Report to Congressional Requesters

United States Government Accountability Office

GAO 

DEFINED BENEFIT 

PLANS 

Proposed Plan 

Buyouts by Financial 

Firms Pose Potential 

Risks and Benefits 

March 2009 

GAO-09-207 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 2009

DEFINED BENEFIT PLANS

Proposed Plan Buyouts by Financial Firms Pose 

Potential Risks and Benefits

Highlights of GAO-09-207, a report to 

congressional requesters 

Some U.S. financial and pension

consulting firms have recently 

proposed alternatives to 

terminating a defined benefit (DB) 

pension plan and contracting with

insurance companies to pay 

promised benefits. In their 

proposals, a plan sponsor would 

typically transfer the assets and 

liabilities of a hard-frozen DB 

plan—one in which all participant 

benefit accruals have ceased—

along with additional money, to a 

financial entity, which would 

become the new sponsor. Such 

buyouts would have implications 

for participants, plan sponsors, and 

the Pension Benefit Guaranty

Corporation (PBGC), the federal 

agency that insures private DB

plans. This report addresses the 

following questions: (1) What is the 

basic model of proposed sales of

frozen DB plans to third-party 

financial firms and how does it 

compare with a standard plan 

termination? (2) What are the

potential risks and benefits of plan

buyouts for participants, PBGC, 

plan sponsors, and other

stakeholders? To address these 

questions, GAO reviewed proposed

models for plan buyouts and 

analyzed regulatory and statutory 

issues associated with terminations 

and buyouts. GAO also interviewed 

labor and pension advocacy

groups, pension regulatory

agencies, and pension experts. 

What GAO Recommends

GAO is not making any 

recommendations. 

Source: GAO analysis of 2004 Survey of Consumer Finances

In proposed DB plan buyouts, a third-party financial company would take 

over sponsorship of a hard-frozen plan from the original sponsor, in exchange 

for money to compensate for plan underfunding, expenses, and risk. As with 

a standard plan termination, the objective of a buyout would be to allow the 

original sponsor to shed its obligations to the plan, but potentially at lower 

cost and possibly with greater flexibility. In buyout proposals, the new 

sponsor would assume all plan responsibilities and PBGC guarantees would 

continue to apply to plan benefits. In comparison, a standard termination ends 

the plan, and an insurance company contracts to pay accrued benefits to 

participants (to the extent participants' benefits are not paid out by the plan 

as part of the termination); PBGC guarantees no longer apply, but state 

guarantees do. Insurance companies generally must comply with state-based

risk-based capital requirements, which may provide safeguards against insurer 

insolvency and protections for pension benefits paid this way. 

In some cases, plan buyouts could increase the security of DB pensions by 

allowing weak sponsors to transfer plan sponsorship to firms with stronger 

financial backing and improved plan management. However, buyouts would 

sever the employment relationship between sponsors and participants, 

possibly eroding incentives to manage the plan in the interests of participants. 

Buyouts could increase the risk of a large claim against PBGC by increasing

the concentration of assets and liabilities held by a single sponsor or sector. 

They could also lead to conflicts between agencies regulating financial 

companies and those regulating pensions. In August 2008, the Internal 

Revenue Service issued a ruling declaring that a DB plan that was bought out 

by a nonemploying entity would not qualify for tax preferences under current 

law. 

Proposed DB Plan Buyout Models

Sources: GAO analysis of proposed DB plan buyouts, Art Explosion (images).

Original plan 

sponsor

Original plan 

sponsor creates

subsidiary

Required funding for 

participant benefits

Pays PBGC premiums

Pension plan assets, liabilities, and 

additional money put into subsidiary

New plan sponsor

purchases subsidiary. 

Original plan sponsor no longer responsible for plan.

Available for future 

required plan contributions

or for the new plan 

sponsor to keep as profit.

Subsidiary

New plan sponsor

Subsidiary

Pension Pension

plan Additional

assets

Pension Pension plan Additional

assets To view the full product, including the scope 

and methodology, click on GAO-09-207. 

For more information, contact Barbara 

Bovbjerg at (202) 512-7215 or 

bovbjergb@gao.gov or Jospeh Applebaum at 

(202) 512-6336 or applebaumj@gao.gov.
Contents 

Letter 1

Results in Brief 4 

Background 5

Proposed Plan Buyouts Would Offer Sponsors an Alternative to 

Standard Plan Terminations, with Significant Differences 8 

Some Plan Buyouts Could Benefit Participants and PBGC, but in 

General Pose New Risks 17 

Concluding Observations 25 

Agency Comments 26 

Appendix I UK Experience with Noninsured Plan Buyouts 

Provides Only Limited Regulatory Lessons for the 

United States 28 

Appendix II Internal Revenue Service 2008 Revenue Ruling on 

Defined Benefit Plan Buyouts 31 

Appendix III GAO Contacts and Staff Acknowledgments 33 

Tables 

Table 1: Comparison of Key Characteristics of Plan Buyouts and 

Terminations 14

Table 2: Potential Positive Outcomes and Risks Associated with 

Plan Buyouts 18 

Figure 

Figure 1: Proposed DB Plan Buyout Models 10 

Page i GAO-09-207 Defined Benefit Plan Buyouts
Abbreviations 

DB defined benefit 

ERISA Employee Retirement Income Security Act of 1974

FASB Financial Accounting Standards Board 

FDIC Federal Deposit Insurance Corporation 

IRC Internal Revenue Code 

IRS Internal Revenue Service 

NAIC National Association of Insurance Commissioners 

NOLHGA National Organization of Life and Health Insurance 

 Guaranty Associations 

OCC Office of the Comptroller of the Currency 

OTS Office of Thrift Supervision 

PBGC Pension Benefit Guaranty Corporation 

PPA Pension Protection Act of 2006 

PPF Pension Protection Fund

UK United Kingdom 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately. 

Page ii GAO-09-207 Defined Benefit Plan Buyouts
United States Government Accountability Office

Washington, DC 20548 

 

March 16, 2009 

The Honorable Charles B. Rangel 

Chairman 

The Honorable Dave Camp 

Ranking Member 

Committee on Ways and Means 

House of Representatives 

The Honorable Sam Johnson 

Ranking Member 

Subcommittee on Social Security 

Committee on Ways and Means 

House of Representatives 

The Honorable Earl Pomeroy 

House of Representatives 

In recent years, a number of prominent U.S. employers have terminated 

their defined benefit (DB) plans.1

 Other pension plan sponsors have frozen 

their plans, either by closing them to new participants or by slowing down 

or ceasing the accrual of additional benefits to existing participants. 

Provisions of the Pension Protection Act of 2006 (PPA),2

 which established 

more stringent plan funding requirements, and recent Financial 

Accounting Standards Board (FASB) standards,3

 which require additional 

financial reporting for DB plan sponsors, place more requirements on DB 

plan sponsors and could possibly lead to more freezes and terminations in 

upcoming years. 

A sponsor generally may terminate a DB plan and shed all plan 

responsibilities either by hiring an insurance company to pay all accrued 

 1

In a defined benefit plan, pension benefits are typically set by formula, with workers

receiving benefits upon retirement based on the number of years worked for a firm and 

earnings in years prior to retirement. DB plans must make available a joint and survivor life 

annuity to retiring participants—a series of periodic payments that begin at retirement and 

continue through the life of the participant and, at the death of the participant, to the 

surviving spouse. 

2

Pub. L. No. 109-280, 120 Stat. 780. 

3

Financial Accounting Standards Board, “Statement of Financial Accounting Standards No. 

158,” Financial Accounting Series No. 284-B, September 2006. 

Page 1 GAO-09-207 Defined Benefit Plan Buyouts
 

benefits to participants through a group annuity contract or, if the plan 

permits, by paying the benefits owed in a different form (such as a lumpsum distribution).4

 In recent years, some U.S. financial institutions and at 

least one pension consulting firm have proposed an alternative to this 

“standard” termination model in which a plan sponsor would engage a 

financial entity to take ownership of the assets and liabilities of a hardfrozen DB plan, or one in which all participant benefit accruals have 

ceased, with the financial entity becoming the new sponsor. Such 

transactions carry potential risks and benefits for participants, plan 

sponsors, and the Pension Benefit Guaranty Corporation (PBGC), the 

federal agency that insures private pension benefits. Government officials,

pension advocates, and some academics have expressed concerns that 

these new arrangements would place the responsibility for managing DB 

plans on firms that have no employment relationship with the participants, 

and potentially increase the risk of losses to participants and PBGC; 

proponents argue that such arrangements will improve the security of 

benefits and provide better overall plan management. In August 2008, the 

Internal Revenue Service (IRS) ruled that such DB plan buyouts by a 

nonemploying entity would not qualify for tax preferences under current 

law, effectively prohibiting this new type of arrangement.5

 At the same 

time, the Department of the Treasury (Treasury) issued guidelines, 

developed with the Departments of Labor (Labor) and Commerce 

(Commerce) and PBGC, that could be used to shape legislation that would 

allow tax preferences for such nonemployer plans, should Congress 

choose to do so.6

 4

29 U.S.C. § 1341(b)(3)(A). 

5

Rev. Rul. 2008-45, 2008-34 I.R.B. 403, available at 

www.treas.gov/press/releases/reports/hp1110revrul200845.pdf. The IRS is not aware of any

buyouts covered by the revenue ruling that have occurred in the United States. However, 

some plan buyouts through noninsurance entities have occurred in the United Kingdom. 

See appendix I for a discussion of British pension buyouts. 

6

Treasury Press Release HP-1110 (Aug. 6, 2008). According to Labor, neither the IRS ruling 

nor the pension regulatory agencies have addressed the application to buyouts of title I of 

the Employee Retirement Income Security Act of 1974, which establishes vesting, funding 

and other pension plan requirements, or title IV, which establishes pension plan 

termination insurance. If a post buyout arrangement sponsored by a nonemployer entity 

fails to constitute an “employee benefit plan” under title I, for example, entities engaged in

such transactions may be subject to state regulation, possibly creating an additional 

disincentive for engaging in such a transaction. 

Page 2 GAO-09-207 Defined Benefit Plan Buyouts
 

In light of these issues, you requested that we examine these proposed 

transactions in greater detail. Specifically, this report addresses the 

following questions: 

1. What is the basic model of proposed sales of frozen DB plans to thirdparty financial firms and how does it compare with a standard plan 

termination? 

2. What are the potential risks and benefits of plan buyouts for 

participants, PBGC, plan sponsors, and other stakeholders? 

To learn about proposed plan buyouts by third-party sponsors in the 

United States, we interviewed individuals from several financial 

institutions and from a pension consulting firm that have publicly 

expressed an interest in engaging in such transactions. We also reviewed 

and assessed literature from these companies describing their proposed 

business models for plan buyouts. We spoke with pension practitioners 

and government representatives in the United Kingdom (UK) to identify 

and analyze plan buyouts that have taken place there, as well as to discuss 

the British pension regulatory structure and pension plan governance.7

 To 

compare proposed buyouts with plan terminations, we spoke with officials 

from IRS and pension and bank regulatory agencies, from insurance 

companies and organizations, and from companies proposing buyout 

models. 

To analyze key regulatory and statutory issues associated with DB plan 

buyouts and identify the potential impact of buyouts on participants, 

PBGC, plan sponsors, and other stakeholders, we interviewed

representatives from labor and pension advocacy groups, pension experts, 

pension regulatory agencies, and the Federal Reserve Board (FRB) and the 

Office of the Comptroller of the Currency (OCC). We also discussed the 

nature of current government oversight of insurance companies that issue 

group annuities for terminated plans with insurance industry experts and 

regulators, and we reviewed rules describing the regulatory safeguards 

and benefit guarantees for group annuities issued by insurers. Finally, we

reviewed laws governing the sponsorship of pension plans and relevant

government statements regarding plan buyouts. We did not assess 

Treasury’s suggested guidelines for buyouts issued concurrently with the 

August 2008 IRS revenue ruling. 

 7

For more detail on DB buyouts in the United Kingdom, see appendix I. 

Page 3 GAO-09-207 Defined Benefit Plan Buyouts
 

In proposed DB plan buyouts, a plan sponsor would transfer plan assets to 

another entity, typically a financial company, that would become the new 

plan sponsor. Plan buyouts would typically target plans that are hardfrozen—in which participants no longer accrue benefits—and therefore 

present relatively limited sources of risk in meeting funding targets. 

However, soft-frozen or active plans, in which some or all participants 

continue to accrue benefits, could also be potential buyout targets, 

although these plans would create problematic incentives in that the new 

sponsor would be funding ongoing benefits for employees of another 

company. In buyout proposals, the new sponsor would receive cash to 

cover any plan underfunding plus additional money to compensate for risk 

and administrative costs, which could be kept outside the plan. A plan 

buyout, like a plan termination, would be intended to allow the original 

sponsor to shed all obligations to the plan, but at potentially lower cost 

and possibly with greater flexibility. However, buyouts would differ in key 

ways from terminations, including the treatment of the plan, applicable

regulatory requirements, protection of plan benefits, and fiduciary 

responsibilities. Under buyout models, the plan would remain ongoing 

and, presumably, all existing pension regulatory requirements would 

continue to apply to the plan and sponsor. By comparison, in a standard 

termination, paying plan benefits becomes an obligation of the insurance 

company, which is under state insurance regulation. States generally 

require insurance companies to meet specific risk-based capital levels to 

help ensure their solvency. PBGC guarantees would continue to apply to

accrued benefits in bought-out plans, whereas state insurance guarantees 

generally would apply to annuity payments to participants of standard 

terminated plans 

Results in Brief 

Plan buyouts by financial companies could, in some cases, improve benefit 

security for participants and PBGC, but also pose some key risks that 

might be difficult to anticipate and mitigate. Plan buyouts could increase 

the security of DB pensions for participants if they allowed weak sponsors 

of underfunded plans that would not choose to do a standard plan 

termination to transfer sponsorship to a company with stronger financial

backing and financial management expertise. PBGC would also benefit 

from continuing to receive premiums for bought-out plans, unlike 

terminated plans. However, even with continued pension regulation and 

oversight in place, plan buyouts could create risks for participants, PBGC, 

and other pension stakeholders. For example, the new sponsor assuming 

responsibility for paying plan benefits would not have an employment 

relationship with participants, raising concerns about its incentives to 

manage the plan in the interests of participants. Buyouts could also 

increase the concentration of liabilities held by a single sponsor if that 

Page 4 GAO-09-207 Defined Benefit Plan Buyouts
 

sponsor took over a number of large plans, potentially increasing PBGC’s 

exposure to risk should the new sponsor encounter financial problems. 

PBGC may, under its current authority, have a limited ability to prevent 

buyouts that may increase risk of losses from terminations. Plan buyouts 

may also create potential regulatory conflicts between the goals of 

agencies regulating financial sponsors and those regulating pensions. 

By many measures, PBGC-insured private sector DB plans have been in 

decline since the 1980s. As of 2007, companies sponsored around 30,000 

DB plans, down from over 114,000 in 1985.8

 The total number of 

participants in these plans rose from 38 million to 44 million over this time 

period, but according to the most recent data available, the percentage of 

the active workforce covered by a DB plan fell from 31 percent in 1985 to

17 percent, as of 2005. Also, the percentage of DB participants who are 

retirees has grown steadily, to where they made up over one-quarter of all 

DB participants in 2005. PBGC has seen its net financial condition hurt by 

losses from the termination of large underfunded plans this decade. After 

reporting a surplus as recently as 2001, PBGC’s insurance programs 

reported a combined net accumulated deficit as high as $23.5 billion in 

2004 before improving to over $11 billion as of the end of fiscal year 2008.9

Background 

Under the U.S. voluntary, tax-preferenced pension system, employers can 

choose to form, terminate, or freeze plans. Both plan terminations and 

freezes can reduce potential retirement income from DB plans for future 

retirees. A termination occurs when a sponsor ceases to operate a plan 

and agrees to disburse all accrued benefits to participants, whereas a 

freeze limits or halts some or all future pension accruals for some or all 

participants. Under the Employee Retirement Income Security Act of 1974

(ERISA), the primary federal law governing DB plans, plan sponsors may 

terminate a fully funded plan (called a standard termination) by 

purchasing a group annuity contract from an insurance company, under 

 8

Some DB plans are not covered by PBGC insurance: for example, plans sponsored by

professional service employers, such as physicians and lawyers, with 25 or fewer 

employees. 

9

This figure reflects the value of program assets less the current value of future benefit 

obligations for terminated plans and net claims for those deemed likely to default for both

the single- and multiemployer insurance programs. PBGC noted in its fiscal year 2008 

Annual Management Report that “since the close of the fiscal year, there continue to be 

significant events in the economy and financial markets that may impact the financial 

statement measurements going forward.” 

Page 5 GAO-09-207 Defined Benefit Plan Buyouts
 

which the insurance company agrees to pay all accrued benefits, or, if the 

plan permits, by paying participants the benefits owed in a different form, 

such a lump-sum distribution.10 If the plan does not have sufficient assets 

to pay all vested benefits owed to participants, and a company is in 

financial distress, the sponsor may file for a “distress” termination with 

PBGC. Under these circumstances, PBGC pays benefits to participants up 

to specified limits,11 using its own assets and any remaining assets in the 

plan.12 PBGC may also initiate termination of a plan if a plan cannot pay 

benefits when due or if the loss to PBGC is expected to grow unreasonably 

without termination.13 From 1990 to 2006, sponsors voluntarily terminated 

over 61,000 sufficiently funded single-employer plans. 

A plan freeze limits some or all future pension accruals for some or all 

participants, but does not terminate the plan. Freezes can take various 

forms: a soft freeze, which closes the plan to new entrants and may limit 

benefit accruals based on a component of the benefit accrual formula; a 

partial freeze, which changes the plan’s benefit formula to reduce future 

accruals for a subset of active participants; and a hard freeze, which 

ceases all future accruals, with no additional benefits granted for future 

years of service or salary gains for any workers. A recent GAO survey 

found that 21 percent of all active participants in single-employer DB plans 

are affected by a freeze, with hard freezes accounting for about half of all 

freezes (although larger sponsors are significantly less likely to have a 

hard-frozen plan than smaller ones).14 A separate PBGC study found that 

 1029 U.S.C. § 1341(b)(3)(A). 

11PBGC’s single-employer insurance program guarantees participant benefits up to $4,500 

per month for age-65 retirees of plans terminating in 2009, with lower guarantees for those 

who retire before age 65. With a joint annuity with 50 percent survivor benefits for a spouse

of the same age, the age-65 monthly guarantee limits are $4,050 for plans terminating in 

2009. Younger workers whose plans terminate receive lower guarantee levels: The 

guarantee for a 55-year-old retiree in 2009 is $2,025 per month, and $1,125 per month for a 

45-year-old. 

12In a distress termination, PBGC also tries to collect plan underfunding from employers

and shares a portion of its recoveries with participants and beneficiaries.

1329 U.S.C. § 1342(a). 

14See GAO, Defined Benefit Pensions: Plan Freezes Affect Millions of Participants and 

May Pose Retirement Income Challenges, GAO-08-817 (Washington, D.C.: July 2008). For 

earlier GAO work on frozen plans, see GAO, Private Pensions: Timely and Accurate 

Information Is Needed to Identify and Track Frozen Defined Benefit Plans, GAO-04-200R 

(Washington, D.C.: Dec. 17, 2003). 

Page 6 GAO-09-207 Defined Benefit Plan Buyouts
 

14 percent of plans were hard-frozen as of 2005, with a nearly 50 percent

increase in frozen plans since 2003.15

Some pension experts expect plan freezes and terminations to persist or 

increase in the near future, partly because of recent changes in pension 

requirements. The PPA tightened certain funding rules for DB plans,16

which may discourage some sponsors from continuing to operate a plan or

offer ongoing benefits accruals.17 The PPA reduced the period allowed for 

filling in funding shortfalls from up to 30 years to 7 years. Previous funding 

requirements had allowed sponsors to smooth DB plan asset values over 5 

years, and use a 4-year average of interest rates to measure plan liabilities, 

rather than reporting assets and liabilities based on current market 

measures; this helped dampen plan funding volatility from year-to-year 

swings in market conditions. The PPA reduced the smoothing period for 

reported assets to 2 years, and reduced the period for averaging interest 

rates used to measure liabilities to 2 years, changes that could increase the 

volatility of reported plan funding. In addition, new accounting standards 

will require DB sponsors to report their pension liabilities and assets on 

their balance sheets in more transparent ways than in the past. In a recent 

GAO survey, the primary reasons cited for freezing plans were the cost of 

plan contributions and the volatility of plan funding.18 About a third of 

sponsors of frozen plans in the survey said they will ultimately terminate 

the plan, and over 60 percent were unsure of their future course. Outside 

experts are also not optimistic about DB plans in the near future: One 

study by McKinsey & Company predicts that 50 to 75 percent of all private 

sector DB assets will be in frozen or terminated status by 2012. Another, 

by Watson Wyatt, stated that plan freezes and terminations may have 

declined in 2007 after a peak in 2006; however, turmoil in the financial 

markets in 2008, with plummeting values in stocks, could severely 

 15Summary of study in “Hard-Frozen Defined Benefit Plans: Findings for 2003, 2004, and 

Preliminary Findings for 2005” in PBGC, Pension Insurance Data Book 2006 (Washington,

D.C.: 2007). 

16 PPA §§ 102 and 112, 120 Stat. 789-809 and 833-846. 

17ERISA minimum plan funding rules say that a sponsor must annually fund the plan’s

“normal cost,” the amount of earned benefits allocated during that year, plus a specified 

portion of other liabilities that may be amortized over a period of years. For more on plan 

funding, see GAO, Private Pensions: Recent Experiences of Large Defined Benefit Plans 

Illustrate Weaknesses in Funding Rules, GAO-05-294 (Washington, D.C.: May 2005). 

18For more on the GAO survey, see GAO-08-817 and GAO, Survey of Sponsors of Large

Defined Benefit Pension Plans, an E-supplement to GAO-08-817. 

Page 7 GAO-09-207 Defined Benefit Plan Buyouts
 

negatively affect the funding of many DB plans, and could lead to 

increased plan freezes or terminations if required contributions rise 

significantly. The recently enacted Worker, Retiree, and Employer 

Recovery Act of 2008 provides DB sponsors with some temporary relief 

from some of these new requirements in response to the current financial

crisis.19

On August 6, 2008, IRS issued a revenue ruling declaring that the transfer 

of a pension plan to “an unrelated taxpayer,” without the concurrent 

transfer of significant business assets, operations, or employees, such as in

a merger or business acquisition, would violate the “exclusive benefit” rule 

of the Internal Revenue Code (IRC).20 This rule provides that any pension 

plan must be operated for the exclusive benefit of a sponsor’s employees

and their beneficiaries.21 This means that under current law, generally any 

plans transferred to a nonemployer sponsor would not receive the same 

tax benefits an employer-sponsored plan would, including but not limited 

to the tax deferral on sponsor contributions and the return on plan assets. 

According to the Treasury Department, as a result of this ruling, 

companies will be unable to take over any pension plans, frozen or active, 

except as part of a business merger or acquisition.

Under proposed models for DB plan buyouts, a plan sponsor would 

transfer plan assets, along with funds to cover any plan underfunding, plus 

additional money to compensate for risk and administrative costs, to a 

financial company. The financial company would become the new plan 

sponsor, taking over all obligations of the original sponsor. These types of 

buyouts would typically, but not necessarily, target hard-frozen plans, or 

portions of plans, in which participants are no longer accruing benefits, 

limiting some of the incentive problems of having a plan sponsor who is 

not the participants’ employer. The new sponsor would be able to keep 

money above the minimum funding levels required by ERISA outside the 

plan and eventually keep whatever money in the transaction was not 

needed to pay for plan funding and expenses. A plan buyout, like a 

standard plan termination via an insurance company, is intended to allow

Proposed Plan 

Buyouts Would Offer 

Sponsors an 

Alternative to 

Standard Plan 

Terminations, with 

Significant 

Differences 

 19Pub. L. No. 110-458, §§ 101(b), 121, 202 and 203, 122 Stat. 5092, 5093-97, 5113-14 and 5117-

18. 

20Rev. Rul. 2008-45. See app. II for further discussion of the IRS ruling and Treasury 

guidelines. 

2126 U.S.C. § 401(a)(2).

Page 8 GAO-09-207 Defined Benefit Plan Buyouts
 

the sponsor to transfer all plan responsibilities to another company, but 

possibly at lower cost than a termination. In addition, the sponsor taking 

over the plan would face different regulatory requirements than an 

insurance company contracting to pay benefits from a terminated plan, 

including different oversight, financial requirements, and benefit 

guarantees.

Proposed Plan Buyouts 

Seek to Offer Alternative 

to Termination, with 

Possible Flexibility and 

Cost Advantages to Plan 

Sponsors 

While there are different models for DB plan buyouts, the basic 

transaction would involve the transfer of the assets and liabilities of a 

pension plan from a plan sponsor to a financial entity. The original 

sponsor would set up a corporate subsidiary, into which it would put the 

pension plan (see fig. 1). The original sponsor would arrange for the 

pension assets to be held by or transferred to a trust designated by the 

subsidiary; in addition, it would transfer to the subsidiary enough cash or 

other assets to cover any plan underfunding. It would also provide 

additional money to cover the new sponsor’s administrative costs and to 

compensate for the risk associated with plan sponsorship, which could be 

kept outside the plan. Risks include factors that could affect the future 

value of plan assets and liabilities, such as investment performance, 

interest rates, or mortality rates. The subsidiary could also include a 

relatively small number of employees from the original sponsor, such as 

those administering the plan. The financial company would then take over

ownership of the subsidiary and become the new plan sponsor. The 

objective of the original sponsor, the employer, would be to shed all of its 

sponsorship responsibilities and liabilities. 

Page 9 GAO-09-207 Defined Benefit Plan Buyouts
 

Figure 1: Proposed DB Plan Buyout Models

Original plan sponsor

creates subsidiary

Required funding for 

participant benefits

Pays PBGC premiums

Pension plan assets, liabilities, 

and additional money put into 

subsidiary

New plan sponsor

purchases subsidiary. 

Original plan sponsor no 

longer responsible for plan.

Available for future 

required plan contributions

or for the new plan 

sponsor to keep as profit.

Subsidiary

New plan sponsor

Subsidiary

Sources: GAO analysis of proposed DB plan buyouts, Art Explosion (images).

Pension

plan Additional

assets

Pension

plan Additional

assets

Original plan 

sponsor

The distinction between assets in the plan versus those outside represents 

a key detail of any plan buyout. In general, if a sponsor withdraws excess 

assets from an overfunded DB plan, this action would trigger a 50 percent 

excise tax as a “reversion,” in addition to corporate income tax.22 Money 

outside the plan would be available for future contributions to the plan if

additional funding is needed; however, should the new sponsor be 

successful at growing plan assets up to a level sufficient to pay accrued 

benefits and administrative expenses, the company may be able to keep

 2226 U.S.C. § 4980(d). Under certain circumstances, the excise tax is 20 percent or 

inapplicable at all when excess assets are transferred to retiree health accounts. 26 U.S.C. § 

420(a)(3)(A). 

Page 10 GAO-09-207 Defined Benefit Plan Buyouts
 

this money as profit without this money being subject to the reversion tax. 

Thus the new sponsor, similar to any sponsor, has an incentive to keep as 

much money as possible outside the plan itself while meeting ERISA 

minimum funding requirements.23

Representatives of firms that have expressed an interest in taking over 

plans said that their firms would most likely target slightly underfunded 

plans.24 It would, most likely, be difficult for the sponsor to include enough 

cash to convince a financial entity to take over a plan that was below 80 

percent funded in a buyout, considering the funding gap and the premium 

the new sponsor would charge to take over the plan. They also said that 

hard-frozen plans would be the simplest types of plans to buy out. In a 

hard-frozen plan, the absence of future benefit accruals for salary 

increases and time of service limits potential sources of funding 

uncertainty. However, even in a hard-frozen plan, changes in interest rates 

or mortality assumptions could increase or decrease the valuation of plan

liabilities, and investment performance can affect plan asset levels, 

possibly triggering additional contributions to maintain plan funding at 

legally required levels. Buyouts would not necessarily be limited to hardfrozen plans; however, transferring sponsorship of an active or soft-frozen

plan would be more complicated, since participants would continue to 

accrue benefits in these plans. This would create a problematic incentive 

for the new sponsor to freeze the plan and cease all accruals in order to 

avoid paying ongoing benefits to participants that work for another firm. If 

buyouts were allowed to include soft-frozen or active plans, explicit 

regulation or contractual language would likely be required to assure 

ongoing benefits and applicable ERISA protections to participants. 

From the point of view of the plan sponsor, a buyout would serve a 

function similar to plan termination, since in both cases an objective of the 

sponsor is to shed responsibilities associated with the plan. Buyouts seem 

 23Plans below certain funding levels, designated under the statute as “at risk,” have to meet 

additional, stricter actuarial assumptions. 26 U.S.C. § 430(i) and 29 U.S.C. §1083(i). In

addition, plans that do not meet certain funding levels could face additional restrictions, 

such as possible prohibitions on benefit increases or lump-sum distributions. 26 U.S.C. § 

436 and 29 U.S.C. § 1056(g). The Worker, Retiree, and Employer Recovery Act of 2008, 

however, provided some plans with temporary relief from some of these provisions. Pub. L. 

No. 110-458, §§ 101(b) and 203, 122 Stat. 5092, 5093-97 and 5118. 

24Overfunded plans could possibly also be targeted for buyouts, with the new sponsor

paying the original sponsor for the overfunded assets, less any fees for administrative costs

and risk. However, the original sponsor could possibly face a reversion tax on any money 

received in the transaction for plan assets in excess of its liabilities. 

Page 11 GAO-09-207 Defined Benefit Plan Buyouts
 

to offer two potential advantages to the sponsor: flexibility and cost. A 

plan buyout could offer flexibility if sponsors were allowed to shed only a 

portion of a plan, rather than terminating the entire plan. For example, a 

sponsor could segregate the benefits for retirees or former employees and 

sell this “legacy” portion of a plan to a new sponsor, with assets moving to 

the new sponsor to cover only the benefit liability for these participants; a 

buyout of this kind would resemble that of a hard-frozen plan in that 

benefits for retirees and separated employees have ceased accruing. If this

arrangement were allowed, the employer could then keep its current 

workers, or active participants, in the original plan that it continues to 

sponsor.25

Buyouts may also cost the sponsor less than a termination of the same 

plan. This cost difference may reflect the differences in assumptions 

appropriate for an ongoing plan, which would be the case for a buyout, as

opposed to a terminating plan whose benefits an insurance company 

would contract to pay. The financial entity taking over sponsorship of an 

ongoing plan would be taking on liabilities recorded at “current liability”—

that is, using the assumptions for discount rates, smoothing, mortality, and 

other factors as prescribed by ERISA funding requirements for ongoing 

plans. ERISA funding rules allow sponsors to report measurements of plan 

assets based on an average over a designated period of time and of 

liabilities using an average of recent interest rates. Using such smoothed 

values dampens the year-to-year volatility in funding levels and required 

contributions compared with using current market values. In contrast, an 

insurance company prices a plan’s liabilities based on assumptions 

appropriate for a terminating plan, or “termination liability.” An insurance 

company may also consider in its price the risk of future improvements in 

mortality beyond those currently projected and the risk of taking on the 

obligation to pay benefits without the possibility of collecting future 

premiums. Other differences between insurance company prices and 

current liability could include (1) a more conservative rate-of-return 

assumption reflecting the investments used to support annuities, (2) an 

underlying interest rate used to value liabilities based on current market 

values rather than smoothed values, and (3) an assumption that 

participants in a terminated plan will retire somewhat earlier than those in

an ongoing plan. 26 It is unclear to what degree the assumptions a firm 

 25Sponsors could achieve a similar effect by purchasing annuities for retired participants. 

26 Insurance companies that offer life insurance may also consider the partial hedge that 

this insurance provides against the longevity risk inherent in issuing annuities. 

Page 12 GAO-09-207 Defined Benefit Plan Buyouts
 

taking over an ongoing plan would reflect current liability or termination 

liability, but prospective financial sponsors said they expected to be able

to compete with plan termination prices. 

From the acquiring sponsor’s point of view, a plan buyout could offer 

access to new investment capital, although with the restrictions facing all 

DB plans regarding ERISA funding requirements and the tax on the 

reversion of plan assets. Buyouts could also provide a strategy for funding 

multiple plans by merging the assets and liabilities of an underfunded plan 

with the excess assets of a similarly overfunded one. While any sponsor 

can merge plans, buyouts might facilitate such a strategy. On net, the 

change in risk of underfunded benefits might be balanced across the 

participants in underfunded and overfunded plans, but workers whose 

previous sponsor had funded a plan to ensure that benefits would be paid 

might not favor their plan’s surplus funding other workers’ benefits at their 

expense. 

Plan Buyouts Would Differ 

in Key Ways from Plan 

Terminations 

While proposed plan buyouts are intended to provide a similar function to 

plan sponsors as plan terminations, they differ in many important ways, 

including the treatment of the plan, applicable regulatory requirements, 

protection of plan benefits, and fiduciary responsibilities (see table 1). 

Fundamentally, a plan buyout differs from a termination because the 

buyout treats the plan as an ongoing concern, while a termination ends the 

plan. In a buyout, the new sponsor would presumably have to fund the 

plan according to ERISA minimum funding requirements and make all 

plan disclosures. The sponsor would pay PBGC premiums, and PBGC 

guarantees would continue to apply to plan benefits.27 Oversight of the 

plan would remain within the jurisdiction of federal pension regulatory 

agencies: PBGC, Labor, and Treasury.

 27In 2009, PBGC charged a flat rate premium of $34 per participant in a single-employer 

program plan, and $9 per participant in a multiemployer plan. These rates are indexed to 

the growth in the average national wage. In addition, sponsors of single-employer plans 

with unfunded vested benefits pay $9 per $1,000 of underfunding. 

Page 13 GAO-09-207 Defined Benefit Plan Buyouts
 

Table 1: Comparison of Key Characteristics of Plan Buyouts and Terminations 

 Characteristic Proposed plan buyouts 

Plan termination with insurance 

company 

Treatment of plan Treated as ongoing arrangement Plan terminated or closed, and all 

accrued benefits are contracted to be 

disbursed 

Measurement of plan’s liabilities 

at time of transaction 

Current liability, calculated using ERISA assumptions for 

ongoing plana

Termination liability, using actuarial 

assumptions appropriate for annuities 

to close out plan

Asset requirements to fund 

pension promises 

Based on ERISA funding rules; regulated financial 

institutions may have to hold capital against the plan 

liabilities, depending on risk factors 

Based on National Association of 

Insurance Commissioners’ risk-based

capital rules 

Relevant regulatory agencies PBGC, Labor, TreasurybState insurance departments

Guarantor of participant benefits PBGC State insurance guarantee funds 

Guarantee limits Up to $54,000 maximum annuallycUp to at least $100,000 cash value for 

annuitiesd

 

Fiduciary responsibility of 

sponsor in choosing purchasing 

entity/provider 

Unclear

e

Must pick “safest available annuity” 

provider 

Sources: GAO analysis of proposed buyout models, ERISA, PBGC guarantees, and NAIC guidelines. 

a

A new sponsor would have to fund the plan based on ERISA current liability; it is unclear which 

assumptions the acquiring entity would use to price the liabilities in the buyout. 

b

Banking activities by regulated financial institutions may in addition be regulated by the Federal 

Deposit Insurance Corporation, Office of Thrift Supervision, OCC, FRB, and state agencies. 

c

For a 65-year-old retiree in a plan terminating in 2009, with lower guarantees for younger workers. 

Retirees may receive more than the maximum guarantee if they earned a higher benefit and the plan 

had sufficient assets to pay benefits beyond the guarantee. 

d

State guaranty associations can levy other insurance companies to collect additional money to pay 

policyholders. 

e

According to Labor, discretionary activities that relate to the formation rather than the management of

plans generally are not fiduciary activities subject to Title I of ERISA, except in the context of 

multiemployer plans. These so-called “settlor” functions include decisions relating to the 

establishment, design, and termination of plans. See Labor, letter to John N. Erlenborn from Dennis 

M. Kass (March 13, 1986); letter to Kirk F. Maldonado from Elliot I. Daniel (March 2, 1987); and 

Advisory Opinion No. 97-03 (January 23, 2007). The extent to which buyouts involve settlor as

opposed to fiduciary activities is unclear. 

In contrast, a standard plan termination ends the plan itself. If the sponsor 

purchases an insurance company annuity contract, payment of plan 

benefits that are covered by the contract becomes the obligation of the 

insurance company, which is regulated by state insurance bodies. State 

regulation of insurance companies is grounded in statutory valuations of 

an insurer’s assets and liabilities and risk-based capital requirements, as 

laid out by the National Association of Insurance Commissioners (NAIC), 

the organization of state insurance regulators. Risk-based capital refers to 

the amount of assets an insurer holds in order to ensure that it can pay its 

Page 14 GAO-09-207 Defined Benefit Plan Buyouts
 

obligations, which in this case would mean the accrued benefits in the 

plan. Regulators set the amount of risk-based capital a firm must hold 

depending on different categories of risk, including asset risk, insurance 

risk, interest rate risk, and business risk, with firms deemed to hold riskier 

obligations or operations forced to hold more assets against those risks.28

Because asset risk is one of the risk categories considered by regulators,

insurance companies have an incentive to invest conservatively. NAIC 

guidelines suggest that an insurer hold total capital levels of at least 200 

percent of the minimum risk-based capital requirements to avoid any 

corrective action. If the insurance company has total capital levels below 

this percentage, regulators could take a variety of corrective actions, 

ranging from requiring the company to report how it intends to raise its 

capital levels to a state takeover of the insurer. 

In a buyout, depending on the institutional nature of the purchasing entity,

the new sponsor may also face capital requirements. For example, 

regulators for banks and other regulated financial institutions, including 

OCC, FRB, the Federal Deposit Insurance Corporation (FDIC), and the 

Office of Thrift Supervision (OTS), look at capital and leverage ratios to 

assess whether banks are holding enough capital based on those identified 

risks to ensure the safety and soundness of the banks and bank deposits.29

Government guarantees backing up plan benefits would also differ under

buyouts and terminations. With plan buyouts, PBGC would continue to 

guarantee benefits for participants of bought-out plans in the event the 

 28Asset risk refers to the risk of default or loss of value in assets the insurer owns, including

affiliated businesses. Insurance risk refers to the possibility of higher-than-expected claims, 

such as, in this case, having to pay out benefits for longer periods of time because of aboveaverage life expectancy. A company faces interest rate risk if it could incur losses in assets 

relative to liabilities if interest rates move in a particular direction. Business risk represents

general uncertainty about the revenues or costs a particular insurance company or industry

can expect. 

29Some financial institutions, such as hedge funds or private equity firms, may be managed 

to be exempt from some requirements of federal securities law and regulations that apply

to other investment vehicles. For more on “alternative” investment vehicles, see GAO, 

Defined Benefit Pension Plans: Guidance Needed to Better Inform Plans of the 

Challenges and Risks of Investing in Hedge Funds and Private Equity, GAO-08-692 

(Washington, D.C.: Aug. 14, 2008). 

Page 15 GAO-09-207 Defined Benefit Plan Buyouts
 

new sponsor could not pay because of financial distress.30 In contrast, for 

benefits paid by insurance companies following plan terminations, state 

insurance commissions maintain guaranty funds, funded by insurance 

companies (on a post insolvency basis), which can be used to pay 

policyholders in the event of insurer insolvency. Guarantee limits vary by 

state, but all states provide coverage of up to at least $100,000 per 

beneficiary for annuities, according to the National Organization of Life 

and Health Insurance Guaranty Associations (NOLHGA). This limit would 

not be as high as PBGC guarantees for distress-terminated plans for some 

beneficiaries, but NOLHGA claims that guarantees have allowed over 90 

percent of policyholder benefits to be paid in full during past insolvencies, 

similar to PBGC’s success to date in covering pension benefits in distress 

terminations. Partly, this is due to assessments the state guaranty 

associations can levy on other insurance companies to collect additional 

money to pay policyholders.31

In addition, sponsor fiduciary requirements could differ between buyouts 

and terminations. Pension plan sponsors have a fiduciary duty to manage

plans solely in the interest of plan participants and beneficiaries.32 While 

the decision whether or not to terminate a plan is generally viewed as 

outside the management of a plan and not covered by this duty, should a 

decision be made to terminate a plan, the selection of an annuity provider 

is a covered fiduciary duty. Labor has interpreted this duty as generally 

requiring DB plan sponsors to choose “the safest available annuity” and 

has published explicit factors for sponsors to consider when making such 

a selection.33 According to insurance representatives with whom we spoke, 

this has typically meant that AA-rated companies or stronger have 

 30PBGC’s single-employer insurance program covers benefits of up to about $4,500 per 

month for a 65-year-old participant whose plan terminates in 2009, with lower guarantees 

for younger retirees. A recent PBGC study found that its guarantees fully covered the 

benefits of 84 percent of participants in PBGC-trusteed plans for distress terminations from

1990 to 2005. 

31GAO highlighted concerns in 1992 about the failure of insurance companies and the 

adequacy of protections for policyholders whose insurance companies fail. See GAO, 

Insurer Failures: Life/Health Insurer Insolvencies and Limitations of State Guaranty

Funds, GAO/GGD-92-44, (Washington, D.C.: March 1992). 

3229 U.S.C. § 1104. 

3329 C.F.R. 2509.95-1(c) (2008). In contrast, the PPA required Labor to issue regulations to 

clarify that the safest available annuity standard and its related factors are not applicable to 

defined contribution plans. PPA § 625, 120 Stat. 980. The final regulation, which became

effective December 8, 2008, was published on October 7, 2008. 73 Fed. Reg. 58,445. 

Page 16 GAO-09-207 Defined Benefit Plan Buyouts
 

dominated the DB plan termination market. Further, a purchase of an 

annuity by a sponsor of a terminating plan establishes an “irrevocable 

commitment,” as required by ERISA, that all plan benefits will be paid.34

While it is possible that similar fiduciary standards could apply in the case 

of DB plan buyouts by financial entities, the law, having not contemplated

such transactions, does not specify explicit standards.35

DB plan buyouts by financial companies could, in some cases, improve the 

security of benefits. Those buyouts in which weak sponsors of

underfunded plans, who otherwise would choose not to terminate, 

transferred their plans to companies with stronger financial backing and 

superior pension financial management could improve plan funding and 

decrease the risk of distress termination. PBGC would, in addition, benefit 

from the continued premiums new sponsors would pay for insurance on

their plan benefits, as opposed to premiums ceasing when a plan is 

terminated. However, these advantages would seem to apply in only a 

small subset of potential buyouts, and would likely provide limited upside 

for participants and PBGC. Further, plan buyouts could create risks for 

various pension stakeholders. For example, the new sponsor assuming 

responsibility for paying plan benefits would not have an employment 

relationship with participants, raising concerns about its incentives to 

manage the plan for the exclusive benefit of participants. Buyouts may 

also raise risks to PBGC, depending on the structure of the transaction, in 

that a financial sponsor taking on several plans may become weak, and 

PBGC may have limited authority to intervene to prevent risky buyouts. 

Further, the recent financial crisis has highlighted the emergence of 

serious and previously unforeseen risks with financial companies, even

among firms that had been considered strong. Buyouts by financial 

sponsors may also create regulatory ambiguities and conflicts between the 

goals of agencies regulating financial sponsors and those regulating 

pensions. (See table 2 for potential risks and benefits of plan buyouts.) 

Some Plan Buyouts 

Could Benefit 

Participants and 

PBGC, but in General 

Pose New Risks 

 3429 U.S.C. § 1341(b)(3)(A). 

35See note e in table 1. 

Page 17 GAO-09-207 Defined Benefit Plan Buyouts
 

Table 2: Potential Positive Outcomes and Risks Associated with Plan Buyouts 

Category Potential positive outcomes Potential risks 

Benefit security Risky plans move from financially weak to strong 

sponsors. 

Financial strength of new sponsor deteriorates 

quickly. 

Sponsor-participant relationship New sponsor provides improved plan 

management and administrative services. 

Possible mismatch of incentives of new sponsor; 

participants might not like plan administration 

moving to another unfamiliar firm; IRS ruling 

rejected bought-out plans as tax-preferred 

employer plans. 

Pension plan management Superior financial management compared with 

original sponsor; additional capital requirements 

for regulated financial institutions. 

Mismatch of incentives to manage plan in 

interests of participants; possible merging of 

over- and underfunded plans. 

PBGC PBGC continues to receive premiums on plans 

that otherwise may have been terminated. 

Could increase the concentration of plan 

liabilities held by a single sponsor or sector, 

raising PBGC’s exposure; PBGC may have 

limited ability to prevent risky buyouts. 

Effects on future termination Large, well-capitalized controlled group protects 

PBGC against major claims. 

Limited or no capital outside plan in controlled

group provides little financial security for plan.

Regulatory issues Financial regulation improves benefit security

compared with that of some sponsors. 

Ambiguities about some benefits; possible 

conflict between pension and financial agency 

goals. 

Effect on DB sponsors Reduced cost and greater flexibility in shedding 

liabilities; ability to shed “legacy” portion of a

plan. 

May encourage sponsors to freeze plans. 

Source: GAO analysis of proposed DB plan buyouts.

Some Plan Buyouts by 

Financially Strong 

Sponsors Could Increase 

Benefit Security for 

Participants and PBGC 

Advocates of allowing pension plan buyouts point to a potential “win-winwin”: more options and lower cost for sponsors who wish to shed their 

pension plans, more security for participants than a weak sponsor can 

provide, and reduced risk of large claims from distress terminations for 

PBGC. Plan sponsors could benefit from buyouts if they provide a cheaper 

means for shedding a pension plan than terminating the plan through an 

insurance company. Buyouts could also allow sponsors to shed just a 

portion of the plan while maintaining sponsorship for a smaller plan. To 

the extent that the lower cost of plan buyouts reflects a competitive 

advantage over a plan termination without increasing pension risk, 

buyouts can be viewed as a beneficial financial innovation. 

Buyouts could add security for plan participants if the new sponsor can 

manage plan assets and liabilities better than the original sponsor, if the 

original sponsor could not terminate the plan. The financial backing of the 

assets of a large, diversified, and well-capitalized parent company or of 

large amounts of investment capital could better ensure that assets will be

Page 18 GAO-09-207 Defined Benefit Plan Buyouts
 

available to pay promised benefits. It could also lower the likelihood that 

PBGC would face a future claim from distress termination, since a 

stronger sponsor would be in a better position to keep the plan funded and 

be less likely to face financial distress than a weaker one. 

Pension Buyouts by 

Financial Entities May 

Pose New Risks and 

Regulatory Challenges 

While buyouts could provide more security for plan benefits in some 

cases, they may also create new risks that could adversely affect benefit 

security. These include the severing of the plan from a direct employment 

arrangement between employer and employee, the ability of PBGC to 

monitor and intervene in buyouts that could have adverse implications for 

participants and PBGC, and potential conflicts and issues between the 

regulatory missions of PBGC and various financial regulators. 

Buyouts would affect the relationship between sponsor and participant by 

separating it from an employment arrangement, possibly raising concerns

about the management of participants’ pension benefits and the long-term 

effect on the DB system. With an employer-sponsored plan, the financial 

fate of the plan depends to a large degree on the financial fate of the 

company, since a healthier company is better able to fund its DB plan and

the plan will not endure a distress termination as long as the company 

thrives. Opponents to buyouts contend that even in the case of a frozen 

plan, an employer sponsor, as opposed to a third-party sponsor, has a 

greater incentive to manage the plan in the interests of its employees 

because it has an incentive to maintain a good working relationship with 

them. In addition, a frozen plan that remains within the firm has at least 

the chance of being “thawed,” especially within a collective bargaining 

agreement.36 Workers may also have a relationship with plan 

administrators within their own company, and may worry about 

addressing concerns when dealing with administrators of a new sponsor 

outside their company. Further, the option of plan buyouts for frozen 

plans as a less expensive alternative to plan termination may provide an 

incentive for existing sponsors to freeze their plans, an act that could 

reduce future retirement income for participants. 

 36A recent GAO survey found that less than half of sponsors with frozen plans have a firm 

idea of the anticipated outcome for their largest frozen plans. Among these sponsors, a

very small number anticipated thawing their plan and about one-third said they would

eventually terminate their largest frozen plans. In contrast, nearly half said they would keep

the plan frozen indefinitely. Another 14 percent reported that it was too early to make a

decision or that they were uncertain what the outcome will be. See GAO-08-817. 

Page 19 GAO-09-207 Defined Benefit Plan Buyouts
 

Buyout proponents argue that the employment relationship plays a 

diminished role in hard-frozen plans, which would be the primary target of 

buyouts. Because these plans offer no future accruals, they serve a very 

limited ongoing function of providing benefits to employees, and therefore

likely do not play a strong role in attracting or retaining workers. As one 

advocate also pointed out, DB plans can change sponsorship as a result of

company mergers or acquisitions, which could result in a situation where 

the new sponsor becomes responsible for managing the benefits of a 

participant it has never employed (such as a worker who has left the firm 

prior to the merger and change of sponsor). However, the IRS ruling 

suggests that the underlying employment relationship between plan 

sponsor and participant is fundamental to the rationale for the tax-favored

status of qualified plans.

The buyout of plans by a nonemployer may also create some perverse 

incentives or ambiguities in applying rules that guide how the sponsor may 

interpret participant benefits or rights. One key issue concerns whether a 

participant who had not yet reached the minimum service time with his 

employer would continue to accrue service time after the plan changes 

sponsors. For example, a plan may require a minimum of 5 years of service 

to be able to qualify for benefits upon retirement. A worker may have 4 

years working for an employer when the company sells its pension to a 

financial entity, which would become the new sponsor. If the participant 

continues to work for another year, he would have 5 years of service with 

the employer, but not with the sponsor, and therefore it is possible the 

sponsor would claim that the participant has not vested.37 Similarly, should

an active or soft-frozen plan be bought out by a nonemployer, there would 

be a potential question of whether a participant would continue to accrue

service time after the transfer of sponsorship. Other benefits, such as 

shutdown benefits—significant early retirement benefits triggered by 

layoffs or plant closings—may be affected by decisions by the employer, 

who would no longer be responsible for paying the benefits, creating an

incentive mismatch between employer and sponsor unless the plan was 

amended explicitly to address this. 

 37Where a plan sponsor sold part of its business but retained the pension plan, a federal 

appeals court has ruled that additional service with the new employer need not count 

toward years-of-service requirements for early retirement. Dade v. North Am. Philips

Corp., 68 F.3d 1558 (3d Cir N.J. 1995). According to Treasury, full vesting applies to plan 

benefits in a termination, but would not necessarily apply to a buyout. 

Page 20 GAO-09-207 Defined Benefit Plan Buyouts
 

Arranging a DB plan buyout in situations where participants and 

beneficiaries are covered by a collective bargaining agreement may 

involve overcoming additional challenges. Under federal law, “wages, 

hours, and other terms and conditions of employment” are mandatory 

subjects of collective bargaining.38 Case law has established that employee 

pension benefits are generally subject to mandatory collective bargaining.39

On the other hand, courts have recognized that terms and conditions of 

employment do not encompass every employer decision or management 

function that may have an indirect impact upon or be of interest to 

employees.40 One expert with whom we spoke was unsure whether the 

sale of a pension plan from an employer to a third-party sponsor would be

considered negotiable under a collective bargaining agreement. The 

outcome in individual cases may depend on the specific facts and 

circumstances involved, including the terms of any applicable union 

contracts. 

Buyouts would have an ambiguous impact on PBGC’s financial position

and risk. PBGC would benefit if a plan buyout moved a plan from a 

financially weak sponsor to a stronger one with a better ability to fund the 

plan sufficiently because PBGC would take a loss if it had to take 

responsibility for paying benefits of an underfunded plan that closed in a 

distress termination. In addition, PBGC would benefit from continued 

premium payments by the new sponsor, compared with the original 

sponsor terminating the plan. However, buyouts would be unlikely to 

involve the weakest and riskiest plans —proponents of buyouts with 

whom we spoke said that the plans financial companies would most likely 

target would be only slightly underfunded. Large, more severely 

underfunded plans held by weak sponsors, which present the biggest risk 

of a large claim on PBGC’s assets, would seem to be an unlikely target for 

buyout because of the amount of cash a prospective financial sponsor 

would require to agree to take over the plan. It therefore seems unlikely 

that the buyouts would help rescue the riskiest plans or reduce PBGC’s 

overall risk significantly, unless a buyout prevented the future erosion of 

plan funding in large plans. 

 3829 U.S.C. § 158(d). Separate collective bargaining requirements apply to railway and 

airline workers. 45 U.S.C § 156.

39E.g., United Brick & Clay Workers v. International Union of Dist. 50, etc., 439 

F.2d 311 (8th Cir. Mo. 1971). 

40E.g., Westinghouse Electric Corp. v. NLRB 387 F.2d 542 (4th Cir. 1967). 

Page 21 GAO-09-207 Defined Benefit Plan Buyouts
 

More important for PBGC, seemingly strong companies buying out plans 

may not remain financially strong. The current turmoil in the financial 

markets, which has led to the failure of financial institutions and direct 

federal financial assistance to others, provides clear evidence that the 

financial strength of a firm or industry can quickly deteriorate. Even if the 

financial sponsor appeared to be stronger than employers from whom it 

purchased DB plans, plan buyouts could move multiple plans from several 

firms in different industries to the control of one firm or industry. This 

could increase the magnitude of future losses to PBGC and participants 

should that sponsor or industry find itself in financial distress. 

For PBGC, the potential risk associated with any particular DB plan 

buyout depends in part on the structure of the new sponsorship. A large 

financial company, such as a bank or an investment bank, might choose to

set up a subsidiary explicitly to sponsor bought-out plans. If the parent 

financial company owns at least 80 percent of the subsidiary containing 

the plan, then the subsidiary would generally be within the financial 

company’s “controlled group.”41 This would mean that the parent company 

could be liable for supporting the pension plan should the plan terminate 

with insufficient assets to pay accrued benefits. However, a firm

conducting a buyout could transfer plan assets and liabilities to a separate

subsidiary or investment vehicle outside the parent company’s controlled 

group. In this case, the larger parent may not be legally liable to the 

pension plan if the plan became underfunded or the sponsor suffered 

financial distress, possibly increasing the risk of lost participant benefits 

or losses to PBGC in the event of a plan termination. Therefore, the 

structure of the sponsorship of any plan may affect the potential risk to 

PBGC. 

According to PBGC officials, the agency’s ability to prevent buyouts that

increase risk to itself and the DB system relies on statutory provisions 

permitting PBGC to involuntarily terminate a plan and to seek recovery

from plan fiduciaries who engage in transactions to evade plan liability. 

PBGC officials indicated, however, that those provisions could be of 

limited value when applied to buyouts. The first provision authorizes 

PBGC to institute proceedings to involuntarily terminate plans in certain 

specific circumstances involving a sponsor failure to comply with funding 

 4129 U.S.C. § 1301(a)(14) and 26 C.F.R. § 1.414(c)-2 (2008). 

Page 22 GAO-09-207 Defined Benefit Plan Buyouts
 

laws or anticipation of such failure.42 The second permits PBGC to recover

from persons entering into transactions for the purpose of evading liability 

in connection with a plan termination.43 This provision was intended to 

deter attempts by plan sponsors to shift pension obligations to weak 

companies.44 Because it could result in original plan sponsors being liable 

for plan obligations as if a plan buyout had never occurred, it may 

discourage plan sponsors from selling plans to a new sponsor that is 

obviously not financially sound. However, PBGC officials stated it would 

still be very difficult and costly to prevent risky buyouts because PBGC 

faces a heavy burden of proving that one of the triggering criteria has been

met, and could involve protracted litigation. Further, under the first 

provision a forced plan termination would still likely lead to losses, and 

under the second provision PBGC has only a 5-year window to prove that 

a transaction was conducted to evade liability. Other former PBGC 

officials with whom we spoke thought that PBGC probably had the ability 

under its current authorities to craft rules to prevent buyouts that would 

increase the risk of losses to the agency. 

Regulated financial firms face capital requirements designed to try to 

ensure the safety of bank deposits and assets. While these requirements 

could provide additional security for plan benefits if they improve the 

likelihood of ongoing solvency for the sponsor, the oversight goals of 

banking regulatory agencies may conflict with those of the pension 

regulatory agencies. Bank regulatory agencies, such as OCC or FRB, seek 

 42Specifically, PBGC may institute such proceedings if (1) a plan has not met the minimum

funding standard under the IRC or has been mailed a notice of tax deficiency under section 

6212 under the IRC; (2) a plan will be unable to pay benefits when due; (3) a plan 

distribution of $10,000 or more is made to a plan owner, not by reason of death, and the 

plan immediately thereafter has nonforfeitable benefits that are not funded; or (4) the

possible long-run loss to PBGC “may reasonably be expected to increase unreasonably” if a 

plan is not terminated. In addition, PBGC is required to terminate a single-employer plan 

that does not have the assets available to pay benefits currently due. 29 U.S.C. § 1342(a). 

43Specifically, it provides that if the principal purpose of a person entering into a 

transaction is to evade such liability and the transaction becomes effective during the 5 

years prior to plan termination, the person and members of such person’s controlled group 

are subject to the same liability as a contributing plan sponsor. 29 U.S.C. § 1369. Person is 

defined to include partnerships, joint ventures, corporations and other entitles, as well as

individuals. 29 U.S.C. § 1002(9). With respect to a single-employer plan, controlled group 

generally means a group of (natural or corporate) persons under common control. 29

U.S.C. § 1301(a)(14)(A). Common control is determined as set out in regulations under the 

IRC to include such corporate forms as parent-subsidiary, brother-sister, and combined

groups of trades or businesses. 29 U.S.C. § 1301(a)(14)(B) and 26 C.F.R. § 1.414(c)-2 (2008).

44H.R. Rep. No. 99-300, at 304. 

Page 23 GAO-09-207 Defined Benefit Plan Buyouts
 

to ensure that the activities of a banking institution do not create undue 

risk for the safety of the depositors and the soundness of the banks. 

Therefore, if a banking institution wanted to take over the sponsorship of 

a pension plan, financial regulatory agencies may need to ensure that plan

sponsorship does not unduly increase the risk to the bank, and especially

to bank depositors. This might take the form of shielding bank assets from 

liability for pension plan underfunding. This would seemingly conflict 

directly with the interests of PBGC, which would want assets of the 

sponsor beyond the plan itself available to cover pension obligations 

before allowing a distress termination. This regulatory conflict would have 

implications for the security of plan benefits under a new sponsor 

following a plan buyout if some of the assets of a large financial sponsor 

were shielded from potential pension liability. Such a conflict may lead to

the perverse result that regulated, well-capitalized banking entities might 

be barred from participating in DB plan buyouts while financial entities 

that may be exempt from some securities laws and regulations, such as 

hedge funds, would not. On the other hand, it is possible that OCC or FRB 

might conclude that the financial company has sufficient assets outside of 

its banking activities to provide financial support for plan funding, or that 

the structure of the buyout provides sufficient protections for banking 

assets, and allow the banking entity to take over a plan.45

Plan buyouts might place additional demands on pension regulators to 

enforce current rules. Financial entities taking over plans in buyouts may 

offer investment services or asset-liability management geared toward DB 

plans. As plan sponsors themselves, they could theoretically hire a related 

subsidiary to provide these services, but doing so could present a conflict 

of interest between their role as sponsor and as investment manager. 

ERISA generally prohibits a range of transactions that could trigger 

conflicts of interest but there are a number of specific exceptions.46 It is 

unclear if plan buyouts will make it more difficult to monitor such 

 45The Citigroup purchase of the Thompson Regional Newspaper pension plan in the UK 

illustrates this potential regulatory conflict. Under section 23A of the Federal Reserve Act, 

FRB reviewed actions of a nonbanking subsidiary that might pose a risk to Citigroup’s 

banking unit. 12 U.S.C. § 371c. Citigroup received a ruling from FRB determining that the

pension buyout transaction in question qualified as an allowable financial activity as a bank 

holding company. This permitted Citigroup to move forward with the acquisition of 

Thompson’s pension plan. However, FRB required Citigroup to secure a letter of assurance

from the UK Pensions Regulator that assets under its banking unit, Citibank, would be

exempt from any calls on Citigroup resources in the event of the pension plan becoming 

insolvent. See app. I for further discussion of this ruling. 

4629 U.S.C. §§ 1106 and 1108. 

Page 24 GAO-09-207 Defined Benefit Plan Buyouts
 

transactions. A second source of potential oversight difficulty concerns 

the excise tax on plan reversions. A sponsor of an overfunded plan could 

attempt to extract excess plan assets, which would typically be subject to

an excise tax, by selling the plan to a financial sponsor in exchange for 

cash or assets reflecting the plan surplus (less fees the new sponsor might 

collect to take over the plan). IRS officials with whom we spoke 

mentioned that buyouts could possibly make enforcing the reversion tax 

more complicated, particularly if the transaction included the transfer of 

some business assets. 

The recent IRS ruling and legislative efforts to address the nation’s 

financial difficulties have pushed DB plan buyouts off the immediate 

policy agenda. At first glance, buyouts in and of themselves seem to be a 

minor issue. With a primary target market of sponsors of slightly 

underfunded, hard-frozen plans, both the direct benefits and costs of such 

transactions appear comparatively small. To the extent that a buyout 

results in a stronger sponsor of the pension plan, the buyout could make 

participant benefits more secure and reduce PBGC’s financial exposure 

somewhat. Sponsors would certainly benefit from the increased choice 

they would have in being able to shed their pension liabilities, presumably 

at reduced cost compared with standard termination through insurance 

companies. If such buyouts represented new level-playing-field

competition to insurance terminations, with no added risk to participants 

or to PBGC, they could be seen as a financial innovation that increased 

flexibility and lowered cost to DB sponsors. 

Concluding 

Observations 

The troubling aspects of DB plan buyouts involve risks that may be 

difficult to foresee or quantify now or at the time of any particular 

transaction. It is unclear to what extent buyouts would cost less than 

standard plan terminations simply because of differences in regulations 

facing financial institutions and insurance companies providing similar 

services to plan sponsors instead of from economic efficiency. Further, the 

current economic downturn has laid bare the current weaknesses and 

imperfections of financial regulation, with banks and insurance companies 

previously considered to be sound and well capitalized suffering 

catastrophic losses. 

Plan buyouts, as proposed by potential sponsors, would likely provide 

very limited upside for participants, since PBGC guarantees have covered

the overwhelming majority of participant benefits in DB plans that PBGC 

has taken over. They may offer cost savings and flexibility to sponsors, but 

they would appear to offer few advantages for benefit protection over plan 

Page 25 GAO-09-207 Defined Benefit Plan Buyouts
 

terminations already recognized by ERISA. Although it is possible that the 

current financial crisis could uncover weaknesses in the regulation of 

annuity providers for terminated plans, the potential advantages appear to 

be limited to a very narrow set of scenarios in which a buyout by a strong 

sponsor rescues the plan from a distress termination and saves 

participants from lost uninsured benefits. Even to the extent they are a 

successful model, buyouts could erode worker retirement benefits by 

encouraging plan freezes by sponsors wishing to avail themselves of this 

option. For PBGC, the gains in security would also likely be small, since 

only mildly underfunded plans are likely to be targeted for buyout, 

although it is possible that some buyouts could prevent further erosion in 

plan funding. Whatever the ultimate effect buyouts would have on benefits

security or plan sponsorship, it seems likely that they would change the 

traditional role that DB pensions play as a benefit employers provide 

directly to their employees. One’s evaluation of buyouts may depend on

the degree to which DB plans are defined by the employer-employee 

relationship, and not just on the monetary value of the benefits. 

We provided a draft of this report to the Department of Labor, the 

Department of the Treasury, IRS, and PBGC, all of whom provided 

technical comments that we incorporated as appropriate. 

As agreed with your offices, unless you publicly announce its contents 

earlier, we plan no further distribution until 30 days after the date of this 

letter. At that time, we will send copies of this report to the Secretary of 

Labor, the Secretary of the Treasury, the Director of PBGC, appropriate 

congressional committees, and other interested parties. We will also make 

copies available to others on request. In addition, the report will be 

available at no charge on GAO’s Web site at http://www.gao.gov. 

Agency Comments 

If you have any questions concerning this report, please contact Barbara 

Bovbjerg at (202) 512-7215 or Joseph Applebaum at (202) 512-6336. 

Page 26 GAO-09-207 Defined Benefit Plan Buyouts
 

Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this report. GAO staff who made 

Barbara D. Bovbjerg, Director 

contributions are listed in appendix III. 

Education, Workforce, and Income Security Issues 

Joseph A. Applebaum, Chief Actuary 

Applied Research and Methods 

Page 27 GAO-09-207 Defined Benefit Plan Buyouts
Appendix I: UK Experience with Noninsured

Plan Buyouts Provides Only Limited Appendix I: UK Experience with Noninsured Regulatory Lessons for the United States 

Plan Buyouts Provides Only Limited 

Regulatory Lessons for the United States 

The United Kingdom (UK) has in recent years seen a marked increase in 

defined benefit (DB) plan sponsors closing their plans. British plan experts 

and policy makers with whom we spoke estimated that terminations are 

expected to involve assets of £10 billion in 2008. Most of these closeouts 

have been conducted by insurance companies in ways similar to pension 

terminations in the United States, with sponsors terminating their plans 

and purchasing group annuities from insurers to pay plan benefits. 

However, a few have involved noninsurance entities. In 2007, two financial 

firms, Citigroup and Pension Corporation, took over control of four 

defined benefit plans with a value of £4.5 billion collectively. Citigroup’s 

purchase of the plan sponsored by Thompson Regional Newspapers most 

clearly resembled the structure of models proposed by U.S. firms: 

Thompson created a subsidiary, into which it put its pension plan plus 

additional assets, and Citigroup purchased this subsidiary and became the 

plan’s new sponsor. Citigroup pointed out some benefits of this buyout for 

all parties involved, including the facts that Thompson was a relatively 

weak sponsor and the investment strategy proposed by Citigroup was 

conservative in nature. 

To take over the Thompson pension plan, Citigroup had to obtain approval 

from both U.S. and United Kingdom regulatory agencies. The Federal 

Reserve Board (FRB) approved the plan buyout while making it clear that 

its approval was limited to the specific conditions of this deal, involving a 

hard-frozen, fully funded plan in which the plan assets equaled or 

exceeded the value of future plan benefit payments.1

 Citigroup proposed 

that this deal be done through a nonbank subsidiary, and FRB wanted to 

know if this transaction posed any risk to subsidiary groups, Citibank in 

particular.2

 We were told that, under UK law, the corporate control group 

of a subsidiary would be liable for any losses the pension plan might incur, 

meaning that the Pensions Regulator, the main British pension regulatory 

agency, could seek recovery from the U.S.-insured depository institution 

of Citibank in the event that something went awry with the fund. FRB 

 1

Citigroup, Inc., 93 Fed. Res. C16 (2207) 

2

Section 23A of the Federal Reserve Act (12 U.S.C. § 371c) and Regulation W (12 C.F.R. pt. 

223 (2008) impose quantitative and qualitative limits on covered transactions between a

depository institution and its affiliates. Covered transactions include, among other things, 

an extension of credit by a depository institution to an affiliate and the issuance of a 

guarantee by a depository institution on behalf of an affiliate. The limitations in section 23A 

and Regulation W provide important protections against a depository institution suffering 

losses due to covered transactions with its affiliates, and also limit the ability of a

depository institution to transfer to its affiliates the subsidy arising from the institution’s 

access to the federal safety net.

Page 28 GAO-09-207 Defined Benefit Plan Buyouts
Appendix I: UK Experience with Noninsured

Plan Buyouts Provides Only Limited 

Regulatory Lessons for the United States 

officials indicated that they would have serious concerns about allowing a 

U.S. banking institution to subject itself to the liabilities of a pension plan 

acquired by a subsidiary. In order to secure final approval from FRB, 

Citigroup had to receive written assurance from the Pensions Regulator 

that Citibank assets would not be pursued in the event of the plan 

becoming insolvent. The Pensions Regulator agreed to grant this 

exemption for a period of 5 years. 

While that buyout contained features similar to those in U.S. proposals, 

there are inherent structural differences between the UK and U.S. pension 

regulatory systems that appear to limit the lessons from the UK experience 

for the United States. Officials told us that, unlike American plans, British 

defined benefit plans are managed by separate boards of trustees rather 

than plan sponsors. Trustees have the power, for example, to constrain 

plan sponsors from employing any investment strategy that may lead to 

undue risk for the participants or the British federal pension insurance 

fund, the Pension Protection Fund (PPF); in contrast, U.S. plans are not 

required to have any such governance body. Furthermore, according to 

pension experts, the tax on plan reversions in the UK is significantly lower

than in the United States, and Citigroup made clear its intent to keep any 

remaining surplus after either paying all promised benefits or terminating 

the plan through an insurance company. This source of profit would not be 

available in the United States because of the size of the reversion tax. 

Additionally, the Pensions Regulator has powers that allow for flexibility 

and give strong protection to plan members. As the DB plan buyout 

landscape continues to evolve, the Pensions Regulator has the power to 

intervene when it believes a noninsurer transaction might put plan 

members and the PPF in jeopardy. The Pensions Regulator has already 

shown its willingness to engage in such intervention during the Pension 

Corporation’s buyout of the telecommunication firm Telent. In contrast to 

Citigroup, the Pension Corporation acquired pension plans by gaining an 

interest in the original employer sponsor. These takeovers more closely 

resembled a merger and acquisition transaction than they did a pension 

plan buyout. In this case, the trustees of the Telent pension plan claimed 

that the interests of the Pension Corporation were not aligned with those 

of the trustees and plan members. Some believed that the Pension 

Corporation’s sole interest in acquiring Telent was to seek higher returns 

from the fund as a means of profit for the corporation, rather than for the 

members. The Pensions Regulator agreed with the trustees and exercised 

its power by installing three additional independent members as trustees, 

thus preventing the Pension Corporation from gaining control of the 

board. In addition to showing the powers of the Pensions Regulator, this 

Page 29 GAO-09-207 Defined Benefit Plan Buyouts
Appendix I: UK Experience with Noninsured

Plan Buyouts Provides Only Limited 

Regulatory Lessons for the United States 

instance also illustrates the relative importance of UK trustees. It was the 

trustees that first notified the Pensions Regulator about the potential risk 

being imposed on members. 

Page 30 GAO-09-207 Defined Benefit Plan Buyouts
Appendix II: Internal Revenue Service 2008

Revenue Ruling on Defined Benefit Plan Appendix II: Internal Revenue Service 2008 Buyouts 

Revenue Ruling on Defined Benefit Plan 

Buyouts 

On August 6, 2008, the Department of the Treasury and the Internal 

Revenue Service (IRS) issued Rev. Rul. 2008-45.

1

 This ruling decided 

whether DB plans bought out by third-party sponsors complied with or 

violated the “exclusive benefit” rule of the Internal Revenue Code (IRC). 

This rule provides that in order to constitute a qualified plan, a pension 

plan must be operated for the exclusive benefit of a sponsor’s employees

and their beneficiaries.2

The ruling declared that the transfer of a pension plan to “an unrelated 

taxpayer,” without the concurrent transfer of significant business assets, 

operations, or employees, such as in a merger or business acquisition, 

would jeopardize a plan’s tax qualification. IRS contrasted the transfer of a 

sole pension plan with the transfer of a plan in connection with the 

acquisition of business assets or operations, and held that since a plan in

the first instance would no longer be maintained by an employer to 

provide retirement benefits for its employees and their beneficiaries, it 

would not satisfy the rule. The ruling further held that this would still be 

the case if the purchasing company has “some employees...or some 

business assets or operations transferred, where substantially all of the 

business risks and opportunities” relate solely to the buyout of the plan 

itself. This means that under current law any plans transferred to a 

nonemployer sponsor would not receive the same tax benefits an 

employer-sponsored plan would, such as the tax deferral on sponsor 

contributions to the plan and on the return on plan assets. According to 

Treasury, as a result of this ruling, companies will be unable to take over 

any pension plans, frozen or active, except as part of a business merger or 

acquisition.

Advocates of buyouts said that they believed the IRS ruling was broader in 

its coverage of all third-party buyouts than it needed to be under the law 

and inconsistent with prior rulings on plans that change sponsors. Instead, 

they thought the ruling should have left open the possibility of case-bycase IRS approval pending an evaluation of whether a buyout benefited

participants or the Pension Benefit Guaranty Corporation (PBGC). 

Concurrent with the ruling, the Department of the Treasury issued a set of

principles, with input from the Department of Labor, Department of 

 1

See IRS Rev. Rul. 2008-45, Aug. 6, 2008, available at 

www.treas.gov/press/releases/reports/hp1110revrul200845.pdf

2

26 U.S.C. § 401(a). 

Page 31 GAO-09-207 Defined Benefit Plan Buyouts
Appendix II: Internal Revenue Service 2008

Revenue Ruling on Defined Benefit Plan 

Buyouts 

Commerce, and PBGC, that might guide Congress should it decide to write 

legislation that would permit pension plan buyouts.3

 These include the

following: (1) companies should give advance notice of plan buyouts to 

participants and regulators; (2) only financially strong entities in wellregulated sectors would be permitted to acquire a pension plan in a plan 

buyout transaction; (3) the parties to the transaction would be required to

demonstrate that participants’ benefits and the pension insurance system 

would be exposed to less risk as a result of the buyout, and that the 

buyout would be in the best interests of the participants and beneficiaries; 

(4) limitations on buyouts would be imposed to limit undue concentration 

of risk; (5) transferees and members of their controlled groups would 

assume full responsibility for the liabilities of transferred plans and would 

comply with post-transaction reporting and fiduciary requirements; and 

(6) subsequent buyout transactions for a plan would be subject to the 

same rules as the original buyout. 

 3

Treasury Press Release HP-1110 (Aug. 6, 2008). 

Page 32 GAO-09-207 Defined Benefit Plan Buyouts
Appendix III: GAO

A

 Contacts and Staff 

cknowledgments 

Page 33 GAO-09-207

Appendix III: GAO Contacts and Staff 

Acknowledgments 

Barbara D. Bovbjerg (202) 512-7215 or bovbjergb@gao.gov

Joseph A. Applebaum (202) 512-6336 or applebaumj@gao.gov

In addition to the contacts above, Charles A Jeszeck, Mark M. Glickman, 

Brian Tremblay, Craig Winslow, Karine McClosky, Jessica Orr, and Mimi 

Nguyen made important contributions to this report. 

Contacts 

Staff 

Acknowledgments 

(130830) Defined Benefit Plan Buyouts
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