ANNUAL PERFORMANCE REPORT

PBGC’s strategic plan for fiscal years 2005-2008 reflects the Corporation’s commitment to safeguarding the interests of the federal pension insurance system, sharpening its focus as a customer-centric organization, and efficiently and cost-effectively administering the federal pension insurance programs. Specifically, the PBGC goals are to:

1. safeguard the federal pension insurance system for the benefit of participants, plan sponsors, and other stakeholders; and
2. provide exceptional service to customers and stakeholders; and
3. exercise effective and efficient stewardship of PBGC resources

In carrying out its mission, PBGC interacts with a variety of customers and stakeholders with an interest in the pension insurance programs, including beneficiaries in terminated pension plans, participants in ongoing pension plans that PBGC insures, the employers that pay premiums, the lawmakers and policymakers who oversee the federal insurance programs, and the public that has an interest in a strong and effective pension system.

PBGC’s performance measures track and gauge customer service accomplishments, success at managing and mitigating risk exposure, and the efficiency with which the agency administers the insurance programs. PBGC measures customer satisfaction through all modes of contact, including its Web site. This is important because several business transactions with customers are now performed through the Web, and these will be expanded in the future.

PBGC’s strategic plan may be found on PBGC’s Web site at www.pbgc.gov/about/stratplan.htm. The following table shows the results achieved in 2004. This meets the annual reporting requirement of the Government Performance and Results Act.

Table - 2005 PBGC Corporate Performance Measures

Achieving Performance Targets

Safeguard the Pension Insurance System for the Benefit of Participants, Plan Sponsors, and other Stakeholders

Financial and operational risks facing the pension insurance system increased significantly in 2005. Since 2002, underfunding in financially weak companies (reasonably possible exposure) increased three-fold. In 2005, PBGC saw a 27 percent increase in unfunded benefit liabilities reported in Section 4010 filings during 2005. The number of missed funding contributions exceeding $1 million more than doubled from 25 in FY 2004 to 55 in FY 2005. PBGC also faced a record number of bankruptcies which significantly increased the number of controlled groups now monitored. Overall PBGC is monitoring 1,987 controlled groups with 4,152 pension plans where the financial condition of the plan sponsor poses a potential risk to the pension insurance system. The Corporation also undertook a substantial amount of litigation involving the largest pension default in the agency’s history, in addition to managing more than 350 active bankruptcy cases.

PBGC actively promoted comprehensive reform of the pension insurance system to address system underfunding through congressional testimony, news releases and statements, speeches and interviews. In each of these instances, PBGC has forcefully made the case for new rules to ensure that pension plans are better funded and that the pension insurance system remains viable over the long-term. During 2004, PBGC was a highly visible advocate for the Administration’s proposals to improve liability measures, enhance disclosure, and strengthen safeguards against underfunding. PBGC performed all of the computational analysis in support of the Administration’s ongoing development of a comprehensive reform proposal, and monitored 25 controlled groups involving 68 plans that had requested a minimum funding waiver in excess of $1 million. These plans covered over 1.1 million participants and had a total $17.3 billion in unfunded benefit liabilities. In addition, PBGC monitored 942 controlled groups with 2,918 pension plans to analyze the financial conditions of the companies and plans that pose a risk to the insurance system.

While the funding levels for insured plans are largely outside of PBGC’s control, the Corporation undertook several steps to improve its ability to monitor and respond to risks facing the insurance programs, including developing new models to quantify program risks, and establishing an Office of Risk Assessment. Early investigations, negotiations, and litigation, form the core of PBGC’s response to the broader solvency issues impacting the pension insurance program.

PBGC actively promoted comprehensive reform of the pension insurance system to address system underfunding through congressional testimony, news releases and statements, speeches and interviews. PBGC continues to make the case for new rules to ensure that pension plans are better funded and that the pension insurance system remains viable over the long-term. During 2005, the PBGC remained visible as an advocate for the Administration’s proposals to improve liability measures, enhance disclosure, and strengthen safeguards against underfunding.

Provide Exceptional Service to Customers and Stakeholders

PBGC uses the American Customer Satisfaction Index (ACSI), a national indicator of customer satisfaction, to measure whether customer expectations are being met and to identify the impact of service elements on customer satisfaction. PBGC obtains ACSI scores for three primary customer groups—pension practitioners, plan participants, and those accessing the PBGC Web site.

• The 2005 ACSI index for pension practitioners dropped to 68, one point less than the previous index of 69 sustained from 2002-2004, and lower than the 2004 composite satisfaction index of 72 for all participating federal agencies. ACSI results for 2005 show improvements in customer care, and timeliness and accuracy of refunds of premium overpayments.

• The 2005 ACSI index for participants who contacted the PBGC Customer Contact Center was 79. This was one point higher than the target of 78 and considerably higher than the 2004 composite satisfaction index of 72 for all participating federal agencies. For retirees who are currently receiving benefits from PBGC, the 2005 ACSI index was 85, one point higher than the target of 84. This was the highest score among the federal agencies that provide benefits to the American public and thirteen points higher than the federal average of 72.

• The 2005 ACSI index for pension practitioners who visited PBGC’s Web site dropped to 66, six points less than the 2004 baseline score of 72 and eight points less than the target of 74. Some of the reduction may be attributable to the fact that PBGC launched a new Web site to which customers were still becoming oriented. The PBGC expects that its new Web site, with its better organization and greater ease of navigation, will result in improved scores over time. In addition, PBGC made substantial improvements to its online services in 2005. For example, online filing of premium payments through the self-service system called My Plan Administration Account (My PAA), and electronic filing of financial information are now available. Efforts are also underway to improve the premium accounting system which is a key system to support practitioner online customer service related activities.

• The 2005 ACSI index for participants visiting the Web site was 65, five points higher than the 2004 baseline score of 60. This exceeded the target of 63. During 2005, PBGC expanded online business transactions for participants. In addition to making address changes and requesting electronic funds deposit, participants who access their benefit accounts electronically through the Web-based My Pension Benefit Account (My PBA) can now apply for benefits, designate a beneficiary and submit a request for a benefit estimate.

Exercise efficient and effective stewardship of PBGC resources

Achieving the Corporation’s performance goals requires effective management of resources–financial, human capital, and information technology. PBGC continued to maintain a cost-efficient operation with an administrative cost per participant in trusteed plans at $194.

President’s Management Agenda

The President’s Management Agenda (PMA) focuses on five areas to promote a customer-centric, results-oriented federal government. PBGC met this challenge in 2005 by:

• Strategic Management of Human Capital: PBGC continued to implement its Human Capital Strategic Plan, taking steps to enhance its ability to recruit and retain top talent and close critical competency gaps. These included establishing the Corporate Outreach Recruitment Team and a Career Intern Program. PBGC has now addressed four of five core competency gaps through highly focused internal training programs: Contract Management, Project Management, Data Management, and a “Big Picture” perspective of the agency’s mission, operations and environment. The first 30 employees completed the two-year Project Management Core Curriculum Program in 2005, with 81 percent of program participants achieving Project Management Professional certification this year. The fifth competency gap, Information Technology, will be addressed in 2007.
  
  In promoting a performance-based culture, PBGC was among the first federal agencies to begin aligning performance expectations with organizational goals, and was given full certification by the Office of Personnel Management for its executive performance system. PBGC also conducted the Gallup Q12 Survey early in 2005 to assess the level of employee engagement. PBGC’s results were in the 61st percentile of the U.S. overall working population. Employees and managers worked together to implement Impact Plans, which are specific roadmaps to improving engagement in the workplace.
  
  PBGC continued to build its program of professional employee development through enhanced succession planning and expanded mentoring programs. The Leaders Growing Leaders program entered its third two-year cycle in 2005. Finally, PBGC effectively leveraged technology to improve management of its personnel, harnessing business intelligence tools for workforce analysis, forecasting and trends.
  
  
• Competitive Sourcing: As a Government Corporation, PBGC is not subject to the FAIR Act competitive sourcing process. For many years PBGC has been a government leader in outsourcing certain of its services making use of an internal process to evaluate whether workload requirements are best addressed via Federal staff or contract support. PBGC uses many private sector entities for a wide variety of functions, including a number of benefit payment and benefits administration services, information technology, actuarial services, money management, office space, legal services, financial advisory services, etc. PBGC’s commitment towards a competitive based work environment has resulted in approximately two-thirds of PBGC’s administrative budget being in the form of procurements along with outsourced services employing some 1,400 contract staff to supplement PBGC’s 851 Federal staff.
  
• Improved Financial Management: PBGC’s management internal controls program was strengthened through the establishment of an Internal Controls Committee to oversee the effectiveness of key management controls, which are tested for design and operating effectiveness. Testing is conducted to strengthen the supporting evidence for the PBGC FMFIA assurance statement. PBGC also completed the 2005 Performance and Accountability Report in 45 days for the second consecutive year.
  
  
• Expanded Electronic Government: PBGC made significant improvements to its Web site and expanded Web-based services available for pension plan administrators and trusteed plan participants. The redesigned Web site, www.pbgc.gov, significantly improves site navigation, enabling users to quickly find information and guidance related to PBGC.
  
  Plan administrators can now file financial information electronically through PBGC e-4010 application and file premium payments electronically, improving data accuracy and reducing filing preparation.
  
  Participants in trusteed plans can now apply for benefits, designate a beneficiary, and submit a request for a benefit estimate, in addition to making address changes and requesting electronic funds deposit. Plan level information for trusteed plans has also now been made available to trusteed participants.
  
  
• Budget and Performance Integration: PBGC modified its strategic planning and budget process to ensure alignment with the Corporation’s strategic direction, and to identify new outcome goals and objectives. These goals and objectives address the challenges PBGC now faces and those anticipated in the future. The Performance Budget for 2007 includes the modified goals and objectives.

Program Evaluation

• PBGC annually evaluates the satisfaction of participants in plans trusteed by PBGC and of pension practitioners. The American Customer Satisfaction Index provides a means to compare PBGC’s results with those of other government and private organizations. Evaluation of the survey responses results in service innovations and process improvements that benefit PBGC customers.

• PBGC had its first Program Assessment Rating Tool (PART) review by the Office of Management and Budget (OMB) in 2004. OMB rated PBGC’s program as “moderately effective” overall with a score of 79. PBGC received scores of 80 or higher, “fully effective”, for the three assessed areas of Program Purpose and Design, Strategic Planning, and Program Management.

The Program Results/Accountability area scored 75. OMB’s PART analysis reflected its view that PBGC performed well in areas that are under PBGC’s statutory control, but that a rating of “effective” was not possible for the Program Results/Accountability area unless and until the statutory mandate under which PBGC operates is modified to strengthen pension plan funding rules and the premium structure is altered to more accurately reflect the risks posed by individual plans. Nonetheless PBGC is working to improve Program Results/Accountability which focuses on financial conditions of the pension system. PBGC worked closely with the Department of Labor (DOL), Department of Treasury and other executive branch agencies promoting comprehensive pension reform. The proposed reforms which strengthen plan funding rules, enhance transparency of plan information, and reform the premium structure for defined benefit plans. Comprehensive pension reform was included in the President’s FY 2006 Budget to Congress. In response to a GAO report in June 2005, PBGC is continuing to work with DOL and IRS to collect pension plan information more efficiently. PBGC continues to aggressively explore opportunities to strengthen its pension plan monitoring and encourage better funding of the defined benefit system.

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