a

GAO

United States Government Accountability Office

Report to Congressional Requesters

August 2009 PENSION BENEFIT 

GUARANTY 

CORPORATION

More Strategic 

Approach Needed for 

Processing Complex 

Plans Prone to Delays 

and Overpayments

GAO-09-716
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

August 2009

PENSION BENEFIT GUARANTY 

CORPORATION 

More Strategic Approach Needed for Processing

Complex Plans Prone to Delays and Overpayments Highlights of GAO-09-716, a report to 

congressional requesters 

As the insurer of over 29,000 

private sector defined benefit 

plans, the Pension Benefit 

Guaranty Corporation (PBGC) may 

be required to assume 

responsibility for the plans of a 

growing number of companies 

filing bankruptcy due to the 

recession. Concerns about PBGC’s 

benefit determination process, 

reductions in benefits due to 

guarantee limits, and workers’ 

retirement security overall led the 

chairmen and ranking members of 

the Senate Health, Education, 

Labor, and Pensions Committee 

and the Senate Finance Committee, 

among others, to ask GAO to study: 

(1) how long it takes PBGC to 

make benefit determinations; 

(2) the extent of overpayments on 

retirees’ benefits; 

(3) how well PBGC communicates 

with participants; and 

(4) the timeliness and accessibility 

of the appeals process. 

To conduct this study, GAO 

reviewed PBGC policies and 

procedures, analyzed automated 

data and case files, and interviewed 

PBGC officials and certain 

associations, participants, and their 

representatives from among those 

most affected by the process. 

What GAO Recommends

GAO is recommending that PBGC 

develop a better strategy for 

processing complex plans in order 

to reduce delays, minimize 

overpayments, improve 

communication with participants, 

and make the appeals process 

more accessible. PBGC generally 

agreed with the recommendations. 

GAO’s review of plans terminated with insufficient funds and trusteed by 

PBGC during fiscal years 2000 through 2008 revealed that a small number of 

complex plans--especially those with large numbers of participants affected 

by limits on guaranteed benefit amounts--accounted for most cases with 

lengthy delays and overpayments. 

Processing times. PBGC completed most participants’ benefit 

determinations in less than 3 years, but required more time—up to 9 years—to 

process determinations for complex plans and plans with missing data. Nearly 

three-quarters of the lengthiest processing times were associated with 

individuals in just 10 of the 1,089 plans reviewed. Although PBGC has taken 

steps to shorten this process, its initiatives do not address the longest delays. 

Overpayments. Although many participants are affected by sizable benefit 

reductions, the vast majority are not affected by overpayments. Moreover, 

nearly two-thirds of overpayments involved participants in just 10 plans. In 

cases with overpayments, PBGC’s policy generally requires participants’ 

benefits to be reduced by no more than 10 percent until the amount owed is 

repaid, but due to participants’ ages, the full amount often is never recouped. 

Figure: A Small Number of Complex Plans Account for Most Delays and Overpayments

Communication. PBGC has made efforts to improve communication, but key 

correspondence often did not meet the needs of those in complex plans. For 

example, when the process was lengthy, PBGC did not communicate with 

some participants for several years. When the benefit calculation was 

complicated, PBGC did not provide explanations that could be understood 

without further information or assistance. 

Appeals. Since restructuring the appeals process in 2003, PBGC has reduced 

the average amount of time needed to decide an appeal by almost a year. 

However, the agency does not readily provide key information that would be 

helpful to participants in deciding whether to pursue an appeal. 

View GAO-09-716 or key components. 

For more information, contact Barbara 

Bovbjerg at (202) 512-7215 or 

bovbjergb@gao.gov. 
Page i GAO-09-716 Pension Benefit Guaranty Corporation 

Letter 1

Background 2 

Most Benefit Determinations Are Completed within 3 Years, but 

Cases with Complex Plans and Missing Data Take Longer 9 

Overpayments Have Been Infrequent and Mostly Concentrated in a 

Few Complex Plans 19 

PBGC’s Initial Communications Drew Praise, but Later 

Communications Were Sometimes Found Lacking 31 

Restructured Appeals Process Resolves Requests More Efficiently 

but Key Information Is Not Readily Provided 36 

Conclusions 44 

Recommendations 45 

Agency Comments and Our Evaluation 45 

Appendix I Scope and Methodology for Analysis of Automated 

and Imaged Data 49 

Appendix II Organizations and Participants Contacted 54 

Appendix III The Process for Allocating Assets and Recoveries to 

Participant Benefits 56 

Appendix IV Limits on Guaranteed Benefits from a Participant’s 

Perspective 62 

Appendix V Profiles of Three Large, Complex Plans 63 

Appendix VI Three Categories of Large, Complex Plans 69 

Appendix VII Sample Benefit Determination Letter 71 

Contents 
Appendix VIII Comments from the Pension Benefit Guaranty 

Corporation 80 

Appendix IX GAO Contact and Staff Acknowledgments 84 

Related GAO Products 85 

Tables 

Table 1: Types of Guaranteed Benefit Limits under ERISA 7 

Table 2: Characteristics of 10 Large, Complex Plans 23 

Table 3: Priority Categories for Allocating Participant Benefits 57 

Table 4: Asset and Recovery Allocation among 10 Large, Complex 

Plans 61 

Table 5: Profile of a Bethlehem Steel Terminated Pension Plan 63 

Table 6: Profile of a Republic Technologies International 

Terminated Pension Plan 65 

Table 7: Profile of a US Airways Terminated Pension Plan 67 

Table 8: Ten Plans Most Affected by Guaranteed Benefit Limits 69 

Table 9: Ten Plans Most Affected by Long Processing Times 69 

Table 10: Ten Plans Most Affected by Overpayments 70 

Figures 

Figure 1: Growth in Number of Single-Employer Plans under PBGC 

Trusteeship (1975-2008) 4 

Figure 2: PBGC’s Benefit Determination Process 6 

Figure 3: Number of Years to Process Benefit Determinations 11 

Figure 4: Number of Participants and Plans Terminated and 

Trusteed, by Fiscal Year (2000-2008) 12 

Figure 5: Average Processing Time, by Fiscal Year of Trusteeship 13 

Figure 6: Ten Plans with the Greatest Number of Benefit 

Determinations Taking 4 Years or Longer 14 

Figure 7: Proportion of Participants with Estimated Benefits that 

Differ from Final Benefits 20 

Figure 8: Ten Plans with the Greatest Number of Participants 

Owing PBGC for Overpayments 22 

Page ii GAO-09-716 Pension Benefit Guaranty Corporation
Figure 9: The Effect of Plan Termination on One RTI Retiree’s 

Monthly Payment 26 

Figure 10: The Effect of Plan Termination on One Weirton Retiree’s 

Monthly Payment 28 

Figure 11: Participants’ Ages at the End of Recoupment in Cases 

with Overpayments Greater than $10,000 29 

Figure 12: PBGC’s Appeals Process 37 

Figure 13: Actions Taken on Correspondence Associated with 

Plans Trusteed during Fiscal Years 2000-2008 39 

Figure 14: Average Age of Closed and Pending Appeals, by Fiscal 

Year 40 

Figure 15: Outcome of Appeals since Restructuring 42 

Figure 16: Example Scenario of Section 4044 Asset Allocation to 

Participants’ Benefits 58 

Figure 17: Example Scenario of Section 4022(c) Recovery 

Allocation to Participants’ Benefits 60 

Figure 18: Understanding the Limits on Guaranteed Benefits 62 

Abbreviations 

AFL-CIO American Federation of Labor and Congress of Industrial 

Organizations 

ERISA Employee Retirement Income Security Act of 1974 

OPM Office of Personnel Management 

PBGC Pension Benefit Guaranty Corporation 

RTI Republic Technologies International 

SPARR Small Plan Average Recovery Ratio 

SSA Social Security Administration 

SSI Supplemental Security Income 

USWA United Steelworkers of America 

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Page iii GAO-09-716 Pension Benefit Guaranty Corporation
Page 1 GAO-09-716 

United States Government Accountability Office

Washington, DC 20548 

 

August 17, 2009 

Congressional Requesters 

The Pension Benefit Guaranty Corporation (PBGC) insures the retirement 

income of nearly 44 million workers in over 29,000 private-sector defined 

benefit plans. In the event that a company files for bankruptcy and can no 

longer fund the benefits promised by its pension plan, the plan may be 

terminated and PBGC may be required to step in and assume 

responsibility for paying the pension benefits owed by that plan, subject to 

certain legal limits. Determining the correct benefit amounts following a 

plan’s termination is a complex process that can take years to complete. 

Concerned about potential reductions to retirees’ benefits, workers’ 

retirement security in the face of economic volatility, as well as PBGC’s 

actions with respect to the recent termination of the Republic 

Technologies International (RTI) pension plans, you asked GAO to assess 

PBGC’s procedures for determining benefits following the termination of 

underfunded plans. Specifically, this report addresses the following: 

• the length of time it takes PBGC to make benefit determinations 

and the causes for delays; 

• the extent to which overpayments affect retirees’ benefits; 

• PBGC’s communication with participants to keep them informed of 

possible impacts on their benefits; and 

• the length of time it takes to obtain an appeals decision and the 

accessibility of the appeals process. 

To address these topics, we reviewed PBGC policies and procedures, 

analyzed automated data, and interviewed PBGC officials knowledgeable 

of various stages of the benefit determination process. We reviewed 

several reports issued by PBGC’s Office of Inspector General in the late 

1990s that provided a description of the benefit determination process 

Pension Benefit Guaranty Corporation 
 

before 2000,1 and focused our study on plans trusteed since then—that is, 

during fiscal years 2000 through 2008.2

 PBGC provided electronic data on 

all the participants in these plans and the status of their benefits as of 

February 2009. We also examined plan and participant documents in 

PBGC’s image processing system, selecting for review those most affected 

by delays and overpayments. For details on our methodology, see 

appendix I. Finally, we spoke with personnel from employee associations 

and advocacy groups who have been involved in some plan terminations, 

including the Pension Rights Center, the American Federation of Labor 

and Congress of Industrial Organizations (AFL-CIO), and the United 

Steelworkers, and with participants and their representatives from six 

large terminated plans: Reliance Group Holdings, Reliance Insurance 

Company, RTI-United Steelworkers’ of America (USWA), RTI-USS/KOBE, 

United Air Lines (ground employees), and United Air Lines (pilots). For a 

complete list of organizations and participants contacted, see appendix II. 

We conducted this performance audit between October 2008 and August 

2009, in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

PBGC was created as a government corporation by the Employee 

Retirement Income Security Act of 1974 (ERISA)3

 to help protect the 

retirement income of U.S. workers with private-sector defined benefit 

Background 

 

1

PBGC Office of Inspector General, The Length of Time It Has Taken PBGC To Issue 

Initial Determination Letters, 99-3/23128-2, (Washington, D.C.: March 1999); PBGC Office 

of Inspector General, Improvements Are Needed To Achieve Better Efficiency And 

Effectiveness In PBGC’s Benefit Determination Process, 99-2/23128-1 (Washington, D.C.: 

March 1999); PBGC Office of Inspector General, Pension Plan Participants Impacted by 

Delays In Initial Determination Letter Issuance, 99-1/23128-3 (Washington, D.C.: March 

1999); and PBGC Office of Inspector General, Audit of PBGC’s Response to Certain 

Questions Concerning Appeals of PBGC Initial Determinations of Pension Benefits, 98-

10/23131 (Washington, D.C.: September 1998). 

2

PBGC administers two separate insurance programs: a single-employer program and a 

multiemployer program. This report focuses solely on plans in PBGC’s single-employer 

program, as PBGC will provide assistance, but will not trustee multiemployer plans that are 

unable to pay guaranteed benefits when due. 

3

Pub. L. No. 93-406, 88 Stat. 829 (codified, as amended, at 29 U.S.C. §§ 1001-1461). 

Page 2 GAO-09-716 Pension Benefit Guaranty Corporation
 

plans by guaranteeing their benefits up to certain legal limits. PBGC 

administers two separate insurance programs for these plans: a singleemployer program and a multiemployer program. The single-employer 

program covers about 34 million participants in about 28,000 plans. The 

multiemployer program covers about 10 million participants in about 1,500 

collectively-bargained plans that are maintained by two or more unrelated 

employers. If a multiemployer pension plan is unable to pay guaranteed 

benefits when due, PBGC will provide financial assistance to the plan, 

usually a loan, so that retirees continue receiving their benefit. However, if 

the sponsor of a single-employer plan is in financial distress and does not 

have sufficient assets to pay promised benefits, the plan will be terminated 

and PBGC will likely become the plan’s trustee, assuming responsibility 

for paying benefits to participants as they become due, up to the 

guaranteed benefit limits. As of the end of fiscal year 2008, PBGC had 

terminated and trusteed a total of 3,860 single-employer plans (see fig. 1). 

The single-employer program is financed through premiums paid by the 

plan sponsors, recoveries from the companies formerly responsible for the 

plans, and investment income from the assets that PBGC acquires when it 

assumes control of a plan. A three-member Board of Directors, consisting 

of the Secretaries of the Commerce, Labor, and Treasury, is charged with 

providing policy direction and oversight of PBGC’s finances and 

operations. 

Page 3 GAO-09-716 Pension Benefit Guaranty Corporation
 

Figure 1: Growth in Number of Single-Employer Plans under PBGC Trusteeship 

(1975-2008) 

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

As of

2008

As of

2004

As of

1999

As of

1994

As of

1989

As of

1984

As of

1979

Source: GAO analysis of PBGC data, 1975-2008.

Number of plans (cumulative)

2,877

2,437

1,744

1,207

586

3,545

3,860

PBGC’s Pension Insurance 

Program Has Been 

Designated “High Risk” 

We designated PBGC’s single-employer pension insurance program as 

“high risk” in 2003, including it on our list of major programs that need 

urgent attention and transformation.4

 The program remains a high-risk 

concern due to an ongoing threat of losses from the terminations of 

underfunded plans. Financially, PBGC’s accumulated deficit totaled $33.5 

billion at the end of the second quarter of fiscal year 2009, a $22.5 billion 

increase since the end of fiscal year 2008. Additionally, as we concluded in 

a recent report, PBGC’s governance structure and strategic management 

need improvement. We found that PBGC’s Board of Directors is limited in 

its ability to provide policy direction and oversight, and recommended that 

the board be expanded.5

 Further, in two additional reports, we concluded 

 

4

GAO, Pension Benefit Guaranty Corporation Single-Employer Insurance Program: 

Long-Term Vulnerabilities Warrant “High Risk” Designation, GAO-03-1050SP

(Washington, D.C.: July 23, 2003). 

5

GAO, Pension Benefit Guaranty Corporation: Governance Structure Needs 

Improvements to Ensure Policy Direction and Oversight, GAO-07-808 (Washington, D.C.: 

July 6, 2007). 

Page 4 GAO-09-716 Pension Benefit Guaranty Corporation
 

that PBGC lacks a strategic approach to its acquisition and human capital 

management needs.6

The Benefit Determination 

Process 

Under the single-employer program, if a company’s pension plan has 

inadequate assets to pay all promised benefits, plan sponsors meeting 

certain criteria can voluntarily terminate a plan through a “distress” 

termination.7

 PBGC may also decide to terminate an underfunded plan 

involuntarily to protect plan assets,8

 and PBGC must terminate a plan if 

assets are insufficient to pay benefits currently due. In all these situations, 

PBGC generally becomes the trustee of the plan and assumes 

responsibility for paying benefits to the participants as they become due. 

Determining participants’ benefit amounts following termination, 

however, is a complex process (see fig. 2). It begins with gathering 

extensive data on plans and individuals’ work and personnel histories, and 

determining who is eligible for benefits under a plan, which can be 

complicated if the company or plan has a history of mergers, elaborate 

structure, or missing data. It requires understanding plan provisions that 

vary from plan to plan and can be numerous, applying the guarantee 

limitations to each individual’s benefit, and valuing plan assets and 

liabilities. If the participant is already retired, or retires before the process 

is complete, PBGC makes payments to the retiree based on an estimate of 

the final benefit amount. Once the process is complete, PBGC notifies 

each participant of the final benefit amount through a “benefit 

determination letter.” In cases with a final benefit that is greater than the 

estimated amount, retirees are likely due a backpayment for having been 

underpaid, which PBGC will repay in a lump sum, with interest. In cases 

with a final benefit that is less, the retirees are likely to have received an 

 

6

GAO, Pension Benefit Guaranty Corporation: Some Steps Have Been Taken to Improve 

Contracting, but a More Strategic Approach Is Needed, GAO-08-871 (Washington, D.C.: 

August 18, 2008); and GAO, Pension Benefit Guaranty Corporation: A More Strategic 

Approach Could Improve Human Capital Management, GAO-08-624 (Washington, D.C.: 

June 12, 2008). 

7

At least one of the following criteria must be met in order for PBGC to approve a distress 

termination filing: (1) liquidation in bankruptcy (Chapter 7) or insolvency proceedings; (2) 

reorganization in bankruptcy (Chapter 11); (3) a company will be unable to continue to stay 

in business unless its plan is terminated; or (4) unreasonable, burdensome pension costs 

caused solely by a decline in workforce. 29 U.S.C. § 1341(c)(2)(B). 

8

PBGC may initiate involuntary terminations for several reasons, including if PBGC’s loss 

from that plan may be expected to increase unreasonably if the plan is not terminated. 29 

U.S.C. § 1342(a). 

Page 5 GAO-09-716 Pension Benefit Guaranty Corporation
 

overpayment, which they then must repay to PBGC, with no added 

interest. 

Figure 2: PBGC’s Benefit Determination Process 

• Monitor underfunded plans

• Work with plans that face distress terminations

• Obtain agreement on plan trusteeship

• Notify participants and request information from retirees

• Ensure that retirees receive benefit payments and that estimated 

payments are reduced to reflect statutory limits

• Gather needed plan documents and participant data

• Define plan population; build and audit participant database

• Audit plan assets

• Determine employer liability

• Calculate individual benefits, in accordance with statutory and 

regulatory requirements

• Determine PBGC’s overall benefit liability

• Determine if estimated benefits being paid retirees are correct and 

reconcile any differences:

 • If benefits have been underpaid, PBGC provides a payment, with 

interest 

 • If benefits have been overpaid, PBGC takes steps to recoup the 

overpaid funds (with no interest)

• Notify participants of the final benefit amount through a “benefit 

determination letter”

• Process participants’ appeals

• Process address changes and death notices

• As nonretired participants enter retirement, calculate benefit based 

on actual retirement and place participants in pay status

• Respond to participants’ requests regarding their benefits

Postvaluation

Administration

(Ongoing)

Notification

Benefit

Valuation

Initial

Trusteeship

(Termination)

Audit

Pretermination

Source: GAO analysis of PBGC documents.

Page 6 GAO-09-716 Pension Benefit Guaranty Corporation
 

When single-employer plans are terminated without sufficient assets to 

pay all promised benefits, PBGC guarantees participants’ benefits only up 

to certain limits, specified under statute in ERISA and related regulations. 

Participants whose benefits exceed these limits may have their benefits 

reduced to the guaranteed amounts, unless the plan has sufficient assets to 

pay the nonguaranteed portion of their benefits, either all or in part.9

These guarantee limits are commonly referred to as the maximum limit, 

the phase-in limit, and the accrued-at-normal limit (see table 1).10 One 

group often affected by the application of these limits is made up of those 

who take early retirement. The maximum limit is lowered for each year a 

person retires before age 65. Also, supplemental benefits—which are 

typically provided to early retirees as a bridge to when they become 

eligible for Social Security benefits—are eliminated or greatly reduced by 

the accrued-at-normal limit. Because many steelworkers and airline pilots 

retire before reaching age 65, retirees in these industries are hit 

particularly hard by the application of such limits. 

Guarantee Limits, Ceased 

Accruals, and 

Overpayments Can Reduce 

Benefits 

Table 1: Types of Guaranteed Benefit Limits under ERISA 

Type of limit Description 

Maximum limit The guaranteed benefit cannot exceed the statutory maximum, adjusted annually, at the time the plan 

terminates. In 2009, the maximum is $54,000 per year for a person retiring at age 65 and with no 

survivor benefit (that is, a single-life annuity). The maximum is lower for those retiring under age 65 or 

with a survivor benefit. 29 U.S.C. § 1322(b)(3); 29 C.F.R. § 4022.24 (2009). 

Phase-in limit The guaranteed benefit cannot include any benefit increase implemented through a plan amendment 

that was made within 1 year of the date of the plan termination. For benefit improvements that became 

effective more than 1 year but less than 5 years prior to the plan’s termination, the guaranteed amount 

is the larger of 20 percent of the benefit increase or $20 per month of the increase for each full year the 

increase was in effect. 29 U.S.C. § 1322(b)(1) and (7); 29 C.F.R. § 4022.25 (2009). 

Accrued-at-normal limit The monthly guaranteed benefit cannot be greater than the monthly benefit provided as a straight-life 

annuity (that is, a periodic payment for the life of the retiree, with no additional payments to survivors) 

available at the plan’s normal retirement age. The portion of any combined early retirement benefit and 

supplemental benefit that exceeds the normal retirement age straight life annuity is eliminated by this 

provision. 29 C.F.R. § 4022.21 (2009). 

Source: ERISA, PBGC’s implementing regulations, and related documents. 

 

9

The process for determining how the plan’s assets are distributed among the plan’s 

participants is detailed in ERISA. For a description of the allocation process, see appendix 

III. 

10For a description of guarantee limits from a participant’s perspective, see appendix IV. 

Page 7 GAO-09-716 Pension Benefit Guaranty Corporation
 

PBGC’s benefits are set based on the amounts accrued as of the date of 

plan termination.11 When a plan terminates, accruals cease.12 As a result, 

participants who are not yet retired are likely to receive lower benefits 

than what they would have received under their plans if they had been 

able to accrue further benefits. For example, if participants work for the 

plan sponsor beyond the termination date, the additional service would 

not be credited under that plan. The dollar amount or salary level used to 

calculate benefits is also frozen at the level in effect as of the date of plan 

termination, which can cause a participant’s benefit to be substantially 

less than it would have been if the plan had continued. Participants can 

also be affected when a plan’s termination date occurs before they become 

eligible for certain benefits, such as early retirement or disability benefits. 

For retirees and participants who retire prior to completion of the benefit 

determination process, estimated benefits are provided that can 

sometimes be greater than the final benefit amount, causing an 

overpayment. In addition to having benefits reduced due to the guarantee 

limits, some retirees’ have their monthly benefit reduced once their benefit 

amount is finalized because they are required to repay an overpayment 

that was incurred while receiving estimated benefits. 

Most participants of terminated plans receive the full amount of the 

benefits they have earned under their plans, according to studies 

conducted by PBGC. PBGC does not systematically track the number of 

participants affected by guaranteed benefit limits or how much these 

limits affect benefit amounts; however, PBGC has conducted two studies 

 

11The termination date is set by either the plan sponsor or PBGC, depending on which party 

initiates the plan termination, except in cases where the plan sponsor has filed for 

bankruptcy. In cases of Chapter 7 or Chapter 11 bankruptcy, the Pension Protection Act of 

2006 required that the date on which a plan sponsor files for bankruptcy be used as the 

date of plan termination for purposes of determining the amount of guaranteed benefits 

and the allocation of assets. Pub. L. No. 109-280, § 404(a), 120 Stat. 280, 928 (codified at 29 

U.S.C. § 1322(g)). If the plan sponsor and PBGC disagree over the date of termination, a 

court determines the date. 

12GAO has issued several reports on the related topic of “plan freezes,” which limit some or 

all future pension accruals for some or all plan participants. For example, see GAO, 

Defined Benefit Pensions: Survey Results of the Nation’s Largest Private Defined Benefit 

Plan Sponsors, GAO-09-291 (Washington, D.C.: Mar. 30, 2009); GAO, Defined Benefit 

Pensions: Plan Freezes Affect Millions of Participants and May Pose Retirement Income 

Challenges, GAO-08-817 (Washington, D.C.: July 21, 2008); 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); and GAO, Pension Plans: Benefits Lost 

When Plans Terminate, T-HRD-92-58 (Washington, D.C.: Sept. 24, 1992). 

Page 8 GAO-09-716 Pension Benefit Guaranty Corporation
 

on the impact of these limitations in a sample of large plans. The first 

study, issued in 1999, found 5.5 percent of participants were affected by 

the limits; and the second study, issued in 2008, found that 15.9 percent 

were affected. PBGC attributed the increase in the numbers affected in the 

second study to the inclusion of several large plans from the steel and 

airlines industries. Officials noted that these plans were more likely to be 

subject to the limits. Steel plans often provide supplements and allow 

retirement with unreduced benefits after 30 years of service, regardless of 

age, and airline plans often allow pilots to retire early and receive 

generous benefits. Across the different plans in both studies, participants’ 

reductions in benefits varied widely, from less than 5 percent for some, to 

over 50 percent for others. 

Source: PBGC.

Number of plans

included in study

Number of 

participants

included in study

1999 

study

2008

study

Percentage receiving 

full plan benefits

Percentage receiving 

reduced benefits

Average amount 

of reduction (as

percentage of 

participant’s

benefit) for those 

with a reduction

PBGC Findings on the Impact of 

Guaranteed Benefit Limits

22 125

90,448 525,700

94.5 84.1

5.5 15.9

16 28 %

%

%

%

%

%

PBGC makes most benefit determinations within 3 years after assuming 

trusteeship of a plan. However, complex plans and plans with missing data 

have required more time to process—up to 9 years, in some instances (the 

full time span we examined). Most of the benefit determinations that took 

4 or more years to process were for participants13 in just 10 plans. PBGC 

officials have taken steps to shorten the benefit determination process, 

although their initiatives have focused on ways to expedite processing of 

straightforward cases instead of the processing of difficult cases prone to 

delays. 

Most Benefit 

Determinations Are 

Completed within 

3 Years, but Cases 

with Complex Plans 

and Missing Data 

Take Longer 

 

13Throughout this report, the term “participant” refers to the primary participant (that is, 

the individual who earned the pension), or if deceased, the beneficiary. For a more detailed 

explanation of our methodology, see appendix I. 

Page 9 GAO-09-716 Pension Benefit Guaranty Corporation
 

PBGC becomes the trustee of most plans within 10 months of termination 

and, once it has assumed trusteeship of a plan, the agency takes slightly 

less than 3 years to process most benefit determinations and notify 

participants of their final benefit amount. Following a PBGC Inspector 

General study, issued in 2000, that found that the majority of benefit 

determination letters were sent more than 5 years after PBGC assumed 

trusteeship of the plan, PBGC set a corporate goal of issuing benefit 

determinations, on average, no more than 3 years after trusteeship.14 Our 

review of the benefit determinations for participants in plans trusteed 

during fiscal years 2000 through 2008 indicates that PBGC has moved 

processing times closer to this mark. Nearly three-quarters of the benefit 

determinations completed for these plans were made in 3 years or less 

(see fig. 3). The vast majority of all completed benefit determinations—95 

percent—was processed in less than 4 years’ time. On the other hand, in 

February 2009, more than 200,000 participants were awaiting benefit 

determinations that had been pending for an average of 3 or more years. 

PBGC Makes Most Benefit 

Determinations in Less 

than 3 Years 

Source: GAO analysis of PBGC data for participants in plans

trusteed during fiscal years 2000 through 2008.

a

In two atypical cases, PBGC made benefit

determinations prior to trusteeship.

Determinations completed (824,718 total):

Maximum:

Minimum:

Mean:

Median:

9.2 years

-0.5 yearsa

2.5 years

2.6 years

Determinations pending, as of February 

2009 (232,554 total):

Maximum:

Minimum:

Mean:

Median:

9.3 years

0.3 years

3.3 years

3.6 years

Length of Time from Trusteeship to Final

Benefit Determination

 

14PBGC Office of Inspector General, Pension Plan Participants Impacted by Delays In 

Initial Determination Letter Issuance, 99-1/23128-3 (Washington, D.C.: March 1999). 

Page 10 GAO-09-716 Pension Benefit Guaranty Corporation
 

Figure 3: Number of Years to Process Benefit Determinations 

0

5

10

15

20

25

30

35

40

Pending, as of February 2009

Completed

More than

5 years

4-5

years

3-4

years

2-3

years

1-2

years

Less than

1 year

Source: GAO analysis of PBGC data on length of time, from trusteeship to final benefit determination, for participants of

plans terminated and trusteed during fiscal years 2000 through 2008 (1,057,272 total).

Percentage of benefit determinations

Number of years

81

4.2% 3.2%

21.6%

6.8%

37.2%

27.0%

PBGC practice is to prioritize benefit determinations based on an 

individual’s retirement status at the time of plan termination. For example, 

participants who were retired when their plans terminated received their 

benefit determinations in about 2.0 years after PBGC assumed trusteeship, 

on average. Participants who had separated from employment under the 

plan but had some vested benefits at the time of the termination received 

benefit determinations in about 2.8 years, on average. All other 

participants received benefit determinations in about 2.8 years, on 

average. 

Workload Affects 

Processing Times 

Processing times have varied considerably in any given year, due in part to 

the number and size of plans being terminated and trusteed that year (see 

fig. 4). The number of plans trusteed by PBGC peaked during 2002, 2003, 

and 2004, although the largest influx of participants occurred in 2005. The 

average number of participants per plan is slightly fewer than 1,000, but 

some plans have many more. For example, the Bethlehem Steel plan has 

Page 11 GAO-09-716 Pension Benefit Guaranty Corporation
 

nearly 93,000 participants, the LTV Steel (hourly) plan has about 68,000 

participants, and the Kaiser Aluminum and Chemical Corp. (hourly) plan 

has just over 10,000 participants. 

Figure 4: Number of Participants and Plans Terminated and Trusteed, by Fiscal 

Year (2000-2008) 

Number of plans Number of participants

0

20

40

60

80

100

120

140

160

180

200

0

30,000

60,000

90,000

120,000

150,000

180,000

210,000

240,000

270,000

300,000

Participants

Plans

2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: GAO analysis of PBGC data on participants in plans terminated and trusteed during fiscal years 2000 through 2008

(1,057,272 participants and 1,089 plans total).

Fiscal year

We found that processing times were longer, on average, for those plans 

trusteed in peak years (see fig. 5). For example, processing times generally 

increased during fiscal years 2002 through 2005. 

Page 12 GAO-09-716 Pension Benefit Guaranty Corporation
 

Figure 5: Average Processing Time, by Fiscal Year of Trusteeship 

Source: GAO analysis of PBGC data on length of time, from trusteeship to final benefit determination, for participants of

plans terminated and trusteed during fiscal years 2000 through 2008 (1,057,272 total).

Portion of determinations pending, as of February 2009

Portion of determinations completed

2.8

2.5 2.5 2.5

2.7

3.0

0.9

1.8

2.7

Fiscal year

Average age of case (in years)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2000 2001 2002 2003 2004 2005 2006 2007 2008

Plan Complexity and 

Missing Data Also Adds to 

Processing Times 

Processing times have also increased with the complexity of plans and the 

unavailability of needed data. Obtaining plan documents, gaining complete 

participant data, and interpreting plan requirements often present 

difficulties. Nevertheless, nearly three-quarters of the benefit 

determinations that took 4 or more years to process were for participants 

in just 10 of the 1,089 plans terminated and trusteed during fiscal years 

2000 through 2008, as shown in figure 6. These plans were sponsored by 

four steel companies, two mining companies, one other manufacturer, an 

insurance company, and a construction company. 

Page 13 GAO-09-716 Pension Benefit Guaranty Corporation
 

Figure 6: Ten Plans with the Greatest Number of Benefit Determinations Taking 4 Years or Longer 

0 10 20 30 40 50 60 70 80

All other plans

Top 10 plans 72.8%

Bethlehem Steel

Percentage of all participants with benefit determinations taking 4 or more years, as of February 2009

LTV Steel Co. (hourly plan)

RTI (USWA plan)

Horizon NR LLC

Kaiser Aluminum and Chemical Corp. (hourly plan)

J.A. Jones, Inc.

Kaiser Aluminum and Chemical Corp.

(salaried plan)

Cone Mills Corp.

Weirton Steel

Reliance Insurance Co.

Source: GAO analysis of PBGC data on participants of plans terminated and trusteed during fiscal years 2000 through 2008.

(Cases taking 4 or more years: 78,553 total participants from 561 plans.)

27.2%

We found that a variety of factors had contributed to the complexity of the 

10 plans with these lengthier determinations. One key factor was the level 

of difficulty of calculating benefits. For some, a history of company or plan 

mergers, or other unusual or complicated benefit formulas, made 

determining a participant’s benefit more difficult and added to processing 

time. For example, the pension plan of Bethlehem Steel Corporation—

which still had some benefit determinations pending as of February 2009, 

nearly 6 years after the plan’s trusteeship—is a product of more than 100 

company mergers, consolidations, and/or spinoffs. There are eight major 

parts to this plan, and three of the parts have separate hourly and salaried 

plans. In general, if a plan has undergone a merger, participants may be 

covered by different plan provisions, or participants may transfer between 

component plans, such as moving from an hourly to salaried plan. 

According to PBGC, the Bethlehem Steel plan required an analysis of more 

than 30 sets of plan documents to make benefit determinations for the 

nearly 93,000 participants. 

Plan Complexity

Unusual or numerous plan provisions have also made benefit 

determinations more challenging and, therefore, time consuming. The 

Page 14 GAO-09-716 Pension Benefit Guaranty Corporation
 

Cone Mills Corporation plan consists of three merged plans. In 2001, the 

company’s plans for long-distance drivers and salaried workers were 

merged into its plan for hourly workers. Yet, distinct provisions in each of 

the original plans remained in place for their respective members. It 

required time for PBGC to understand which participants belonged to 

each group and the provisions associated with each participant. 

In other cases, an elaborate plan structure has also made it challenging for 

PBGC to determine the availability of plan assets and to distribute them 

across different categories of participants’ benefits in the asset allocation 

process.15 The Kaiser Aluminum and Chemical Corp. had 26 direct and 

indirect subsidiaries in its controlled group and in bankruptcy; 36 

subsidiaries not in bankruptcy; and 13 operating subsidiaries and joint 

ventures not in the controlled group or in bankruptcy.16 Kaiser had eight 

defined benefit plans, seven of which were trusteed by PBGC, and the 

assets for these eight plans were commingled, which added complexity to 

PBGC’s audit of the plans’ net worth. 

Benefit guarantee limits contributed to the complexity of several plans. 

PBGC must determine, on a participant-by-participant basis, the level of 

benefits each is entitled to under ERISA and related regulations.17

According to PBGC officials, these calculations can be time consuming 

when there are a large number of participants receiving benefit 

adjustments as a result of these limits. For example, there were several 

benefit rate increases in the LTV Steel (hourly) plan that went into effect 

within 5 years of the plan’s termination and, therefore, were subject to the 

phase-in limit. These included a plant shutdown supplement for certain 

participants, a surviving spouse’s special payment, and additional 

 

15For a description of the allocation process, see appendix III. 

16A controlled group is a group of businesses under common control that is treated as a 

single employer for the purposes of determining the extent of employer liability. 

17As noted previously (see background section), PBGC’s 2006 study of these limits found 

that participants in steel and airline industry plans are often subject to the guarantee limits 

because these plans provide generous benefits and allow their participants to retire at 

relatively young ages. 

Page 15 GAO-09-716 Pension Benefit Guaranty Corporation
 

continuous service for participants affected by certain layoffs.18 In total, 

there were 35,279 participants whose benefits were affected by the phasein limitation under this plan, as well as 4,850 affected by the accrued-atnormal limit, and 3,644 affected by the maximum limit.19

Qualified domestic relations orders have also contributed to the 

complexity of making a benefit determination. When participants have 

domestic relations orders related to child support, alimony payments, and 

marital property rights, some portion of, or all of, a participant’s pension 

benefits may be assigned to a spouse, former spouse, child, or other 

dependent. In these cases, PBGC must determine whether the order is a 

qualified domestic relations order, a process which can entail a detailed 

review of legal documents. Although nearly two-thirds of the plans we 

examined did not have any participants with qualified domestic relations 

orders, several of the ten plans associated with the lengthiest processing 

times had numerous participants with such orders. For example, the 

Bethlehem Steel plan included 904 participants with qualified domestic 

relations orders, and the LTV Steel (hourly) plan included 609. 

The condition of plan and participant data is also a key factor affecting 

processing times. When a plan terminates, PBGC tries to obtain all plan 

documents, such as the original plan, plan amendments, and, if applicable, 

negotiated agreements with unions, as well as personnel and payroll data. 

To do so with the termination of a large, complex plan, PBGC auditors 

have usually visited sponsor locations to collect data and contacted the 

plan’s actuarial staff, administrators, or others responsible for managing 

the plan’s assets. When the plan’s administration is decentralized, this 

process involves collecting records from different locations in the course 

of many site visits. For example, over a 2-month period, a PBGC audit 

team visited Bethlehem Steel facilities in Sparrows Point, MD; Bethlehem, 

PA; Coatesville, PA; Steelton, PA; Lackawanna, NY; and Burns Harbor, IN 

Missing Data 

 

18In a more recent plan termination, PBGC did not provide shutdown benefits for two RTI 

plans (USWA and USS/KOBE). These plans’ termination dates—which were ultimately 

decided in court and set prior to the shutdown date—precluded some participants from 

qualifying for shutdown benefits. (For a more detailed discussion of the RTI plan 

terminations, see appendix V). However, in accordance with the Pension Protection Act of 

2006, PBGC’s guarantee of shutdown benefits is now phased in from the date of plan 

shutdown. If this requirement had been in place at the time of the RTI case, the date of plan 

termination would not have been significant for determining benefits. § 403, 120 Stat. 928. 

19Participants may be subject to more than one type of limitation, so numbers cannot be 

added together to determine a total. 

Page 16 GAO-09-716 Pension Benefit Guaranty Corporation
 

to collect records. Data were not always available in electronic form. The 

Bethlehem Steel Lackawanna facility, for example, did not use an 

electronic recordkeeping system, so PBGC collected more than 20,000 

hard-copy employee record cards from the site. 

According to PBGC officials, plan sponsors have frequently diverted 

resources away from actuarial and information technology services during 

rough financial periods, causing records maintenance to deteriorate before 

PBGC is able to take over the plan. In such situations, data become 

difficult to locate, key personnel with knowledge of the data leave the 

organization, and data systems may be inaccessible. Additionally, the data 

PBGC is able to collect has often been incomplete. As a result, PBGC 

actuaries sometimes have to make assumptions about which plan 

provisions apply to whom when estimating the plan’s assets and liabilities, 

and calculating individual participants’ benefits. When processing the 

Weirton Steel plan, for example, PBGC was required to calculate benefits 

for some participants whose average monthly earnings were missing. A 

PBGC official told us that they sometimes use collective bargaining 

agreements and board resolutions, even if their legality cannot be verified, 

if those documents provide the best information available. 

To avoid situations where data are missing or in poor condition, PBGC 

officials told us they generally try to obtain data prior to taking over a 

plan. In most situations, they will quickly try to assess the location and 

condition of plan records, and take steps to preserve the records in the 

event that PBGC takes over the plan. However, officials acknowledged 

that negotiations between PBGC and plan sponsors prior to trusteeship 

have sometimes deterred them from using their access authority20 to 

secure records until after actually becoming the trustee. For example, the 

RTI case involved a lengthy legal deliberation over the plan’s termination 

date, and while this litigation was ongoing prior to trusteeship, PBGC’s 

case processing division did not pursue documents from RTI prior to 

trusteeship, on the advice of the agency’s and company’s counsel at the 

time. PBGC officials noted that when aspects of termination are being 

contested, it is not uncommon for company officials to be unwilling to 

share information until after PBGC’s trusteeship is official. In the RTI case, 

by the time the court case was resolved and PBGC became the trustee, a 

new owner had assumed control of the personnel files, documentation 

 

2029 U.S.C. §§ 1302, 1303, and 1310. 

Page 17 GAO-09-716 Pension Benefit Guaranty Corporation
 

needed to determine benefit entitlement had been purged, and only one 

person remained with working knowledge of the RTI pension plan.21

New Initiatives to Shorten 

the Benefit Determination 

Process Do Not Address 

Longest Delays 

PBGC officials have taken steps to shorten the benefit determination 

process, although these initiatives do not specifically address complex 

cases. Rather, PBGC officials said that their initiatives are intended to 

process straightforward cases more quickly so that staff can concentrate 

on those that are difficult. Specifically, PBGC adopted a simplified data 

validation process to speed the processing of plans with fewer than 200 

participants. They decided that the validation process used for large plans, 

which involves a full electronic data audit and a review of all data 

elements by an auditor, was unnecessary for smaller plans, which have 

fewer participants and less data, making any errors highly visible. PBGC 

has also prioritized benefit determinations for retirees who have been 

receiving benefits for some time. Such determinations are more 

straightforward because these retirees are less likely to have their benefits 

reduced by the guarantee limits. These efforts help PBGC to avoid 

unnecessary delays in straightforward cases. PBGC does not, however, 

target its changes on complex plans with benefit determinations most 

prone to lengthy delays. Nor does PBGC set benchmarks for complex 

cases or goals for decreasing the processing time for these cases. Officials 

acknowledged that the current tracking of timeliness focuses on average 

processing times only. 

 

21Of the cases with the lengthiest processing times, the RTI plan was the only one with 

more than 1 year between termination and trusteeship. PBGC officials regarded the 

circumstances of this case—specifically, the protracted legal battle over the plan’s 

termination date—to be rare. Moreover, the circumstances giving rise to this debate are 

unlikely to be repeated due to changes made by the Pension Protection Act of 2006, which 

provides for the phase-in of PBGC’s guarantee from the date of a plant shutdown, and for 

the date on which a sponsor files for bankruptcy to be used as the date of plan termination 

for the purposes of determining the amount of guaranteed benefits and the allocation of 

assets. §§ 403 and 404, 120 Stat. 928 and 928. 

Page 18 GAO-09-716 Pension Benefit Guaranty Corporation
 

Overpayments Have 

Been Infrequent and 

Mostly Concentrated 

in a Few Complex 

Plans 

Overpayments have been infrequent and the impact on benefit amounts 

has been generally minor. As with the cases that required lengthy 

processing times, most of the cases in which overpayment occurred have 

been concentrated in a small number of plans. These tended to be large 

plans with large numbers of retirees, as well as plans whose total asset 

values were difficult to determine or anticipate. Meanwhile, PBGC’s 

requirement for repayment of overpayments is highly amortized, thereby 

limiting the amount of money that PBGC will recoup. By comparison, 

some other federal agencies have more aggressive repayment policies, but 

more liberal waiver policies for cases of hardship. 

Overpayments Are 

Infrequent and Generally 

Have Limited Impact on 

Benefits 

Overpayments generally occur when a plan retiree receives estimated 

benefits while PBGC is in the process of making benefit determinations 

and the final benefit amount is less than the estimated benefit amount. Our 

review of plans terminated and trusteed during fiscal years 2000 through 

2008 found that this happened only in a small percentage of cases (see fig. 

7). Of the 1.1 million participants in plans terminated and trusteed during 

fiscal years 2000 through 2008, more than half were not yet retirees and, 

therefore, did not receive estimated benefits before the benefit 

determination process was complete. For most who were retirees, the 

estimated benefit amount received did not change when finalized. Of those 

whose benefit amount did change when finalized, about half received a 

benefit that was greater and half received a benefit that was less (about 3 

percent of total participants in these plans, overall). 

Page 19 GAO-09-716 Pension Benefit Guaranty Corporation
 

Figure 7: Proportion of Participants with Estimated Benefits that Differ from Final 

Benefits 

Source: GAO analysis of PBGC data on participants of plans terminated and trusteed during fiscal years 2000 through 2008

(1,057,272 cases total).

Final benefit pending

No change

3.1

Final benefit greater

3.4

Final benefit less

54.9% No estimated benefit

28.4%

10.2%

Page 20 GAO-09-716 Pension Benefit Guaranty Corporation
 

According to PBGC data on recoupments, 22,623 participants in plans 

terminated and trusteed during fiscal years 2000 through 2008 owed PBGC 

for overpayments. These amounts varied widely—from less than $1 to 

more than $150,000—but our analysis of PBGC data suggests that most 

owed less than $3,000.22 Since in most cases PBGC recoups no more than 

10 percent of a participant’s final benefit each month,23 the impact on the 

participant’s benefit was limited. Per individual, the median benefit 

reduction due to recoupment was about $16 a month, or about 3 percent 

of the monthly payment amount, on average. Per case, the median amount 

that had been repaid, as of February 2009, was $365. 

Estimated total amount 

of overpayments: 

Estimated total 

amount recouped, as

of February 2009: 

Number of participants

with overpayments: 22,623

$13,000,000

$100,000,000

Maximum:

Minimum:

Mean:

Median:

over $150,000

under $1

about $4,400

about $2,500

$930

under $1

about $24

about $16

Monthly benefit reductions

due to recoupments:

Monthly benefit reductions as

percentage of payment:

Maximum:

Minimum:

Mean:

Median:

50%

less than 1%

about 3%

about 2%

Maximum:

Minimum:

Mean:

Median:

Recoupment Cases

Source: GAO analysis of PBGC data on participants in plans

terminated and trusteed during fiscal years 2000 through 2008.

 

22Data reliability issues prevented us from conducting a more definitive analysis of total 

overpayment amounts. For a more detailed discussion of these data limitations, see 

appendix I. 

23PBGC regulations generally limit benefit reductions to the greater of (a) 10 percent of the 

participant’s monthly benefit, or (b) the amount in excess of the participant’s “maximum 

guaranteeable benefit.” 29 C.F.R. § 4022.82 (2009). In addition, the regulation provides that 

PBGC may use its discretion to recoup overpayments by other methods. 29 C.F.R. § 

4022.81(a) (2009). According to the PBGC Operating Policy Manual, these other methods 

include situations when there is a delay in implementing the recoupment; when the 

overpayment was due to (a) the participant providing false information, (b) a failure to pay 

an alternate payee under a qualified domestic relations order, or (c) a change in disability 

benefits; or when the recoupment was initiated by the plan sponsor prior to termination. In 

these situations, the amount of the reduction may be increased to 25 percent, 40 percent, or 

some other percentage of the benefit, and, in certain situations, the entire benefit may be 

suspended. 

Page 21 GAO-09-716 Pension Benefit Guaranty Corporation
 

Of the 1,089 plans terminated and trusteed during fiscal years 2000 through 

2008, just 10 accounted for more than 65 percent all cases of overpayment 

(see fig. 8).24 Nine of these 10 plans were sponsored by steel companies 

trusteed by PBGC from 2001 to 2003. When PBGC assumes responsibility 

for a plan, retirees generally continue to receive an estimated benefit that 

is the same as what they had been receiving, unless PBGC determines they 

are subject to any of the guarantee limits, and that their estimated 

payments need to be reduced to reflect these limits. In such cases, 

overpayments can occur for two basic reasons: (1) there is a period of 

time when the retiree’s estimated benefit has not yet been reduced to 

reflect applicable limits; and (2) the retiree’s estimated benefit is adjusted 

to reflect applicable limits, but the estimate is still greater than the benefit 

amount that is ultimately determined to be correct once the benefit 

determination process is complete. 

A Few Plans Accounted 

for Most Cases with 

Overpayments 

Figure 8: Ten Plans with the Greatest Number of Participants Owing PBGC for Overpayments 

0 10 20 30 40 50 60 70 80

All other plans

Top 10 plans 65.3%

Bethlehem Steel

Percentage of all participants indentified as owing PBGC for overpayment, as of February 2009

LTV Steel Co. (hourly plan)

LTV Steel Company Co. (salary plan)

LTV Steel Mining Co. 

RTI (USWA plan)

RTI (USS/KOBE plan)

National Steel (hourly plan)

Outboard Marine (employees plan)

Weirton Steel

Northwestern Steel & Wire (plan A)

Source: GAO analysis of PBGC data on participants of plans terminated and trusteed during fiscal years 2000 through 2008.

(Cases with overpayments: 22,623 total participants from 467 plans.)

34.7%

 

24Four of these 10 plans also were among the 10 plans with the greatest number of benefit 

determinations taking 4 years or longer to process (see fig. 6). 

Page 22 GAO-09-716 Pension Benefit Guaranty Corporation
 

As summarized in table 2, of the 10 plans with the greatest number of 

overpayments, 9 also had large numbers of participants, including many 

who were subject to the guarantee limits and who were retired and 

receiving estimated benefits.25 In addition, all these plans had assets or 

recoveries allocated to pay some, but not all, of retirees’ nonguaranteed 

benefits, which are generally some of the first nonguaranteed benefits to 

be paid from the allocation process—before, for example, future retirees’ 

nonguaranteed benefits.26 According to PBGC officials, uncertainty about 

how much a plan’s assets or recoveries will be able to contribute toward a 

retiree’s benefit that the agency does not guarantee, under law, can make 

it difficult to calculate an accurate benefit amount until the benefit 

determination process is complete. 

Table 2: Characteristics of 10 Large, Complex Plans 

Number subject to guarantee limitsa

Plan 

sponsor 

(name)b 

Total 

number of 

participants 

Accrued-atnormal 

 limit 

Maximum 

limit

Phase-in 

limit

Number 

receiving 

estimated 

benefits

Sufficient assets or 

recoveries to pay 

some nonguaranteed 

benefitsc

Total 

number of 

participants 

with 

overpayments

LTV Steel 

Co. (hourly 

plan) 

68,124 4,850 3,644 35,279 46,007 Yes—retirees’

nonguaranteed 

benefits partially paid 

4,442

Weirton 

Steel 

9,757 1,342 2,482 672 d 6,915 Yes—retirees’

nonguaranteed 

benefits partially paid 

1,997

RTI (USWA 

plan) 

4,289 941 11 1,693 2,257 Yes—retirees’

nonguaranteed 

benefits partially paid 

1,508

National 

Steel (hourly 

plan) 

10,433 40 1,113 --e6,272 Yes—retirees’

nonguaranteed 

benefits partially paid 

1,075

LTV Steel 

Company 

Inc. (salary 

plan) 

13,450 45 7 1,401 9,606 Yes—retirees’

nonguaranteed 

benefits partially paid 

913

 

25Bethlehem Steel could not be included in the table because the valuation of that plan was 

not complete as of February 2009, and the number of participants subject to guarantee 

limits had not yet been documented. 

26For a description of the allocation process, see appendix III. 

Page 23 GAO-09-716 Pension Benefit Guaranty Corporation
 

 Number subject to guarantee limitsa 

Plan 

sponsor 

(name)b 

Total 

number of 

participants 

Accrued-atnormal 

 limit 

Maximum 

limit

Phase-in 

limit

Number 

receiving 

estimated 

benefits

Sufficient assets or 

recoveries to pay 

some nonguaranteed 

benefitsc

Total 

number of 

participants 

with 

overpayments

RTI 

(USS/KOBE 

plan) 

2.299 874 51 7 1,356 Yes—retirees’

nonguaranteed 

benefits partially paid 

730

Outboard 

Marine 

(employees 

plan) 

9,744 780 159 -- e 4,797 Yes—retirees’

nonguaranteed 

benefits partially paid 

614

LTV Steel 

Mining Co. 

3.416 643 381 1,099 2,383 Yes—retirees’

nonguaranteed 

benefits partially paid 

548

Northwestern 

Steel & Wire 

(plan A) 

3,576 1,023 533 0 2,812 Yes—retirees’

nonguaranteed 

benefits partially paid 

450

US Airways 

Inc. (pilots’

plan) 

7,050 51 5,171 175 1,501 Yes—retirees’

nonguaranteed 

benefits partially paid 

111

Source: GAO analysis of PBGC data. 

a

Participants may be subject to more than one type of limitation, so the three columns cannot be 

added together to determine a total. 

b

Bethlehem Steel was not included in this table because valuation of the plan was not complete and 

data on numbers subject to the guarantee limits were not available as of February 2009.

c

For further details about the allocation process, see appendix III. 

d

This represents the number of participants subject to the phase-in limitation who were in pay status 

as of the date of plan termination. No data were readily available on the number of participants 

subject to this limitation who retired (or will retire) after the date of plan termination. 

e

Various changes in benefits were described as subject to the phase in limit in these plans (9 for 

National Steel and 17 for Outboard Marine), but no listings were provided to indicate the number of 

participants affected. 

Finally, a lengthy benefit determination process can exacerbate the impact 

of inaccurate estimates. The total overpayment can become substantial 

over a long period of time, even if the difference between the estimated 

and final monthly benefit amount is small. Also, when plans are terminated 

involuntarily, there can sometimes be lengthy delays before PBGC reduces 

estimated benefits to reflect guarantee limits. Among the 10 plans with the 

most overpayments, all were involuntary terminations, and we found that 

the length of time between plan termination and when estimated benefits 

were adjusted to reflect guarantee limits varied widely. In some cases, 

estimated benefits were adjusted within 9 months of termination, while in 

other cases, more than 6 years elapsed before estimated benefits were 

adjusted—and in general, the longer the delays, the larger the 

Page 24 GAO-09-716 Pension Benefit Guaranty Corporation
 

overpayments. In contrast, when plans are terminated at the sponsor’s 

request as distress terminations, the sponsors are required to impose these 

limits themselves so that participants’ benefits are reduced as of the date 

of termination.27

The following examples illustrate how the above circumstances can 

combine to create large numbers of cases with overpayments among some 

plans. We chose these two case examples from among the cases sampled 

in the 10 plans with the most overpayments to illustrate the two types of 

situations that can result in overpayments outlined previously: (1) delayed 

adjustment of the retiree’s estimated benefit to reflect applicable limits; 

and (2) timely, but inaccurate adjustment of the retiree’s estimate to 

reflect applicable limits. We also chose these two case examples 

specifically because they had similar benefit amounts prior to termination. 

In the RTI (USWA) plan, four large groups of participants were affected by 

the guarantee limits: (1) those with six different types of temporary 

supplements who were subject to the accrued-at-normal limit;28 (2) former 

Bar Technologies employees whose benefits were subject to a $20 or 20 

percent phase-in limit;29 (3) those who retired or will retire with 30 years of 

service and were subject to a $60 or 60 percent phase-in; and (4) those 

who retired under the early retirement program whose benefits were 

subject to a $60 or 60 percent phase-in. To explore the impact of guarantee 

limits on the retirees who incurred overpayments, we randomly selected 5 

participants from among the 1,693 subject to the phase-in limits, and found 

 

2729 U.S.C. § 1341(c)(3)(D)(ii)(IV). For example, although our analysis of plan data suggests 

that several airline plans were among those most affected by guarantee limits, no airline 

plans were among those most affected by overpayments (see appendix VI). This is likely 

due to the fact that these airlines plans were terminated at the sponsor’s request. For 

example, according to agency officials, the Delta Air Lines plan and the US Airways pilots’ 

plan were both distress terminations at the sponsor’s request, and both reduced 

participants’ benefits as of the date of plan termination, as required by law. Thus, we found 

that although nearly 60 percent of the individuals associated with the US Airways pilots’ 

plan were affected by one or more of the guarantee limits (see table 2), US Airways was not 

on the list of 10 plans most affected by overpayments. (For a more detailed discussion of 

the US Airways plan termination, see appendix V.) 

28The accrued-at-normal limit requires guaranteed benefits to be calculated based on 

retirement at the plan’s normal retirement age, with no survivor benefits. (For more details, 

see the background section, table 1.) 

29Phase-in limits apply to benefit changes made during the 5 years before plan termination. 

The term “$20 or 20 percent” means the larger of either $20 per month or 20 percent of the 

benefit increase for each full year the increase was in effect prior to termination. (For more 

details, see the background section, table 1.) 

Page 25 GAO-09-716 Pension Benefit Guaranty Corporation
 

that all were retirees who had their benefits reduced between 19 percent 

and 63 percent from what they had been receiving prior to termination. In 

three cases, estimated benefits were adjusted to reflect these limits 2.3 

years after termination, but in two cases, estimated benefits were not 

adjusted prior to issuance of the benefit determination letter, which took 

place more than 6 years after termination. Due to inaccurate estimated 

benefits that were paid over several years, all 5 had incurred 

overpayments, ranging from $2,000 to about $57,000, and as a result, their 

benefits were reduced further to recoup the amounts owed. The effect on 

the monthly payment for one RTI retiree, whom PBGC overpaid by a total 

of $23,986, is illustrated in fig. 9. Ultimately, this retiree’s payment was 

reduced by almost two-thirds, mostly due to guarantee limits. 

Figure 9: The Effect of Plan Termination on One RTI Retiree’s Monthly Payment 

Source: GAO analysis of PBGC data.

Dollars

0

500

1,000

1,500

2,000

Payment reduction to recoup overpayment

Payment amount

Portion of payment amount that is an overpayment

8/1/08

final

monthly

benefit

2007

estimated

monthly

benefit

2006

estimated

monthly

benefit

7/1/05

estimated

benefit

increased

to correct

an error

10/1/04

estimated

benefit

reduced

due to

limits

2003

estimated

monthly

benefits

2002

estimated

monthly

benefit

Final

benefit

determination

amount

• 6/14/02: Plan termination

• 9/30/03: Date of trusteeship

$402a

$562 $562 $562 $562

$1,504 $1,504

$56

$506

a

During this time, participant was underpaid. Amount of underpayment was factored in when the total 

net overpayment amount was determined. 

Page 26 GAO-09-716 Pension Benefit Guaranty Corporation
 

In the Weirton plan, we found that large numbers of participants were 

subject to the accrued-at-normal limits due to various plan supplements; 

and were subject to the phase-in limits due to seven different types of 

benefit changes made within 5 years before plan termination. In addition, 

many participants were subject to the maximum limits, in part due to the 

aggregate limit imposed when participants are involved in more than one 

terminated plan30 (many participants had worked previously for National 

Steel or other PBGC-trusteed plans). We reviewed five randomly-selected 

cases from among the 1,342 participants who were subject to the accruedat-normal limit and found that all were retirees whose estimated benefit 

amounts were inaccurate for at least part of the period involving the 

benefit determination process. One case resulted in an underpayment, 

with a backpayment of $11,384 to be repaid to the retiree, plus interest. 

The other four cases resulted in overpayments, ranging from $3,200 to just 

over $6,000, with reductions in benefit payments to recoup the amounts 

overpaid. In contrast with the five sampled RTI participants, these retirees 

had their benefits adjusted more quickly to reflect the guarantee limits so 

that, in general, the overpayments incurred were not as large. All 4 had 

their estimated benefits adjusted in less than 9 months. The effect on one 

Weirton retiree’s monthly payment is illustrated in fig. 10. As was the case 

in the previous example, this retiree’s payment was ultimately reduced by 

nearly one-half, mostly due to guarantee limits. 

 

3029 U.S.C. § 1322(b). 

Page 27 GAO-09-716 Pension Benefit Guaranty Corporation
 

Figure 10: The Effect of Plan Termination on One Weirton Retiree’s Monthly 

Payment 

Source: GAO analysis of PBGC data.

Dollars

0

500

1,000

1,500

2,000

Payment reduction to recoup overpayment

Payment amount

Portion of payment amount that is an overpayment

3/13/08

benefit

adjusted

due to

overpayment

12/17/07

final

monthly

benefit

2006

estimated

monthly

benefit

2005

estimated

monthly

benefit

7/1/04

estimated

benefit

reduced

due to

limits

2003

estimated

monthly

benefits

• 10/21/03: Plan termination

• 11/12/03: Date of trusteeship $1,521

$821 $821 $821 $821 $821

$38

$783

Final

benefit

determination

amount

Large Overpayments Are 

Not Fully Recouped 

Our analysis of PBGC data indicates that the overpayments owed by 

participants in plans terminated and trusteed during fiscal years 2000 

through 2008 totaled almost $100 million.31 Of this total, about $14 million 

had been recouped, as of February 2009. However, PBGC’s policy of 

restricting recoupments to no more than 10 percent of the recipient’s 

monthly benefit results in a long amortization period for collection that 

can well exceed normal life expectancies. Since PBGC does not pursue 

further collection from a participant’s estate once a retiree (and any 

 

31Data reliability issues prevented us from conducting a more definitive analysis of total 

overpayment amounts. For a more detailed discussion of these data limitations, see 

appendix I. 

Page 28 GAO-09-716 Pension Benefit Guaranty Corporation
 

beneficiary) dies, a substantial portion of these overpayments will not be 

repaid. Specifically, for many of these individuals, it was projected that 

these debts would not be fully paid until the year 2099, PBGC’s arbitrary 

cutoff. Nearly 60 percent of those with future recoupments would not 

finish repaying these debts until the year 2020 and beyond. We analyzed 

the ages of retirees and/or beneficiaries at their projected end date of 

recoupment for all cases involving overpayments greater than $10,000. 

Although these cases accounted for fewer than 10 percent of those with 

overpayments, the amounts they owed accounted for more than 40 

percent of total recoupments. We found that about 60 percent of these 

individuals would be age 80 or older, and over 30 percent would be age 100 

or older, when their debts to PBGC would be fully repaid (see fig. 11). The 

life expectancy for those age 65 in 2009 is estimated to be 82 to 87 years.32

Figure 11: Participants’ Ages at the End of Recoupment in Cases with 

Overpayments Greater than $10,000 

Source: GAO analysis of PBGC data on participants in plans terminated and trusteed during fiscal years 2000 through 2008 with

recoupments greater than $10,000 (2,035 cases total).

Age 80 to 99

Age 100 and over

Under age 80

39.7%

31.1% 29.2%

Note: In 173 of these cases, the end date was the arbitrary cutoff of 2099, so ages at the actual end 

of recoupment would be greater. 

 

32Based on the Social Security Administration’s Cohort Life Expectancy Tables for the 

cohort age 65, as of January 1, 2009, males are projected to live another 16.8 to 18.1 years 

on average, and females another 19.2 to 20.6 years on average. PBGC uses different tables 

that project slightly greater life expectancies. In 2009, these tables projected healthy males 

to live another 19.3 years, and healthy females to live another 21.8 years. 

Page 29 GAO-09-716 Pension Benefit Guaranty Corporation
 

Once overpayments have been made, finding the right balance between 

agency fiscal responsibility and fairness to participants can be difficult to 

achieve. Compared with PBGC’s policy on overpayments,33 federal 

agencies such as the Social Security Administration (SSA) and the Office 

of Personnel Management (OPM) generally allow larger reductions to 

benefits when recouping overpayments, but their policies also give much 

greater prominence to waivers. PBGC policy stipulates that in cases with 

an ongoing payment, recoupment of an overpayment may not be waived 

unless the monthly reduction would be less than $5.34 Waivers for hardship 

are to be considered only in cases for which there is no ongoing payment 

to the participant. According to the agency’s general counsel and 

subsequent comments from agency officials, since the outset of 2009, 

PBGC has been receiving hardship waiver requests in recovery cases at 

more than twice the rate received the prior year. 

Some Federal Agencies 

Reduce Payments More 

Aggressively, but Also 

Grant More Waivers for 

Overpayments 

In contrast, both SSA and OPM policies on overpayments allow hardship 

consideration for cases with ongoing payments. For overpayment of Social 

Security benefits, SSA will withhold the full amount of the benefit each 

month until the overpayment is fully recouped. However, in its fact sheet 

on overpayments with respect to Social Security benefits and 

Supplemental Security Income (SSI) benefits, available on its Web site, 

SSA devotes over half the document to detailing the steps participants 

should take if they wish to either appeal or request a waiver. For SSI 

benefits, SSA will withhold 10 percent of the maximum federal benefit rate 

each month,35 but the beneficiary can request a lesser withholding amount, 

subject to SSA approval. Further, if the beneficiary disagrees with the 

overpayment, he or she can appeal or request that collection be waived.36

 

33PBGC has reserved the right to use its discretion to recoup overpayments by methods 

other than those specifically set out in its applicable regulation, and may decide not to 

recoup net overpayments that it determines to be de minimis. 29 C.F.R. §§ 4022.81(a) and 

4022.82(a)(4) (2009). 

34In addition, in the last month that benefits are to be reduced to repay an overpayment, 

PBGC policy allows the final monthly reduction amount to be waived if the remaining 

balance due is less than the normal monthly reduction amount. 29 C.F.R. § 4022.82(a)(5) 

(2009). 

35If no benefits are being paid, SSA can recover the overpayment from federal income tax 

refunds or from the person’s wages and report delinquencies to credit bureaus. 

36According to SSA’s Performance and Accountability Reports, in fiscal year 2007, SSA 

detected $5.1 billion in overpayments and collected $2.5 billion. 

Page 30 GAO-09-716 Pension Benefit Guaranty Corporation
 

Similarly, OPM’s policy guidance on overpayments of retirement benefits 

devotes over half the document to the subject of waivers. Under law, OPM 

is directed not to recover overpayments when the beneficiary bears no 

responsibility for the overpayment and requiring repayment would be 

“against equity and good conscience.”37 In deciding whether to grant a 

waiver, errors or delays by OPM may be considered, along with financial 

hardship or any other basis for equity that OPM deems appropriate. Just 

the last 7 pages of this 34-page policy guide are devoted to policies on 

collections. These policies call for overpayments of federal employee 

retirement benefits to be collected in one lump sum, whenever feasible. If 

one lump-sum payment is not feasible and recoupment is by installment, 

the payments are to be sufficient in size and frequency to recoup the debt 

in no more than 3 years. The standard rate of collection is 10 percent of 

the net monthly annuity or $50 per month, whichever is higher; but if a 10 

percent reduction will not result in full recoupment within 3 years, the 

reduction rate can be increased up to 50 percent.38

PBGC’s initial communications with participants shortly following 

termination—especially its on-site information sessions—generally drew 

praise from the pension advocacy groups and union representatives we 

interviewed. These groups’ concerns with PBGC’s communication efforts 

most often focused on the long gaps between contacts when the benefit 

determination process was lengthy and the complicated calculations that 

accompanied letters notifying participants of significant benefit 

reductions. 

PBGC’s Initial 

Communications 

Drew Praise, 

but Later 

Communications 

Were Sometimes 

Found Lacking 

 

375 U.S.C. § 8346(b). 

38According to OPM’s annual report, in fiscal year 2008, OPM identified $194.1 million in 

overpayments and recovered $165.9 million (including amounts due from prior years). 

Page 31 GAO-09-716 Pension Benefit Guaranty Corporation
 

PBGC’s first communication with participants is generally a letter 

informing them that their pension plan has been terminated and that 

PBGC has become the plan trustee.39 Shortly thereafter, this letter is 

generally followed by a more detailed letter with a packet of materials, 

including a DVD with an introduction to PBGC and frequently-asked 

questions about how the benefit determination process works. PBGC 

officials refer to this as a “welcome” package. Additionally, for large plans 

likely to have many participants affected by the guarantee limits, PBGC 

will hold on-site information sessions shortly after plan termination. PBGC 

also operates a customer service center with a toll-free number that 

participants can call if they have questions, provides a Web site for 

workers and retirees with detailed information about plans and benefits, 

and sends participants a newsletter with information about PBGC once or 

twice per year.40

PBGC’s Initial Notification 

and On-Site Information 

Sessions Generally Drew 

Praise 

Nearly all pension advocacy groups and union representatives we spoke 

with41 praised PBGC’s efforts to hold information sessions with the larger 

plans. One union representative commended PBGC staff for going out into 

the field to talk with participants and answer questions even though 

participants are going to be angry. Other union representatives 

commented that they have been impressed by PBGC’s staff for staying at 

these sessions until they have answered every participant’s questions. 

While these sessions are generally viewed as helpful, some pension rights 

advocates noted that the information presented is difficult for participants 

to understand, and may not have the same meaning when talked about in 

generalities as when they later receive notices concerning their specific 

benefits. Also, since not everyone may attend these events, these 

advocates believe it is important for all the information presented at the 

sessions to be provided through written communication as well. 

PBGC’s customer service center and Web site received mixed reactions 

from the pension rights advocates and union representatives we 

interviewed. A few noted that some of their members reported receiving 

good service from the toll-free number while others found the service 

 

39Prior to termination, plan sponsors are required to notify participants if the plan is 

significantly underfunded and warn them that if the plan is terminated, their benefits must 

be cut back to ERISA levels as of the plan termination date. 29 U.S.C. § 1021. 

40PBGC produces an annual newsletter for retirees and a biannual newsletter for future 

retirees. 

41For a list of these groups, see appendix II. 

Page 32 GAO-09-716 Pension Benefit Guaranty Corporation
 

frustrating or useless. One union representative said that the center’s staff 

use PBGC terminology, which may be different from the plan and benefit 

language that is familiar to their members. However, other groups we 

spoke with were generally more positive regarding their own direct 

communications with PBGC staff, describing PBGC staff as forthcoming 

and responsive to their inquiries. Similarly, the groups we interviewed 

generally found the information on PBGC’s Web site useful, but they 

expressed doubt that this would be the case for most of their members. 

They noted that many people whose plans are taken over by PBGC are not 

accustomed to using a computer or do not have access to the internet, and 

that some do not feel comfortable relying on information they find on a 

Web site. 

Long Gaps in 

Communication until 

Completion of the Process 

Raised Some Concerns 

Following the initial contacts, PBGC generally does not communicate with 

participants again until the benefit determination process is complete, 

which in some cases can stretch into years.42 Among the participants’ files 

we examined when the benefit determination process took 4 or more 

years, we found that there often was no contact from PBGC for most of 

this time. For example, we examined the files of five randomly selected 

Bethlehem Steel participants whose benefit determinations were still 

pending as of February 2009,43 and found that—aside from one instance of 

an acknowledgment of a form submitted by one participant—PBGC had 

not communicated with these participants for more than 5 years. The last 

PBGC-initiated communications were dated late 2003 or early 2004. 

Some of the pension advocacy groups and union representatives we spoke 

with said that these long periods without communication are problematic 

for participants for several reasons. For example, retirees whose benefits 

are subject to the guarantee limits but who continue to receive their higher 

plan-level benefits for long periods of time may come to expect that these 

higher amounts are permanent, and then they are surprised when—years 

later—their benefits are suddenly reduced. Even for participants who are 

not yet receiving benefits, the lack of communication about the likely 

amount of their final benefits makes it difficult to plan for retirement. 

 

42However, if a participant applies to start benefit payments during this time, 

communications would be exchanged between PBGC and the participant about the 

participant’s current status, eligibility, and benefit amount, based on the requested 

retirement date. 

43For a description of our random selection process, see appendix I. 

Page 33 GAO-09-716 Pension Benefit Guaranty Corporation
 

Some groups noted that PBGC does not always provide realistic time 

frames for completing the benefit determination process, and does not 

periodically update participants on the status of benefit processing. Two 

groups suggested it would be helpful if PBGC provided updates at least 

every 6 months. 

Complicated Benefit 

Calculations Are Not 

Adequately Explained 

When participants are notified of a payment amount—whether estimated 

or final—PBGC’s letters generally provide only limited explanations for 

why the amount may be different from the amount provided under their 

plan. In complex plans, when benefit calculations are complicated, the 

letters do not adequately explain why benefits are being reduced, and 

although benefit statements are generally attached, the logic and math 

involved can be difficult even for pension experts. 

The standard language used in these letters to explain a different 

estimated amount states: “We have adjusted the amount of your benefit 

because there are legal limits on how much we can pay.” The standard 

language used to explain a different final benefit amount states: “Your final 

monthly benefit of [amount] is the amount that the PBGC is legally 

allowed to pay you. It was calculated by determining the benefit you are 

entitled to in your plan and then applying the limits spelled out in federal 

pension law.” These letters generally provide no specific information 

about which limits apply or why. However, enclosed with each benefit 

letter is a detailed attachment that shows the line-by-line calculations 

leading to the benefit amount, referred to as a “benefit statement.” In the 

participant files we reviewed, these benefit statements ranged in length 

from 2 to 8 pages, and were very difficult to understand. In some cases, 

there were as many as 20 to 30 different line items that required making 

comparisons between the items to understand the logic of the 

calculations. (See sample letter provided in appendix VII.) 

Some pension advocates and union representatives we spoke with said 

that they found the explanations in these letters to be too vague and 

generic, and that the letters did not provide enough information specific to 

the individual’s circumstances to be helpful. This was especially true in 

cases where participants were shocked or confused by a large benefit 

reduction. Moreover, some said they did not think most participants would 

be able to understand the accompanying benefit statements without 

additional information and assistance—especially for complex cases, 

according to one advocate. At the same time, they were generally 

sympathetic to the difficulty of communicating such complicated 

information. As one advocate acknowledged, for the letters to be accurate, 

Page 34 GAO-09-716 Pension Benefit Guaranty Corporation
 

they have to be complicated; this may just be “the nature of the beast.” 

Nevertheless, they said that PBGC could take some steps to improve the 

letters. For example, for those likely to incur overpayments, they 

suggested providing an example of how the recoupment process works. 

For those with complex benefit statements, they suggested that PBGC 

provide more text to help explain each step of the calculations, and 

include referrals to pension rights groups for obtaining additional 

information and assistance. 

In addition, we found a number of errors in the correspondence with 

participants, although we reviewed only a small sample of letters for 

participants in certain complex plans. For example, we found a number of 

cases with corrected benefit determination letters and other 

correspondence that had been sent to rectify various errors, such as the 

failure to account for overpayments, or inaccurate end dates for 

recoupment. We also identified some errors in the payment amounts or 

other information in the letters that we brought to PBGC’s attention to be 

corrected.44

PBGC has developed more than 500 letter formats—in both English and 

Spanish—to address the myriad of situations that may arise in the benefit 

determination process. Nevertheless, PBGC officials acknowledged that 

their standard letter formats may not always meet the needs of 

participants, especially those in complex plans, and they recently 

undertook a project to review and update their letters to try to better meet 

participant needs. 

According to PBGC officials, in September 2008, they began rolling out 

about 50 different versions of key letters to fit different circumstances. 

They also noted that the amount of detail and length of the benefit 

statements has varied over time—sometimes longer, sometimes shorter. 

Most recently, they have tended toward longer. They commented, 

however, that they are not sure it makes a difference either way, because 

for the most part, participants react to the benefit amount, not to the steps 

PBGC has used to arrive at the amount. Finally, they also noted that while 

the benefit amounts in the letters are verified by actuaries, the letters are 

prepared manually by Field Benefit Administration staff, using the 

 

44We reviewed letters only to determine if they accurately conveyed information 

documented elsewhere in the files. We did not attempt to verify PBGC calculations of 

benefit amounts. 

Page 35 GAO-09-716 Pension Benefit Guaranty Corporation
 

standard formats, and until recently, these letters were not reviewed. 

Beginning in early 2009, however, plan analysts have started to review the 

letters before mailing. 

Since streamlining its appeals process in 2003, PBGC has responded more 

quickly to correspondence sent to its Appeals Division (see fig. 12). It has 

reduced the average amount of time to decide an appeal by almost a year 

and has cut the average amount of time needed to resolve all appealsrelated inquiries in half. At the same time, most appeals docketed since 

2003 have not resulted in appellants receiving higher benefit amounts. A 

lack of understanding on the part of participants about how their benefits 

are calculated may contribute to unnecessary appeals. 

Restructured Appeals 

Process Resolves 

Requests More 

Efficiently but Key 

Information Is Not 

Readily Provided 

Page 36 GAO-09-716 Pension Benefit Guaranty Corporation
 

Figure 12: PBGC’s Appeals Process 

Source: GAO analysis of PBGC documents.

Incoming correspondence

Within 45 days of receiving a final benefit determination, participants may appeal to PBGC’s Appeals Board or request 

additional time to file an appeal.a PBGC acknowledges the receipt of incoming correspondence with a letter and decides if it 

should be docketed as an appeal based on whether the correspondence raises a question about how the plan was

interpreted, how the law was interpreted, or the practices of the plan’s sponsor.

Docketed as Appeal

The appeal is assigned to a member of PBGC’s

board of appeals and an analyst, who review 

information on the case. The board member 

determines whether there is a precedent-setting 

legal issue involved.

Appeals Closed

Once a decision is made, affected parties are 

notified. If the decision results in a change in the 

benefit determination, the Benefits Administration 

and Payment Department is notified.

Change in Benefit Determination

As a result of an appeal decision or because of new information received, PBGC’s Benefits Administration and Payment 

Department may calculate a new benefit amount for any affected parties.

Not Docketed as Appeal

PBGC officials categorize correspondence 

that is not docketed as an appeal.

Treated as extension request

PBGC grants the appellant an additional 

45 days to submit an appeal. Board Decision

Three of the five 

board members

discuss and vote on 

any precedent-setting 

cases.

Board Member 

Decision

Board members make 

independent decisions

on cases that are not 

precedent-setting.

Referred internally

Correspondence may be referred to the 

Benefits Administration and Payment 

Department or to the Appeals Division.

Other

Some correspondence may not require a

response.

yes

yes

no

no

a

If an appeal is filed, PBGC’s benefit determination will not take effect until the Appeals Board issues 

a decision; in the meantime, PBGC continues to pay retirees benefits at the estimated level. 

Page 37 GAO-09-716 Pension Benefit Guaranty Corporation
 

PBGC’s appeals process was restructured in 2003 to create a triage system 

that makes more efficient use of agency resources and resolves cases 

more quickly. Previously, PBGC treated nearly every correspondence sent 

to its Appeals Division as an appeal. The agency now evaluates 

correspondence to determine if it raises a question about how the plan 

was interpreted, how the law was interpreted, or the practices of the plan’s 

sponsor and dockets correspondence as an appeal if it meets these criteria 

based on regulations.45 In analyzing appeals correspondence associated 

with plans trusteed by PBGC from fiscal year 2000 to fiscal year 2008, we 

found that since 2003, PBGC docketed as an appeal less than one-third of 

the correspondence received by the Appeals Division (see fig. 13). 

Correspondence concerning corrections to personal data, such as a 

participant’s date of hire or length of service, is now directed to PBGC’s 

Benefits Administration and Payment Department (Benefits Department) 

so that a corrected benefit determination can be issued more 

expeditiously. Additionally, in instances where a potential appellant 

requests a more detailed explanation of his or her benefit determination, 

the Benefits Department can quickly provide a detailed explanation based 

on its familiarity with the benefit calculation and relevant participant data. 

Further, under this triage approach, the Appeals Board staff, rather than 

the Appeals Board, responds to appeals received before a benefit 

determination has been issued or to claims that PBGC’s recovery of 

overpayments create a financial hardship and should be waived. 

Triage Approach Has 

Streamlined Appeals 

Process 

 

45This triage approach was later formalized in PBGC’s Rules for Administrative Review of 

Agency Decisions. 29 C.F.R. § 4003 (2009). 

Page 38 GAO-09-716 Pension Benefit Guaranty Corporation
 

Figure 13: Actions Taken on Correspondence Associated with Plans Trusteed 

during Fiscal Years 2000-2008 

Source: GAO analysis of PBGC data on participants in plans terminated and trusteed during fiscal years 2000 through 2008.

Actions

Referred to the Appeals Divisiona

Otherb

Treated as extension request

Referred to the Benefits Administration and Payment Divisionc

Docketed as appeal

Correspondence received prior

to Fiscal Year 2003

Correspondence received

Fiscal Years 2003-2009

90.2%

9.8%

16.4%

16.4%

12.4%

29.0%

25.7%

Note: Data reflect multiple correspondences associated with individual cases. 

a

Referrals to the Appeals Division include appeals that are filed too early or requests to have PBGC’s 

recovery of overpayments waived. 

b

Other includes correspondence that requires no action or is sent in response to a PBGC request, as 

well as Freedom of Information Act requests. 

c

Referrals to the Benefits Administration and Payment Division include corrections to personal 

information and requests for benefit explanations. 

Since streamlining the appeals process, PBGC has reduced its response 

time for appeals and other appeals-related inquiries without increasing the 

size of its appeals staff. According to agency data, PBGC reduced its 

average time for closing docketed appeals from 2.3 years to 1.4 years since 

implementing this triage approach. In fact, since fiscal year 2005, PBGC 

has averaged a response time of less than 10 months (see fig. 14). PBGC 

has also reduced the average age of pending appeals from about 2 years to 

less than 9 months, since implementing its triage approach. We also found, 

on examining the 14,545 appeals-related correspondences associated with 

Page 39 GAO-09-716 Pension Benefit Guaranty Corporation
 

plans trusteed from fiscal year 2000 to fiscal year 2008, that PBGC 

responded to all correspondence in an average of less than 4 months after 

2002 (fiscal years 2003 through 2009), as compared to an average of about 

8 months prior to 2003 (fiscal years 2000 through fiscal year 2002). 

However, there were also 852 cases of correspondence which had been 

pending for an average of nearly 7 months, as of April 2009. 

Figure 14: Average Age of Closed and Pending Appeals, by Fiscal Year 

Average age of appeal (in years)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Pending appeals

Closed appeals

2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: GAO analysis of PBGC data on participants in plans terminated and trusteed during fiscal years 2000 through 2008.

Fiscal year

Note: Data provide a snapshot of the average age of closed and pending appeals at the end of each 

fiscal year. 

The procedural requirements of the appeals process do not appear to 

present barriers to appellants. Appellants are to provide a specific reason 

for their appeals and submit them within 45 days of their benefit 

determinations.46 Of the 3,637 closed appeals we examined, only 37 were 

closed because the appellant did not conform to a procedural 

 

4629 C.F.R. §§ 4003.52 and 4003.54 (2009). 

Page 40 GAO-09-716 Pension Benefit Guaranty Corporation
 

requirement.47 Additionally, PBGC readily grants extensions. Within the 

correspondence we examined, PBGC granted 2,371 extension requests 

during fiscal years 2000 through 2008. 

Most Appeals Have Not 

Resulted in Higher Benefit 

Amounts for Appellants 

More than 80 percent of appeals resulted in appellants receiving no 

increase in their benefit amounts. Of the 4,337 correspondences that were 

docketed as appeals since the beginning of fiscal year 2003, 3,637 had been 

decided as of April 2009. In most of these cases, the appeal decision 

resulted in no change to the participant’s benefit determination amount 

(see fig. 15). However, appellants received a higher benefit amount in 18 

percent of the cases.48 For example, in one of the successful appeals, a 

Bethlehem Steel participant submitted copies of his medical records with 

his appeal, convincing the Appeals Board that he was eligible to receive a 

“permanent incapacity” benefit. In another case, a participant in the US 

Airways Inc. (pilots) plan had US Airways Inc. furnish documentation to 

PBGC that his date of hire had been adjusted as the result of a lawsuit, and 

with this new date of hire, PBGC considered the participant vested. 

 

47More specifically, 27 appeals were closed because the appeal was not submitted within 

the required time frame; 7 were closed because the appellant failed to identify a specific 

error; and 3 were closed because the appellant attempted to appeal an issue that cannot be 

appealed through this process. 

48When PBGC identifies an error through the appeals process in how it interpreted plan 

provisions, it also typically adjusts the benefits of all other similarly-situated participants 

accordingly; but, generally only does so if it results in a higher benefit amount. 

Page 41 GAO-09-716 Pension Benefit Guaranty Corporation
 

Figure 15: Outcome of Appeals since Restructuring 

Source: GAO analysis of agency data on participants in plans terminated and trusteed during fiscal year 2003 to fiscal year 2008 with a

closed appeal. There were 700 appeals that had not yet been closed, as of April 2009. 

No effect on benefit determination

0.5%

Less favorable outcome than benefit

determination

More favorable outcome than benefit

determination

18.5%

81.0%

In cases with no change in the participant’s benefit determination amount, 

the amount of overpayment can grow significantly during an appeal. While 

cases are appealed, PBGC typically places a hold on any change in benefit 

until the appeal is resolved. Thus, in cases where the benefit determination 

amount is less than the estimated amount, the participant may continue to 

receive the higher estimated amount during an appeal. If the lower amount 

is ultimately upheld, we found that these continued higher payments could 

add significantly to the amount of the participant’s overpayment—more 

than $10,000 in some cases. 

PBGC Does Not Readily 

Provide Key Information 

that Could Help Avoid 

Unnecessary Appeals 

Although some appellants have successfully used the appeals process to 

increase their benefits, PBGC is not readily providing key information that 

would be helpful to participants in deciding whether or not to pursue an 

appeal. For example, the information PBGC provides on how it arrives at 

its benefit calculations can be difficult for potential appellants to 

understand. Plan provisions and guarantee limitations are often 

complicated, and it may be difficult for the average individual to interpret 

PBGC’s benefit calculations, especially for complex plans. Based on 

Appeals Board findings, it appears that participants sometimes file appeals 

because they do not understand how the guarantee limitations affect their 

Page 42 GAO-09-716 Pension Benefit Guaranty Corporation
 

benefits. For example, the Appeals Board denied one Weirton Steel 

participant’s appeal by explaining that the participant’s estimated benefit 

included a temporary supplement that, ultimately, was not payable due to 

the accrued-at-normal limitation. In another case, the Appeals Board 

concluded that an Outboard Marine participant simply did not understand 

PBGC’s benefit statement and explained the accrued-at-normal, maximum, 

and phase-in limitations, while denying the participant’s appeal. 

Even pension counselors and union representatives, who are 

knowledgeable about pensions and have experience filing appeals with 

PBGC, had difficulty understanding the materials provided to participants 

about their benefits . Several of the pension counselors and union 

representatives we interviewed told us that they have established contacts 

at PBGC who help them understand benefit determinations in appeals 

cases, and they, in turn, help convey this information to the participants 

they serve. Some have even held three-way calls with PBGC’s customer 

service center and participants, so that they can help participants 

understand the information provided by PBGC. Additionally, 

representatives from the pension counseling centers we spoke with have 

actuarial support they consult for help interpreting complicated benefit 

calculations.49 In some cases, by assisting participants in understanding 

their benefit calculations better, pension counselors told us they can also 

help participants avoid unnecessary appeals. 

Some of those we interviewed also told us that a complete understanding 

of a participant’s benefit determination—which is important for an 

effective appeal—cannot be obtained from a benefit determination letter 

alone. Several of these pension counselors and union representatives 

commented that they routinely file Freedom of Information Act50 requests, 

on a participant’s behalf, to obtain more information about a participant’s 

case from PBGC when preparing an appeal because there is not sufficient 

information in the benefit determination letter. Although PBGC provides a 

guide on how to use these requests on its Web site, PBGC’s 

communications materials about the appeals process do not provide a 

description of how individuals can gain access to PBGC’s full benefit 

calculation records through a Freedom of Information Act request. 

 

49The Administration on Aging currently funds six regional counseling projects that provide 

core services in 27 states for individuals who need help in understanding and enforcing 

their pension and retirement savings plan rights. 

505 U.S.C. § 552. 

Page 43 GAO-09-716 Pension Benefit Guaranty Corporation
 

The current economic downturn has already brought a new influx of 

pension plan terminations to PBGC, and more are expected to follow. 

While our findings reveal a reasonably good record of processing 

beneficiary cases and assuming responsibility for the payment of benefits 

since 2000, the loss of jobs at this time, as well as the impending 

retirement of the baby boom generation, leave little room for anything 

short of high performance. This means acting as quickly and as efficiently 

as possible to value and allocate plan assets; to expedite the calculation of 

estimated benefits to reflect guarantee limits, as well as final benefit 

amounts; and to keep plan participants well-informed throughout the 

benefit determination process. Workers and retirees in terminated plans 

who stand to lose as much as one-half or more of their long-anticipated 

retirement income will likely have to make painful financial adjustments, 

and due consideration in helping to ease that pain is warranted. 

Conclusions 

The calculation of benefits according to complicated provisions that vary 

by plan is a challenging task. It becomes more so with the delays that can 

occur in valuing the assets of large and complex plans and determining 

how those assets are to be allocated among different groups. However, the 

likelihood of lengthy processing for some plans is not unpredictable, and 

while PBGC has taken steps to expedite the processing of small and 

simpler plans, its approach to large and complex plans appears less than 

strategic. The hope of freeing up staff to handle complex plans by 

processing others more quickly will probably not be sufficient by itself for 

tackling difficult plans in the near future. Absent a calculated effort to 

anticipate and plan for such terminations, the heretofore modest number 

of beneficiaries caught in a protracted process could, indeed, grow in the 

next few years. 

While overpayments to those already in retirement have been infrequent, 

delays clearly exacerbate them. Moreover, the failure to communicate 

more often and clearly with participants awaiting a final determination can 

be disconcerting—especially when they receive the news that their final 

determination is “surprisingly” less than they anticipated, or when retirees 

learn that the estimated interim benefit they had been receiving was too 

high and that they owe money. PBGC’s long recoupment period—which 

can be even further elongated by an appeal—may be a consolation to such 

retirees; however, the agency itself stands to lose considerable sums under 

this policy. This is another peril for an agency that may well be dealing 

with an increasing number of plan failures. Clearer and more frequent 

communication with plan participants, including quicker and responsible 

adjustments to estimated benefits, more information about how their 

benefits are calculated, and where to find help if they wish to appeal, 

Page 44 GAO-09-716 Pension Benefit Guaranty Corporation
 

would better manage expectations, help people plan for their future, avoid 

unnecessary appeals, and earn good will in a trying time for all. 

To improve PBGC’s benefit determination process, a more strategic 

approach is needed to prepare for and manage the calculation of benefit 

amounts and communications with participants in cases involving large, 

complex plans. Specifically, we recommend that: 

• PBGC should set goals for timeliness and monitor the progress made in 

finalizing benefit determinations for large, complex plans separately from 

other plans. 

• To reduce the number and size of overpayments in large, complex plans, 

PBGC should prioritize the calculation of estimated benefits for retirees 

subject to the guarantee limits and adjust estimates, as needed, throughout 

the benefit determination process. To reduce increased overpayments due 

to appeals, PBGC should prioritize the processing of appeals for those 

already receiving benefits and should consider implementing the final 

benefit determination for retirees during the appeals process. 

• PBGC should develop improved procedures for adapting and reviewing 

letters to participants in large, complex plans, such as by (1) providing 

more specific information in letters to participants who receive benefit 

reductions describing which limits were applied and why; (2) ensuring all 

letters to participants involving benefit reductions are reviewed for 

accuracy and coherence before being sent; and (3) establishing processes 

to more frequently communicate with participants who are experiencing 

delays in receiving final benefits determinations. 

• PBGC should provide information or resources to help participants in 

large, complex plans better understand their benefit calculations and also 

to avoid any unnecessary appeals. Specifically, PBGC’s benefit 

determination letters should provide information, such as how 

participants can obtain additional information by using the Freedom of 

Information Act or other resources. 

We obtained written comments on a draft of this report from PBGC’s 

acting director, which are reproduced in appendix VIII. PBGC also 

provided technical comments, which are incorporated into the report 

where appropriate. In addition, we provided copies of the draft report to 

the Departments of Commerce, Labor, and Treasury. 

Recommendations 

Agency Comments 

and Our Evaluation 

Page 45 GAO-09-716 Pension Benefit Guaranty Corporation
 

In response to our draft report, PBGC generally concurred with our 

recommendations and outlined actions the agency has under way or plans 

to take in order to address each topic of concern. With respect to the first 

recommendation, PBGC agreed and noted that the agency has started to 

implement steps for tracking and monitoring tasks associated with 

processing large, complex plans. While we are pleased to learn of these 

steps being initiated, we would like to emphasize the importance of setting 

goals for processing large, complex plans and reporting progress toward 

meeting those goals separately from other plans. With respect to the 

second recommendation, PBGC agreed and commented that it generally 

already identifies and prioritizes cases where adjustments to estimated 

benefits are likely, but will continue to look for ways to improve its 

processes. Moreover, despite possible legal concerns with implementing 

final benefit determinations prior to completion of the appeals process, 

the agency is willing to explore options for making earlier benefit 

adjustments, when appropriate. With respect to the third recommendation, 

PBGC agreed and noted that the agency is revising the guidelines for its 

benefit statements to better communicate the complexities of PBGC 

benefits and to better manage expectations of plan participants. The 

comments state that the agency will evaluate and make necessary 

modifications to its letter review process, as well as examine ways to more 

frequently and clearly communicate with participants experiencing delays 

in receiving final benefit determinations. Finally, with respect to the fourth 

recommendation, PBGC agreed to amend its appeals brochure to include 

information about accessing records through Freedom of Information Act 

requests. 

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

earlier, we plan no further distribution of this report until 30 days after its 

issue date. At that time, we will send copies of this report to the Acting 

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

and other interested parties. In addition, the report will be available at no 

charge on the GAO Web site at http://www.gao.gov. If you or your staff 

have any questions concerning this report, please contact me at (202) 512-

7215 or bovbjergb@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

Page 46 GAO-09-716 Pension Benefit Guaranty Corporation
 

of this report. GAO staff who made key contributions to this report are 

Barbara D. Bovbjerg 

listed in appendix IX. 

Director, Education, Workforce, and 

 Income Security Issues 

Page 47 GAO-09-716 Pension Benefit Guaranty Corporation
 

List of Requesters 

The Honorable Max Baucus 

Chairman 

The Honorable Charles E. Grassley 

Ranking Member 

Committee on Finance 

United States Senate 

The Honorable Edward M. Kennedy 

Chairman 

The Honorable Michael B. Enzi 

Ranking Member 

Committee on Health, Education, Labor, 

 and Pensions 

United States Senate 

The Honorable Barbara A. Mikulski 

Chairman 

The Honorable Richard Burr 

Ranking Member 

Subcommittee on Retirement and Aging 

Committee on Health, Education, Labor, 

 and Pensions 

United States Senate 

The Honorable Evan Bayh 

The Honorable Sherrod Brown 

The Honorable Robert P. Casey, Jr. 

The Honorable Richard J. Durbin 

The Honorable Arlen Specter 

United States Senate 

Page 48 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix I: Scope and Methodology for Appendix I: Scope and Methodology for Analysis of Automated and Imaged Data 

Analysis of Automated and Imaged Data 

To assess the timeliness and results of the Pension Benefit Guaranty 

Corporation’s (PBGC) benefit determination process, we obtained 

automated data from PBGC on all plans terminated and trusteed during 

fiscal years 2000 through 2008, as well as data for all individuals associated 

with those plans. Three different data sets were provided: (1) a plan level 

data set, (2) an individual level data set with benefit data, and (3) an 

individual level data set with appeals data. 

The plan level data set, including 1,089 plans total, was comprised of three 

component groups: 

• Group A - plans for which the valuation of assets and liabilities had been 

completed, as of February 2009 (909 plans). 

• Group B – plans for which the valuation of assets and liabilities had not 

been completed, as of February 2009 (83 plans). When actual values were 

not yet available, estimated values for assets and/or liabilities were 

provided. The participant count for these plans was based on audited data. 

 

• Group C – plans for which the valuation of assets and liabilities was not 

completed, as of February 2009 (97 plans). Estimated values for assets 

and/or liabilities were only available for some plans. The participant count 

for these plans was based on preliminary data. 

We analyzed the plan level data to determine the length of time it takes 

PBGC to complete the valuation of a plan’s assets and liabilities, on 

average. We also analyzed the plan level data to identify various plan 

characteristics, such as the fiscal year when trusteed by PBGC and the 

extent to which participants’ benefits are affected by legal guarantee 

limits. PBGC does not systematically track the number of participants 

affected by one or more of the three types of guaranteed benefit limits 

specified under the Employee Retirement Income Security Act of 1974 

(ERISA) and related regulations—which include maximum, phase-in, and 

accrued-at-normal limits—or how much these limits affect participants’ 

benefit amounts. However, PBGC does systematically track each plan’s 

total benefit liabilities and the amount PBGC owes, taking into account the 

guarantee limits. The difference between these two amounts (referred to 

as the amount of “unfunded nonguaranteed benefits”) provides an 

indicator of the magnitude of the impact of guarantee limits on 

participants within each plan. If the amounts are the same, it means that 

no participants had benefits reduced due to these limits. If total liabilities 

are greater, it means that at least one participant had benefits reduced due 

to these limits. 

Page 49 GAO-09-716 Pension Benefit Guaranty Corporation 
Appendix I: Scope and Methodology for 

Analysis of Automated and Imaged Data 

The individual level data set, with benefit data as of February 2009, 

included 1,487,679 individuals associated with 1,057,272 primary 

participants (the person who had earned the pension). The most common 

reasons for multiple individuals per case were situations where a portion 

of the pension was to be shared between the primary participant and 

another individual with a qualified domestic relations order (referred to in 

the data set as an “alternate payee”), or situations where a primary 

participant had died and the pension was being paid to a beneficiary. In 

our analyses, we aggregated the data so that the characterization of each 

case reflected the data for the primary participant, as well as all other 

individuals associated with that primary participant, as appropriate for the 

data element being analyzed. 

We analyzed the individual level data on benefits, by case, to determine 

the length of time it takes PBGC to make benefit determinations and the 

extent to which overpayments affect retirees’ benefits. To assess the time 

required for processing, we began by identifying all those participants 

whose benefit determinations had been completed. We then examined the 

length of time between the date the participant’s plan was trusteed and the 

date PBGC first issued a final benefit determination letter to the 

participant. (Subsequent benefit determination letters are sometimes 

issued when corrections are needed or when a participant successfully 

appeals.) For participants whose benefit determinations were still 

pending, we calculated the length of time between the plan’s trusteeship 

and February 18, 2009, when these data were provided, to determine how 

long the determinations had been awaiting completion. We also analyzed 

the length of time to process benefit determinations by participants’ 

retirement status at the time the plan terminated. 

To determine the proportion of participants possibly affected by 

overpayments, we first identified all those who had received estimated 

benefits and then compared the earliest available estimated benefit 

amount with the final benefit amount, by case, tabulating whether the 

difference was positive (indicating a likely overpayment) or negative 

(indicating a likely underpayment). Because estimated benefit amounts 

may be adjusted over time, and because the records on estimated benefits 

had sometimes been overwritten or deleted, we were not able to use these 

data to determine with certainty whether or not an overpayment or 

underpayment had been incurred, or the amounts involved. Instead, to 

assess the amount of overpayments incurred and the effect of repaying 

these debts on participants’ benefits, we analyzed the data on 

recoupments. First, we identified all those who were listed as having 

amounts recouped to date, by case. We then used the available data on 

Page 50 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix I: Scope and Methodology for 

Analysis of Automated and Imaged Data 

projected benefit reductions, which included the amount of monthly 

reduction and the start date and end date for that reduction amount 

(sometimes involving up to four different reduction amounts) to calculate 

the amounts yet to be recouped. We determined the total amount of the 

overpayments, by case, by combining the data PBGC provided on amounts 

recouped to date with our calculation of amounts yet to be recouped. 

Based on a review of selected records in PBGC’s image processing system 

for cases with the largest overpayments, it appears that these data are 

reliable for identifying whether a case has an overpayment, but not as 

reliable for determining the total amount of overpayments. We were able 

to verify that the participant with the largest overpayment, according to 

our analysis of these data, was correct: an LTV participant with an 

overpayment of about $152,000. Also, we found that that the amounts 

calculated using these data were very close (within 2 percent) of the 

overpayment amounts in the records for 15 of the 24 cases reviewed—

differences small enough to be explained by rounding. However, in the 

remaining 9 cases, the amounts calculated varied significantly from those 

in the records—some greater, some less. We investigated the 3 most 

egregious differences and found that all 3 were due to data entry errors in 

the PBGC data set. In 2 cases, PBGC officials told us that the end date for 

recoupment had been entered as 12/1/2099 by default, which was not 

correct. They said that they would implement a system fix to prevent 

inappropriate use of this default in the future. In the third case, we found 

that the monthly payment amount had been inadvertently entered as the 

monthly reduction amount. None of these errors had resulted in 

inaccurate payments to participants, since all involved future recoupment 

amounts. However, it appears that the reliability of these data for 

calculating total overpayment amounts is limited. 

We also analyzed the individual level data, by case, to identify various case 

characteristics, aggregating the data together for all individuals associated 

with the same case. These characteristics included the final benefit 

amount (with and without any benefit reduction due to recoupment), and 

the projected age of the youngest individual at the end of recoupment for 

cases with overpayments greater than $10,000. 

We then combined the plan level data and individual level data, by case, to 

determine the number of individuals and cases associated with each plan, 

and identify those plans with the most cases that took 4 or more years to 

provide a final benefit determination, and the most cases with 

overpayments. We also used these data to generate lists of cases for more 

detailed reviews of documents in PBGC’s image processing system and 

Page 51 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix I: Scope and Methodology for 

Analysis of Automated and Imaged Data 

examine more closely the cases that took the longest to provide a benefit 

determination and that had the largest overpayments and benefit 

reductions. 

In addition to the automated data, PBGC maintains records that are 

individually scanned into an image processing system. The types of 

documents we reviewed in PBGC’s image processing system included both 

plan documents and participant records. On the plan level, we reviewed 

documents for the plans most affected by guarantee limits, by delays in 

processing, and by overpayments (see appendix VI). For the 10 plans 

ranking highest in each of these categories, we typically reviewed the 

“actuarial case memo,” which summarizes all the steps taken to obtain 

records and determine the value of assets and liabilities for each plan 

terminated and trusteed by PBGC. We then selected five of these plans for 

more detailed review of participant records in order to illustrate key 

trends identified in our analysis of the automated data. These five plans 

were: Bethlehem Steel, LTV Steel, RTI-United Steelworkers of America 

(USWA), US Airways, and Weirton Steel. For Bethlehem Steel, we 

randomly selected five participants from among those participants whose 

benefit determinations were still pending. For each of the other four plans, 

we randomly selected five participants from the lists of participants 

provided in the plans’ actuarial memos. Then, for each of these 

participants, we typically reviewed all letters sent to the participant, all 

benefit calculation documents, and the internal correspondence among 

PBGC staff about the case. We reviewed the letters to participants only to 

determine if they accurately conveyed information documented elsewhere 

in the files. We did not attempt to verify PBGC calculations of benefit 

amounts. 

Finally, to assess the length of time it takes PBGC to provide a decision 

when a participant appeals, we examined PBGC data on the average time 

to close docketed appeals and the average age of pending appeals, by 

fiscal year, 2000 through 2008. We also analyzed the 14,545 appeals-related 

correspondences associated with plans terminated and trusteed during 

fiscal years 2000 through 2008 so that we could make comparisons 

between PBGC’s average response time, both before and after its 

restructuring of the appeals process. Data reflect multiple 

correspondences associated with individual cases. For correspondences 

that were pending, we calculated the amount of time between when PBGC 

received these correspondences and April 13, 2009, when we received 

these data. To describe PBGC’s triaging system, which was implemented 

in fiscal year 2003, we analyzed PBGC’s action taken code for each 

correspondence and aggregated these results into two groups: those 

Page 52 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix I: Scope and Methodology for 

Analysis of Automated and Imaged Data 

correspondences received during fiscal years 2000 through 2002, and those 

received during fiscal years 2003 through 2008. Of the 4,337 

correspondences that were docketed as appeals, 3,495 had been decided 

as of April 2009. We then tabulated the data on the outcomes of closed 

appeals and the reasons why these appeals were closed, which were 

coded to indicate whether a change to the benefit amount occurred. 

Page 53 GAO-09-716 Pension Benefit Guaranty Corporation
A

Con

ppendix II: Organizations and Participants 

tacted 

Page 54 GAO-09-716 

Appendix II: Organizations and Participants 

Contacted 

American Federation of Labor and Congress of Industrial 

Organizations (AFL-CIO) (http://www.aflcio.org) A voluntary 

federation of 56 national and international labor unions, representing 11 

million members in a variety of industries. 

Organizations 

Air Line Pilots Association (http://www.alpa.org) The largest airline 

pilot union in the world, representing nearly 54,000 pilots at 36 U.S. and 

Canadian airlines. 

Association of Flight Attendants-Communications Workers of 

America (http://www.afanet.org) The world’s largest flight attendant labor 

union, organized by flight attendants for flight attendants, representing 

over 55,000 flight attendants at 20 airlines. 

New England Pension Assistance Project

(http://www.pensionaction.org/nepap.htm) One of the six regional projects 

funded by the Administration on Aging to provide free pension counseling 

services. Initially, the project served only Massachusetts residents, but in 

1998, it expanded to help residents of the six-state New England region: 

Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and 

Vermont. 

Ohio Pension Rights Center

(http://www.proseniors.org/oh_pension.html) Part of one of the six 

regional projects funded by the Administration on Aging to provide free 

pension counseling services. The Ohio Pension Rights Center shares a 

grant with the Michigan Pension Rights Project and provides all types of 

pension assistance to people in Michigan, Ohio, Pennsylvania, Kentucky, 

and Tennessee. 

Pension Rights Center (http://www.pensionrights.org) Provides legal 

consultation and training to the six regional projects funded by the 

Administration on Aging to provide pension counseling services for 

individuals who need help in understanding and enforcing their pension 

and retirement savings plan rights. 

Pension Benefit Guaranty Corporation 
Appendix II: Organizations and Participants 

Contacted 

United Steelworkers1 (http://www.usw.org/) The largest industrial labor 

union in North America, representing 1.2 million current and retired 

workers in industries that include primary and fabricated metals, mining, 

chemicals, paper, glass, rubber, transportation, utilities, container 

industries, pharmaceuticals, call centers, and health care. 

Members of the Reliance Group Holdings Inc. plan and the Reliance 

Insurance Company plan, which were among the plans most affected by 

long processing times. 

Participants 

Members of the Republic Technologies International USWA and 

USS/KOBE plans, which were among the plans most affected by the 

guarantee limits, long processing times, and/or overpayments. 

Members of United Air Lines ground employees plan and pilots’ plan. 

 

1

Formerly the United Steelworkers of America (USWA); in 2005, the union’s name was 

officially changed to United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, 

Allied Industrial and Service Workers International Union, but is commonly known as 

United Steelworkers. 

Page 55 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix III: The Proc

Assets and Re

ess for Allocating

coveries to Participant Benefits

Page 56 GAO-09-716 

Appendix III: The Process for Allocating 

Assets and Recoveries to Participant Benefits

Upon the termination of a single-employer plan, plan assets are identified, 

valued, and then allocated to participant benefits, in accordance with the 

provisions in ERISA, section 4044.1

 In addition to plan assets, any monies 

from company assets that PBGC recovers for unfunded benefit liabilities 

are allocated to participant benefits, in accordance with the provisions in 

ERISA, section 4022(c).2

Section 4044—Allocation 

of Plan Assets 

The amount of plan assets available to pay for participant benefits 

includes all plan assets remaining after the subtraction of all prior or 

current liabilities paid or payable from the plan. This amount includes the 

value of the collectible portion of any due and unpaid employer 

contributions.3

 Liabilities include expenses, fees and other administrative 

costs, and benefit payments due before the allocation date. For plans 

terminated and trusteed by PBGC, assets are valued and the allocation 

determined based on liabilities as of the termination date.4

Plan assets available to pay for benefits under the plan are allocated to 

participant benefits according to six priority categories, as described in 

Table 3. Assets are allocated to each priority category in succession, 

beginning with priority category 1. If the plan has sufficient assets to pay 

for all benefits in a priority category, the remaining assets are allocated to 

the next lower priority category. This process is repeated until all benefits 

in priority categories 1 through 6 have been provided or until all available 

plan assets have been allocated. Most private sector defined benefit plans 

do not require or allow participant contributions. Thus, in most trusteed 

 

1

29 U.S.C. 1344. 

2

29 U.S.C. 1322(c). 

3

Before 2006, for any plan that had due and unpaid employer contributions, PBGC would 

value the collectible portion of these contributions and include that value as part of the 

plan assets, as determined through adjudication (for example, in bankruptcy) or 

settlement. The Pension Protection Act of 2006 created a new mechanism, similar to the 

recovery ratio used for purposes of section 4022(c), that allows PBGC to assign a value to 

the collectible portion of these contributions in order to complete the valuation of the plan 

more quickly. Pub. L. No. 109-280, § 408(b)(2), 120 Stat. 780, 931-32 (codified at 29 U.S.C. § 

1344(f)). 

4

Based on provisions in the Pension Protection Act of 2006, the date that the sponsor files 

for bankruptcy is treated as the plan termination date for purposes of determining the 

amount of guaranteed benefits and allocating assets, if that date is after September 16, 2006 

and the sponsor is still in bankruptcy when the plan actually terminates. § 404, 120 Stat. 928 

(codified at 29 U.S.C. §§ 1322(g) and 1344(e)). 

Pension Benefit Guaranty Corporation 
Appendix III: The Process for Allocating 

Assets and Recoveries to Participant Benefits 

plans, asset allocation begins with the benefits in priority category 3, that 

is, the benefits of those retired or eligible to retire 3 years before the plan 

terminated. However, it should be noted that assets are allocated based on 

type of benefit, not retirement status, and that many participants have 

benefits in more than one category. 

Table 3: Priority Categories for Allocating Participant Benefits 

Priority category 1 Accrued benefits derived from voluntary employee contributions. (According to PBGC, such benefits are 

“extremely rare” among private sector defined benefit plans.)a 

Priority category 2 Accrued benefits derived from mandatory employee contributions. (According to PBGC, such benefits are 

“quite uncommon” among private sector defined benefit plans.) 

Priority category 3 Annuity benefits that have been in pay status for at least 3 years before the plan’s termination date, or 

could have been in pay status for at least 3 years before the plan’s termination date had the participant 

chosen to retire at his or her earliest possible retirement date; however, benefits subject to the phase-in 

limitation (that is, benefit increases made within the last 5 years) are excluded. These benefits can be 

either guaranteed or nonguaranteed. 

Priority category 4 Other guaranteed benefits, and certain nonguaranteed benefits.b

Priority category 5 Other vested nonguaranteed benefits that a participant is entitled to under the plan; however, benefits that 

result solely due to the termination of the plan—which are deemed “forfeitable”—are excluded. 

Priority category 6 All other benefits under the plan. This category includes nonvested benefits and “grow-in” benefits, which 

are benefits that are provided in some situations where the company continues to operate after the plan is 

terminated. 

Source: GAO analysis of PBGC documents. 

a

However, one PBGC official noted that in the General Motors salaried plan, employees have the 

option to make contributions, and that if PBGC were to take over the plan, this would add a great deal 

of complexity to the benefit determination process. 

b

Specifically, the nonguaranteed benefits included in priority category 4 are those that are 

nonguaranteed because they are subject to the aggregate benefits limitation for participants in more 

than one plan that has been terminated with insufficient funds, or because they are subject to special 

provisions applicable to substantial owners (that is, those owning more than 10 percent of the 

company). 

Except for priority category 5, which includes benefits subject to the 

phase-in limit, if the plan assets available for allocation to any priority 

category are insufficient to pay for all benefits in that priority category, 

those assets are distributed among the participants according to the ratio 

that the value of each participant’s benefit or benefits in that priority 

category bears to the total value of all benefits in that priority category. If 

the plan assets available for allocation to priority category 5 are 

insufficient to pay for all benefits in that category, the assets are allocated 

by date of plan amendment, oldest to newest, until all plan assets available 

for allocation have been exhausted. Within each priority category, once 

the amount of assets to be allocated to each participant has been 

determined, assets are allocated first to the participant’s “basic-type” 

benefits (which include benefits that are guaranteed by PBGC, or that 

Page 57 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix III: The Process for Allocating 

Assets and Recoveries to Participant Benefits 

would be guaranteed but for the maximum and phase-in limits), and then 

to the participant’s “nonbasic-type” benefits (which include all other 

benefits). 

Plan assets are distributed according to the process described above until 

all have been allocated. Thus, to the extent plan assets are available for 

allocation under this scheme, some participants may have some or all their 

nonguaranteed benefits paid. For example, in the scenario illustrated in 

figure 16, sufficient plan assets are available to cover all priority category 3 

guaranteed and nonguaranteed benefits, as well as a portion of priority 

category 4 guaranteed benefits. PBGC would then pay the remaining 

guaranteed benefits in priority category 4, but all remaining benefits (that 

is, priority categories 5 and 6 benefits, which are all nonguaranteed 

benefits), would not be paid, and participants would have their benefits 

reduced accordingly, unless there are recoveries of company assets that 

can be allocated to benefits, as discussed below. 

Figure 16: Example Scenario of Section 4044 Asset Allocation to Participants’ 

Benefits 

Portion of benefits paid for by plan assets

Nonguaranteed benefits

Guaranteed benefts

PC-1 PC-2 PC-3 PC-4 PC-5 PC-6

Source: Adapted from PBGC materials.

Priority catagories (PC)

Benefit liability (in dollars)

Plan assets

Plan assets

81

Page 58 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix III: The Process for Allocating 

Assets and Recoveries to Participant Benefits 

Section 4022(c), added to ERISA in 1987,5 requires PBGC to share with 

participants a portion of its recoveries resulting from an employer liability 

claim against the plan sponsor and other liable parties, usually in 

bankruptcy. As a result, a portion of participants’ losses of unfunded 

nonguaranteed benefits can be paid. Where a plan’s unfunded 

nonguaranteed benefits exceed $20 million, the total amount paid under 

§4022(c) depends on PBGC’s actual recoveries in that case. In all other 

cases, the amount paid is determined by an average of PBGC’s recoveries 

over a 5-year period.6

Section 4022(c)—

Allocation of Recovered 

Company Assets 

PBGC allocates the participants’ portion of the §4022(c) amount, as 

described above, to participants’ unfunded nonguaranteed benefits using 

the same priority categories and procedures outlined above for the §4044 

asset allocation process. The allocation begins with the highest priority 

category in which there are unfunded nonguaranteed benefits, and then to 

each lower priority category, in succession. If the plan §4022(c) amount to 

be allocated in a particular priority category is not sufficient to pay all the 

unfunded nonguaranteed benefits in that category, the amount will be 

allocated within the category as described above for the §4044 allocation 

process. As noted by one employee group we spoke with, it is more 

advantageous for participants for assets to be considered recoveries 

allocated under §4022(c) than plan assets allocated under §4044, because 

recoveries are shared between PBGC and participants. For example, to 

continue with the scenario introduced above, if company assets are 

recovered, some would be allocated to pay a portion of the guaranteed 

benefits in priority category 4 that PBGC would pay to participants 

regardless, and some would be allocated to pay a portion of priority 

category 5 nonguaranteed benefits that would not have been paid 

otherwise (see fig. 17). 

 

5

Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, § 9312(b)(3)(A)(ii), 111 

Stat. 1330, 1330-362—1330-363 (codified at 29 U.S.C. § 1322(c)). 

6

This average is known as the Small Plan Average Recovery Ratio (SPARR). Before passage 

of the Pension Protection Act of 2006, this 5-year period consisted of the 5 fiscal years 

before the fiscal year in which termination was initiated for the plan in which benefits are 

being determined. The Pension Protection Act of 2006 backed up the 5-year period for 

plans with unfunded nonguaranteed benefits not exceeding $20 million. Specifically, the 5-

year period was changed to consist of the 5 full fiscal years ending with the third fiscal year 

before the fiscal year in which termination was initiated for the plan in which benefits are 

being determined. § 408(a), 120 Stat. 931 (codified at 29 U.S.C. § 1322(c)(3)(B)(ii). This 

change allowed processing for these plans to be expedited. 

Page 59 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix III: The Process for Allocating 

Assets and Recoveries to Participant Benefits 

Figure 17: Example Scenario of Section 4022(c) Recovery Allocation to Participants’ 

Benefits 

Portion of benefits paid for by recovered company assets

Portion of benefits paid for by plan assets

Nonguaranteed benefits

Guaranteed benefts

PC-1 PC-2 PC-3 PC-4 PC-5 PC-6

Source: Adapted from PBGC materials.

Priority catagories (PC)

Recovered company assets

Plan assets

Benefit liability (in dollars)

81

To help illustrate this process, we gathered data from plan records about § 

4044 and § 4022(c) asset allocation for 10 large, complex plans. The results 

are summarized in table 4. 

Page 60 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix III: The Process for Allocating 

Assets and Recoveries to Participant Benefits 

Table 4: Asset and Recovery Allocation among 10 Large, Complex Plans 

Plan sponsor (name) 

Results of §4044 asset 

allocation Results of §4022(c) recovery allocationa

LTV Steel Company Inc. (hourly plan) 66.08% of PC3 100% of PC3 and 28.76% of one subgroup of 

PC5 (phase-in limit losses) 

LTV Steel Company Inc. (salary plan) 65.38% of PC3 100% of PC3 (maximum limit losses) and 0.25%

of PC5 (accrued-at-normal and phase-in limit 

losses) 

LTV Steel Mining Company, Inc. 100% of PC3 3.20% of PC5 

National Steel Corporation (hourly plan) 76.69% of PC3 0 

Northwestern Steel & Wire (plan A) 100% of PC3 0 

Outboard Marine (employees’ plan) 100% of PC3 and 

62.51% of PC4 

9.21% of one subgroup of PC5 (phase-in limit 

losses) 

Republic Technologies International (USS/KOBE 

plan) 

85.63% of PC3 0 

Republic Technologies International (USWA plan) 100% of PC3 0 

US Airways Inc. (pilots’ plan) 100% of PC3 0.19% of PC5 

Weirton Steel 70.83% of PC3 0 

Source: Based on PBGC data on selected large, complex plans from among those listed in appendix VI with completed financial 

valuations, as of February 2009. 

a

The amount of assets allocated as recoveries under § 4022(c) is determined differently, depending 

on the amount of the plan’s unfunded nonguaranteed benefits. If that amount exceeds $20 million, the 

total amount paid under § 4022(c) depends on PBGC’s actual recoveries. For example, this was the 

case for both Northwestern Steel and RTI-USWA, and there were no recoveries to allocate. 

Alternatively, if the amount of unfunded nonguaranteed benefits is less than $20 million, the total 

amount paid under § 4022(c) depends on an average of PBGC’s recoveries over a 5-year period 

(known as the SPARR calculation). For example, the SPARR calculation was used for both LTV Steel 

Mining and US Airways, and a small amount of assets were allocated to priority category 5 benefits in 

each of these plans. 

Page 61 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix IV: Limits o

from a Particip

n Guaranteed Benefits 

ant’s Perspective 

Page 62 GAO-09-716 

Appendix IV: Limits on Guaranteed Benefits 

from a Participant’s Perspective 

The statutory and regulatory limits on guaranteed benefits can be difficult 

to understand for many participants. The following schematic distills the 

application of these limits into a series of questions, one for each type of 

limit: phase-in, accrued-at-normal, and maximum. 

Figure 18: Understanding the Limits on Guaranteed Benefits 

Source: GAO analysis of ERISA, PBGC’s implementing regulations, and related documents.

Is the full amount of your benefit guaranteed?

Was your benefit 

increased in the last 5 

years?

Your benefit is not likely 

to be fully guaranteed 

due to the “phase-in” 

limit.

Did you receive any 

supplemental benefits?

Your benefit is likely 

to be fully 

guaranteed.

Your benefit is not likely 

to be fully guaranteed 

due to the “accrued-atnormal” limit.

Yes

Yes

No

No

Is your benefit amount 

greater than the 

maximum set by law for 

your age at retirement 

and type of benefit?

Your benefit is not likely 

to be fully guaranteed 

due to the “maximum 

guarantee” limit.

Yes

The portion of a

benefit increase that 

is guaranteed is

reduced for each year 

it was not in effect 

during the last 5 

years.

The amount of 

guaranteed benefits

is limited by an 

amount set by law, 

and is lower for those 

retiring before age 

65 or with survivor 

benefit.

Supplemental 

benefits that exceed 

the retirement benefit 

provided at normal 

retirement age are 

not guaranteed. 

No

Pension Benefit Guaranty Corporation 
Appendix V: Profiles of Three Large, Complex 

Plans 

Page 63 GAO-09-716 Pension Benefit Guaranty Corporation 

We selected three terminated pension plans to profile as examples of 

large, complex plans: Bethlehem Steel, RTI (USWA), and US Airways 

(pilots) (see appendix VI). All three were among the 10 plans most 

affected by the guarantee limits. In addition, both Bethlehem Steel and RTI 

(but not US Airways) were among the 10 plans most affected by 

processing delays and by overpayments.1

Table 5: Profile of a Bethlehem Steel Terminated Pension Plan 

Plan sponsor: Bethlehem Steel Corporation 

Maximum Minimum Mean Median

Plan name: Pension Plan of Bethlehem Steel Corporation 

• Date of plan termination: 12/18/2002 

• Date of trusteeship: 4/30/2003

• Date plan valuation complete: Valuation not complete as of February 2009. 

• Number of individuals associated with the plan: 151,991 

• Number of cases (primary participants): 92,924 

• Total amount of unfunded nonguaranteed benefits: $537,500,000 

Context for termination: 

In 2000, the principal activities of Bethlehem Steel were the production, manufacture, and sale of a wide variety of steel mill products, 

including hot rolled, cold rolled, and coated sheets; tin mill products; carbon and alloy plates; specialty booms; carbon and alloy bars; 

and large diameter pipe. Bethlehem Steel also had iron ore, lake shipping, railroad and trucking operations, but steel products

accounted for 92 percent of its revenue in 2000. 

On October 15, 2001, Bethlehem Steel filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. The company entered into 

an agreement, which was ratified on April 22, 2003, that provided for the sale of substantially all of its assets to a third party. The 

company is no longer in operation. 

Over the years, the Bethlehem Steel plan was the product of a culmination of over 100 mergers, consolidations, and or spinoffs. At the 

date of the plan’s termination, PBGC and the Milliman Actuaries identified 8 major component parts: Bethlehem Steel Corporation

Steel, Bethlehem Steel Corporation Shipbuilding, Bethlehem Steel Corporation Railroad, 1976 Great Lakes Hourly, Bethlehem 1957 

Hourly, Washington Steel Hourly 1998, Bethlehem Lukens Plate Hourly – 1998, and Lukens Salaried – 1998. Three of the 

components, the Bethlehem Steel Corporation Steel, the Bethlehem Steel Corporation Shipbuilding and the Bethlehem Steel 

Corporation Railroad, have separate hourly and salaried plans.

 

 

1

US Airways (pilots) was 2nd on the list of plans most affected by guarantee limits, but 18th 

on the list of plans most affected by processing delays, and 27th on the list of plans most 

affected by overpayments. 

Appendix V: Profiles of Three Large, 

Complex Plans 
Appendix V: Profiles of Three Large, Complex 

Plans 

Page 64 GAO-09-716 Pension Benefit Guaranty Corporation 

Groups affected by guarantee limits: 

Data not available as of February 2009. 

Maximum Minimum Mean Median

PBGC processing time (from trusteeship to issuance of 

benefit determination letters):

• Number of cases taking 4 or more years (including cases 

pending as of February 2009): 25,619 

5.8 years 7.6 months 2.7 years 2.3 years 

Overpayments (total amount, per case):a

• Estimated total amount of overpayments for plan: $11.1 

million

(N/A)b

less than $1 about $4,400 about $3,500

Recoupments (monthly benefit reduction due to 

recoupment, per individual): 

• Number of cases with recoupments: 2,487

$660 less than $1 $28 $23

Appeals: Number 

• Cases with appeals: 186 

• Appeals cases pending as of April 2009: 33 

• Appeals closed: 153 

• Closed appeals resulting in a higher benefit amount: 48 

• Closed appeals resulting in a lower benefit amount: 1 

• Closed appeals resulting in no change in benefits: 104 

Source: GAO analysis of PBGC data and documents. 

a

Data reliability issues prevented us from conducting a more definitive analysis of total overpayment 

amounts. For a more detailed discussion of these data limitations, see appendix I. 

b

Amount of maximum overpayment for this case, based on calculations using data provided in 

PBGC’s individual level data set: $58,903. Amount of overpayment for this case, verified in case 

records: $99,032. Discrepancy was due to a legal dispute between the participant and his ex-wife 

(who had a qualified domestic relations order) and appeals that were not yet resolved and entered 

into the system at the time we obtained our data set. 
Appendix V: Profiles of Three Large, Complex 

Plans 

Page 65 GAO-09-716 Pension Benefit Guaranty Corporation 

Table 6: Profile of a Republic Technologies International Terminated Pension Plan 

Plan sponsor: Republic Technologies International (RTI) 

Plan name: Republic Technologies International LLC - USWA Defined Benefit Plan 

• Date of plan termination: 6/14/2002 

• Date of trusteeship: 9/30/2003 

• Date plan valuation complete: 12/6/2007 

• Number of individuals associated with the plan: 6,929 

• Number of cases (primary participants): 4,289 

• Total amount of unfunded nonguaranteed benefits: $77,901,131 

Context for termination 

After Republic Technologies International, LLC (RTI), once a leading domestic producer of special bar quality steel products, declared 

bankruptcy and was unable to pay pension benefits, PBGC initiated an involuntary termination of 4 plans administered by RTI. While 

in bankruptcy proceedings, RTI agreed to sell a substantial portion of its assets to a new company that intended to hire many of RTI’s 

employees, but that did not want responsibility for the pension plans. Two of the plans covered participants represented by the United 

Steelworkers (USW) and included provisions for shutdown benefits, which allow participants who meet certain age and service 

requirements to receive an immediate unreduced early retirement benefit. USW reached an agreement with RTI to consider the sale

of RTI’s assets to the new company a “shutdown” under the plans, thereby triggering the provisions for shutdown benefits. 

Concerned about the impact of the proposed sale on the plans and its own financial condition, PBGC sought to terminate the plan

prior to the asset sale. This earlier termination date would preclude PBGC from having to pay the shutdown benefits, because 

participants cannot earn additional benefits after a plan terminates. USW raised the issue in court, seeking a termination date after the 

asset sale. Although a lower court found in favor of USW, setting a termination date after the asset sale, a circuit court overturned this 

decision and established the termination date prior to the asset sale. As a result, PBGC was not obligated to pay the shutdown 

benefits. However, during the time between the lower and higher courts’ decisions, PBGC began determining participants’ eligibility for 

shutdown benefits and paying groups of individuals shutdown benefits. When the termination date changed, PBGC stopped paying 

these individuals shutdown benefits and sought repayment of the shutdown benefits already dispensed. 

Groups affected by guarantee limits: Number Description

• Accrued-at-normal limit 941 Groups with various types of supplemental benefits 

• Maximum limit 11 (no description provided) 

• Phase-in limit 1,693 Groups affected by the following three changes: 

1. The RTI settlement agreement effective 8/2/98: $60/60% phasein. 

2. The resolution relating to various retirement plan changes 

(effective dates varied): $60/60% phase-in. 

3. The restatement effective 9/8/98: $60/60% phase-in. 

 Maximum Minimum Mean Median

PBGC processing time (from trusteeship to issuance of 

benefit determination letters):

• Number of cases taking 4 or more years (including cases 

pending as of February 2009): 3,819 

5.3 years 3.5 years 4.5 years 4.6 years 

Overpayments (total amount, per case):a

• Estimated total amount of overpayments for plan: $13.4 

million

about $56,700b

less than $70 about $8,900 about 

$5,600
Appendix V: Profiles of Three Large, Complex 

Plans 

Page 66 GAO-09-716 Pension Benefit Guaranty Corporation 

 Maximum Minimum Mean Median

Recoupments (monthly benefit reduction due to 

recoupment, per individual): 

• Number of cases with recoupments: 1,508

$117 less than $1 $28 $28

Appeals:c Number 

• Cases with appeals: 375 

• Appeals cases pending as of April 2009: 372 

• Appeals closed: 3 

• Closed appeals resulting in a higher benefit amount: 1 

• Closed appeals resulting in a lower benefit amount: 0 

• Closed appeals resulting in no change in benefits: 2 

Source: GAO analysis of PBGC data and documents. 

a

Data reliability issues prevented us from conducting a more definitive analysis of total overpayment 

amounts. For a more detailed discussion of these data limitations, see appendix I. 

b

Amount of maximum overpayment for this case, based on calculations using data provided in 

PBGC’s individual level data set: $56,745. Amount of overpayment for this case, verified in case 

records: $56,772. 

c

According to PBGC officials, as of June 2009, there were 376 RTI (USWA) appeals. Of these, 160 

appeals were pending and 216 appeals had been closed. Of the 216 appeals closed, one resulted in 

a higher benefit amount and 215 resulted in no change in benefits. 
Appendix V: Profiles of Three Large, Complex 

Plans 

Page 67 GAO-09-716 Pension Benefit Guaranty Corporation 

Table 7: Profile of a US Airways Terminated Pension Plan 

Plan sponsor: US Airways Inc. 

Plan name: Retirement Income Plan for Pilots of US Airways Inc. 

• Date of plan termination: 3/31/2003 

• Date of trusteeship: 3/31/2003 

• Date plan valuation complete: 8/3/2006 

• Number of individuals associated with the plan: 8,990 

• Number of cases (primary participants): 7,050 

• Total amount of unfunded nonguaranteed benefits: $1,692,381,669 

Context for termination: 

US Airways began as All American Aviation in May 1939 as the first airmail service for many small western Pennsylvania and Ohio

Valley communities. It evolved through various mergers and name changes until becoming US Airways in 1997, under the parent 

holding company of US Airways Group, Inc. In 2002, it was the seventh largest US air carrier, transporting passengers, property and 

mail on a network focused primarily in the Northeast, with some international operations. Over a 9-month period in 2002, US Airways 

and US Airways Express served almost 47 million passengers. 

In 2000, a general economic downturn led US Airways to propose a merger with United Air Lines, however, the merger proposal was

blocked. Subsequently, US Airways’ weak economic position was exacerbated by the events of September 11, 2001, and in March 

2002, a new management team was hired to formulate a restructuring plan. To implement the plan, significant labor, aircraft lease, 

and vendor cost concessions were negotiated. However, in August 2002, US Airways Group, Inc., filed voluntary petitions in 

bankruptcy court seeking reorganization relief under Chapter 11, and in January 2003, US Airways notified PBGC of its intent to

terminate its Pilots’ Retirement Income Plan (and seven other plans covering various employees of its eight wholly-owned 

subsidiaries), citing “a serious funding shortfall.” 

After US Airways gained the consent of the pilots’ union (the Air Line Pilots Association, International) to terminate the plan, the 

company entered into an agreement with the PBGC setting March 31, 2003, as the plan’s termination date. Prior to the termination 

date, US Airways, as the pretermination plan administrator, was responsible for revising benefit payments under the plan from thencurrent levels to what it estimated would be the amount of benefits that would be covered by plan assets or guaranteed by the PBGC 

following termination. US Airways completed these determinations and informed plan participants of their estimated post-termination 

benefits by letters dated March 28, 2003. 

Groups affected by guarantee limits: Number Description 

• Accrued-at-normal limit 51 Former Shuttle Plan participants who had a “non-level benefit 

stream.” 

• Maximum limit 5,171 Five groups were affected by the maximum limit: 

1. Non-Shuttle deferreds. Participants who were not in pay status 

and were not members of the Shuttle Plan prior to its 2/1/2000 

merger into US Airways (4,409 affected). 

2. Shuttle deferreds. Participants who were not in pay status and 

were members of the plan prior to the merger (59 affected). 

3. Enhanced Retirement Incentive Program (ERIP) retirees. 

Participants and beneficiaries who retired under this 1998 

program (339 affected). 

4. Non-ERIP retirees. Pre-termination participants and beneficiaries 

other than the ERIP retirees (327 affected). 

5. Total and Permanent Disability participants (37 affected). 
Appendix V: Profiles of Three Large, Complex 

Plans 

Page 68 GAO-09-716 Pension Benefit Guaranty Corporation 

Number Description 

• Phase-in limit 175 Groups affected by the following four changes: 

1. The merger of the Shuttle Plan into the US Airways Pilots’ Plan 

effective 2/1/2000: $60/60% phase-in (76 affected). 

2. The cost-of-living adjustment increase for former Piedmont 

participants effective at the beginning of each calendar year: $/% 

varied (97 affected). 

3. Increases in benefit limits under Internal Revenue Code section 

415 and compensation limits under section 401(a)(17) effective 

more than 5 years before termination, but subsequent automatic 

increases subject to the limit (1 affected). 

4. Benefit increases provided by ERIP effective 5/1/1998: $80/80% 

phase in (1 affected). 

 Maximum Minimum Mean Median

PBGC processing time (from trusteeship to issuance of 

benefit determination letters): 

• Number of cases taking 4 or more years (including cases 

pending as of February 2009): 866 

5.8 years 3.4 months 3.6 years 3.5 years 

Overpayments (total amount, per case):a

• Estimated total amount of overpayments for plan: $1.0 

million

about

 $95,000b

less than $20 about $8,900 about $4,300

Recoupments (monthly benefit reduction due to 

recoupment, per individual): 

• Number of cases with recoupments: 111

$930 less than $1 $93 $48

Appeals: Number 

• Cases with appeals: 871 

• Appeals cases pending as of April 2009: 15 

• Appeals closed: 856 

• Closed appeals resulting in a higher benefit amount: 104 

• Closed appeals resulting in a lower benefit amount: 1

• Closed appeals resulting in no change in benefits: 751

Source: GAO analysis of PBGC data and documents. 

a

Data reliability issues prevented us from conducting a more definitive analysis of total overpayment 

amounts. For a more detailed discussion of these data limitations, see appendix I. 

b

Amount of maximum overpayment for this case, based on calculations using data provided in 

PBGC’s individual level data set: $95,090. Amount of overpayment for this case, verified in case 

records: $95,218. 
Appendix VI: Three Categories of Large, 

Complex Plans 

Page 69 GAO-09-716 Pension Benefit Guaranty Corporation 

Table 8: Ten Plans Most Affected by Guaranteed Benefit Limits 

Plan sponsor (name) 

Total number of 

participants

Unfunded 

nonguaranteed 

benefits

Percentage of total 

unfunded nonguaranteed 

benefits ($8,522,175,078)a

Cumulative 

percentage

Delta Air Lines Inc. 13,435 $2,958,936,274 34.7% 34.7%b

US Airways Inc. (pilots’ plan) 7,050 1,692,381,669 19.9% 54.6%

United Air Lines Inc. (management, 

administrative, and public contact plan) 46,645 744,800,000 8.7% 63.3%b

LTV Steel Company Inc. (hourly plan) 68,124 672,467,408 7.9% 71.2%

Bethlehem Steel Corp. 92,924 537,500,000 6.3% 77.5%b

United Air Lines (flight attendants plan) 28,416 273,600,000 3.2% 80.7%b

Weirton Steel 9,757 205,022,166 2.4% 83.1%

National Steel Corporation (hourly plan) 10,433 149,076,504 1.7% 84.9%

RTI (USWA) 4,289 77,190,131 0.9% 85.8%

National Steel Corporation (retirement plan) 5,783 73,293,054 0.9% 86.7%

Source: GAO analysis of PBGC data and documents as of February 2009 for participants in plans terminated and trusteed during fiscal 

years 2000 through 2008. 

a

Total calculated based on the 668 plans with data indicating a balance of unfunded nonguaranteed 

benefits (for 362 plans, data indicated there were no unfunded nonguaranteed benefits; and for 59 

plans, the data were insufficient to do the analysis). 

b

Data on these plans are based on estimates as of February 2009, as the financial valuations of the 

plans were not yet complete. 

Table 9: Ten Plans Most Affected by Long Processing Times 

Plan sponsor (name) 

Total 

number of 

participants

Number of 

participants with 

benefit 

determinations that 

took more 

than 4 years 

Percentage of total 

number of participants 

with benefit 

determinations that 

took more than 4 years 

(78,553)

Cumulative 

percentage

Bethlehem Steel Corp. 92,924 25,619 32.6% 32.6%

LTV Steel Company Inc. (hourly plan) 68,124 4,678 6.0% 38.6%

Horizon NR, LLC 4,722 4,356 5.5% 44.1%

Kaiser Aluminum and Chemical Corp. (hourly plan) 10,300 4,201 5.3% 49.5%

RTI (USWA plan) 4,289 3,819 4.9% 54.3%

J.A. Jones, Inc. 5,514 3,380 4.3% 58.6%

Kaiser Aluminum and Chemical Corp. (salaried plan) 5,299 3,042 3.9% 62.5%

Cone Mills Corporation 6,365 2,956 3.8% 66.3%

Weirton Steel 9,757 2,741 3.5% 69.8%

Reliance Insurance Company 7,280 2,366 3.0% 72.8%

Source: GAO analysis of PBGC data and documents as of February 2009 for participants in plans terminated and trusteed during fiscal 

years 2000 through 2008. 

Appendix VI: Three Categories of Large, 

Complex Plans 
Appendix VI: Three Categories of Large, 

Complex Plans 

Page 70 GAO-09-716 Pension Benefit Guaranty Corporation 

Table 10: Ten Plans Most Affected by Overpayments 

Plan sponsor (name) 

Total number of 

participants

Number of participants 

with recoupments 

Percentage of total 

number of participants 

with recoupments 

(22,623)

Cumulative 

percentage

LTV Steel Company Inc. (hourly plan) 68,124 4,442 19.6% 19.6%

Bethlehem Steel Corp. 92,924 2,487 11.0% 30.6%

Weirton Steel 9,757 1,997 8.8% 39.5%

RTI (USWA plan) 4,289 1,508 6.7% 46.1%

National Steel Corporation (hourly plan) 10,433 1,075 4.8% 50.9%

LTV Steel Company Inc. (salary plan) 13,450 913 4.0% 54.9%

RTI (USS/KOBE plan) 2,299 730 3.2% 58.1%

Outboard Marine 9,744 614 2.7% 60.8%

LTV Steel Mining Company, Inc. 3,416 548 2.4% 63.3%

Northwestern Steel & Wire (plan A) 3,576 450 2.0% 65.3%

Source: GAO analysis of PBGC data and documents as of February 2009 for participants in plans terminated and trusteed during fiscal 

years 2000 through 2008. 
Appendix VII: Sample Benefit Determination 

Letter 

Page 71 GAO-09-716 

Appendix VII: Sample Benefit Determination 

Letter 

To illustrate the complexity of some benefit calculations, this appendix provides a 

sample benefit determination letter that PBGC sent to an RTI (USWA) participant, as 

well as a 5-page benefit statement and a recoupment summary that were provided as 

attachments. 

Pension Benefit Guaranty Corporation 
Appendix VII: Sample Benefit Determination 

Letter 

Page 72 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix VII: Sample Benefit Determination 

Letter 

Page 73 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix VII: Sample Benefit Determination 

Letter 

Page 74 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix VII: Sample Benefit Determination 

Letter 

Page 75 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix VII: Sample Benefit Determination 

Letter 

Page 76 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix VII: Sample Benefit Determination 

Letter 

Page 77 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix VII: Sample Benefit Determination 

Letter 

Page 78 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix VII: Sample Benefit Determination 

Letter 

Pension Benefit Guaranty Corporation

Appendix VII: Sample Benefit Determination 

Letter 

Page 79 GAO-09-716 
Appendix VIII: Comments from the Pension Appendix VIII: Comments from the Pension Benefit Guaranty Corporation 

Benefit Guaranty Corporation 

Page 80 GAO-09-716 Pension Benefit Guaranty Corporation 
Appendix VIII: Comments from the Pension 

Benefit Guaranty Corporation 

Page 81 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix VIII: Comments from the Pension 

Benefit Guaranty Corporation 

Page 82 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix VIII: Comments from the Pension 

Benefit Guaranty Corporation 

Page 83 GAO-09-716 Pension Benefit Guaranty Corporation
Appendix IX: 

S

GAO Contact and 

taff Acknowledgments

Page 84 GAO-09-716 

Appendix IX: GAO Contact and Staff 

Acknowledgments 

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

In addition to the contact named above, Blake L. Ainsworth, Assistant 

Director; Margie K. Shields, Analyst-in-Charge; Kristen W. Jones; and 

Wayne Turowski made significant contributions to this report. Joseph A. 

Applebaum, Jeffrey L. Bernstein, Susan C. Bernstein, Jena Y. Sinkfield, 

Walter K. Vance, and Craig H. Winslow also made important contributions. 

GAO Contact 

Staff 

Acknowledgments 

Pension Benefit Guaranty Corporation 
Related GAO Products 

Page 85 GAO-09-716 

Related GAO Products 

Pension Benefit Guaranty Corporation: Financial Challenges Highlight 

Need for Improved Governance and Management, GAO-09-702T

(Washington, D.C.: May 20, 2009). 

Auto Industry: Summary of Government Efforts and Automakers’ 

Restructuring to Date, GAO-09-553 (Washington, D.C.: April 23, 2009). 

Defined Benefit Pensions: Survey Results of the Nation’s Largest Private 

Defined Benefit Plan Sponsors, GAO-09-291 (Washington, D.C.: March 30, 

2009). 

Pension Benefit Guaranty Corporation: Improvements Needed to 

Address Financial and Management Challenges, GAO-08-1162T

(Washington, D.C.: September 24, 2008). 

Pension Benefit Guaranty Corporation: Some Steps Have Been Taken to 

Improve Contracting, but a More Strategic Approach Is Needed,

GAO-08-871 (Washington, D.C.: August 18, 2008). 

Defined Benefit Pensions: Plan Freezes Affect Millions of Participants 

and May Pose Retirement Income Challenges, GAO-08-817 (Washington, 

D.C.: July 21, 2008). 

Pension Benefit Guaranty Corporation: A More Strategic Approach 

Could Improve Human Capital Management, GAO-08-624 (Washington, 

D.C.: June 12, 2008). 

Pension Benefit Guaranty Corporation: Governance Structure Needs 

Improvements to Ensure Policy Direction and Oversight, GAO-07-808

(Washington, D.C.: July 6, 2007). 

Private Pensions: Timely and Accurate Information Is Needed to 

Identify and Track Frozen Defined Benefit Plans, GAO-04-200R

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

Pension Benefit Guaranty Corporation Single-Employer Insurance 

Program: Long-Term Vulnerabilities Warrant “High Risk” Designation,

GAO-03-1050SP (Washington, D.C.: July 23, 2003). 

Pension Plans: Benefits Lost When Plans Terminate, T-HRD-92-58

(Washington, D.C.: September 24, 1992). 

(130904) Pension Benefit Guaranty Corporation
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