U.S. Department of Labor
Julie A. Su, Acting Secretary of Labor
Lisa M. Gomez, Assistant Secretary, Employee Benefits Security Administration EBSA
Ali Khawar, Principal Deputy Assistant Secretary, EBSA
Gwen McCullough, Special Assistant in the Office of the Assistant Secretary, EBSA
Nicole Swift, Division Chief, EBSA
Ashley Piatt, Employee Benefits Law Specialist, EBSA
Janelle Leung-Tat, Employee Benefits Law Specialist, EBSA
U.S. Department of the Treasury
Laurie Schaffer, Acting Assistant Secretary for Financial Institutions
W. Moses Kim, Director, Office of Financial Institutions Policy
Jong Ho Hwang, Senior Policy Advisor, Office of Financial Institutions Policy
Kyle Brown, Deputy Benefits Counsel, Office of Benefits Tax Counsel
U.S. Department of Commerce
Gina M. Raimondo, Secretary of Commerce
Ezra Kagan, Senior Policy Advisor to the Secretary
Julia Beckhusen, PhD, Senior Economist, U.S. Census Bureau
Pension Benefit Guaranty Corporation
Ann Orr, Acting Director, Pension Benefit Guaranty Corporation
Karen L. Morris, General Counsel and Secretary to the Board
Michael Rae, Acting Chief Policy Officer
Patricia Kelly, Chief Financial Officer
David Mudd, Chief Investment Officer
Arrie Etheridge, Director, Human Resources Department
Ross Marcelin, Director, Plan Compliance Department
Bob Scherer, Chief Information Officer
David Foley, Chief of Benefits Administration
Ted Goldman, Director, Policy Research and Analysis Department (PRAD)
Evan Inglis, Actuary, PRAD
Kevin Muse, Actuary, PRAD
PBGC Office of Inspector General
Nick Novak, Inspector General
PBGC Office of the Participant and Plan Sponsor Advocate
Connie Donovan, Participant and Plan Sponsor Advocate
Camille Castro, Senior Associate Participant and Plan Sponsor Advocate
Emily Spreiser, Associate Participant and Plan Sponsor Advocate
The Chair called the meeting to order and welcomed the attendees. The Chair welcomed Ann Orr to her first board meeting as PBGC Acting Director. The Chair recognized President Biden’s nomination of Deva Kyle, a former PBGC employee, for the PBGC Director position. The Board approved the April 22, 2024, Board meeting minutes by voice vote.
The Acting Director provided an update on the Special Financial Assistance (SFA) program work, noting the milestone of PBGC’s approval of SFA applications for plans covering a total of 1 million participants, and expressing appreciation for the hard work and dedication of PBGC staff and PBGC’s consultation and collaboration with Board agency staff.
The Acting Director closed her report by highlighting recent meetings she hosted with ERISA stakeholder groups to discuss concerns about single-employer and multiemployer defined benefit plans and premiums, noting that PBGC’s forthcoming Projections Report will provide more details about the funding of PBGC’s pension programs.
The Chair thanked the Acting Director and asked about PBGC’s timeline for establishing the final rule for withdrawal liability assumptions under ERISA § 4213. The Acting Director stated that PBGC is working closely with Labor and Treasury Department staff to draft a final rule that PBGC anticipates publishing in the Federal Register before the end of 2024.
The Chair requested an update on PBGC’s MyPBA online benefit estimates. The Acting Director reported that PBGC is making substantial progress toward enabling all participants and beneficiaries in PBGC-trusteed single-employer plans to obtain a benefit estimate from PBGC’s website. The Chair thanked the Acting Director and congratulated PBGC on approving Special Financial Assistance for plans covering 1 million participants.
Secretary Raimondo thanked the Acting Director for her report and for her meetings with stakeholder groups and asked about a framework for evaluating premium concerns. The Acting Director noted that PBGC is working closely with OMB and its Board on these issues and discussed balancing the goals of retirement security and affordability, and the long term health of the defined benefit program. Treasury Board Representative Schaffer congratulated the Acting Director on her work and her report.
The Chair recognized PBGC Plan Compliance Department Director Ross Marcelin for an update on the SFA program. Mr. Marcelin observed that in November 2023, PBGC expanded its death audits of current and expected SFA applicant plans to all categories of participants. Adoption of the expanded program required developing new controls and procedures, reassigning personnel to handle the increased workload, and obtaining additional documentation to conduct independent death audits using the Social Security Administration’s Death Master File.
Mr. Marcelin highlighted PBGC’s approval of payment of about $62 billion to 85 SFA applicant multiemployer plans covering over 1 million participants including approval of applications from 13 plans in the last two months. PBGC expects to increase its pace of accepting SFA applications for review and completing review of all initial and revised SFA applications by the statutory deadlines.
Mr. Marcelin closed by describing PBGC’s work, since March 2024, to conduct retroactive death audits of 64 SFA recipient multiemployer plans. All such plans provided PBGC with the necessary data; PBGC expects to issue letters requesting plans to repay SFA amounts attributable to discrepancies in the participant census determined through the death audit review to the Treasury Department later this year.
The Chair requested confirmation that PBGC will complete review of all SFA applications by the statutory deadline and Mr. Marcelin advised that PBGC is on track to complete review and make decisions on all SFA applications by the statutory deadline. The Board members thanked Mr. Marcelin and stressed the importance of the SFA program.
The Chair recognized Ted Goldman, Director of PBGC’s Policy, Research and Analysis Department (PRAD) to provide an overview of PBGC’s FY 2023 Projections Report. On behalf of the Board, the Chair acknowledged Mr. Goldman’s upcoming July 31, 2024 retirement and thanked him for his dedication, hard work and expertise.
Mr. Goldman highlighted the difference between PBGC’s single-employer and multiemployer insurance programs and the positive net financial position of each program. He reviewed the net financial position of the programs, which had been primarily negative until recently.
Mr. Goldman explained the key factors driving the results of PBGC’s Projections Report. He noted the favorable equity returns and high interest rates of FY 2023, two important factors for the funded status of pension plans PBGC insures. In addition, the results illustrate the historically low amount of claims against PBGC’s insurance program and the impact of the SFA program on multiemployer plan funding.
Turning to the details of the report, Mr. Goldman highlighted aspects of the multiemployer program, including that the program is likely to remain solvent over the projection period with increasing uncertainty in the out years, depending on future economic conditions.
Mr. Goldman next described significant aspects of PBGC’s single-employer program, including the projected net positive financial position of the program. Premiums, claims from plan sponsor bankruptcies, and pension risk transfers are among factors PBGC incorporated into its modeling.
The Chair thanked Mr. Goldman and his staff for their work in developing the Projections Report. The Chair asked for more details about PRAD’s multiemployer modeling, which includes the possibility of a future net negative position. Mr. Goldman explained that PRAD projected future contributions, asset performance, and funding. Key drivers of a negative net position in the multiemployer program are poor asset returns and low interest rates which increase plan liabilities and underfunding. Some plans have a low contribution base relative to the size of plans and the ratio of retirees to active participants, leaving room for additional structural reforms. The Chair observed the need to focus on downside scenarios which may require policy changes.
The Chair asked Mr. Goldman what could impact the positive net financial position of PBGC’s single-employer program, including employer bankruptcies and pension risk transfers. Mr. Goldman illustrated the modeling his team did to evaluate financial stressors and strategic approaches to maintaining the health of the single-employer program and encouraging the future of retirement security.
Secretary Raimondo asked how the extreme downside scenarios tested compared to the investment returns of the Great Financial Crisis of 2008. PBGC Chief Policy Actuary Evan Inglis explained that in 2008 and 2009, pension plans experienced negative 25 to 30 percent returns before returning to positive returns from late 2009 onward. By contrast, PBGC modeled negative 20 percent returns without improvement, assuming a higher number of employer bankruptcies. PBGC Actuary Kevin Muse added that coupling severe asset losses with very severe bankruptcy rates would result in a high level of claims. Secretary Raimondo thanked PBGC for including the stress testing with extreme downside scenarios in its Projections Report and noted her satisfaction with PBGC’s responses.
The Board approved the transmittal of the FY 2023 PBGC Projections Report by voice vote.
The Chair recognized PBGC Inspector General (IG) Nick Novak. The IG identified the PBGC’s FY 2023 Financial Statement Audit as the most important item in his report. For the past four years, Ernst & Young (EY) has conducted this audit and each year, the auditor is required to submit its Planning Communication through the IG to the Board. The IG included the EY documents in the Board materials and asked the Board to review those materials. Highlights of EY’s Planning Communication include conducting inquiries with PBGC management about risks of material misstatement, fraud and noncompliance with laws and regulations, the overall scope and timing of EYs audit being consistent with the prior year, and concluding that they found no significant changes in EY’s overall risk assessment for PBGC between the FY 2023 and FY 2024 audits.
The Chair thanked the IG and congratulated Jonathan LaFrance for his appointment as Assistant Inspector General for Investigations.
As there were no further questions, the Chair and the Board Members thanked Acting Director Orr and all who participated and adjourned the meeting.
AGENDA
MEETING OF THE BOARD OF DIRECTORS OF
THE PENSION BENEFIT GUARANTY CORPORATION (PBGC)
Tuesday, July 16, 2024
10:00 a.m. – 11:00 a.m.
- Introduction by Acting Secretary Su and Approval of the April 22 Board meeting minutes
- Acting Director’s Report
- Special Financial Assistance Program
- Projections Report
- OIG Update