Summary: Several years ago, GAO placed the Pension Benefit Guaranty Corporation (PBGC) on its "high-risk" list of federal programs because of long-standing internal control weaknesses and potentially huge losses to taxpayers. This testimony discusses GAO's December 1992 high-risk series report on PBGC (GAO/HR-93-5). In GAO's view, successfully addressing the problems confronting PBGC involves management reforms, modification of the pension funding rules, and possible changes in the insurance premium structure. As long as pension plan underfunding persists, the pension insurance program and plan participants' benefits are at risk. GAO believes that this is the time--while PBGC still has a positive cash flow--to develop solutions to better fund pension promises. GAO supports more effective funding standards for defined benefit pension plans. Reducing underfunding would limit PBGC's future exposure and appropriately target the greatest threat confronting it--underfunded pension plans. In addition, Congress should consider whether the overall premium ceiling and existing variable premium rate best reflect the risk to PBGC. Raising premiums, by making the variable rate premium more risk-related, would cut PBGC's deficit.
