U.S. Pension Agency Cited For Lax Controls

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by John Solomon

The federal corporation charged with rescuing Americans' pensions from financially faltering companies is receiving poor reviews of its own that are alarming the agency's internal watchdog and key members of Congress.

Over the past two years, the Pension Benefit Guaranty Corp. has lost Social Security numbers stored on an unsecured thumb drive, given erroneous information to lawmakers and even flunked its own financial management audit, a Center for Public Integrity review has found.

"PBGC did not have effective internal control over financial reporting (including safeguarding assets) and compliance with laws and regulations and its operations," Rebecca Anne Batts, the PBGC inspector general, wrote in a recent letter. Auditors hired by Batts' office found that the corporation suffered from a "material weakness," the accounting equivalent of an F grade.

The center's review of hundreds of pages of memos, audits and internal reports shows the PBGC has been unable to make several guarantees about its own work — in some cases misleading Congress and its inspector general into believing long-simmering problems were resolved.

"Providing false information to OIG or Congress can be a criminal violation," Sen. Charles Grassley of Iowa, the senior Republican on the Senate Finance Committee, warned in a letter March 31 that was provided to the center. Grassley chided the corporation for its "apparent dishonesty" in claiming it fixed long-simmering problems when it did not.

Created in 1974, PBGC is essentially the government's insurance program for retirees. It protects the pensions of approximately 44 million workers and retirees in more than 29,000 private defined benefit pension plans that promise a fixed monthly payment to retirees for life. When a covered company's pension plan defaults, PBGC swoops in and protects workers' retirements.

The corporation receives no tax dollars, funded instead by insurance premiums paid by pension plan operators, investments and assets it recovers from companies whose pension plans needed to be rescued.

A Litany Of Problems

Getting its story straight with Congress is just one of PBGC's problems.

The corporation has been criticized for letting its contractors hire employees with inadequate experience or education, and it has been cited repeatedly since 1997 for failing to create a unified financial management system to better safeguard its funds. It lacks the ability, for instance, to independently confirm the investment revenue figures reported by a contractor hired to engage in securities lending on its behalf, according to audit reports and interviews.

"I am acutely aware that every dollar spent on a contractor who doesn't provide the promised level of service or who doesn't provide contract workers with the minimum qualifications needed to do the job is a dollar that is not available to pay the pension benefits of the workers that PBGC was created to protect," Batts said in an interview.

In addition, former PBGC Chief Executive Charles Millard was the subject of a yearlong criminal investigation that ended in March with no criminal charges but a conclusion that his conduct raised "serious ethical concerns," documents show.

Such systemic problems are of acute concern to lawmakers like Grassley and Democratic Sen. Herb Kohl of Wisconsin, the chairman of the Senate Aging Committee, particularly because the corporation's own long-term financial outlook has worsened over the past few years.

Kohl, who is pressing for legislation to strengthen the PBGC's oversight, said the corporation's "long-running problems ... should serve as a wake-up call to Congress."

"Nearly 1 in 6 Americans relies on the PBGC to guarantee the pensions they've worked a lifetime for. The agency is far too important to let it operate without adequate oversight," he said.

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[Ban Hammer 13,369]

we just need another government program to watch over this government program.....