Statement of Regulatory and Deregulatory PrioritiesStatement of Regulatory and 

Deregulatory Priorities

PENSION BENEFIT GUARANTY CORPORATION (PBGC)

PBGC Insurance Programs

The Pension Benefit Guaranty Corporation (PBGC) administers two insurance 

programs for privately defined benefit plans under title IV of the Employee 

Retirement Income Security Act of 1974 (ERISA): A single-employer plan 

termination insurance program and a multiemployer plan insolvency insurance 

program. The PBGC protects the pensions of nearly 42 million working men and 

women in about 45,000 privately defined benefit plans, including about 2,000 

multiemployer plans.

Under the single-employer program, the PBGC pays guaranteed and certain other 

pension benefits to participants and beneficiaries if their plan terminates with 

insufficient assets (distress and involuntary terminations). At the end of 

fiscal year 1997, the PBGC was trustee of about 2,500 plans and paid $824 

million in benefits to about 206,000 people during 1997. Another 260,000 people 

will receive benefits when they retire in the future.

Most terminating single-employer plans terminate with sufficient assets to pay 

all benefits. The PBGC has administrative responsibility for these terminations 

(standard terminations), but its role is limited to seeing that proper 

procedures are followed and participants and beneficiaries receive their plan 

benefits.

The multiemployer program (which covers about 8.8 million workers and retirees 

in about 2,000 insured plans) is funded and administered separately from the 

single-employer program and differs in several significant ways. The 

multiemployer program covers only collectively bargained plans involving more 

than one unrelated employer. The PBGC provides financial assistance (in the form 

of a repayable loan) to the plan if the plan is unable to pay benefits at the 

guaranteed level. Guaranteed benefits are generally less than a participant's 

full benefit under the plan (and less than the single-employer guaranteed 

benefit). PBGC financial assistance occurs infrequently.

The PBGC receives no funds from general tax revenues. Operations are financed by 

insurance premiums, investment income, assets from pension plans trusteed by the 

PBGC, and recoveries from the companies formerly responsible for the trusteed 

plans.

To carry out these functions, the PBGC must issue regulations interpreting such 

matters as the termination process, establishment of procedures for the payment 

of premiums, and assessment and collection of employer liability.

Objectives and Priorities

PBGC regulatory objectives and priorities are developed in the context of the 

statutory purposes of title IV: (1) To encourage voluntary private pension 

plans, (2) to provide for the timely and uninterrupted payment of pension 

benefits to participants and beneficiaries, and (3) to maintain the premiums 

that support the insurance programs at the lowest possible levels consistent 

with carrying out the PBGC's statutory obligations (ERISA section 4002(a)).

The PBGC implements its statutory purposes by developing regulations designed 

(1) to assure the security of the pension benefits of workers, retirees, and 

beneficiaries; (2) to improve services to participants; (3) to ensure that the 

statutory provisions designed to minimize losses for participants in the event 

of plan termination are effectively implemented; (4) to encourage the 

establishment and maintenance of defined benefit pension plans; (5) to 

facilitate the collection of monies owed to plans and to the PBGC, while keeping 

the related costs as low as possible; and (6) to simplify the termination 

process.

Legislative Initiatives

On December 8, 1994, the Retirement Protection Act of 1994 was enacted. The 

Retirement Protection Act (1) accelerates the funding of underfunded 

single-employer pension plans, (2) phases out the cap on the variable rate 

portion of the premium paid to the PBGC by underfunded single-employer plans, 

(3) provides the PBGC with better tools to prevent employers from escaping their 

plan funding obligations through corporate transactions, (4) requires better 

information to participants in underfunded plans on plan funding status and PBGC 

guarantees, and (5) helps assure that workers do not lose pensions because they 

have lost contact with a terminating pension plan covered by the PBGC.

In May 1996, the President submitted the Retirement Savings and Security Act 

(RSSA) to Congress. The RSSA would have expanded coverage, increased portability 

and worker protection, and simplified pension law. The proposal included an 

increase in the guarantees in the multiemployer insurance program to address 

inflation since 1980 and expansion of the PBGC's missing participant program to 

include terminating defined contribution plans and non-PBGC-covered defined 

benefit plans. The Small Business Job Creation Act of 1996 and the Taxpayer 

Relief Act of 1997 included many of the RSSA provisions but did not include the 

increase in the multiemployer guarantee or the expansion of the missing 

participant program. These provisions are contained in several bills that were 

introduced in the House and Senate in 1997 and 1998 and remain legislative 

objectives.

Many workers are not saving enough, through personal savings or a 401(k) or 

other defined contribution plan, for a secure retirement. About half of all 

workers have no employment-based pension coverage. In businesses with fewer than 

100 employees, only about 20 percent of workers are covered by any retirement 

plan. Traditional pension plans, i.e., defined benefit plans, provide a 

predictable lifetime benefit, guaranteed by the PBGC. Yet the defined benefit 

system is stagnating. We want to revitalize the system so that it can meet the 

retirement needs of American workers into the future.

In early 1998, the Administration proposed a new, simplified defined benefit 

plan--the Secure Money Annuity or Retirement Trust (SMART)--for employers with 

100 or fewer employees. SMART combines the advantages of traditional defined 

benefit plans and defined contribution plans, while removing some of the major 

obstacles that discourage small business from adopting defined benefit plans. 

(The SMART proposal is contained in the Employee Pension Portability and 

Accountability Act of 1998 (H.R.3672) and the Retirement Accessibility, 

Security, and Portability Act of 1998 (S.2249 and H.R.4152).) For workers, SMART 

provides predictable benefits for life, guaranteed by PBGC, portability, and a 

chance to share in favorable investment experience. For employers, SMART offers 

more predictable contributions and reduced administrative costs. The 

Administration is also looking at ways to revitalize the defined benefit system 

for larger employers and their workers. The PBGC has made one of its priorities 

talking with consultants and others trying to market defined benefit plans in 

order to understand what are the current barriers to expansion of defined 

benefit plans and what changes are necessary to reinvigorate the defined benefit 

system.

Regulatory and Deregulatory Initiatives

The PBGC issued regulations implementing the Retirement Protection Act through 

the end of 1996. In FY 1997 and FY 1998, the PBGC focused on changes that would 

simplify the rules and reduce regulatory burden. The PBGC:

* Reduced penalties for late premiums that are paid before the PBGC notifies the 

plan of the delinquency (statement of policy, December 2, 1996).

* Extended the time limits for various actions required to terminate a fully 

funded single-employer plan in a ``standard termination'' (final rule, November 

7, 1997).

* Stopped the reduction of monthly benefits under its actuarial recoupment 

method once the nominal amount of the benefit overpayment is repaid (final rule, 

May 29, 1998).

* Provided participants with benefits valued up to $5,000 in PBGC-trusteed plans 

with the choice of receiving their benefit in the form of an annuity or a lump 

sum (final rule, July 17, 1998). 

The PBGC is continuing to review its regulations to look for further 

simplification opportunities.

The PBGC's regulatory plan for October 1, 1998, to September 30, 1999, consists 

of one significant regulatory action.