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PBGC Plan Sponsor Advocate: Progress in ’22, But More to Do

Regulatory Agencies

The Pension Benefit Guaranty Corporation’s (PBGC) Office of the Participant and Plan Sponsor Advocate reports progress in 2022, but adds in its 2022 annual report that there is more to be done. 

Payments to Participants 

The Office of the Advocate reports that in 2022, the PBGC paid more than $7 billion to more than 960,000 plan participants. 

Customer Service  

During the first half of 2022, the report says that the Office of the Advocate at times received a high volume of calls from participants involving issues with PBGC’s Customer Contact Center. These included: 

  • long wait times;
  • dropped calls; and 
  • the inability to bring matters to upper management. 

The report attributes these issues, in part, to challenges the PBGC faced with the rollout of its new customer relationship management (CRM) software and other information technology upgrades, as well as a staffing shortage affecting the number of customer service representatives. 

The report says that the PBGC Office of Benefits Administration (OBA) has assured the Office of the Advocate that it is taking steps to improve staffing levels, onboarding times, training, and technology to better enable the Customer Contact Center to better handle large call volumes. The report notes that the Office of the Advocate has observed a “consistent decrease” in the number of participant complaints about the Customer Contact Center, and attributes that to OBA’s efforts during the second half of the year.

Connecting Participants with Their Unclaimed and Lost Benefits

The Office of the Advocate reports that in 2022:

  • It helped participants with pension tracing research to locate their lost defined benefit plans.
  • It was involved with larger initiatives to connect certain populations of missing participants with unclaimed benefits belonging to them that the PBGC holds.
  • The PBGC’s ongoing interagency agreement with the Department of Labor’s Employee Benefits Security Administration (EBSA), struck in 2017 by the Office of the Advocate, continued to be helpful in connecting individuals with their earned pension income. Under this agreement, EBSA’s regional office benefits advisors help the PBGC locate and connect participants with their unclaimed benefits held as part of PBGC’s Missing Participants Program. 

Risk Transfer

The Office of the Advocate says that it has observed “a notable shift” in the volume and type of plan sponsor cases over the years, and that many plan sponsors are acting to de-risk their existing pension liabilities — and many of them chose “to fully exit the defined benefit system.” 

Risk transfer, the report warns, has far-reaching implications — especially for participants who would lose PBGC guarantees and protection. Further, it says, de-risking affects the PBGC by potentially increasing the agency’s overall risk and exposure if financially healthy plan sponsors reduce or eliminate their obligation and risk, causing less healthy sponsors with more poorly funded plans to make up a greater share of the defined benefit system.

Distress Terminations

The report says that the Office of the Advocate “has repeatedly raised suggestions to agency senior leadership for distress termination process improvements,” and that these include:

  • recommending regular status meetings with the plan sponsor;
  • greater oversight and supervision of the case team; 
  • streamlining procedures for charity and not-for-profit plan sponsors; and 
  • obtaining feedback directly from plan sponsor advisors familiar with the process.

Pension Plan Registry

The report says that the Office of the Advocate is working with the PBGC’s Quality Management Division to review and assess the prototype and identify additional data sources and fields that can be incorporated into a more robust pension plan registry tool. 

Looking Ahead 

The report also looks to the future. 

Missing Participants. “One thing the agency can do right now to help promote retirement security is improve its Missing Participants Program in accordance with recommendations outlined in a January 2022 report on the topic by the PBGC Inspector General,” writes PBGC Participant and Plan Sponsor Advocate Constance A. Donovan.

 “There is much more that PBGC could be proactively doing to locate the many missing participants not captured by this activity,” says Donovan. For instance:

  • The PBGC’s records and pension expertise can help participants find information about defined benefit plans they haven’t been able to locate. 
  • The Office of the Advocate’s Pension Plan Registry Project is exploring options for building a registry database using PBGC data from old DB plan-related records that can be used to trace the history of a plan. 
  • The PBGC is currently testing a prototype registry tool.

Processes. The report says that the office “has repeatedly identified inefficiencies resulting from the stove-piped nature” of other departments and “there is an urgent need to reassess and update the agency’s internal processes so that each department knows its role in bringing a case toward resolution.” 

The report says that this reassessment must involve:

  • reviewing outdated policies and procedures; and 
  • resolving outstanding questions about (1) case ownership and (2) responsibility for making benefits administration decisions. “Every benefit determination does not need to become a legal question” that only the Office of the General Counsel can answer, she asserts. 

Pension Plan Registry. The Office of the Advocate plans to conduct a mid-year assessment of the prototype tool in 2023, which it says will involve further exploring new data and enhancements that could eventually be integrated in a larger registry database. It also anticipates continued collaboration with the PBGC in reviewing the prototype and implementing the registry system architecture.

The Big Picture 

“Unless solutions are identified to enhance retirement security, a growing number of older Americans lacking benefits from defined benefit plans will face dire resultant financial challenges, including an inability to afford housing and long-term care post-retirement,” warns the report. It continues that, “Later generations, charged with supporting relatives who are no longer able to work, will also feel the economic reverberations of the shift away from the defined benefit retirement system to a savings-based system in which participants bear the responsibility of ensuring adequate funds for retirement.”

“The future of the defined benefit system and what it means for retirement security in America is an issue of interest to the Office of the Advocate,” says Donovan.