Examination of Financial Statements of the Pension Benefit Guaranty Corporation for the Fiscal Year Ended September 30, 1977

The financial statements of the Pension Benefit Guaranty Corporation (PBGC) were examined for the fiscal year (FY) ending September 30, 1977. PBGC administers the insurance programs that guarantee certain benefits will be paid to participants of defined benefit pension plans in the event the plans terminate without sufficient assets to provide benefits.

GAO could not verify that PBGC financial statements present fairly the financial position of PBGC. Various procedural and accounting problems and material uncertainties in the collection of receivables were noted. PBGC estimated a liability receivable from employers of $35.4 million as of September 30, 1977; the collectibility of this liability, however, is questionable because PBGC estimating methodology may not be accurate and some employers of terminated plans are in bankruptcy or out of business. Also, PBGC ability to collect employer liability, under certain circumstances, has been challenged in the courts. PBGC estimated liability for future benefits was $209 million, but it is not certain whether the reported amount presents fairly this liability, since 88 percent of the amount is estimated. The actual amount of unearned premiums, reported as $7.6 million for FY 1977, cannot be validated. GAO was not able to substantiate about $8.5 million of the $13 million in reported total benefit payments that were paid. A PBGC study identifed many premium billing and collection system weaknesses, ranging from duplicate premium filings or no filings to computer entry errors. PBGC reported a deficit of $95.3 million as of September 30, 1977, which was a $54.3 million increase over the previous FY for the single employer program.