Testimony of

THE HONORABLE W. THOMAS REEDER

DIRECTOR

PENSION BENEFIT GUARANTY CORPORATION

before the

HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, 

AND EMERGENCY MANAGEMENT

Hearing

“Independent Leasing Authorities: Increasing Oversight and Reducing Costs of Space 

Leased by Federal Agencies”

July 6, 2016

Mr. Chairman, Ranking Member Carson, and Members of the Subcommittee. 

Good morning. I am pleased to appear before you today to discuss the Pension Benefit Guaranty 

Corporation (PBGC) and its engagement of the General Services Administration (GSA) to secure 

a new headquarters lease for PBGC that reduces our space costs and consolidates our 

headquarters operations into a single location.

PROTECTING PENSIONS 

Before I talk about the agency’s leasing efforts, I would like to share some information with you 

about PBGC’s work to fulfill its statutory mission. The agency was established over 40 years ago 

by the Employee Retirement Income Security Act of 1974 to protect the retirement incomes of

workers and retirees covered by private sector defined benefit pension plans. PBGC assumes

responsibility for underfunded pension plans when sponsors can no longer afford them. PBGC 

receives no taxpayer dollars. Its operations are financed by insurance premiums, investment 

income, and assets and recoveries from failed plans.

PBGC protects the pension benefits of more than 40 million Americans. The agency runs two 

separately operated, separately financed pension insurance programs: one covering singleemployer pension plans and another covering multiemployer pension plans. Under the singleemployer program, PBGC protects about 30 million workers and retirees in over 20,000 pension 

plans. Under the multiemployer program, PBGC protects over 10 million workers and retirees in 

about 1,400 pension plans.

We work with financially troubled employers that sponsor underfunded pension plans to help 

them preserve promised benefits and avoid plan failure. Participants are best served when their 

pension plans remain ongoing and they receive their full, promised benefits rather than 
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potentially reduced amounts under PBGC’s legal limits. Nonetheless, for workers and retirees in

plans that do fail, the agency’s guaranty is critical to retirement security. 

Today PBGC is responsible for the current and future pensions of about 1.5 million people in 

4,800 failed single-employer and multiemployer pension plans.

As of September 30, 2015, the single-employer and multiemployer programs reported balance 

sheet deficits of $24 billion and $52 billion, respectively. Last month PBGC issued two reports 

on the prospects of PBGC’s insurance programs – the FY 2015 Projections Report (which is 

required by law to provide an actuarial evaluation of the future status of the insurance funds) and 

the Multiemployer Pension Reform Act Report (which is required by law to describe the 

premium amounts PBGC needs to sustain the multiemployer program). While the financial 

position of the agency’s single-employer program is likely (but not certain) to improve, the 

multiemployer program, without reforms, is likely to run out of funds by 2025.

Since becoming PBGC’s Director, I’ve had the opportunity to work alongside the talented and 

dedicated staff of the agency. Together, we are working to provide retirees with timely payments 

and to encourage employers to preserve and maintain defined benefit pension plans.

PBGC’s staff come from diverse fields, including law, actuarial science, financial analysis, 

auditing, and information technology. The results of the highly collaborative work environment 

and devotion to mission do not go unnoticed by PBGC’s customers. In 2015, retirees rated 

PBGC’s customer service 91 (on a 100 point scale) in the American Customer Satisfaction Index 

survey. This score surpassed the best government agencies as well as the best companies in the 

private retail sector.

PBGC LEASING

PBGC has independent leasing authority under section 4002(b)(5) of ERISA and leased office 

space without the assistance of GSA for many years. It has generally been successful in its 

leasing efforts: GAO found that 60% of the PBGC leases it reviewed (including its main 

headquarters lease) contained rates below those of comparable GSA leases. The Corporation 

began leasing its current headquarters space at 1200 K Street, NW in 1992 (389,334 sq. ft.). As 

the demand for PBGC’s services has grown, its workforce (federal and contractor) has also 

expanded. In 2004, the agency began leasing additional headquarters space across the street at 

1275 K Street, NW (69,991 sq. ft.), and in 2014, the Corporation acquired office space at 1225 

“Eye” Street, NW (11,922 sq. ft.). PBGC’s three headquarters leases expire in December 2018. 

The agency is currently working with GSA to obtain a single, consolidated headquarters space 

for the agency. 

Since 2003, PBGC also has leased space (28,128 sq. ft.) in Kingstowne, Virginia to take 

advantage of lower rates for certain back office operations while maintaining proximity for 

headquarters staff. The Kingstowne site houses our contractor-staffed Customer Call Center, 

which handles over 600,000 participant inquiries per year, as well as our Document 

Management Center, which processes millions of plan and participant documents and records. 

The Kingstowne location also serves as the agency’s continuity of operations site. 
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In addition to its headquarters and Kingstowne operations, the Corporation leases field benefit 

administration (“FBA”) offices. The Corporation started using FBA offices in the late 1980s. 

These FBA offices were generally located in areas where the Corporation had taken over large 

pension plans with high concentrations of participants in the immediate area. FBA offices 

enabled the agency to retain incumbent pension plan administration staff with invaluable 

institutional knowledge and community relationships, as well as accommodate walk-in traffic, in 

the days before electronic filing was available. At first, the agency did not lease FBA locations, 

but rather, contracted directly with service providers who provided space (paid for as overhead 

or a line item on the contract). In the mid-1990’s, PBGC changed its approach and began 

directly leasing all FBA space and contracting separately for plan administration services. 

PBGC made this change to enhance its flexibility to expand or to contract FBA offices -- for 

instance, closing some offices and assigning work to other more cost-effective sites.

In 1994, the Corporation had 17 FBAs. At about that time, PBGC started reviewing whether to 

consolidate its FBA offices due to cost and other considerations. Since then, the Corporation 

has slowly reduced the number of its FBA offices as the number of large trusteed plans has gone 

down and advances in technology have enabled the Corporation to handle more pension 

administration work electronically and remotely. By 2000, the Corporation leased 11 FBA sites.

In the last five years, the Corporation has taken additional steps to reduce the cost of its real 

estate portfolio. Today, the Corporation leases space for 5 FBAs (Coraopolis, PA; Miami, FL; 

Richmond Heights, OH; Sarasota, FL; Wilmington, DE) with a combined footprint of only 

65,328 square feet (each is less than 15,000 square feet). We continue to look for opportunities 

to improve the efficiency of our field operations and further reduce our footprint.

PBGC DECISION TO WORK WITH GSA 

With PBGC’s headquarters lease expiring in December 2018, the agency began planning for a 

replacement lease in 2014. One of the first considerations for the agency was whether to 

continue to exercise its independent leasing authority or instead become a client of GSA. While 

it is still a small agency, PBGC has grown over the past decade as the need for its services and 

thus its workload has grown. PBGC’s employees have a very full plate, providing retirement 

security, protecting pensions, and implementing best practices across its infrastructure, such as 

enterprise risk management. Cost was also a factor. In light of recent GAO decisions, we had 

questions about our authority to incrementally fund a long-term lease. After consulting with the 

Office of Legal Counsel (OLC), we determined that, although we have no-year funds available 

for a long-term lease, the Recording Statute (31 U.S.C. 1501) prevents us from incrementally 

funding it without express authority, which GSA has and PBGC does not. Therefore, with 

respect to our headquarters lease, it was an obvious decision for us to go to the agency with the 

expertise, bench strength and authority to obtain the best value for PBGC’s premium payers and 

other stakeholders. 

PBGC’s EXPERIENCE WITH GSA

PBGC reached out to GSA in early 2014 to request assistance in analyzing the risks and benefits 

of procuring a new headquarters lease through GSA versus using the agency’s own leasing 

authority. In April 2015, PBGC began working on its Program of Requirements (“POR”) while 
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the agency reviewed several leasing strategies before deciding to have GSA procure its 

consolidated headquarters space. PBGC officially began working with GSA on its headquarters 

lease procurement in October 2015. At the initial kickoff meeting, GSA and PBGC discussed 

the roles and responsibilities of agency personnel in the leasing process. In November 2015, 

PBGC submitted its POR to GSA, allowing GSA to populate PBGC’s Housing Plan as part of 

the prospectus submission. In March 2016, PBGC met with GSA and CBRE (the broker 

assigned to PBGC’s lease procurement) to go over proposed timelines and additional 

information. GSA submitted the prospectus lease for PBGC’s consolidated headquarters space 

to the Committee on June 9, 2016. 

Although it is still early in the process, I believe we have established a sound working 

relationship with GSA. Since we are new to the GSA leasing function, it has been important for 

the two agencies to agree on roles and responsibilities GSA has worked collaboratively with us 

to refine our requirements and respected our role as a partner. They have been helpful in guiding 

us though the GSA leasing process. In turn, we bring to the table the lessons we learned from 

successful leasing; most notably, the importance of ensuring that procurement experts, legal 

experts and the real estate broker work as an integrated team. The PBGC and GSA teams have 

been working well together and communications are good. PBGC has weekly meetings with 

GSA to discuss the lease project. We are moving forward in accordance with the steps GSA and 

PBGC have agreed to and are making good progress.

An early lesson we have learned from working with GSA’s process thus far is the importance of 

taking a disciplined approach to space savings that can be achieved through consolidation.

Consolidating our headquarters into one building will also improve effective communication,

and collaboration in serving our customers and stakeholders.

CONCLUSION

PBGC is pleased to be partnering with GSA in seeking a consolidated headquarters location. 

Having the prospectus in the Committee’s hands is an important step. We look forward to 

working with the Committee and GSA to answer any questions you may have as we work toward 

our goal of obtaining a lease that will provide the best value for our stakeholders.