PENSION BENEFIT GUARANTY CORPORATION

The Pension Benefit Guaranty Corporation (PBGC) is a wholly-owned Government Corporation, guided by a board of directors chaired by the Secretary of Labor, which guarantees the payments of pension plan benefits to participants in the event that covered plans fail or go out of existence.

Single Employer Program Benefit Payments
Monthly pension payments are made to plan participants and other beneficiaries of plans which have been trusteed by PBGC. Payments are expected to increase in FY 2001 due to projected increases in trusteed plans and the number of participants in pay status.

Multi-Employer Program Financial Assistance
Financial assistance provides for repayable loans to insolvent multi-employer sponsored plans to enable these plans to continue paying benefits if a series of prescribed steps is taken to place the plan on a sound financial basis. Payments are expected to decrease in FY 2001 by $88 million largely because of the disproportionate budgetary impact in FY 2000 of a lump sum settlement of the liability for one major multi-employer plan.

Administrative Expenses
These administrative expenses, subject to limitation by appropriation, provide for: collection of almost $1 billion in premiums; accounting and auditing services; asset management; executive direction; and other support functions. This activity includes an increase for enhancements to PBGC's information technology infrastructure, including necessary replacements and additions to network engineering hardware, and strengthened computer security.

Services Related to Terminations
The services related to terminations provides for costs attributable to trusteed pension plans and benefit payment service. The FY 2001 PBGC budget request provides for a significant improvement in the timeliness of frontline services to participants by reducing processing time for final benefit determinations from 5.7 years in FY 1999 to 3-4 years. The Corporation proposes an increase of $1.5 million to allow earlier actuarial valuations (which directly support final benefit determinations) as well as $1.2 million to accelerate implementation of a new actuarial software package that will facilitate future benefit determinations.

PBGC also proposes an increase of $2.8 million to continue the current level of active management of its growing investment portfolio. The Corporation's investment strategy has in recent years helped transform PBGC's actuarial deficit into a surplus. This proposal will allow for continued matching of industry performance indices at a cost substantially lower than the industry average.