On August 11, 2017, the U.S. Chamber of Commerce submitted comments in response to the Pension Benefit Guaranty Corporation's request for feedback on the draft Fiscal Year 2018-2022 Strategic Plan.
August 11, 2017
Submitted via email at:
Pension Benefit Guaranty Corporation
1200 K St NW
Washington, DC 20005-4026
RE: PBGC Strategic Plan for Fiscal Years, 2018 – 2022
To Whom It May Concern:
On behalf of the US Chamber of Commerce, we submit this letter in response to a call for comments on the Pension Benefit Guaranty Corporation Strategic Plan for Fiscal Years, 2018 – 2022 (the “Plan”). The U.S. Chamber of Commerce is the world's largest business federation, representing more than three million businesses and organizations of every size, sector, and region. Besides representing a cross-section of the American business community in terms of number of employees, the Chamber represents a wide management spectrum by type of business and location. Each major classification of American business—manufacturing, retailing, services, construction, wholesaling, and finance—is represented. Also, the Chamber has substantial membership in all 50 states. Positions on national issues are developed by a cross-section of Chamber members serving on committees, subcommittees, and task forces. More than 1,000 business people participate in this process.
Chamber members are very concerned about the state of the defined benefit plan system and feel that the ensured stability of the PBGC is vital to that system. Therefore, we appreciate the opportunity to comment on the Plan and hope that this is only the beginning of a continued dialogue that will strengthen the system that provides retirement benefits to millions of people every year.
Recommendations for Strategic Goal 1
The first strategic goal is to:
PRESERVE PLANS AND PROTECT THE PENSIONS OF COVERED WORKERS AND RETIREES.
PBGC protects pensioners and supports the continuation and maintenance of voluntary private pension plans for the benefit of their participants by:
• Protecting workers and retirees when plans are at risk.
• Uniting more missing participants with their pensions.
• Encouraging flexibility to preserve plans through changes in legislation and regulations.
• Addressing the impending insolvency crisis in the multiemployer insurance program.
The PBGC Should Strengthen its Commitment to Encourage Plan Sponsors to Continue to Maintain Defined Benefit Plans.
We appreciate that the Plan focuses on protecting workers and retirees when plans are at risk; however, the Plan should also include a specific statement to encourage plan sponsors to continue to maintain defined benefit plans. ERISA states that one of the PBGC’s primary goals is “to encourage the continuation and maintenance of voluntary private pension plans.” While the Plan as a whole is aimed at this directive, there is no explicit recognition of this statutory goal. Consequently, we encourage the PBGC to explicitly include this directive.
Recently, the PBGC has made significant efforts aimed at addressing employer concerns. The Chamber supports these efforts and encourages further actions in this vein. As such, we believe that by explicitly making a commitment in the Plan of encouraging plan sponsors to continue to maintain defined benefit plans, the PBGC would deter further erosion of that commitment in future Administrations. In terms of action, there are particular steps that would be helpful. For example, the PBGC could be a conduit between employers and Congress for conveying concerns and gathering information. For example, while FASB is not under the jurisdiction of the PBGC, it is an issue with significant impact upon defined benefit plans. As such, the PBGC could be a valuable liaison between plans sponsors, Congress, and FASB.
The PBGC Should Finalize the Missing Participants Regulation.
The Chamber is pleased to see that the Plan includes uniting missing participants with their pensions. To further this goal we encourage the PBGC to move forward with finalizing its regulation for the missing participant program. In 2016, the PBGC proposed to expand its missing participants program to include multiemployer plans covered by Title IV, most defined contribution plans, and certain plans not already covered. In general, the Chamber supports the proposed rule and encourages the agency to move forward in the finalizing the rule.
Specifically, the Chamber appreciates that the PBGC intends to streamline the process where applicable and minimize burdens on plan sponsors, particularly small plan sponsors. Understanding that the statute addresses only terminated plans, the Chamber nevertheless encourages the PBGC to coordinate with other efforts to track and locate participant accounts in active plans. For example, a bill has been introduced in Congress that would create a pension registry that would serve as a central location of retirement plan information and would connect individuals with their retirement benefits. While the Chamber has not specifically endorsed this bill, it is important that all efforts in this area be coordinated to ensure that various programs do not become complicated or duplicative for plan sponsors and participants.
Encourage Congress to Maintain Reasonable Premium Payments.
Another way to preserve and protect pensions is to ensure that PBGC premiums should be affordable, administrable, fair, consistent, and predictable. Premiums should not be increased except as part a long-term plan to address the future of private sector defined benefit plans and the PBGC. As you are aware, there have been significant increases in the single-employer program which have created significant burdens on plan sponsors. Such premium increases restrict the employers’ ability to fund and maintain their defined benefit plans, creating a disincentive to maintain these plans.
The PBGC has been helpful by stating that single-employer increases are no longer necessary. However, plans would benefit from the PBGC having a more active role in Congress to educate members about PBGC premiums and how increasing them further could have a detrimental impact on the single-employer system. As such, the Chamber believes that this should be part of the Plan.
The Chamber Supports Addressing the Needs of Multiemployer Defined Benefit Pension System.
As you are aware the Chamber has also expressed consistent concern about the state of the multiemployer system and is encouraged that this is goal expressly listed in the Plan. The Multiemployer Pension Reform Act (MPRA) was passed at the end of 2014 and it is a significant first step in comprehensive reform. The enactment of MPRA was welcomed by the Chamber and its employer members that contribute to multiemployer plans. The precarious state of underfunding by many multiemployer plans threatens insolvency for such plans and for the PBGC and it is a serious threat to participating employers. Nonetheless, while MPRA is a strong first step in multiemployer pension reform, the Chamber believes that further attention to the problem is necessary. Specifically, Congress needs to address the withdrawal liability issue and consider new plan options for multiemployer pension plans.
The Chamber has submitted several sets of comments on this issue to the PBGC and looks forward to continuing to work with the agency and the Congress in resolving this very important issue.
Recommendations for Strategic Goal 3
The third strategic goal is to:
MAINTAIN HIGH STANDARDS OF STEWARDSHIP AND ACCOUNTABILITY
PBGC is responsible for insuring the pensions of tens of millions of people, whose benefits are valued at hundreds of billions of dollars, while collecting over $6 billion in premiums per year. The Corporation exercises care in the management of over $100 billion in assets. The Corporation has attained 24 consecutive unmodified audit opinions on its financial statements. PBGC will continue to work in ways that maintain the trust of its customers and the public. PBGC remains committed by holding itself to the highest standards of service, professionalism, accountability, and ethics. This will be accomplished by:
• Providing exceptional customer service.
• Seeking opportunities to improve PBGC’s finances.
• Maintaining a high performance workforce.
• Maintaining effective Information Technology (IT) and Security Programs.
Enhance PBGC Governance Procedures.
Changes in PBGC governance are needed to ensure its ongoing viability. The PBGC’s Board of Directors does not currently have any formal, written governance procedures. Until recently, the Board was not required to meet any certain number of times annually, and it met infrequently over the past three decades. During the period
between 1980 and 2010, the Board met only 23 times—less than annually. In 2003, the Board agreed to meet twice a year, although a review of meeting minutes indicates that the meetings usually last only about an hour, with no significant time being spent on operational and strategic issues.
In 2012, Congress passed several PBGC reforms in the Moving Ahead for Progress in the 21st Century Act (MAP-21); however, one substantive proposal that was not passed into law was the increase in the number of PBGC Board members.14 The Chamber encourages the PBGC to increase the number of Board of Directors and to include representatives for small and large businesses and sponsors of multiemployer plans. Furthermore, the terms of the Board members should overlap to encourage smooth transition periods.
Conclusion
The defined benefit system covers millions of employees and pays out billions of dollars in benefits. Therefore, despite the general perception that defined benefit plans are no longer relevant, they are still a significant benefit for many workers and retirees. Consequently, it is critical that all interested parties work together to maintain this system. The dialogue you have started by publishing your Plan and asking for comment is a huge step toward this goal. Thank you again for the opportunity to comment and we look forward to further conversations with you.
