, and expanded hours of customer support at peak filing times. Changes made to the survey questionnaire in 2006 enabled PBGC to better identify customer interest and target customer improvements, and performance targets were re-established to more accurately project reasonable stretch goals. In 2008, premium filers expressed the greatest satisfaction with PBGC’s customer care, in particular with the ease of reaching the appropriate person. Targets for future years remain flat at 70, while PBGC focuses on effectively assisting premium filers with a series of new requirements, including mandatory e-filing and compliance with the Pension Protection Act.
Another key measure of PBGC’s mission effectiveness is the average time required to provide participants with a final determination of their benefits. During 2008, the PBGC issued nearly 137,000 final benefit determinations, which it completed within an average of 3.3 years after the date PBGC trusteed the participant’s plan. The very complex benefit determination process for plans trusteed in 2004 and 2005 adversely impacted the performance measurement and will continue to impact the 2009 performance. Process improvement efforts underway, such as the “Lean” methodology, should streamline the benefit determination process and reduce process times in the future.
Exercise Effective and Efficient Stewardship of PBGC Resources
PBGC strives to manage its resources efficiently and effectively. By aligning managers’ performance agreements with the Corporation’s strategic goals and performance targets, PBGC ensures that resources remain focused on performance expectations. PBGC continued to implement a long-term strategy for addressing information security and technology concerns. A concerted effort in 2008 to improve IT project management resulted in a stronger IT capital planning process that enabled PBGC to be removed from the Office of Management and Budget’s Watch List. At the end of 2008, PBGC’s cost per participant in trusteed plans was $207, an increase from $196 in 2007.
Another key area of PBGC's stewardship is the evaluation or performance assessment of the Corporation's investment program. One of PBGC's most fundamental operational objectives is to ensure that funds are available to fulfill the Corporation's obligations. PBGC generated a -6.5 percent return on total invested funds for FY 2008 compared to the Corporation's total fund benchmark return of -6.6 percent. The total fund return and total fund benchmark return are weighted average returns representing the asset allocation of the entire investment portfolio.
The Corporation is taking a slow and deliberate approach to the implementation of the new investment policy, and at the end of FY 2008 its allocation was approximately 71% to fixed income, including cash. Due to the cyclical nature of capital markets, PBGC reports both one-year and five-year returns for its investment program. For the five-year period ending September 30, 2008, PBGC’s return on total fund investments was 4.2 percent compared to a total fund benchmark return of 4.1 percent.
The Pension Protection Act of 2006 requires PBGC to estimate the effect of an asset allocation based on a combination of two commonly used market benchmarks. This hypothetical portfolio, with a 60 percent allocation to the Standard & Poor's 500 equity index and a 40 percent allocation to the Lehman Brothers Aggregate fixed income index, while presenting a risk-return profile different from PBGC’s current allocation, would have decreased the assets of the Corporation by approximately $3.0 billion (-12.3% return compared to PBGC’s actual return of -6.5%) for the one-year period ending September 30, 2008 and increased the assets of the Corporation by approximately $1.5 billion (4.8% return compared to PBGC’s actual return of 4.2%) over the five-year period ending September 30, 2008. For further analysis of PBGC’s Investment Activities please refer to page 15. As reported in last year’s FY 2007 Annual Report the same “60/40 portfolio” would have increased the assets of the Corporation by approximately $2.3 billion (11.9% return compared to PBGC’s actual return of 7.2%) for the one-year period and $7.3 billion (11.0% return compared to PBGC’s actual return of 7.7%) for the five-year period ending FY 2007. These results are summarized in the following table.
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|
|
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60/40 Hypothetical Portfolio Analysis versus PBGC Actual Return |
(60/40 is comprised of S&P 500/Lehman Aggregate) |
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|
1 Year Period Ending |
|
5 Year Period Ending |
Fiscal Year |
60/40 |
60/40 |
PBGC |
60/40 |
60/40 |
PBGC |
|
|
|
|
|
|
|
9/30/2008 |
($3.0) |
-12.3% |
-6.5% |
$1.5 |
4.8% |
4.2% |
|---|---|---|---|---|---|---|
|
|
|
|
|
|
|
9/30/2007 |
$2.3 |
11.9% |
7.2% |
$7.3 |
11.0% |
7.7% |
President’s Management Agenda
Incorporating the principles of the President’s Management Agenda into its strategic planning process further demonstrates PBGC’s commitment to deliver high-quality services to American citizens and maintain a results-oriented, performance-based organization. During 2008, the PBGC achieved the following:
- Strategic Management of Human Capital: PBGC furthered its effort to build a results-oriented, performance-based organization. In 2008, PBGC implemented a new performance management program and began developing a strategic human capital plan that will strengthen the identification and alignment of human resources needed to support accomplishing the agency’s goals.
The Office of Government Ethics (OGE) recognized PBGC’s Ethics Program with a 2008 Education and Communication Award. The award recognizes federal agencies that demonstrate strong commitment to ethics education and communication, create stronger ethical cultures as a result of these efforts, and use model practices to encourage understanding and awareness of ethical behavior. OGE singled out for special mention PBGC’s interactive training entitled “Staying Off the Warning Track” and the special Hatch Act edition of the PBGC newsletter.
- Commercial Services Management: PBGC continues to improve its commercial services management and procurement operations using a variety of techniques to ensure effective and efficient program delivery. PBGC contracts with private-sector entities for a wide variety of support functions, such as investment management and financial advice, benefit administration, information technology, actuarial services, and legal services. During 2008, PBGC strengthened contractor oversight through staff training and also applied performance-based contracting techniques to improve service delivery.
- Improved Financial Management: For the 16th consecutive year PBGC received an unqualified audit opinion on its fiscal year 2008 Financial Statements from an independent financial auditor. A key component of the financial management structure at PBGC is an active internal controls program. For the fifth consecutive year PBGC received an unqualified opinion on management's assertion regarding the effectiveness of internal controls. PBGC’s interdepartmental Internal Controls Committee oversaw the documentation and testing of key internal control activities, including testing of financial reporting controls, general information technology controls, and entity-wide controls. The testing helps management to support the “Federal Managers Financial Integrity Act” assertion that PBGC has an effective internal control system.
Substantial efforts were made to address the three significant deficiencies that existed at the end of fiscal year 2007. Financial systems planning and design activities in fiscal year 2008 have set a stronger foundation for improved data integrity controls and for the promotion of systems integration. PBGC's Financial Systems Segment Architecture now in development will serve to strategically connect these activities going forward in an enterprise-wide, business-driven model and approach to investing in and implementing financial systems. PBGC also continued its efforts to significantly improve entity-wide security program planning and management, and embarked on a rigorous program to strengthen security access controls.
- Expanded E-Government: PBGC’s Web site (www.pbgc.gov) serves about 7,400 visitors per day and it is the means through which all of the Corporation’s other E-Gov services are accessed. Customers' satisfaction with the Web site improved significantly this year, rising from 62 in 2007 to 70 in 2008. Site enhancements such as an automatic e-mail feature that notifies pension plan practitioners of updates, a new frequently asked questions (FAQs) page that helps a customer locate desired content more quickly, and advance notices of temporary planned outages improved customers’ experiences. PBGC strengthened its Web governance structure and established dedicated Web manager positions during 2008 to more closely monitor and improve PBGC.gov performance and ease of use.
Through PBGC.gov, PBGC provides readily accessible services to customers online using My Pension Benefit Account (MyPBA) for participants and My Plan Administration Account (My PAA) for pension plan administrators. In 2008, participants used MyPBA to complete over 130,000 transactions. Since premium e-filing began in 2004, the PBGC has received more than 50,000
e-filings totaling more than $220 million of online payments.
PBGC uses the ACSI to monitor customer satisfaction and target web site improvements. Survey scores for online Web services continued to improve in 2008. Satisfaction with MyPBA remains high and relatively stable and satisfaction with My PAA continues to trend upward. For MyPBA, the score rose three points from 79 in 2007 to 82 in 2008. Similarly for My PAA, the score rose four points from 76 in 2007 to 80 in 2008. PBGC has kept pace with customer expectations using its survey feedback to target system improvements. For example, in 2008, PBGC launched a new feature that enabled more than 7,000 participants to print their benefit tax forms. The premium filer experience on My PAA also has improved with periodic webcasts and online demonstrations supporting the e-filers.
Performance Improvement: During 2008, senior leaders met quarterly to monitor the Corporation’s budget activity and performance status. At these meetings, key performance goals, measures, and initiatives were discussed and used to evaluate the effectiveness of corporate strategies in addressing management challenges.
The Treasury Department’s Federal Consulting Group (FCG) recognized the PBGC with a 2008 Customer Satisfaction Achievement Award. The award recognizes PBGC’s continuous and comprehensive use of citizen satisfaction to assess and improve programs, services, and website content. FCG found PBGC to be “among the most forward-thinking in developing performance measures and strategic plans that include citizen satisfaction.”
Program Evaluation
- During 2008, the Government Accountability Office (GAO) conducted several reviews of PBGC. A review of PBGC’s governance concluded that while the PBGC Board of Directors amended the bylaws to streamline processes and clarify the roles and responsibilities of the Board, Board representatives and PBGC Director, the need for improved oversight persists. Other reviews concluded that some steps have been taken to improve contracting, but a more strategic approach is needed; a more strategic approach could improve human capital management; and implementation of the new investment policy will need stronger Board oversight. Efforts are underway to address these findings.
- In fiscal year 2008, PBGC’s Office of Inspector General (OIG) conducted audits and evaluations of PBGC’s major management challenges. Reports included the annual audit of the PBGC financial statements, and the semi-annual reports to Congress. The OIG identified five major management challenge areas—governance, stewardship, PBGC’s business model, information security, and procurement and contracting. Overall, PBGC management is taking steps to address each of the management challenge areas.
- PBGC made considerable progress in 2008 toward implementing the improvements recommended in the Program Assessment Rating Tool (PART) review completed by the Office of Management and Budget in 2007. PBGC:
- Completed information technology (IT) certification and accreditation of its general support systems and major applications;
- Established a new performance goal to analyze and prepare a report on options for improving the financial condition of the single employer insurance program. PBGC expects to issue its first report early in the next fiscal year;
- Increased communication among its operating units to enable the Corporation to better prepare for workload changes and mitigate risk.
PBGC uses the American Customer Satisfaction Index survey methodology to receive feedback from its customers. In 2008, PBGC either exceeded or achieved all ACSI targets. The ACSI methodology scores on a 0-100 scale and produces indices for 10 economic sectors and 43 industries, including private and governmental entities. The ACSI provides a means for PBGC to compare its results with those of other government and private organizations, to identify areas of high value to our customers, and to benchmark best practices. Evaluation of the survey responses results in PBGC targeting its resources for service innovation and process improvements that benefit the PBGC customer.