Pension Benefit Guaranty Corporation: A More Strategic Approach Could Improve Human Capital Management
Released: 2008-07-14T00:00:00

Letter

Background

Congress passed ERISA to protect the interests of participants and beneficiaries of private sector employee benefit plans. Before the enactment of ERISA, few rules governed the funding of defined benefit pension plans, and participants had no guarantee that they would receive promised benefits. Title IV of ERISA created PBGC to insure private sector plan participants’ benefits. PBGC receives no funds from general tax revenues. Instead, operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.

Since its inception, PBGC’s workloads have increased significantly. In fiscal year 1975, PBGC administered three pension plans covering a total of 400 participants. By fiscal year 2007, PBGC administered almost 3,800 pension plans, incurring responsibility for more than 1.3 million participants. To service this increased workload, PBGC employed 847 federal employees in fiscal year 2007 working across several divisions. Of the 847, PBGC’s key staff totaled 486, of which approximately 10 percent were attorneys, 7.2 percent were accountants, and 3.4 percent were financial analysts (see table 1).

PBGC also relies heavily on the services of a variety of private sector contractors to assist in its mission. As of June 2007, these contractors accounted for 64 percent of PBGC’s total workforce. In fiscal year 2007, PBGC reportedly spent $297 million (75 percent) of its $398.3 million operating budget for contracting and related expenses. In addition to operating PBGC’s 10 field benefit administration offices throughout the country, private sector contractors supplement federal staff at the corporation’s headquarters and a call center facility.

PBGC, like many executive branch agencies, is subject to the General Schedule and the federal pay system. In contrast, certain federal financial regulatory agencies, including the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), and the Securities and Exchange Commission (SEC), have the flexibility to establish their own compensation programs outside the various statutory provisions on classification and pay for executive branch agencies. (See app. II for a list and description of the federal financial regulatory agencies.) These financial regulatory agencies are generally required to seek to maintain pay comparability with each other.

In June 2007, we examined the actions these agencies have taken to assess and implement comparability in pay and benefits with each other. While PBGC has unique responsibilities pertaining to insuring certain employee defined benefit pensions, some of these federal financial regulators highlighted under the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), such as FDIC and NCUA, also have insurance programs and funds. Further, PBGC employs occupations not only similar to those of the FIRREA agencies, but also to those of SEC, the Office of Federal Housing Enterprise Oversight (OFHEO), and the Federal Reserve Board (FRB).

While human capital authorities and flexibilities vary governmentwide, we have noted in our prior work that there are two key principles that remain central to the human capital idea. First, people are assets whose value can be enhanced through investment, and second, an organization’s human capital policies must be aligned to support the organization’s “shared vision”—that is, the mission, vision for the future, core values, goals and objectives, and strategies by which the organization has defined its direction and expectations for itself and its people. As noted in the report, all human capital policies and practices should be designed, implemented, and assessed by the standard of how well they help the organization pursue its shared vision.

We have also reported that strategic workforce planning generally addresses the alignment of an organization’s human capital program with its current and emerging mission and programmatic goals and the development of long-term strategies for acquiring, developing, motivating, and retaining staff to achieve programmatic goals. There are a variety of models of how federal agencies can conduct workforce planning, but certain key principles are generally common to such planning: involving top management, employees, and other stakeholders in developing, communicating, and implementing the strategic workforce plan; determining skills and competencies needed in the future workforce to meet the organization’s goals and identifying gaps in skills and competencies that an organization needs to address; selecting and implementing human capital strategies that are targeted toward addressing these gaps and issues; building the capacity needed to address administrative, educational, and other requirements important to support workforce planning strategies; and evaluating the success of the human capital strategies.

According to our strategic human capital management model, self- assessment is the starting point for creating “human capital organizations”—agencies that focus on valuing employees and aligning “people policies” to support organizational performance goals. Part of the impetus for creating human capital organizations comes from the Government Performance and Results Act of 1993, but agencies themselves must follow through on tailoring their human capital systems to their specific missions, visions for the future, core values, objectives, and strategies. To strategically manage an agency’s human capital approach, there are certain planning documents an agency can utilize: Strategic mission plan: An overall agency strategic plan includes a clear and coherent shared vision of an agency’s mission, goals, values, and strategies that is clearly and consistently communicated and reinforced to all employees.

Human capital strategic plan: A coherent human capital strategic plan, integrated with the agency’s overall strategic planning, outlines a framework of human capital policies, programs, and practices specifically designed to steer the agency toward achieving its shared vision.

Succession plan: A formal succession plan includes a review of the agency’s current and emerging leadership needs in light of its strategic and program planning, identifies sources of executive talent both within and outside the agency, and includes planned development opportunities, learning experiences, and feedback for executive candidates.

Workforce plan: A workforce planning document, linked to the agency’s strategic and program planning efforts, identifies its current and future human capital needs, including the size of the workforce; its deployment across the organization; and the knowledge, skills, and abilities needed for the agency to pursue its shared vision.

Appendix III discusses elements of GAO’s human capital framework in further detail.

PBGC Has Generally Been Able To Hire and Retain Key Staff, but May Face Workforce and Compensation Challenges in the Future

From fiscal years 2000 to 2007, PBGC was generally able to hire and retain staff in its key occupations, but the corporation has had some difficulty hiring and retaining financial analysts and certain other staff. Despite difficulty in these areas, PBGC’s overall ability to retain staff in key occupations has been similar to that of the rest of the federal government. However, our analysis suggests that PBGC may face several workforce and compensation challenges in the future—such as (1) a workforce with relatively fewer years of federal experience, (2) the possible retirement of up to a quarter of its workforce within the next 4 years, and (3) the potential difficulty of hiring and retaining staff due to the corporation’s existing compensation structure, which offers salaries lower than those of some other executive branch agencies that employ similar staff.

PBGC Has Generally Been Able to Hire Staff for Key Occupations, but Has Experienced Difficulties in Filling Certain Positions

From fiscal years 2000 to 2007, PBGC was generally able to hire staff for occupations it views as key to its organizational mission—accountants, actuaries, attorneys, auditors, financial analysts, information technology specialists, and pension law specialists. Our analysis of OPM’s CPDF found that from fiscal years 2000 to 2007, PBGC hired 289 employees in these key occupations, compared to 203 employees in those occupations who left PBGC. Of these, PBGC hired more people than it lost in each of the key occupations except for attorneys and pension law specialists.

Additionally, PBGC officials stated that data indicated that it was able to fill 65 percent of its vacancies in fiscal year 2007 across all occupations within 45 days of the close of the announcement of the job vacancy, exceeding OPM’s government standard of 60 percent for that year. However, PBGC officials emphasized that the 45-day hiring model, which includes data across all occupations, can hide the corporation’s inability to fill certain key positions.

PBGC officials acknowledged that the corporation was generally able to hire people for most of its key occupations, but they stated they have had difficulty filling certain positions like the chief financial officer, senior financial analyst, systems accountant, and procurement attorney. To address this difficulty, PBGC officials stated that the corporation has left some positions unfilled and on occasion has hired individuals who required in-house training.

PBGC’s Overall Attrition Rate Is Similar to Those of Other Federal Agencies, but Rates Differ for Certain Key Occupations

From fiscal year 2000 to 2007, PBGC retained staff at rates similar to the rest of the federal government for the corporation’s key occupations. PBGC’s overall average attrition rate was about 6 percent for these occupations, roughly equal to that of other federal agencies over that period (see fig. 1). For example, for occupations like attorneys and information technology specialists, the attrition rates were similar to those of other federal executive branch agencies. Likewise, the attrition rates for PBGC’s executives were similar to those of other federal executive branch agencies. Our analysis also found that PBGC’s overall attrition experience was comparable to those at the federal financial regulatory agencies— such as FDIC and SEC. However, attrition rates did differ for certain key occupations. For example, PBGC’s attrition rates for financial analysts were greater than those of other agencies, with an average attrition rate of 8.4 percent, compared to 3.7 percent in other federal executive branch agencies governmentwide, and 5.5 percent for the financial regulators.

Further, over the last 3 years, PBGC’s and other executive branch agencies’ overall attrition rates were higher than their 8-year averages, which were nearly identical, as shown in figure 2, while the rates for the federal regulators collectively dipped below their 8-year average in 2007 (see fig. 2).

PBGC’s attrition rates for staff hired from fiscal years 2000 to 2007 were also similar to rates at other federal executive branch agencies. For the seven key occupations collectively, a total of 10.8 percent of key PBGC staff hired from fiscal years 2000 to 2007 left during their first 2 years of employment, roughly equal to staff in these positions at other federal executive branch agencies. However, at PBGC, only 60 percent of financial analysts remained; a rate lower than for the six other key occupations hired during these 8 years (see fig. 3).

In reviewing staff separations from the corporation, we found that departing PBGC staff in key occupations were more likely to resign from federal employment—for example, seeking employment outside the federal government—than their counterparts in other federal agencies (see fig. 4). We could not determine where employees that resigned from the federal government moved to because CPDF does not include information on employment outside the federal government. However, PBGC officials indicated that while they do not systematically track the employment of all their employees after separation, it was common for employees to find employment with private sector entities after leaving PBGC.

Our analysis also found that during the same time period, key staff departing from PBGC were slightly more likely than staff from other agencies to transfer to another federal agency (see fig. 4). However, no identifiable pattern existed among the specific federal agencies to which PBGC staff transferred. In fact, from fiscal year 2000 to 2007, CPDF data showed that 47 PBGC staff in key occupations transferred to 23 different federal agencies and only one of those agencies—the Department of Labor—employed more than 5 of these staff. On the basis of the results of PBGC’s voluntary exit surveys and additional information collected by PBGC officials, employees frequently cited greater pay as a reason why they left PBGC for the private sector or another federal agency.

Further differences existed in PBGC’s seven key occupations with respect to whether departing staff retired, transferred to another agency, or otherwise resigned. According to CPDF data, resignations accounted for 83 percent of separations for financial analysts, the highest rate of any key occupation, while resignations accounted for just 13 percent of auditors’ separations. Other federal agencies also experienced varied rates across occupations with respect to types of separations (see fig. 5).

PBGC May Face Workforce Challenges Regarding Key Staff Experience, Retirement Eligibility, and Compensation Limitations

Despite the corporation’s overall ability to hire and retain key staff, our analysis of CPDF data suggests that PBGC may face several workforce challenges in the future, such as (1) a staff with relatively fewer years of federal experience, (2) the possibility of losing a significant number of its key staff due to retirement eligibility, and (3) potential difficulties hiring and retaining certain staff because of PBGC’s compensation.

First, in fiscal year 2007, PBGC’s key staff had relatively fewer years of federal experience than their counterparts in other federal executive branch agencies. Specifically, according to CPDF data, overall key PBGC staff had an average of 12.8 years of federal experience, while staff in similar positions at the other federal executive branch agencies had 16.8 years of federal experience. Additionally, we found that while 25 percent of PBGC’s accountants had less than 3 years of experience, only 10 percent of accountants in other executive branch agencies had similar years of experience. In fact, for every key occupation except pension law specialist, PBGC had a greater percentage of staff with less than 3 years of experience compared to other agencies, though in some cases the differences were slight (see table 2). Similarly, PBGC’s workforce data corroborated this finding. Our analysis of the corporation’s tenure data indicated that 23.3 percent of accountants, auditors, attorneys, financial analysts, and actuaries had 3 or fewer years of experience.

The limited federal experience may indicate a workforce challenge for PBGC, because PBGC officials said that it can take entry-level staff 3 to 4 years to reach full productivity. However, PBGC officials added that the corporation regularly hires individuals with prior private sector experience, so not all staff with limited tenure at PBGC would be entry- level staff. For more seasoned staff, PBGC officials said that there is generally an expectation that such staff will reach full productivity within a 90- to 120-day time frame. Using CPDF, we could not determine the extent of an individual’s work experience outside of the federal government.

Second, PBGC faces the prospect of losing a significant number of its key staff due to retirement eligibility. Over the next 4 years, nearly one-quarter of PBGC’s staff in key occupations will be eligible to retire. While this rate is lower than that of other federal executive branch agencies—about 32 percent of staff at other federal executive branch agencies in these occupations will be eligible to retire in the next 4 years—retirement eligibility could still present a workforce challenge for PBGC, because the corporation could lose key institutional knowledge. According to CPDF data, PBGC’s pension law specialists and attorneys will have the greatest retirement eligibility over the next 4 years (see fig. 6).

Third, PBGC may face difficulties in hiring and retaining certain key staff in the future due to the corporation’s existing compensation structure, which offers salaries lower than some other federal agencies that employ similar occupations. Specifically, PBGC officials noted that the corporation—which is subject to the General Schedule—has lost staff to some federal financial regulators that are not on the General Schedule and pay higher salaries for these key occupations. While our analysis found that PBGC has lower pay ranges and lower average basic salaries (which do not include locality pay) than the federal financial regulators in these key occupations, CPDF data did not suggest that large numbers of key PBGC staff were leaving the corporation for these agencies. In addition, PBGC’s data indicated that just 7 of 99 departing employees (from all occupations, not just key occupations) transferred to federal financial regulators between fiscal year 2005 through 2007—PBGC officials said that these 7 employees left PBGC for increased pay.

While PBGC’s average salaries were lower than those at the financial regulators, PBGC staff collectively have pay ranges and salaries similar to those in other federal executive branch agencies, many of which are subject to the General Schedule. For example, salaries for attorneys, auditors, and executives at other federal agencies were generally similar to those at PBGC. However, PBGC had higher average salaries for financial analysts, accountants, and information technology specialists and lower average salaries for pension law specialists and actuaries (see fig. 7).

While this information may be informative on a broad scale, the number of years of experience and general schedule grade level at which PBGC workers are hired play a significant role in their salaries, as is true for other federal executive branch agencies on the General Schedule as well. However, because the financial regulators are not subject to the General Schedule, these agencies have greater flexibilities in setting their salaries. (App. IV contains information on minimum and maximum pay ranges and average salary for mission critical occupations for selected federal agencies.)

PBGC Has Taken Some Steps to Strategically Manage Its Workforce, but Has Not Prepared for Possible Workforce and Compensation Challenges

PBGC has taken some steps in recent years to improve its human capital planning and practices. These steps have included drafting planning documents, such as components of a human capital plan like a succession management directive. However, as of March 2008, the corporation had no formal, comprehensive human capital plan integrating all necessary components to prepare for future challenges, nor had it systematically collected and analyzed its workforce data to identify such challenges. In addition to limited planning and data, PBGC had not fully explored all available compensation options under its statutory authority even though corporation executives stated that PBGC’s compensation structure may hinder it from attracting and retaining key staff.

While PBGC Is Making Progress toward Better Human Capital Management, No Formal, Comprehensive Human Capital Plan Exists to Prepare for Future Challenges

PBGC has taken steps to improve its human capital planning and practices. These steps have included drafting planning documents, such as components of a human capital plan like a succession management directive. In addition, PBGC has included key human capital goals in its annual report. This report highlights PBGC’s initiatives for the management of human capital, such as ensuring employees have the skills and competencies needed to support its mission and establishing a performance-based culture within the corporation. PBGC has made some progress toward these goals. For instance, PBGC recently hired a new director of human resources and a new human capital specialist with expertise in human capital and succession planning. Also, in an effort to establish a performance-based culture, PBGC linked employees’ performance expectations to corporate goals and objectives in 2007. Specifically, key PBGC human capital officials, including the Chief Management Officer, are to be evaluated based on their progress toward developing strategic human capital plans and policies.

In addition, the human capital office is developing new human capital policies and practices, including increasing management’s involvement in order to produce better results. Toward that end, a PBGC official stated that the human capital office is planning to adjust the process of writing position descriptions so that the human capital specialist and the department manager can discuss the position’s responsibilities and duties and create job announcements more collaboratively. Furthermore, PBGC’s human capital office has developed and implemented various recruitment strategies in recent years, such as an outreach program to colleges and universities and recruitment through federal internship and fellowship programs. PBGC human capital officials stated that certain recruitment strategies are being reassessed, with the goal of increasing their effectiveness.

Despite these actions, the corporation lacks a formal, comprehensive human capital strategy, articulated in a formal human capital plan that includes human capital policies, programs, and practices. In our previous work we have identified critical success factors that agencies should use to manage their workforces strategically. The critical success factors are interrelated and mutually reinforcing so that no human capital issue can be compartmentalized and addressed in isolation (see app. III). Workforce planning and succession management, among other things, are critical components of a comprehensive human capital plan.

Workforce planning uses workforce data to develop long-term strategies for acquiring, developing, and retaining staff to achieve programmatic goals and prepare the agency for its current and future needs. In 2001, PBGC established a workforce planning team and conducted a comprehensive review of its future human capital needs in response to a GAO recommendation in 2000. As part of this effort, the team identified needed skills and future critical needs for the corporation and prepared a gap analysis for the seven key occupations. From this analysis, the team then determined if and where workforce gaps existed and formulated corresponding strategies to address the gaps, all of which was documented in a workforce planning report drafted in 2002 that was to serve as the basis for its future ongoing workforce planning efforts. Since that time, the corporation has conducted little workforce planning and the workforce planning team has dissolved. However, PBGC has recently done more in the area of succession planning, with the goal of identifying and developing appropriate leaders to meet their future challenges. In fact, PBGC human capital officials have drafted a succession management plan, and the corporation continues to use a program developed in 2002 to prepare staff for PBGC’s leadership vacancies.

According to a senior PBGC official, the corporation has lacked a formal, comprehensive human capital plan in recent years because the increased workload and demand for qualified staff required the human capital office to primarily focus on hiring and training new staff, with little time to strategically plan, and because the human capital office required a higher level of expertise to develop a comprehensive human capital strategy. However, PBGC officials stated that because PBGC has now acquired such expertise with the hiring of a new human capital director and a new human capital specialist, the corporation intends to have a formal human capital strategic plan by the end of fiscal year 2008.

GAO’s prior work has shown that high-performing organizations must have a leadership team committed to human capital management who personally develop and direct reform and continuously drive improvement. Several PBGC officials have undertaken actions to conduct succession planning within their own departments; however, differing opinions among PBGC’s leadership concerning some aspects of human capital planning—such as workforce and succession planning—may complicate and prolong PBGC’s strategic efforts. For example, some PBGC executives conduct departmental succession planning, while others believe any succession management plan should incorporate a corporate viewpoint. Our prior work suggests that efforts to address human capital management are most likely to succeed if an agency’s top management and human capital leaders set the overall direction, pace, tone, and goals from the outset.

Limited Data Analysis on PBGC’s Overall Workforce May Hinder Its Ability to Address Current and Future Human Capital Needs

PBGC has not routinely and systematically targeted and analyzed all key workforce data—such as attrition rates, occupational skills mix, and trends—necessary to create an overall workforce profile that addresses current and future workforce needs. Instead, PBGC human capital officials stated that they generally collected personnel data and reported certain workforce statistics—such as counts of the number of open positions filled, recruitment and retention incentives used, workforce diversity, and separation—for top management on a monthly basis. However, the monthly report does not provide context regarding the significance of these statistics for the corporation as a whole. Furthermore, officials stated that they generally conducted in-depth data collection and analysis in response to requests from the corporation’s executive management. For example, in 2006, PBGC’s human capital office conducted an analysis of the representation of minorities and women by grade and occupation to target the corporation’s recruitment with the goal of ensuring a diverse workforce. However, because such analysis has been conducted only periodically and on requested topics, information on PBGC’s overall workforce trends has been limited and therefore unavailable for anticipating the corporation’s current and future needs.

While PBGC’s human capital office has conducted some workforce analysis, it has not taken steps to formally evaluate needed data that could inform its workforce planning efforts. Our prior work has found that collecting and analyzing workforce data are fundamental to measuring the effectiveness of an organization’s human capital approaches in support of the mission and goals of an agency. To evaluate factors affecting attrition, agencies can compare their attrition rates to those of other federal agencies, estimate the cost of recruiting and training new employees who leave and the cost of recruiting and training their replacements, and evaluate labor market conditions in locations where it operates. While PBGC’s human capital office maintains data on the corporation’s attrition rates, it does not perform certain types of analysis to better understand its attrition. As of March 2008, PBGC had not conducted any of these analyses.

Similarly, the corporation has done little since 2002 to identify and analyze its workforce skills by gathering skills data on current employees, critical skills that are needed throughout the agency, to determine if and where gaps exists. Our prior work has noted that maintaining current information on staff members’ critical skills and competencies is especially important for federal agencies operating in an ever-changing environment. Shifts in national priorities, budget constraints, and other factors affect the critical skills an agency needs to fulfill its mission. For PBGC, such information is particularly useful for determining and addressing gaps in the critical workforce skills of staff and making efficient resource allocations, because PBGC must respond quickly to changes in the financial markets and defined benefit pension plan industry. However, PBGC has only in recent months, and at the request of the newly hired Chief Information Officer, taken steps to evaluate the critical skill needs and gaps of one of its key occupations—Information Technology Specialist. For the other key occupations, PBGC had not yet determined or updated the skills inventory and competencies of its workforce, as of March 2008. PBGC officials told us that they planned to develop a process for identifying such skill needs by the end of fiscal year 2008.

Although PBGC Faces Possible Compensation Challenges, It Has Not Fully Explored All Available Compensation Options

PBGC has not fully explored all available compensation options under its statutory authority, even though corporation officials stated that PBGC’s current compensation structure limits its ability to hire and retain certain key staff. While data suggest that PBGC is generally able to hire and retain most key staff, PBGC officials have expressed the belief that the corporation is at a competitive disadvantage not only with the private sector, but also with certain federal agencies like FDIC and SEC that employ similar staff. As we noted, while PBGC staff in key occupations have pay ranges and salaries similar to those of the rest of the federal government, PBGC’s pay ranges and average salaries are lower than those of their counterparts at some similar agencies. Moreover, data suggest that as of September 2007, PBGC’s highest pay for financial analysts, the key occupation that PBGC appears to have the most difficulty hiring and retaining, was lower than that of both the federal financial regulators and the rest of the federal government. Yet, despite corporate concerns, PBGC has not taken steps to fully explore all available compensation options with OPM and the Office of Management and Budget (OMB).

Our prior work has found that the insufficient and ineffective use of flexibilities can significantly hinder the ability of an agency to recruit, hire, retain, and manage its workforce, and that the effective, efficient, and transparent use of human capital flexibilities must be a key component of agency efforts to address human capital challenges. According to our Internal Control Management and Evaluation Tool, an agency’s compensation system should be adequate to acquire, motivate, and retain personnel, and incentives should be used to provide encouragement for personnel to perform at their maximum capability. Further, to assist agencies, OPM has developed a handbook describing currently available human capital flexibilities.

In recent years, PBGC has made use of various human capital flexibilities in which the corporation has discretionary authority to provide direct compensation in certain circumstances to support its recruitment and retention efforts. Our review of PBGC’s use of the compensation options recorded in CPDF found that PBGC had used options such as recruitment and retention incentives, superior qualification pay-setting authority, and special pay rates for specific occupations. We also found that PBGC used performance management incentives, such as awards (bonuses) for suggestions, superior accomplishments, or special acts. (See app. V for a list of selected compensation flexibilities and authorities.) However, some PBGC officials stated that the corporation has not used these flexibilities to their fullest potential. For example, some senior management officials said the corporation should provide recruitment and retention incentives to more employees. Our review of CPDF found that between fiscal year 2004 and 2007, PBGC used recruitment incentives 14 times and retention incentives 10 times.

Further, PBGC officials said that they had not recently explored additional flexibilities that required the approval of OPM and OMB to determine whether they would be applicable or appropriate for the corporation. For example, as of March 2008, PBGC officials said that they had not explored whether positions, such as its Chief Insurance Program Officer, Chief Financial Officer, and Chief Investment Officer—positions that require specialized technical expertise specifically related to defined benefit pension plan structure and finance—may fall under OPM’s criteria for critical position pay authority. While most of these positions are currently filled, PBGC officials have cited difficulty filling some of these more technical positions and have expressed concern about filling them in the future as individuals leave. In another example, PBGC had not explored whether it would be appropriate or applicable to waive the recruitment and retention incentive limitation of 25 percent based on a critical agency need.

In addition to not exploring all available compensation options, PBGC has done little over the last decade to determine what effect its compensation system and lower pay ranges may have on its recruitment and retention efforts and the extent to which an alternative pay system may be needed. In the early 1990s, PBGC evaluated its workforce and conducted a compensation study comparing its compensation system with those of federal financial regulators and the private sector. The study concluded that some PBGC staff were relatively under compensated compared to the private sector and those federal agencies classified under FIRREA. On the basis of that evidence, PBGC sought to establish a new compensation system (outside of the federal government’s General Schedule and merit pay systems), arguing that PBGC could do so because the corporation did not pay compensation entirely from appropriated funds. However, in response, the Solicitor of Labor concluded that PBGC’s compensation was in fact paid from appropriated funds and that PBGC was not exempt from the General Schedule. As of March 2008, DOL’s Office of the Solicitor had not changed its conclusions. In addition, GAO has long held the view that the revolving funds of PBGC are appropriated funds.

According to PBGC officials, the corporation has not taken steps to evaluate its compensation structure since the early 1990s, because of the position taken by the Department of Labor. Officials told us that it would not be cost-effective for the corporation to invest resources in evaluating the corporation’s compensation structure if no action could be taken to modify the pay system, if needed. However, other federal agencies also facing increased workload demands have in some cases explored and obtained alternative pay systems—systems where market rates and performance are central drivers of pay—after establishing a need for additional compensation. For example, Congress enacted FIRREA after the U.S. savings and loan crisis, and specifically provided the federal financial regulators with the flexibility to establish their own pay system.

Conclusions

Although PBGC is a relatively small agency, it is faced with the challenge of insuring retirement income for millions of Americans’ promised defined benefit pensions. Because of this, PBGC must have at its disposal a highly qualified workforce with the skills necessary to seek the best financial arrangements needed to support its mission. While it appears that PBGC is generally able to hire and retain key staff, the corporation has faced hiring and retaining difficulties in certain technical positions, such as its financial analysts and chief financial officer. In addition to these difficulties, the corporation may face several workforce challenges in the near future if it does not take steps now to strategically prepare itself by identifying its current and future challenges. However, because PBGC does not systematically collect and analyze all necessary workforce data, the foundation on which to identify and address such challenges is limited. In order to develop strategies for identifying and filling any workforce gaps or spotlight areas in need of attention, PBGC management must rely on valid workforce data. If it does not, the corporation’s ability to effectively target its resources or know which key areas to focus on when recruiting, developing, and retaining top talent is limited. While the costs of collecting such data may require some trade-offs among PBGC’s competing priorities, the costs of making decisions without the necessary information could be even greater over time.

PBGC officials have suggested that the corporation’s compensation system places it at a competitive disadvantage not only with the private sector, but also with other federal entities when competing for some key staff. While such perceptions may be reasonable for certain occupations, the fact that PBGC has not fully explored all compensation options with OPM and OMB may hinder its ability to develop innovative compensation packages within its current statutory authorities. If PBGC were to fully exhaust all available options, PBGC executives, in conjunction with the corporation’s board of directors, could more reasonably take steps to seek additional flexibilities, such as an alternative compensation structure, if it seemed warranted. By doing so, PBGC’s ability to insure and deliver retirement benefits to the millions of Americans that rely upon them could be strengthened.

Recommendations for Executive Action

To improve PBGC’s human capital management structure, we recommend that PBGC’s Director instruct PBGC’s Chief Management Officer to Integrate formal workforce and succession planning components as part of the corporation’s efforts in developing a formal strategic planning approach to managing its workforce.

Systematically collect and analyze workforce data and integrate the results of such analyses into its workforce planning efforts. Such an approach could include updating PBGC’s 2002 Workforce Planning Report, analyzing the reason for and the associated costs of its attrition, and identifying the types of skills and competencies critical to PBGC’s mission.

Fully explore with the Office of Personnel Management and Office of Management and Budget all compensation options currently available to determine and document what options are appropriate and applicable within its statutory authority. Subsequently, the corporation should make use of all applicable and appropriate options, and continuously track, document, and monitor the use of such options. Once such steps are taken, PBGC should determine the extent to which its ability to hire and retain is hindered by its compensation structure. If such efforts conclude that PBGC is in fact hindered, the corporation’s board of directors and Director should work to formulate recommendations to Congress for modifying its structure.

Agency Comments and Our Evaluation

We obtained written comments on a draft of this report from PBGC, which are reproduced in appendix VI. In addition, we provided copies of the draft report to the Departments of the Treasury, Labor, and Commerce as well as OPM for their comments. In instances where comments were provided, they were incorporated in the report where appropriate.

In response to our draft report, PBGC generally concurred with our recommendations and outlined the actions the corporation has underway or plans to take with regard to them. Specifically, PBGC stated that the corporation would do more to better manage its workforce particularly with regard to its human capital succession planning and workforce data analysis. PBGC reiterated the steps that the corporation is taking to strengthen its human capital management, and added that these improvements were expected to address many of our concerns. Further, PBGC stated that the corporation has taken steps in years past to explore compensation options, but noted that legal and policy considerations beyond the purview of PBGC’s management have hindered the corporation’s ability to do so. Nevertheless, as we recommended, PBGC stated that the corporation will continue to explore other compensation options considered appropriate and maintain a dialogue with OPM, OMB, and members of PBGC’s board of directors regarding this issue.

As agreed with your offices, 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 director of PBGC; the Secretaries of the Treasury, Labor, and Commerce; and other interested parties. We will also make copies available to others on request. If you or your staff have any questions concerning this report, please contact me on (202) 512-7215. Key contributors are listed in appendix VII.

Appendix I: Scope and Methodology

To determine the Pension Benefit Guaranty Corporation’s (PBGC) recent experience in hiring and retaining mission-critical staff, we worked with PBGC executives and human capital officers to identify which staff were considered critical to PBGC’s mission. On the basis of these discussions and in conjunction with a 2002 PBGC workforce planning team report, it was agreed with PBGC officials that we would focus on seven occupations that were considered key to the corporation’s business operation and also made up the majority of the corporation’s workforce. These occupations were 6. information technology specialists, and 7. pension law specialists.

After identifying these key occupations, we assessed PBGC’s recent experience in hiring and retaining staff by using the Office of Personnel Management’s (OPM) Central Personnel Data File (CPDF) to identify different workforce data, such as hiring, attrition, separation types, retirement eligibility, federal tenure, and pay averages for these positions. To identify trends in some of these data, we analyzed hiring, attrition, and separation workforce data sets for PBGC’s key occupations from fiscal year 2000 to 2007 and compared attrition and separation information with comparable information from the rest of the federal government for the same period. We chose to review this data from these fiscal years to determine what trends, if any, existed prior to and after the significant workload increases and financial liabilities resulting from several large companies terminating their defined benefit pension plans around fiscal years 2003 and 2004.

To assess the reliability of OPM’s CPDF, we reviewed GAO’s prior data reliability work on CPDF data. We supplemented that work as necessary by analyzing employee movement using CPDF data when we found exceptions from standard personnel procedures, such as employees with a transfer-out code but with an accession code in the hiring agency that did not include a transfer-in code. We also found duplicate separation or accession records for the same individual on the same day. However, these types of data limitations represented less than 1/10th of 1 percent of the data used. As a result, we concluded that the data were sufficiently reliable for the purposes of our review. We also requested attrition and other workforce data from PBGC’s computerized system called the Federal Personnel and Payroll System (FPPS) to determine the extent to which CPDF data matched FPPS data. We reviewed related agency documentation, interviewed agency officials knowledgeable about the data, and brought to the attention of these officials any concerns or discrepancies we found with the data for correction or updating. However, we did not independently verify the workforce data we received from PBGC. In a number of cases, we compared PBGC’s CPDF data with data on other federal executive branch agencies as a group that employ the seven key occupations, or with financial regulators specifically.

The following describes the steps that we took to identify selected workforce data in CPDF for the seven occupations.

We identified all new hires for fiscal years 2000 through 2007 by using personnel action codes in CPDF for accessions to career or career conditional positions. Accessions include new hires and hires of individuals returning to the government. To put PBGC hiring into context, we used attrition data (discussed below) to compare the numbers of staff hired with the number of staff leaving. Additionally, we used PBGC hiring data from 2007 to describe how quickly PBGC fills its job vacancies and compared that data to OPM standards.

To determine the overall attrition rates for staff in these key positions, we analyzed data from the CPDF for fiscal years 2000 to 2007. For each fiscal year, we counted the number of permanent (career) employees with personnel actions indicating they had separated from PBGC. Separation (attrition) data for new hires included resignations, retirements, terminations, and deaths. We did not include a small percentage of individuals with inconsistent data such as multiple or different hiring or separation dates. The small percentage of employees with inconsistent data is congruent with the generally reliable data in the CPDF we have reported previously. We then divided the total number of separations for each fiscal year by the average of the number of these employees in the CPDF as of the last pay period of the fiscal year before the fiscal year of the separations and the number of these employees in the CPDF as of the last pay period of the fiscal year of separation.

To determine the attrition rates for new hires in the seven critical occupations, we used CPDF data to identify the newly hired staff and followed them over time to see how many left PBGC. We identified all new hires for fiscal years 2000 through 2007 by using personnel action codes for accessions to career or career conditional positions. Next, we determined whether these individuals had personnel actions indicating they had separated from PBGC. By subtracting the hire date from the separation date, we determined how long individuals worked before separating. We calculated the attrition rates for a specific time period by dividing the number of individuals who left within that time period by the total number of new hires tracked for that time period.

Once we identified the overall attrition and new hire attrition rates, we examined CPDF data to determine any patterns or trends for each of the seven key occupations and for PBGC executives. Additionally, we conducted a comparative analysis by calculating the attrition rates of the rest of the federal government and the federal regulators to put PBGC attrition rates into context.

To identify the ways key staff separated from PBGC from 2000 through 2007, we reviewed CPDF data identifying employees who resigned from federal employment, retired, transferred to another federal agency, or were separated in another way, such as a reduction in force. As part of this work, we built on our analysis of the CPDF to determine the extent to which PBGC is losing staff to other federal agencies. To determine those PBGC staff that moved to another federal agency, we identified employees who had a CPDF separation code for a voluntary transfer and who also had a CPDF accession code from a federal agency within 25 days of the transfer out. We analyzed separation data to determine any patterns for the receiving agency. To understand whether there were any patterns within PBGC’s key occupations, we reviewed CPDF data to examine the distribution by type of separation for each of the key occupations. To put PBGC’s separation data into context, we compared the types of separations for its key employees with the same information for the rest of the federal executive branch agencies. To identify the reasons that staff left PBGC, we reviewed available reports with information about the reasons for attrition and interviewed officials to determine the reasons why employees leave the agency and how PBGC collects data on such departures.

To determine PBGC employee retirement eligibility for fiscal years 2012 and 2017, and after 2017, we used CPDF information on age at hire, years of service, birth date, and retirement plan coverage. We compared PBGC eligibility information to eligibility information for staff in the seven key occupations in the rest of the federal government.

To determine federal tenure rates, we examined CPDF information on number of years of federal service for key staff, at both PBGC and other federal agencies. We compared PBGC tenure information to tenure information for staff in the seven key occupations in the rest of the federal government. We also compared CPDF federal tenure data to PBGC’s data for length of service at PBGC specifically.

Average Pay and Pay Ranges To report on the average pay and pay ranges for employees in selected occupations and executives, we analyzed basic pay data from CPDF from September 2007 for PBGC, financial regulators, and other federal executive branch agencies that also had staff in the seven mission-critical categories. Using CPDF, we determined the low, high, and mean pay for each of these occupational categories and executives. We did not separately analyze locality pay for these entities.

To identify the steps that PBGC had taken to strategically hire and retain key staff, we reviewed previous GAO work on strategic human capital management, PBGC’s single-employer insurance programs, and the corporation’s management challenges. We also reviewed information on PBGC’s organizational objectives and succession planning goals from documents such as annual reports and workforce or succession plans. Moreover, we reviewed GAO and OPM reports on human capital to establish criteria for PBGC’s recruitment, retention, and succession planning efforts. On the basis of the information we obtained, we assessed PBGC’s human capital strategic plan, performance measures, and policies and procedures against GAO’s Standards for Internal Controls in the Federal Government to determine if internal control weaknesses or inefficiencies existed. Weaknesses identified directed our review of PBGC’s human capital operations and were explored further in interviews with PBGC officials.

We reviewed PBGC’s efforts to analyze attrition, interviewed PBGC and OPM officials, and relied on prior GAO reports on federal human capital issues to determine how federal agencies develop and analyze data on the reasons for this attrition. other selected agencies’ performance management and pay systems, including succession and strategic plans, guidance, and policies and procedures on the systems; PBGC’s internal assessments of its workforce challenges; OPM’s 2006 Federal Human Capital Survey; recent OPM human capital operations audits; and OPM’s 2006 Recruitment, Relocation, and Retention study.

Further, we reviewed relevant provisions of federal law, including the Employee Retirement Income Security Act of 1974; the Government Corporation Control Act; the Financial Institutions Reform, Recovery, and Enforcement Act of 1989; and the Classification Act. As part of this work, we collected and reviewed memorandums and documentation related to PBGC’s compensation proposal as well as correspondence from the Department of Labor (DOL) and Office of Management and Budget (OMB). We also obtained a legal opinion from DOL’s Office of the Solicitor confirming that DOL still held the view that PBGC is not exempt from the General Schedule. Moreover, we collected documents and interviewed officials at PBGC to determine the extent to which PBGC governance and organizational structure have affected PBGC’s ability to pursue alternative compensation and benefit flexibilities. We also used recent GAO work that reviewed compensation flexibilities at the financial regulatory agencies.

To gather information on PBGC’s use of human capital flexibilities related to compensation, we used CPDF data to calculate the number of occasions on which these flexibilities were administered between fiscal year 2004 and 2007. Specifically, we identified the number of times PBGC used recruitment incentives, individual and group cash awards, individual and group time-off awards, individual and group suggestion/invention awards, quality step increases, student loan repayments, and retention incentives. In addition, we interviewed PBGC’s human capital officials to determine if PBGC was using certain compensation flexibilities that we did not identify in CPDF. We did not assess whether PBGC was using these flexibilities appropriately.

To address both objectives, we also interviewed board representatives, the PBGC Director, PBGC’s executives, senior PBGC management officials, and officials from OPM and DOL. Additionally, we met with the corporation’s union representatives and PBGC’s Inspector General, and coordinated with OPM’s human capital evaluators regarding their audit of PBGC human capital policies and programs. At the time of our review, OPM officials confirmed they were finalizing a PBGC Human Resource Operations Evaluation. While OPM’s review covered certain aspects of strategic human capital management, OPM’s review also focused on specific human capital programs, such as competitive examining. OPM officials stated they would be presenting findings and working with PBGC on corrective measures to improve the corporation’s human capital program.

Appendix II: List of Federal Financial Regulators and their Mission

Regulates commodity futures and option markets in the United States.

Ensures a safe, sound, and dependable source of credit and related services for agriculture and rural America.

Preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $100,000 per depositor; by identifying, monitoring, and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails.

Regulates the 12 Federal Home Loan Banks that were created in 1932 to improve the supply of funds to local lenders that, in turn, finance loans for home mortgages.

Federal Reserve Board Conducts the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices; supervises and regulates banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers; maintains the stability of the financial system and containing systemic risk that may arise in financial markets; provides certain financial services to the U.S. government, to the public, to financial institutions, and to foreign official institutions, including playing a major role in operating the nation’s payments systems.

Charters and supervises federal credit unions. National Credit Union Administration, backed by the full faith and credit of the U.S. government, operates the National Credit Union Share Insurance Fund (NCUSIF) insuring the savings of 80 million account holders in all federal credit unions and many state- chartered credit unions.

Charters, regulates, and supervises all national banks. It also supervises the federal branches and agencies of foreign banks.

Promotes housing and a strong national housing finance system by ensuring the safety and soundness of Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation)—the largest housing finance institutions in the United States.

Primary federal regulator of federally chartered and state- chartered savings associations, their subsidiaries, and their registered savings and loan holding companies.

Administers federal securities law in the United States. The agency is charged with protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.

Appendix III: Elements of Strategic Human Capital Management

People are an agency’s most important organizational asset. An organization’s people define its character, affect its capacity to perform, and represent the knowledge base of the organization. As such, effective strategic human capital management approaches serve as the cornerstone of any serious change management initiative. They must also be at the center of efforts to transform the cultures of federal agencies so that they become less hierarchical, process-oriented, stovepiped, and inwardly focused; and flatter and more results-oriented, integrated, and externally focused.

Studies by several organizations, including GAO, have shown that successful organizations in both the public and private sectors use strategic management approaches to prepare their workforces to meet present and future mission requirements. For example, preparing a strategic human capital plan encourages agency managers and stakeholders to systematically consider what is to be done, how it will be done, and how to gauge progress and results. Federal agencies have used varying frameworks for developing and presenting their strategic human capital plans. Various agencies are using OPM’s Human Capital Assessment and Accountability Framework (HCAAF) as the basis for preparing such plans. HCAAF, which the Office of Personnel Management developed in conjunction with the Office of Management and Budget and us, outlines six standards for success, key questions to consider, and suggested performance indicators for measuring progress and results. These six standards for success and related definitions are as follows: Strategic alignment: The organization’s human capital strategy is aligned with mission, goals, and organizational objectives and integrated into its strategic plans, performance plans, and budgets.

Workforce planning and deployment: The organization is strategically utilizing staff in order to achieve mission goals in the most efficient ways.

Leadership and knowledge management: The organization’s leaders and managers effectively manage people, ensure continuity of leadership, and sustain a learning environment that drives continuous improvement in performance.

Results-oriented performance culture: The organization has a diverse, results-oriented, high-performance workforce, and a performance management system that effectively differentiates between high and low performance and links individual, team, or unit performance to organizational goals and desired results.

Talent management: The organization makes progress toward closing gaps or making up deficiencies in most mission-critical skills, knowledge, and competencies.

Accountability: The organization’s human capital decisions are guided by a data-driven, results-oriented planning and accountability system.

As we have reported, strategic workforce planning, an integral part of human capital management and the strategic workforce plan, involves systematic assessments of current and future human capital needs and the development of long-term strategies to fill the gaps between an agency’s current and future workforce requirements. Agency approaches to such planning can vary with each agency’s particular needs and mission; however, our previous work suggests that irrespective of the context in which workforce planning is done, such a process should incorporate five key principles: (1) involve management and employees, (2) analyze workforce gaps, (3) employ workforce strategies to fill the gaps, (4) build the capabilities needed to support workforce strategies, and (5) evaluate and revise strategies (see fig. 8).

Our human capital model highlights the kinds of thinking that agencies should apply, as well as some of the steps they can take, to make progress in managing human capital strategically. The model consists, in part, of the Critical Success Factors Table. This table identifies eight critical success factors for managing human capital strategically, which embody an approach to human capital management that is fact-based, focused on strategic results, and incorporates merit principles and other national goals. These factors are organized in pairs to correspond with the four governmentwide high-risk human capital challenges that our work has shown are undermining agency effectiveness (see fig. 9). When considering the human capital cornerstones and the critical success factors, it is important to remember that they are interrelated and mutually reinforcing. Any pairing or ordering of human capital issues may have a sound rationale behind it, but no arrangement should imply that human capital issues can be compartmentalized and dealt with in isolation from one another.

All of the critical success factors reflect two principles that are central to the human capital idea: People are assets whose value can be enhanced through investment. As with any investment, the goal is to maximize value while managing risk.

An organization’s human capital approaches should be designed, implemented, and assessed by the standard of how well they help the organization achieve results and pursue its mission.

In developing this model, we built upon GAO’s Human Capital: A Self- Assessment Checklist for Agency Leaders (GAO/OCG-00-14G, September 2000). Self-assessment is the starting point for creating “human capital organizations”—agencies that focus on valuing employees and aligning their “people policies” to support organizational performance goals. Certain unifying considerations should be kept in mind: All aspects of human capital are interrelated: The principles of effectively managing people are inseparable and must be treated as a whole. Any sorting of human capital issues may have a sound rationale behind it, but no sorting should imply that human capital issues can be compartmentalized and dealt with in isolation from one another.

Trust requires transparency: To pursue its shared vision effectively, the agency must earn the trust of its workforce by involving employees in the strategic planning process and by ensuring that the process is transparent—that is, consistently making it clear that the shared vision is the basis for the agency’s actions and decisions.

Merit principles and other national goals still apply: Performance- based management does not supersede the merit principles or other national goals, such as veterans’ preference. A modern merit system will achieve a reasonable balance among taxpayer demands, employer needs, and employee interests.

Constraints and flexibilities need to be understood: The purpose of human capital self-assessment is to help agencies target areas in which to make changes in support of their organizational missions and other needs. Agencies that identify areas for improvement need to learn what constraints exist that apply to them and what flexibilities are available.

Fact-based human capital management requires data: Federal agencies typically do not have the data required to effectively assess how well their human capital approaches support results. A more fact-based approach to human capital management will entail the development and use of data that demonstrate the effectiveness of human capital policies and practices—thereby improving managers’ ability to maximize the value of human capital investments while managing the related risks.

The use of best practices requires prudent decision making: Identifying best practices and benchmarking against leading organizations are both potentially useful and important pursuits. Federal agencies must be careful to recognize the unique characteristics and circumstances that make organizations different from one another and to consider the applicability of practices that have worked elsewhere. For example, the environments in which public and private sector organizations operate differ significantly; our work has shown that many management principles identified in the private sector are applicable to the federal sector, but these differences need to be taken into account when agencies consider alternatives to their current management approaches.

Attention to human capital must be ongoing: To be effective, strategic human capital management requires the sustained commitment and attention of senior leaders and managers at all levels of the agency. Managing the workforce is not a problem for which the organization can supply an answer and then move on. Rather, managers must continually monitor and refine their agencies’ human capital approaches to ensure their ongoing effectiveness and continuous improvement.

Appendix IV: Minimum and Maximum Pay Ranges and Average Basic Pay for Critical Occupations by Selected Federal Agency

Baalary minimum and maximum by occupation

CPDF did not indicte tht OFHEO employed IT pecili as of encieExecutives include political appointees above GS-15, such as those in the Senior Executive Service, those in the Senior Level and Senior Scientific or Professional pay plans, and equivalent officials. Different executive pay plans have different pay ceilings. For example, the Senior Level and Senior Scientific and Professional pay plans (SL and ST) have lower ceilings than the Senior Executive Service pay plan. PBGC executives included the Director of PBGC and those in the Senior Level pay plan. The maximum base pay allowed for SES in 2007 was the rate for level II of the Executive Schedule ($168,000) for agencies with a certified performance appraisal system, or the rate for level III of the Executive Schedule ($154,600) for agencies without a certified performance appraisal system. The maximum base pay allowed for SL/ST employees in 2007 was $145,400 (the rate for level IV of the Executive Schedule). However, SL/ST employees working in the 48 contiguous States also received locality payments ranging from 12.6percent to 30.3 percent in 2007, depending on location, with locality rates capped at the rate for level III of the Executive Schedule, or $154,600.

We submitted the relevant PBGC data to PBGC officials, who concurred with the basic ranges and averages for PBGC.

While CFTC, FCA, and NCUA senior management could be classified as executives, each agency has a pay plan that, as of this writing, did not allow GAO to specifically identify executives’ salaries through CPDF.

The agencies in the table include the Commodity Futures Trading Commission (CFTC), Farm Credit Administration (FCA), Federal Deposit Insurance Corporation (FDIC), Federal Housing Finance Board (FHFB), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), Office of Federal Housing Enterprise Oversight (OFHEO), Office of Thrift Supervision (OTS), Pension Benefit Guaranty Corporation (PBGC), Securities and Exchange Commission (SEC), and the Federal Reserve Board (FRB).

Appendix V: Selected Compensation Flexibilities and Authorities Available in the Federal Government

Flexibilities addressing recruitment of new employees

A monetary payment to a newly hired employee when the agency has determined that the position is likely to be difficult to fill in the absence of such an incentive. The employee must sign an agreement to complete a specified period of service with the agency (not to exceed 4 years).

Upon the request of the head of an agency, OPM may waive the recruitment or relocation incentive 25 percent limitation based on a critical agency need. Under such an approval, the total amount of recruitment or relocation incentive payments may not exceed 50 percent of an employee’s annual rate of basic pay at the beginning of the service period multiplied by the number of years in the service period.

Agencies may set the rate of basic pay of a newly appointed employee at a rate above the minimum rate of the appropriate General Schedule grade because (1) the candidate has superior qualifications or (2) the agency has a special need for the candidate’s services.

A step increase to reward General Schedule employees at all grade levels who display high-quality performance. It is a step increase that is given sooner than the normal time interval for step increases.

A monetary award to recognize superior employee and group performance (also known as spot awards).

A monetary award for suggestions, inventions, or a productivity gain.

An award of time off to recognize superior employee and group performance.

A monetary award to recognize employees who bring new talent into the agency.

A monetary payment given to a current employee when the agency determines that the unusually high or unique qualifications of the employee or a special need of the agency for the employee’s services makes it essential to retain the employee and if the employee would be likely to leave the federal service in the absence of a retention incentive.

At the request of an agency head, OPM may waive the retention incentive limitation of 25 percent of basic pay for individual employees or 10 percent for a group or category of employees (but not to exceed 50 percent of basic pay) based on a critical agency need. The agency must determine the unusually high or unique qualifications of the employee(s) are critical to the successful accomplishment of an important agency mission, project, or initiative (e.g., programs or projects related to a national emergency or implementing a new law or critical management initiative).

The federal student loan repayment program permits agencies to repay federally insured student loans as a recruitment or retention incentive for candidates or current employees of the agency.

A monetary payment to an employee who must relocate to a position in a different geographic area that is likely to be difficult to fill in the absence of such an incentive. In return, the employee must sign an agreement to fulfill a period of service of not more than 4 years with the agency.

OPM may, upon the request of an agency head, and after consultation with OMB, grant authority to fix the rate of basic pay for one or more critical positions in an agency at not less than the rate that would otherwise be payable for that position, up to the rate for level I of the Executive Schedule under the critical pay authority. A higher rate of pay may be established upon the President’s written approval.

Appendix VI: Comments from the Pension Benefit Guaranty Corporation

Appendix VII: Contacts and Acknowledgments

GAO Contact

Acknowledgments

The following team members made key contributions to this report: David Lehrer, Assistant Director; Jason Holsclaw, Analyst-in-Charge; Susannah Compton; Monika Gomez; Catherine Hurley; Anar Ladhani; Armetha Liles; Andrew Nelson; Mimi Nguyen; Jessica Orr; Roger Thomas; Rebecca Shea; and Gregory Wilmoth.

Related GAO Products

Pension Benefit Guaranty Corporation: Governance Structure Needs Improvements to Ensure Policy Direction and Oversight. GAO-07-808. Washington, D.C.: July 2007.

PBGC’s Legal Support: Improvements Needed to Eliminate Confusion and Ensure Provision of Consistent Advice. GAO-07-757R. Washington, D.C.: May 18, 2007.

High Risk Series: An Update. GAO-07-310. Washington, D.C.: January 2007.

Private Pensions: The Pension Benefit Guaranty Corporation and Long- Term Budgetary Challenges. GAO-05-772T. Washington, D.C.: June 9, 2005.

Pension Benefit Guaranty Corporation: Single-Employer Pension Insurance Program Faces Significant Long Term Risks. GAO-04-90. Washington, D.C.: October 2003.

Pension Benefit Guaranty Corporation: Contracting Management Needs Improvement. GAO/HEHS-00-130. Washington, D.C.: September 2000.

Strategic Workforce Planning and Human Capital Management Federal Deposit Insurance Corporation: Human Capital and Risk Assessment Programs Appear Sound, but Evaluations of Their Effectiveness Should Be Improved. GAO-07-255. Washington, D.C.: February 2007.

The Federal Workforce: Additional Insights Could Enhance Agency Efforts Related to Hispanic Representation. GAO-06-832. Washington, D.C.: August 2006.

Securities and Exchange Commission: Some Progress Made on Strategic Human Capital Management. GAO-06-86. Washington, D.C.: January 2006.

International Trade: USTR Would Benefit from Greater Use of Strategic Human Capital Management Principles. GAO-06-167. Washington, D.C.: December 2005.

Department of Homeland Security: Strategic Management of Training Important for Successful Transformation. GAO-05-888. Washington, D.C.: September 2005.

Human Capital: Selected Agencies Have Opportunities to Enhance Existing Succession Planning and Management Efforts. GAO-05-585. Washington, D.C.: June 2005.

Human Capital: Agencies Need Leadership and the Supporting Infrastructure to Take Advantage of New Flexibilities. GAO-05-616T. Washington, D.C.: April 21, 2005.

Human Capital: Selected Agencies’ Statutory Authorities Could Offer Options in Developing a Framework for Governmentwide Reform. GAO-05-398R. Washington, D.C.: April 21, 2005.

National Nuclear Security Administration: Contractors’ Strategies to Recruit and Retain a Critically Skilled Workforce Are Generally Effective. GAO-05-164. Washington, D.C.: February 2005.

Diversity Management: Expert-Identified Leading Practices and Agency Examples. GAO-05-90. (Washington, D.C.: January 2005).

Human Capital: Principles, Criteria, and Processes for Governmentwide Federal Human Capital Reform. GAO-05-69SP. Washington, D.C.: December 2004.

Human Capital: Increasing Agencies’ Use of New Hiring Flexibilities. GAO-04-959T. Washington, D.C.: July 13, 2004.

Human Capital: Key Practices to Increasing Federal Telework. GAO-04-950T. Washington, D.C.: July 8, 2004.

Human Capital: Status of Efforts to Improve Federal Hiring. GAO-04-796T. Washington, D.C.: June 7, 2004.

Human Capital: A Guide for Assessing Strategic Training and Development Efforts in the Federal Government. GAO-04-546G. Washington, D.C.: March 2004.

Human Capital: Selected Agencies’ Experiences and Lessons Learned in Designing Training and Development Programs. GAO-04-291. Washington, D.C.: January 30, 2004.

Human Capital: Key Principles for Effective Strategic Workforce Planning. GAO-04-39. Washington, D.C.: December 2003.

Human Capital: Succession Planning and Management Is Critical Driver of Organizational Transformation. GAO-04-127T. Washington, D.C.: October 1, 2003.

Human Capital: A Guide for Assessing Strategic Training and Development Efforts in the Federal Government (Exposure Draft). GAO-03-893G. Washington, D.C.: July 2003.

Human Capital: Opportunities to Improve Executive Agencies’ Hiring Processes. GAO-03-450. Washington, D.C.: May 2003.

Human Capital: OPM Can Better Assist Agencies in Using Personnel Flexibilities. GAO-03-428. Washington, D.C.: May 2003.

Human Capital: Effective Use of Flexibilities Can Assist Agencies in Managing Their Workforces. GAO-03-2. Washington, D.C.: December 2002.

A Model of Strategic Human Capital Management. GAO-02-373SP. Washington, D.C.: March 2002.