	Background

PBGC’s single-employer insurance program is a federal program that  protects the retirement incomes of more than 34 million workers and  retirees covered by almost 29,000 private sector defined benefit pension  plans. PBGC Has a Process in Place to Monitor and Ensure the Accuracy of Its Single- Employer Probable Claims Forecasts

PBGC reports that it monitors its probable claims on an ongoing basis by  contacting plan sponsors to obtain certain plan financial information,  reviewing filings submitted by probable plans to conduct a risk analysis,  and performing valuations to determine, among other things, the present  value of net probable claims and expected date of probable plan  termination. PBGC Takes Steps to Ensure the Accuracy of Its Probable Claims

PBGC reports that it takes certain steps to help ensure the accuracy of its  probable claims. Although PBGC and public companies follow the same accounting  standards for recording probable losses in their annual financial  statements, they each follow different policies and requirements when  reporting information about probable losses throughout the fiscal year. When reporting information on liability settlements, PBGC follows its own  set of policies and procedures, while public companies are required to  follow the standards set forth by SEC requirements. Differences in PBGC and Public Company Liability Settlement Reporting Result from Differences between PBGC Disclosure Policies and SEC Requirements

PBGC and publicly traded companies have different practices for  disclosing information on liability settlements, including probable losses. Unlike public companies, PBGC and FDIC are not subject to SEC  requirements. In addition, pension  experts, financial analysts, and industry association representatives told us  that PBGC’s disclosures are likely to become increasingly important in  light of upcoming changes in the pension accounting rules for plan  sponsors. Over the last several years PBGC took the following actions to improve the  transparency of its disclosures:  it published a fact sheet on its Web site that provides answers to questions  that have been raised about PBGC financial condition, including its deficit,  the true cost of its insurance program, and pension underfunding; it revised its annual report to include more detailed information about its  methodology for determining probable claims; it revised its Pension Insurance Data Book 2003 , which has detailed  statistics for the agency’s insurance programs, to include information  related to PBGC’s claims experiences in order to provide more historical  data on the number and size of claims by the year the plans terminated,  the funding levels of the plans at termination, and the size of the plans at  termination; it released extensive data about PBGC’s financial condition, as well as  explanatory and white papers about how to understand PBGC’s financial  condition, reports, and methods available on its Web site (www.pbgc.gov);  and it revised the agency’s Web site to make it more user-friendly. For example, PBGC does  not include sufficient information to determine the financial impact of new  terminations on PBGC’s financial position when it issues a press release. To improve the transparency of the interest rate assumptions PBGC uses  to calculate its liabilities, we recommend that PBGC makes it interest rate  methodology more widely available to the public. Appendix I: Comments from the Pension Benefit Guaranty Corporation

Appendix II: Comments from the Securities and Exchange Commission

Appendix III: Other Concerns Regarding the Information PBGC Discloses about Its Financial Condition

Pension experts and others had additional concerns about the Pension  Benefit Guaranty Corporation’s (PBGC) methodology and practices that  have been addressed by PBGC.
Why GAO Did This Study

The Pension Benefit Guaranty Corporation's (PBGC) single-employer insurance program insures the pension benefits of over 34 million participants in almost 29,000 private sector defined benefit pension plans. The increase in PBGC's probable claims has raised questions about PBGC's monitoring and financial disclosure practices, including whether the information that PBGC discloses is sufficient for interested parties to understand the effect on PBGC's financial condition. GAO examined (1) the steps that PBGC takes to monitor and ensure the accuracy of its probable claims, (2) how PBGC's financial liability reporting compares with those of publicly traded companies, and (3) the steps PBGC has taken to improve the transparency of its financial reporting and whether additional improvement is needed.

What GAO Found

PBGC takes steps to monitor and ensure the accuracy of its single-employer probable claims forecasts. PBGC reported it monitors its probable claims on an ongoing basis by contacting plan sponsors to obtain certain plan financial information, reviewing filings submitted by probable plans to conduct a risk analysis, and performing valuations to determine the present value of net probable claims and expected date of probable plan termination. To ensure the accuracy of its probable claims, PBGC reported that it uses an automated system and available plan financial data to calculate the assets and liabilities for probable plans. PBGC and public companies have different practices for disclosing certain information about liability settlements, including probable losses, that arise from the differences between PBGC's responsibilities and disclosure policies, and the Security and Exchange Commission's (SEC) requirements for public companies. While PBGC and public companies follow the same accounting standards for recording probable losses in their annual financial statements, they each follow different policies and requirements when reporting information about probable losses throughout the fiscal year. When reporting information on liability settlements, public companies are required to follow the standards set forth by SEC requirements, while PBGC, which is not subject to SEC requirements, follows its own set of policies and procedures. GAO found that PBGC's disclosure practices regarding probable losses are more comparable to those of the Federal Deposit Insurance Corporation (FDIC). PBGC has made efforts to improve the transparency of the information it discloses about its financial condition, but pension experts, financial analysts, and others believe that additional improvements are still needed. PBGC has recently taken steps to include more information about its methodology for determining probable claims in its annual reports and make more detailed information on its financial condition available on its Web site. However, pension experts, analysts, and industry association representatives still have concerns about transparency. Many stated that the press releases PBGC issues that announce newly terminated plans do not provide the public with enough information to determine the financial impact of such plans on PBGC's published deficit. In addition, these parties expressed concern about the lack of transparency regarding the methodology PBGC uses to determine its interest rate its uses to calculate its liabilities. Specifically, these parties told us the fact that PBCG does not widely disclose the interest rate methodology contributes to ambiguity about PBGC's assumptions and means that these parties are unable to fully assess PBGC's financial condition.