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CCH® PENSION AND BENEFITS — 11/28/08

GAO recommends improvements to EBSA, PBGC

The U.S. Government Accountability Office (GAO) has issued recommendations for improving the monitoring and enforcement of pension laws and regulations by the Labor Department’s Employee Benefits Security Administration (EBSA) and has recommended ways for the Pension Benefit Guaranty Corporation (PBGC) to improve its financial stability. The recommendations were posted to the GAO’s website. The postings also provide links to key reports for further research into each specific policy recommendation.

Improving private pension plan monitoring and enforcement

EBSA lacks the information it needs to provide effective oversight of private pension plans, such as specific information on 401(k) plan fees, which could improve monitoring and compliance efforts, according to the GAO. Although EBSA’s enforcement has improved, the GAO said that the agency continued to be “largely reactive” in its enforcement of private pension laws and regulations. Instead of conducting routine compliance examinations or ongoing risk assessments, the agency focused its efforts on responding to participant complaints, and targeted its inspections using information from completed investigations, using data that was often several years old. “It is important that EBSA evaluate its overall enforcement strategy and determine how its reliance on dated information has affected its investigations,” the GAO said.

The GAO made the following recommendations:

- Congress should consider whether payroll-deduction IRAs should be subject to direct oversight in light of the DOL’s comments that it does not have jurisdiction over these IRAs.

- The Labor Department should examine ways to encourage employer sponsorship of IRAs, evaluate measures to determine whether employers offering IRAs are in compliance with the law, and develop means to collect additional information on IRAs.

- EBSA should expand enforcement to include a focus on terminated defined benefit plans the Pension Benefit Guaranty Corporation has identified as having potential conflicts of interest, and share data on conflicts of interest with PBGC and the Securities and Exchange Commission.

- Congress should consider amending ERISA to expand the authority of the Labor Department to recover losses against nonfiduciaries.

Improving financial stability of PBGC

In July 2003, the GAO designated the PBGC’s single-employer pension insurance program—its largest insurance program—as “high risk.” The GAO noted that the program remains on the high risk list today.

To improve the stability of the PBGC, the GAO recommends:

- That the PBGC provide for all legal functions to be overseen by a single chief legal officer with full authority to delineate the duties of each legal office and a direct reporting relationship to the Director.

- Congress consider expanding the PBGC’s board of directors. In addition, the board should take steps to ensure greater accountability for the full implementation of the board’s new investment policy decisions and for appropriate oversight of an investment policy that carries more risk.

- The PBGC take steps to improve its contract management as it implements a performance-based approach to contracting; revise its human capital strategic plan to reflect the importance of contracting and its use of contractors; and better link staffing and contracting decisions at the corporate level.

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