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October 11, 2019 Issue: Fall 2019

PBGC’s Participant and Plan Sponsor Advocate: An Overview

By: Camille M. Castro (The views expressed in this article are the author’s own and do not represent the views of the United States federal government.)

Dealing with a bureaucracy, such as a federal government agency, can be a time-consuming and frustrating experience. Recognizing the need for assistance to help cut through the red tape, several agencies have established independent advocate or ombudsmen offices to help the public resolve issues with an agency. One such office is the Participant and Plan Sponsor Advocate (Advocate) at the Pension Benefit Guaranty Corporation (PBGC), the federal agency tasked with protecting private sector defined benefit pension benefits.

The Advocate at PBGC is fairly new. In 2012, the Moving Ahead for Progress in the 21st<\/sup> Century Act established the role of the Advocate, and PBGC's Board selected the first and current Advocate in late 2013. Since then, the role has expanded with the creation of an Office of the Advocate which is independent from PBGC management, reporting directly to PBGC's Board.

Modeled after the Internal Revenue Service's (IRS) Taxpayer Advocate which helps taxpayers solve problems with the IRS, PBGC's Advocate acts as a liaison between participants, plan sponsors, and PBGC, and assists participants and plan sponsors in resolving disputes with the corporation. The Advocate does not assist participants with disputes with their plan administrators (or vice versa); its role is limited to helping to resolve disputes between a participant or plan sponsor and PBGC. Additionally, the Advocate identifies areas where participants and plan sponsors have persistent problems in their dealings with PBGC and proposes administrative and legislative changes to mitigate the problems.

The Advocate must submit an annual report detailing the Office of the Advocate's activities to PBGC's congressional committees of jurisdiction by December 31st<\/sup> of each year. The report summarizes individual requests for assistance; identifies significant problems; and proposes legislative and regulatory changes to address these problems, as well as any actions taken by PBGC to correct problems identified in prior Advocate annual reports.

The Advocate concurrently submits its annual report to the PBGC Board, PBGC's Director, and any other appropriate officials when the report is submitted to PBGC's congressional committees of jurisdiction. The enabling statute's concurrent submission requirement ensures the independence of the Advocate, as there is no opportunity for prior outside review which could influence the contents of the report. The report is also publicly posted on the Advocate's website after the Advocate submits it to the statutorily required parties. The most recent annual report, issued December 31, 2018, marked the fifth anniversary of the report and the role of the Advocate at PBGC.

In addition, the Advocate plays a role relating to applications for benefit suspensions, partitions, and mergers. Under the rules for benefit suspension, the Advocate may make recommendations to the Treasury Secretary regarding a suspension application if: (1) the Treasury Department approves the application; (2) the participants vote to reject the proposed benefit reductions; and (3) the plan is systemically important. The Advocate's duties differ for partition and merger cases, where the Advocate plays a consultative role during the application review process. As part of its review, PBGC is required to consult with the Advocate on whether the plan has taken all reasonable measures to avoid insolvency. Similarly, PBGC must consult with the Advocate on merger applications to determine how the merger affects the interests of the participants and beneficiaries in the involved plans.

Due to the expansive nature of the Advocate's duties, the office has been involved with a wide range of participant and plan sponsor issues. For example, one of the Advocate's first significant projects involved PBGC's enforcement of ERISA section 4062(e). The Advocate assisted several prominent plan sponsors dealing with PBGC on section 4062(e) enforcement issues, and played a role in facilitating a resolution. Additionally, the Advocate has been involved in a variety of participant cases and issues, including intervening to successfully preserve a historical summary plan description collection and assisting with various requests from participants seeking lost pension benefits

Some cases brought to the attention of the Office of the Advocate have become a catalyst for significant regulatory and administrative change. For example, the Advocate identified premium penalties as an area in need of improvement after helping a plan sponsor who faced a significant penalty as a result of a late premium payment due to human error. PBGC subsequently established an internal working group to address premium penalty issues and later finalized a regulatory change which provided significant relief by reducing penalties for late payment of premiums.

Additionally, Advocate recommendations have shaped procedural changes at the agency. PBGC recently consolidated the review of potentially omitted participants cases into one department, acting on a 2014 recommendation from the Advocate. PBGC also implemented a mediation program to resolve plan sponsor disputes in response to the Advocate's longstanding suggestion. The mediation program allows plan sponsors to resolve Early Warning Program, termination liability, and fiduciary breach cases on a consensual basis without the need for litigation.

The Advocate's past annual reports describe other activities, such as assisting participants with complex benefit entitlement issues and helping plan sponsors who face delays in resolving distress termination liability matters with PBGC. In addition to individual cases and PBGC-related issues, the Office of the Advocate also commissioned a study on pension plan de-risking, focusing on PBGC and Congressional actions that may slow de-risking.

Given the breadth of the Advocate's activities, the Office of the Advocate is another resource that participants, plan sponsors, and their advisors should consider when seeking resolution to PBGC issues.   

How to contact the Office of the Advocate:

    Camille M. Castro

    Senior Associate Participant and Plan Sponsor Advocate at Pension Benefit Guaranty Corporation