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Answer: We have no plans to discourage anyone from requesting copies of reports. However, because of a reduction in disclosure room staff, requestors may have to wait longer for a response. In addition, fewer summary plan descriptions (SPDs) will be disclosed because we will have to spend more time locating each one. This extra time is a result of our stopping the microfiching of SPDs to save contract funds. We are not satisfied with this arrangement and are looking at changes that can be made to make our operations more cost effective.
Question: What effect will a reduction in advisory services have on future violations?
Answer: Reducing the number of advisory opinions issued by PWBP could have some adverse effect on the actions of plan administrators and others involved with employee benefit plans. PWBP issues advisory opinions (written statements applying ERISA to specific factual situations) on a wide range of difficult issues, for example, determining whether a certain individual is a plan administrator under ERISA, whether a certain plan is covered by ERISA, whether ERISA preempts a certain law, etc. These opinions not only assist the particular individuals requesting an opinion but assist all such individuals in similar circumstances.
We are hopeful that ERISA expertise has increased to an extent, and enough regulations have been issued, that the ERISA community can interpret the law without benefit of advisory opinions. We also intend to use speeches and responses to telephone inquiries to provide assistance and make our position clear.
PENSION BENEFIT GUARANTY CORPORATION
STATEMENT OF ROBERT E. NAGLE, EXECUTIVE DIRECTOR
HENRY ROSE, GENERAL COUNSEL, OFFICE OF THE GENERAL
COUNSEL WILLIAM DEHARDE, DIRECTOR, OFFICE OF PROGRAM OPERATIONS LAWRENCE MASLAN, DIRECTOR, OFFICE OF FINANCIAL OPERATIONS
Senator ABDNOR. Next, we are going to hear from Mr. Robert Nagle, the Executive Director of the Pension Benefit Guaranty Corporation.
Mr. Nagle, we welcome you and your colleagues this morning. I will ask you to introduce the people with you.
INTRODUCTION OF ASSOCIATES
Mr. NAGLE. Good morning, Mr. Chairman.
On my left, immediate left, is Mr. Henry Rose who is the General Counsel of our agency.
And to his left is Mr. William DeHarde who is Director of our Office of Program Operations.
On my right is Mr. Lawrence Maslan who is our Director of Financial Operations.
Senator ABDNOR. Fine.
Mr. Nagle, I know you have a prepared, written, statement. As the same with Mr. Dotson, it isn't necessary for you to go through it in its entirety. I assure you your written statement will be placed in the record as though given in the full form. So you may go ahead any way you care to.
Mr. NAGLE. Well, if it suits you, Senator, we can just proceed with the questions, or I will give a short summary.
SUMMARY OF PREPARED STATEMENT
The Pension Benefit Guaranty Corporation was established in 1974 under Title IV of the Employee Retirement Income Security Act. Our function is to guarantee certain benefits under privately sponsored defined benefit pension plans.
The costs of our program are borne entirely by premiums assessed against plans which are covered by the program. And we use no general revenue funds.
At the present time, we administer essentially two programs. One is for single-employer defined benefit plans. Under that program, if the sponsor of a single-employer program intends to terminate the plan,
they must notify us, and provide us with sufficient information to make a judgment as to whether the plan does have sufficient assets to pay all guaranteed benefits.
If it does not, we end up becoming the trustee of that plan. We take over its assets and assume the obligation to pay the benefits which are vested under that plan and guaranteed pursuant to the statute. And those payments that we thereby make to participants are reflected in one of the items in our budget plan. That would be the $75.9 million projected for fiscal 1983.
We also administer a guarantee program for multiemployer plans. That program was redesigned in 1980 by Congress when it passed the Multiemployer Pension Plan Amendments Act of 1980.
The purpose of that legislation was to encourage multiemployer plans to continue in existence even though they may be experiencing some degree of financial difficulty. If a multiemployer plan should become insolvent and unable to pay the level of guaranteed benefits provided by the statute, we provide financial assistance to that plan to enable it to pay guaranteed benefits.
That financial assistance might end up being either an outright grant or a loan, depending upon the plan's circumstances. That aspect of our responsibility is reflected in the second item in our budget plan which projects $2.8 million for financial assistance to insolvent multiemployer plans for fiscal 1983.
And the third item on our budget plan is for administering these programs. We have projected $27.9 million for fiscal 1983 which would support 492 full-time positions.
Senator ABDNOR. Is that $2.8 million, the projections you have, with the economy in the shape it is in, I suppose, a pretty reliable figure, do you think, for the year?
Mr. NAGLE. The amount that we will have to pay in benefits?
Mr. NAGLE. Well, I think that it is. Due to the conditions in the economy, we may during this period of time incur more long-range obligations than we hope to, but if we are just looking ahead to the amount of payments we will be actually paying out over the next year, I think this figure is likely to be pretty close to the mark.
LEGISLATION TO INCREASE PREMIUMS Senator ABDNOR. The Corporation's revolving fund is expected to have a $192 million deficit by the end of fiscal year 1983 compared to $131 million at the end of fiscal 1981.
Now, the basic problem we see seems to be that the premiums charged pension funds are inadequate to cover the amount of liability assumed by the fund. Last year you testified that legislation to increase premiums would soon be forthcoming. However, no legislation has yet been submitted.
Why has the Corporation not yet submitted legislation to increase the funds?
Mr. NAGLE. We will be sending a recommendation for a premium increase within the next few weeks, Senator. The staff has prepared a recommendation for a premium increase, and it has recently been approved by our Board of Directors. We are now preparing a more comprehensive submission, explaining all the reasons for it, and providing various analyses for the use of the Congress. We will be forwarding that to Congress within the next few weeks.
Senator ABDNOR. Well, it is kind of an obvious question, but why did it take a couple of years to take care of this? Was there a lot of backgound that had to be prepared on that?
Mr. NAGLE. Well, we did want to assess the results of our fiscal year 1981 which ended last September. And the experience of that year did indicate that our deficit had increased even more than we had supposed that it would.
There has also been considerable talk about the possibility that Congress might enact some significant revisions to our single-employer program. We thought it appropriate to make some additional assessment of what the impact of that legislation might be if it was passed.
There is legislation that has been introduced in Congress for that purpose.
Senator ABDNOR. Has the picture cleared up now so you think you have a better feel for it?
Mr. NAGLE. I think so; yes. As well as can be done. We are operating in a very uncertain field. The best we can do, we believe, is to make projections based upon our past experience.
Obviously, there are many uncertainties in the economy facing us. And it is very hard to translate those uncertainties into a premium figure.
Senator ABDNOR. You will have something submitted in the very near furture, will you?
Mr. NAGLE. Yes, indeed.
RECOMMENDED AMOUNT OF PREMIUM INCREASE Senator ABDNOR. Let me ask how much of an increase in premiums do you think is needed to put the revolving fund on a sound financial footing?
Mr. NAGLE. We are recommending a premium increase from the present $2.60 per participant per year to $6.
Senator ABDNOR. Substantial. Would that pretty well wipe out your deficit if you had that kind of a rate?
Mr. NAGLE. We believe that if our experience continues as we have projected from the past that that would be sufficient to handle future claims and eliminate the present deficit over the next 5 years.
Senator ABDNOR. Before you send all that material up in your recommendations, this is going to be directed to Congress, or do you first have to go through OMB?
Mr. NAGLE. Well, we have been through that process.