Congress passed ERISA to protect the rights and 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 plan participants’ benefits and to encourage the continuation and maintenance of private sector defined benefit pension plans by providing timely and uninterrupted payment of pension benefits. Through its two insurance programs, PBGC covers certain private sector defined benefit plans. PBGC is funded through insurance premiums from employers that sponsor insured pension plans as well as investment income and assets from terminated pension plans. ERISA established a governance structure consisting of a board of directors, with the Secretary of Labor as the Chairman of the Board. ERISA provided the Secretary of Labor with responsibility for administering PBGC’s operations, personnel, and budget. The Secretary delegated the responsibility for administering PBGC to an Executive Director through a series of chairman’s orders describing the Executive Director’s responsibilities. For example, one order issued in 1984 authorized the Executive Director to make final decisions addressing legal matters on behalf of the corporation. In 2006, PPA replaced the Chairman of the Board as PBGC’s administrator with a Senate-confirmed director. The PPA established the director position at the same level of the executive schedule as two of the PBGC board representatives—Under Secretaries of Commerce and Treasury as well as the heads of other federal government corporations, such as the Federal Deposit Insurance Corporation (FDIC) and the Export-Import Bank of the United States. In addition, the corporation is aided by a seven-member Advisory Committee appointed by the President to represent the interests of labor, employers, and the general public. This committee has an advisory role but has no statutory authority to set PBGC policy or conduct formal oversight. Under the GCCA, PBGC is a wholly owned government corporation—that is, the government holds all its assets and liabilities. However, the United States is not liable for any obligation or liability incurred by the corporation. (See app. II for a list of selected government corporations). According to public administration experts, a government corporation is appropriate for the administration of governmental programs that are predominately of a business nature, produce revenue and potentially are self-sustaining, involve a large number of business-type transaction with the public, and require greater budget flexibility than a government department or agency. Under ERISA, PBGC is also empowered to sue and be sued; appoint and fix the compensation of officers, employees, attorneys, and agents; and utilize the personnel and facilities of any other agency or department of the U.S. government with or without reimbursement (with its head’s consent). Figure 1 illustrates some of the differences among traditional government departments/agencies, government corporations, government- sponsored enterprises (GSE), and private corporations. With the financial collapse of several large corporations over the past years and the passage of the Sarbanes-Oxley Act of 2002, which outlined a framework for more effective corporate governance, many private sector companies have reassessed their corporate governance practices. Although the Sarbanes-Oxley Act is intended to strengthen the corporate governance of private sector entities, certain corporate governance elements from it may also be relevant to government corporations and government-sponsored enterprises. For example, corporate governance practices suggest that corporations headed by boards of directors should have people in place with the appropriate qualifications, independence, and resources to conduct their responsibilities effectively. (See table 1 for examples of corporate governance practices.) Additional information on corporate governance practices is included in appendix III. PBGC’s financial outlook has improved since 2004, when it reported an accumulated deficit of $23 billion, but PBGC still projects large deficits for its single-employer program. Despite PPA’s provisions to strengthen defined benefit plan funding, PBGC reported an accumulated deficit of $18.1 billion as of September 30, 2006. While PBGC currently has assets exceeding $60 billion, sufficient to meet its responsibilities in the coming years, the single-employer program has had an accumulated deficit for much of its existence—the value of its program assets is less than the present value of benefits and other obligations (see fig. 2). PBGC’s board has limited time and resources to provide policy direction and oversight and has not established procedures and mechanisms to monitor PBGC operations. Although PBGC’s board members have met more frequently since 2003, the three cabinet secretaries composing the board have numerous other responsibilities, and have been unable to dedicate consistent and comprehensive attention to PBGC. In fact, we found that between 1980 and May 2007, a span of 27 years, there were only 18 board meetings, 10 of which were since 2003. The three-member board is also not large enough to ensure diverse skills, such as knowledge in strategic risk assessment and management, are included to direct and oversee PBGC. Since the board has limited time to direct and oversee PBGC, the members have designated officials within their respective agencies to conduct much of the work on their behalf. However, these officials also have limited resources to dedicate to PBGC. Further, the board has not established important mechanisms, such as the use of standing committees, to monitor and review PBGC operations and programs. Instead, the board mostly relies on the Inspector General and PBGC’s management oversight committees to ensure that PBGC is operating effectively. However, there are no formal protocols requiring the Inspector General to routinely meet with the board or its representatives and staff, and PBGC’s management committees are neither independent of PBGC, nor are they required to routinely report all matters to the board. As a result, the effectiveness of the board’s oversight may be limited, because it cannot be certain that it is receiving high-quality and timely information about all significant matters facing the corporation, even though PBGC officials report that they informally communicate with the board representatives weekly. PBGC’s board members have numerous other responsibilities in their roles as cabinet secretaries and have been unable to dedicate consistent and comprehensive attention to PBGC. ERISA charges the PBGC board with directing and overseeing PBGC management in several ways. The board is required to approve final decisions on policy matters that could affect many American employers and their workers. The board is also responsible for reviewing and approving PBGC’s budget, monitoring financial performance, approving the corporation’s strategic plan, and evaluating the effectiveness of its managers, among other responsibilities. Beyond their roles as heads of executive agencies and sitting on PBGC’s board, two of the cabinet secretaries are also members of other boards. For example, the Secretary of the Treasury serves on the boards of the Millennium Challenge Corporation, the Community Development Financial Institutions Fund, and is a managing trustee of the Social Security and Medicare trust funds. The Secretary of Commerce is on the board of the Export-Import Bank of the United States. The Secretary of Labor is also a trustee of the Social Security and Medicare trust funds. According to some corporate governance guidelines, boards should have no fewer than 5 members and no more than 15. With only 3 members, PBGC’s board may not be large enough to include the knowledge needed to direct and oversee PBGC, such as expertise in accounting, management, or strategic risk assessment. According to corporate governance guidelines, the board of directors should be large enough to provide the necessary skill sets, but also small enough to promote cohesion, flexibility, and effective participation. We did not identify any other government corporations with a similar board size as PBGC. Government corporations’ boards averaged about 7 board members, with one having as many as 15. For example, the Overseas Private Investment Corporation’s board of directors consists of 15 members—8 from the private sector and 7 from the federal government, as shown in table 2. PBGC’s board structure does not guarantee that the board represents a diverse set of interests and contains areas of expertise particular to PBGC. According to corporate governance guidelines published by The Conference Board, corporate boards should be structured so that the composition and skill set of a board is linked to the corporation’s particular challenges and strategic vision, and should include a mix of knowledge and expertise targeted to the needs of the corporation. Boards of directors should include certain expertise in accounting and finance, strategic risk assessment, management, and industry knowledge, among other factors. PBGC’s board members represent the interests of three government agencies—DOL and the Treasury share responsibility for ERISA, and Commerce represents the interests of business and economic sectors. While having these interests represented on PBGC’s board is important and the members can draw on the expertise within their respective agencies, PBGC’s governance structure does not necessarily guarantee that board members will have a range of diverse expertise needed to specifically address PBGC’s policy and oversight because the current structure only consists of members who serve by virtue of their position in the federal government. Our review of other governance structures found that many government corporations’ boards of directors consist of a variety of individuals reflecting a mix of knowledge, perspectives, and political affiliations. For instance, the FDIC board includes a full-time Chairman as well as the directors of the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and two other directors with specific banking expertise, such as state bank supervision. In addition, because PBGC’s board is composed of cabinet secretaries, PBGC’s board members typically change with each administration, limiting the board’s institutional knowledge of the corporation. Other government corporations have integrated staggered term limits to avoid such gaps. For example, OPIC’s directors may be appointed for a term of no more than 3 years, and the terms of no more than 3 of the 15 directors can expire in any 1 year. Since PBGC’s inception, the board has met infrequently.