US - The financially stricken Pension Benefit Guaranty Corporation (PBGC) has revealed it is setting up a panel of advisers to tackle companies head on in the battle over pension fund obligations.
The panel of financial advisers, transaction specialists and management consultants will advise the organisation
on how to combat corporate behaviour which ends up compromising the PBGC’s ability to pay pension benefits.
In its most recent financial report, the PBGC, which is currently labouring under a deficit of more than US$18bn, showed it lacked the resources to meet long term obligations to participants in both its single and multi-employer programme.
The solicitation document for the tender, which closed on 1 March, asked for experts to “assist in the monitoring of corporate events and transactions of insured defined benefit pension plan sponsors” and“provide financial analysis and negotiations support that will enable the PBGC to mitigate the risk of exposure to PBGC and plan participants”.
It also stated it would require applicants to aid the PBGC in “evaluating the financial condition of plan sponsors that pose a risk of loss to the PBGC, reviewing the financial condition of plan sponsors filing notices under Sections 4041 (c) (Distress Terminations) and 4043 (Reportable Events) of ERISA, and identifying operational
Gary Squires, a partner in specialist consultancy Kroll and head of their European pensions advisory team, said the PBGC did not enjoy the same protection or power as its UK equivalent, the Pension Protection Fund (PPF).
In fact, when setting up the PPF, the UK government visited the US to look at the experience of the PBGC and consequently incorporated “moral hazard provisions” into The Pensions Act 2004, which allow the regulator
greater powers to force employers to contribute to pension schemes in certain circumstances.
Examples of these include the power to overturn transactions, for example benefit enhancement, made in
the run up to distress or to claim corporate assets belonging to the wider group of companies, not just the
specific company pension scheme members are listed under.
Squires commented: “Because in the US, the employer itself is the fiduciary, which is arguably like putting
the fox in charge of the hen house, in some circumstances the PBGC is left fulfilling the kind of role trustees
fulfil [in the UK].
At the time of going to press, the PBGC was unavailable for comment.
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