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GAO-05-578SP 1 (2005-06-01)

handle is hein.gao/gaocrptarqv0001 and id is 1 raw text is: ( A 0 ~~i~ Highlights of 70P Why GAO Convened This Forum Emplyer-ponsreddefined benlefit pen'lsionl p4lns face unprecedentedI challengies inl the m1idst of signlificant chan11ges inl our nationl's retivmentil land1(scape. Mlany\ definled beneofitl plans 'and thle federal1 agecyc that1 inlsurles themi t he Pensionl Beneofit Gu-aanty Corp)oration (P1BGC), hav1\e accumnulated large anld grlowinglc deficits th1at thrieateIn the(ir survival. Meanw hile, thI e percen ta ge of Am iericanl wvorkers c-oved by definedI 1enefft pLans ha,-s been declining for aboutl 3yerreflecting- a nilovrnentil t oward defined contr-ibution plans (eg,401(k) pl'ans) -Ind pecrhapjs funldamentllal changeilos inl how; ourl society\ thinkisabout wvho should bear11 responlsibilty\ anld r'isk fol. the retirementil inlcome security of Ameroicanl w;orkers. 1t is imlper'ative thfat policyma1; kers ;addl-oss not onl1Y thle challeng11ces falcing the definled benlefit system land the PBI-GC, butl al1so consider broalder questtons albout overll1 retir-eent inlcomle polic. To addvess thlese issues, GAO convened a d1iverse groupif of knlowledgea1ble individuals wh1o have\ b een infiluentdial inl sh1aping Ithe definled benlefit p~ensionls debate over thIe y ears. Participantis inicludod governmentcil officials, reem-Olers, uccoluittiitg experts, actuarlies, p4ln sponlsor anld elmlploye e group11 representla iv es, and memnbers of the investmnent commultnit. HIGHLIGHTS OF A GAO FORUM The Future of the Defined Benefit System and the Pension Benefit Guaranty Corporation What Participants Said Forum participants debated both the specifics of potential changes to the regulations governing America's defined benefit pension system and broader ideas about how policymakers should address retirement income security. There were varying levels of agreement on the following statements: Current pension funding rules do not adequately ensure sound funding in plans that are at the greatest risk of termination, and the federal government needs to do more to hold employers accountable for the benefit promises they make. Addressing deficiencies in the pension funding rules would be more effective and more important than reforming the PBGC premium structure, since policymakers should focus on getting employers to fulfill the promises they make to employees. Greater pension funding flexibility could help maintain adequate pension funding and remove disincentives that have stopped plan sponsors from contributing more to their plans in the past. PBGC's premium structure should better reflect the risk that a pension plan presents to the solvency of PBGC's pension insurance program. Improvements should be made to the transparency and timeliness of pension plan financial information that is reported to plan participants, regulators, and those who invest in the plan sponsor's stocks and bonds. Any reforms of pension funding rules and premium structures would be easier to achieve by separately addressing legacy costs-the costs from terminated and currently underfunded defined benefit plans. Although the traditional defined benefit system has been in retreat for about 30 years, this trend might be halted if policymakers would clarify the legal ambiguities surrounding cash balance and other hybrid plans. Rather than focusing on promoting certain types of pension plans, policymakers should identify and encourage those features of pension plans (both defined benefit and defined contribution) that are most likely to provide sufficient income security for American retirees. To view the full product. including the scope and methodology. click on the link above. Frmore infomation. contact Barbara Bovbjerg at (202) 512-7215 or bovbjergb @gao.gov. .United States Government Accountability Office ------------------

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