Detailed Information on the
Pension Benefit Guaranty Corporation Assessment

Educating the public on the issues facing the private defined benefit pension system and working with Congress on legislative reforms to enable the PBGC to meet its long-term obligations to retirees.

Using the information the PBGC collects to mitigate risk and prepare for workload changes associated with pension plan terminations.

Developing a comprehensive approach to information and infrastructure security and a timeline for addressing IT concerns highlighted in PBGC's 2006 Annual Report.

Conducting analysis of potential legislative reforms. This milestone was developed to track progress against the long-term education and legislative PART improvement action.

Refine and mature the new certification and accreditation (C&A) process for deployment of major systems and General Support Systems using relevant IT guidelines.

Refine and mature the new certification and accreditation (C&A) process for deployment of major systems and General Support Systems using relevant IT guidelines.

Refine and mature the new certification and accreditation (C&A) process for deployment of major systems and General Support Systems using relevant IT guidelines.

Refining and maturing the new certification and accreditation (C&A) process for deployment of major systems and General Support Systems using relevant IT guidelines.

Developing and implementing the specific application security controls defined by the National Institute of Standards and Technology (NIST) in furtherance of the Federal Information Systems Management Act (FISMA).

Refine and mature the new certification and accreditation (C&A) process for deployment of major systems and General Support Systems using relevant IT guidelines.

Developing a comprehensive approach to information and infrastructure security by finishing its IT Certification and Accreditation process for the corporation's general support systems and major applications.

Measure: Commit to eliminate PBGC's deficit and account for PBGC's expected losses, in order that workers and retirees can expect to receive qualified benefit payments from the PBGC for the defined benefit pension plans that the PBGC assumes.

Explanation:This new measure provides options to improve the pension insurance program and eliminate PBGC's deficit. It provides legislative and financial analysis of scenarios that may include premium increases, changes in PBGC's investment policy, guarantees and asset allocation rules, and adjustments to the benefits of those receiving payments from PBGC. This analysis includes projections using PBGC's Pension Insurance Modeling System (PIMS) model and other applicable models that show PBGC's financial position under certain situations. The first report will be provided in 2008.

Measure: Customer Satisfaction score for premium filers.

Explanation:This measure tracks the satisfaction of plan sponsors and premium filers with PBGC's premium collection process. Using the American Customer Satisfaction Index (ACSI), a nationally recognized survey methodology that is used by both federal and private sector entities, the PBGC receives feedback from customers on issues such as whether its service is timely, accurate and responsive. PBGC uses the feedback to evaluate the effectiveness of services and identify process improvements. A baseline for this measure was established in 2004. Targets are flat for 2009-2013 as PBGC implements the pension reforms in the Pension Protection Act of 2006 and mandatory electronic premium filing for all plans.

Measure: Customer Satisfaction score for retirees receiving benefits from PBGC.

Explanation:This measure tracks the satisfaction of retirees to whom PBGC pays benefits. Using the American Customer Satisfaction Index (ACSI), a nationally recognized survey methodology that is used by both federal and private sector entities, PBGC receives feedback from customers on issues such as whether its service is timely, accurate and responsive. PBGC uses the feedback to evaluate the effectiveness of services and identify process improvements. A baseline for this measure was established in 2003. According to ACSI, the 2007 score is "21 points above the federal government average."

Measure: Customer Satisfaction score for responding to trusteed plan participant callers.

Explanation:This measure tracks the satisfaction of participants who call the PBGC's Customer Contact Center for information about their pension plan and benefits. Using the American Customer Satisfaction Index (ACSI), a nationally recognized survey methodology that is used by both federal and private sector entities, PBGC receives feedback from customers on issues such as whether its service is timely, accurate and responsive. PBGC uses the feedback to evaluate the effectiveness of services and identify process improvements. The baseline for this measure was established in 2001. Although the targets for 2008-2013 are flat, PBGC will focus on increasing efficiency with more streamlined processing and increased accountability during that period.

Measure: Average time (in years) between trusteeship and benefit determination issuance

Explanation:This is an operational measure of time to provide participants with a final determination of their benefits. Annual production of benefit determinations increased from about 20,000 in the early 1990s to over 100,000 per year from 2004 through 2006. This increased production lowered the average age of determinations from 8 years to 2.5 years. The volume of terminations from 2002-2005 significantly outpaced capacity for benefit determination production. PBGC will need 2008 and 2009 to clear out the built up inventory and improve its process.

Measure: Cost per Participant in Trusteed Plans.

Explanation:This measure is an important indicator of the efficient use of resources. It tracks the cost to provide services to participants in terminated plans for which PBGC has assumed responsibility. The numerator is funding for plan termination activities and the denominator is the total number of trusteed plan participants.

Is the program purpose clear?

Explanation: Explanation: The purpose of the Corporation is set forth in statute: 1) to encourage the continuation and maintenance of voluntary private pension plans for the benefit of their participants; 2) to provide for the timely and uninterrupted payment of pension benefits to participants and beneficiaries under plans to which the title applies; and 3) to maintain premiums at the lowest level consistent with carrying out its obligations under this title.

Evidence: Authorizing Law--Employee Retirement Income Security Act of 1974, as amended (29 U.S.C. 1301 et seq.). FY 2006-2011 draft Strategic Plan; PBGC's Mission Statement (http://www.pbgc.gov/about/about.html#1).

Does the program address a specific and existing problem, interest, or need?

Explanation: When companies with underfunded pension plans terminate their plans, PBGC ensures participants will receive their accrued benefits, subject to certain statutory and regulatory limits. In FY 2006, PBGC paid $4 billion in benefits to more than 600,000 retirees and beneficiaries in single-employer plans for which PBGC is the statutory trustee. More than half a million additional participants in these plans will receive benefits from PBGC when they become eligible under the terms of their respective plans. At the end of FY 2006, the present value of future benefits PBGC expected to pay participants in these plans was $64 billion. In addition, PBGC's Multiemployer Program provided $70 million in financial assistance to 33 insolvent multiemployer plans in FY 2006. The problem of underfunded defined benefit pension plans is widespread and an overarching insurance program must reasonably be administered at the Federal level to ensure consistency of coverage and adequacy of benefit protection levels. Without the protections provided by PBGC, many current and future retirees could lose a large portion of their retirement benefits. PBGC estimates that as of September 30, 2006, the total underfunding in the ongoing single-employer plans it insures was approximately $350 billion and that in ongoing insured multiemployer plans, over $150 billion.

Evidence: Legislative History of the Employee Retirement Income Security Act of 1974 (Committee Print compiled by the Subcommittee on Labor of the Senate Committee on Labor and Public Welfare) (1976). PBGC's "Annual Management Report, Fiscal Year 2006," pages 5, 12, 36, 40, and 67 (http://www.pbgc.gov/docs/PBGCAMR.pdf). Pension Insurance Data Book 2006 (Forthcoming). PBGC's Guarantee Limits: An Analysis of Benefits Received by Participants in Selected PBGC-Trusteed Plans, published in PBGC's Pension Insurance Data Book 1999. (http://www.pbgc.gov/docs/1999databook.pdf) See Secretary Chao's message in PBGC's 2005 Annual Report (http://www.pbgc.gov/docs/05annrpt.pdf).

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: PBGC's programs are not duplicative. Although a number of other governmental and private sector entities pay monthly benefits to their programs' participants, no other government or private sector program insures the retirement benefits of participants in defined benefit pension plans. Instead of paying benefits itself to participants in the single-employer plans it has trusteed, PBGC could purchase annuities from private sector insurance companies once benefit amounts and forms are known with certainty. This might shift investment and mortality risk to the private sector. However, cost savings are unlikely and PBGC might remain liable if the annuity provider became insolvent (i.e., it might end up insuring the insurer). A 1991 National Academy of Public Administration study found that privatization of the function is not a practical alternative, because lack of profitability prevents the creation of a private sector market for insuring defined pension benefit plans.

Evidence: Legislative History of the Employee Retirement Income Security Act of 1974 (Committee Print compiled by the Subcommittee on Labor of the Senate Committee on Labor and Public Welfare) (1976). PBGC Annual Reports (http://www.pbgc.gov/about/annreports.html). GAO, "Answers to Key Questions About Private Pension Plans," September 2002 (includes agency roles) (http://www.gao.gov/new.items/d02745sp.pdf). GAO, "Private Pensions: Multiemployer Plans Face Short- and Long-Term Challenges," GAO-04-423, March 26, 2004 (http://www.gao.gov/new.items/d04423.pdf). Federal Credit Reform Act of 1990, Section 506(a) (P.L. 101-508). FY2008 President's Budget Appendix, p. 690. PBGC's 2005 Annual Report.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The statute under which PBGC operates prevents it from following many insurance industry best practices. PBGC's premium structure does not adequately reflect the risks and exposures individual plans pose for PBGC and is not flexible enough to address PBGC's changing revenue needs. PBGC has no authority to limit the insurance it provides plans posing the greatest risk to it or to engage in formal or informal enforcement actions against sponsors who do not adequately fund their plans. It can try to negotiate funding improvements or other protections, but it has no authority to enforce such actions. It can involuntarily terminate a plan under certain conditions, but this is an undesirable action that it tries to avoid whenever possible. While the Corporation had almost $60 billion in assets at the end of Fiscal Year 2006 - which assures it will be able to continue paying participants their guaranteed benefits for a number of years - PBGC's net financial position at the end FY 2006 was a deficit of $18.9 billion. While the Pension Protection Act (PPA) of 2006 made significant reforms to the pension system, the Corporation still lacks the resources to satisfy fully the agency's long-term obligations to plan participants. As GAO reports in its 2007 High-Risk Update, "while some of these reforms represent progress, their ultimate impact on the single-employer program's deficit is unclear. Many of these reforms will be phased in gradually, postponing their potentially positive effect on plan funding, while other changes could have the effect of increasing PBGC's financial exposure." Addressing PBGC's current $18.9 billion deficit will require additional legislative action by Congress and the President.

Evidence: GAO's High-Risk Series: An Update, GAO-07-310, January 31, 2007 (http://www.gao.gov/new.items/d07310.pdf). See Secretary Chao's message in PBGC's 2004 Annual Report (http://www.pbgc.gov/docs/2004_annual_report.pdf). Pension Protection Act of 2006 (Public Law 109-280), Titles I, II, IV, and V. Deficit Reduction Act of 2005 (Public Law 109-171), Title VIII, subtitle B. PBGC's FY2008 Congressional Budget Submission. GAO, "Pension Benefit Guaranty Corporation: Structural Problems Limit Agency's Ability to Protect Itself From Risk," GAO-05-360T, March 2, 2005 (http://www.gao.gov/new.items/d05360t.pdf).

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: Much of PBGC's caseload work is to ensure that participants in the plans PBGC trustees are paid the proper level of guaranteed benefits. When PBGC trustees a plan, it calculates the guaranteed benefits of each participant on a case-by-case basis. This process takes into account the terms of the plan, the participants' work and earnings history under the plan, the benefit priority category of the participant, the level of benefits the plan's assets will support, the level and distribution of any recoveries from the plan's sponsor or controlled group, and whether and to what extent the participant's benefits are subject to PBGC's benefit limitation provisions. While their guaranteed benefit levels are being determined, participants in pay status are paid estimated benefits. Once the guaranteed benefit level is known, appropriate adjustments are made to make up any underpayments or to recover any overpayments. PBGC has in place a system of internal controls to ensure benefits are only paid to those entitled to them and that benefits are paid in the correct amount. PBGC regularly conducts assessments of the effectiveness of its internal controls over the effectiveness and efficiency of operations and compliance with applicable laws and regulations in accordance with OMB Circular A-123. The most recent assessment provides assurance that, as of September 30, 2006, PBGC's internal controls were operating effectively and no material weaknesses were found in the design or operation of these internal controls. PBGC has also conducted an assessment of improper payment risk and has concluded that its benefit payments, premium refunds, payroll and travel disbursements, vendor payments and other payment processes are not susceptible to significant improper payment risk.

Evidence: Entity-wide Internal Controls Assessment, Report No. 2006-4006. Also see Highlights section of PBGC's 2005 Annual Report: (http://www.pbgc.gov/docs/05annrpt.pdf). PBGC's Guarantee Limits: An Analysis of Benefits Received by Participants in Selected PBGC-Trusteed Plans, published in PBGC's Pension Insurance Data Book 1999, (www.pbgc.gov/publications/databook/databook99.pdf). FY 2006-2011Strategic Plan [need link]. PBGC's "Annual Management Report, Fiscal Year 2006," pages 20 and 21 (http://www.pbgc.gov/docs/PBGCAMR.pdf). See Secretary Chao's message and the Single-Employer Program Exposure section in PBGC's 2006 Annual Report, (web site reference when available).

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: PBGC has three strategic goals to address its mission: (1) Safeguard the federal pension insurance program for the benefit of participants, plan sponsors, and other stakeholders; (2) provide exceptional service to customers and stakeholders; and (3) exercise effective and efficient stewardship of PBGC resources. PBGC's outcome measure for strategic goal #1 , "Commit to eliminate PBGC's deficit and account for PBGC's expected losses, in order that workers and retirees can expect to receive qualified benefit payments from the PBGC for the defined benefit pension plans that the PBGC assumes," reflects the program's commitment to its own long-term financial sustainability. PBGC's deficit of $18.9 billion threatens the program's ability, in the long-term, to pay scheduled benefit payments to beneficiaries. While PBGC alone cannot fix the program's solvency problems, PBGC can actively support attempts to eliminate its deficit and account for its expected losses by providing research and analytical support to Administration policymakers and Congress as they consider alternative reform efforts. To this end, PBGC will issue an annual report that analyzes the measures that could be taken to eliminate its deficit and account for its expected losses over specified periods. Service is also critical to fulfilling the program's purpose. PBGC has solid performance measures that tie into its second and third strategic goals, including: (1) achieve customer satisfaction target for premium filers, (2) achieve customer satisfaction target for responding to trusteed plan participant callers, and (3) achieve customer satisfaction target for retirees receiving benefits from PBGC.

Evidence: FY 2006-2011 Strategic Plan [pdf]; FY 2008 Performance Budget (http://www.dol.gov/dol/budget/2008/PDF/CBJ-2008-V2-02.pdf); FY 2006 Annual Management Report (http://www.pbgc.gov/docs/PBGCAMR.pdf).

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: PBGC has developed ambitious targets for its long-term outcome and efficiency goals. With respect to PBGC's commitment to eliminating the program's deficit, efforts in this area center on the Agency's responsibility to provide policymakers with complete, timely information in response to requests regarding various policy proposals and to keep the public fully informed of the solvency situation and how it could affect them. Ambitious targets have been established for PBGC's major line of business (benefit payments to participants) through the American Customer Satisfaction Index (ACSI) survey. The ACSI surveys provide data used for PBGC's continuous improvement processes and aid in making the pension insurance program a citizen-centered public service. For example, in 2004, PBGC piloted "My Pension Administration Account (MyPAA), allowing sponsors to file and make premium payments online. In 2006 through an ACSI survey, PBGC responded to premium filers' feedback by adding a "What's New" section for quick reference and by providing Web casts demonstrating how to file premiums electronically. ACSI targets for 2007 are 80 for participant callers, 84 for retirees and 68 for premium filers; and represent a high-level of customer satisfaction, comparable to the scores of other government agencies and the private sector. PBGC has shown an admirable ability to maintain its customer satisfaction scores even as the agency has experienced a tremendous growth in its workload caused by the terminations of many large underfunded pension plans (there were more participants in the plans PBGC trusteed from 2002 through 2006 than there were in the plans it trusteed from 1975 through 2001). For Strategic Goal #3, PBGC uses the cost per participant in trusteed plans efficiency measure which is derived from the number of participants who are receiving or will receive benefits from PBGC and the annual funding for pension plan termination processing.

Evidence: PBGC Customer Service History: Executive Summary"(PBGC's Strategic Planning Department document includes highlights of survey results and PBGC's responses from 1993 - 2006) [pdf copy]; American Customer Satisfaction Index scores (ACSI) 2006 (http://www.theacsi.org/index.php?option=com_content&task=view&id=27&Itemid=62); PBGC's Strategic Plan FY 2006-2011 (draft 10/10/2006, pdf); PBGC's FY 2008 Congressional Budget Justification (http://www.dol.gov/dol/budget/2008/PDF/CBJ-2008-V2-02.pdf; OMB's Comments on PBGC's FY 2008 Congressional Budget Justification (pdf); PBGC's FY 2006 Annual Management Report (http://www.pbgc.gov/docs/PBGCAMR.pdf).

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: PBGC's annual performance measure for its long-term goal of safeguarding the pension insurance program include completing the reforms included in the Pension Protection Act (PPA) of 2006 by the end of FY 2008. The completion of this task, in addition to the enactment of the Administration's re-proposal of premium reforms (including authorizing PBGC's Board of Directors to adjust the variable rate premiums and extending this premium to all underfunding, not just that based on a plan's vested liabilities) will allow PBGC to better address its $18.9 billion deficit. While this is an acceptable annual measure for strategic goal #1, PBGC's annual measures could be stronger if they connected more directly to the achievement and maintenance of the agency's long-term financial sustainability. PBGC will be working over the next few months to develop an annual measure that addresses this issue. PBGC's annual performance targets for its long-term outcomes of providing exceptional customer service and exercising efficient and effective stewardship parallel its long-term measures. PBGC's Customer Satisfaction indices are defined as annual targets and as long-term outcomes. ACSI targets for 2007 are 80 for participant callers, 84 for retirees, and 68 for premium filers; and represent a high-level of customer satisfaction, comparable to the scores of other government agencies and the private sector. PBGC has consistently achieved high quality public service.

Evidence: See II.2.1, plus American Customer Satisfaction Index scores in 2006 (http://www.theacsi.org/index.php?option=com_content&task=view&id=27&Itemid=62); PBGC's FY 2006 Annual Management Report, Annual Performance Report section (http://www.pbgc.gov/docs/PBGCAMR.pdf); Corporate Performance Reporting System report September 30, 2006 (pdf).

Does the program have baselines and ambitious targets for its annual measures?

Explanation: PBGC has targets for three different customer groups. This strategy enables PBGC to adopt processes that ensure service is timely, accurate, and responsive. In these three categories, the Customer Satisfaction Index score is at or above the average score for all government agencies dealing with a similar customer base. For example, for participants who call the Customer Contact Center, PBGC achieved a baseline of 73 in 2001 and set ambitious targets through 2008 of 74 to 80. ACSI targets for 2007 are 80 for participant callers, 84 for retirees, and 68 for premium filers; and represent a high-level of customer satisfaction, comparable to the scores of other government agencies and the private sector. The 2007 targets compare to 2004-2006 scores of 78, 79 and 75, respectively, for participant callers; 84, 85 and 85 for retirees; and 69, 68 and 68 for premium filers. There were more participants in the plans PBGC trusteed from 2002 through 2006 than there were in the plans it trusteed from 1975 through 2001. PBGC has shown an ability to maintain its customer satisfaction scores while administering an increased workload. Targets for strategic goal #1 include fully implementing regulations for variable and flat-rate premiums and the new termination premium established in PPA and DRA by the end of FY 2008. While this is an acceptable target for this measure, PBGC will be working over the next few months to develop ambitious targets for an annual measure more closely related to the agency's long-term financial sustainability.

Evidence: American Customer Satisfaction Index, (ACSI) 2006 (http://www.theacsi.org/index.php?option=com_content&task=view&id=27&Itemid=62); PBGC's FY 2006 Annual Management Report, Annual Performance Report section pages 23-31 (http://www.pbgc.gov/docs/PBGCAMR.pdf).

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: PBGC obtains the commitment of its contractors providing direct support (e.g., its Field Benefit Administration offices, auditors and actuaries) and those providing indirect support (e.g., information systems) to its annual and long-term goals. Additionally, PBGC regularly communicates its goals and priorities with its contractors to virtually the same extent that it does with its employees. Provisions in the scope of work for benefits administration service contracts specify performance measures, customer service standards and internal benchmarks, such as providing benefit estimates, placing applicants into pay status, and returning calls within 24 hours. PBGC and the contractors monitor these measures quarterly or as needed, and collaboratively implement improvements to achieve annual and long-term goals.

Evidence: FBA contract and workplan; PBGC Town Hall Meetings (http://intranet/news_events/townhall/sept2006.cfm); www.pbgc.gov (http://www.pbgc.gov/about/pledge.html); E-Mail notices (pdf) [All relating to disseminating information about goals and strategic planning for the corporation.]

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Evaluations on both a regular and as-needed basis have been performed and continue to be performed by independent and objective entities. One of the activities performed by the OIG in developing its annual audit plan is soliciting input from the Board of Directors and senior managers to identify the challenges facing PBGC. Since 2004, PBGC has improved its internal controls program, including development of a risk assessment process so that it is able to self-identify what changes are needed to its internal controls based on changes to PBGC's internal and external environments. A recent Information Technology Risk Assessment, conducted by KPMG consultants, identified challenges and opportunities. For example, management of data from a plan's IT systems presents a unique challenge for PBGC as the data quality varies from plan to plan, and one plan may actually contain subsets of other plans. Addressing the challenges in this study is anticipated to result in process improvement through integrated information systems, optimization of e-government, and implementation of standards for security, availability and privacy. In addition, PBGC currently has a benefits administration service delivery model study underway. Field benefit administration (FBA) offices are being independently evaluated for efficiency and effectiveness. The FBAs, a post-trusteeship risk assessment and an expanded plan asset audit are all part of the study. Results of this study will set the stage for PBGC's service delivery model going forward, i.e., paying benefits to defined benefit pension plan participants is the core of PBGC's mission, therefore, any changes towards more effective or efficient customer service are most likely to result in benefits to the entire corporation. The Pension Insurance Modeling System (PIMS) model that PBGC uses to quantify the amount of risk and exposure facing the program was presented at a Wharton conference in November 1996 and reviewed by a large group of econometric modelers. PIMS projects PBGC's potential financial position by combining simulated claims with simulated premiums, expenses and investment returns, and provides a useful snapshot of the long-term costs that face the agency.

Evidence: PBGC's FY 2006 Annual Management Report (http://www.pbgc.gov/docs/PBGCAMR.pdf); IT Risk Assessment by KPMG, January 2007; Annual Systems Security Review, September 2006; The Office of Inspector General Final Evaluation Report, "Evaluation of the Field Benefits Administration Concept", 2004 (http://oig.pbgc.gov/audit/2004/summaries/23178.html); OIG Semiannual Reports to the Congress (http://oig.pbgc.gov/). A. Ippolito and W. Ross, eds., "Pension Insurance Modeling System," Paper presented at the Wharton School for the Pension Research Council, November 1996.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: In formulating its annual budget request, PBGC assesses the impacts of policy, procedural, legislative, and automation changes on its workloads. PBGC's budget request explicitly identifies the funds to be used for administrative expenses, separate from its projected benefit payments to beneficiaries of retirement plans that it has taken over. Administrative expenses include all the direct and indirect costs incurred by PBGC. They exclude indirect costs outside of PBGC, such as the costs of DOL's Office of the Secretary. PBGC budgets based on its performance goals of providing timely benefit payments and conserving the assets available to pay pensions. Its ability to document the relationship between resources and its performance goals [not targets] is demonstrated in the proposed changes in its appropriations language in the FY 2008 President's Budget. The language includes a new contingency trigger to provide additional administrative funds to PBGC for unexpected, large retirement plan terminations. The additional funds provided under this trigger are based on PBGC's documented costs of providing benefits to terminated participants and of managing asset investment received as a result of new plan terminations.

Evidence: FY 2008 Performance Budget (Congressional Budget Justification), February 5, 2007 (http://www.dol.gov/dol/budget/2008/PDF/CBJ-2008-V2-02.pdf).

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: PBGC has made significant strides in improving its strategic planning by clarifying its planning governance process, and ensuring alignment with strategic goals, objectives and measures. PBGC has also aligned its strategic plan with its information technology (enterprise architecture) plan, its human-capital plan, and its budget process. Wherein PBGC had identified eight performance measures in the 2004 PART review, it expects to reduce the number of specific long-term measures it will monitor and report in the future to a few key ones that better reflect PBGC's programs. Although a financial management measure and target were not explicitly stated in the 2004 PART, a long-term goal is to have an unqualified (clean) opinion on financial statements. For the past 14 consecutive years, PBGC has achieved that goal. In 2007 and beyond, PBGC is adopting this as a long-term measure.

Evidence: Compare, Strategic Plans from FY 2004-2008 to the current draft Strategic Plan of FY 2006 - 2011, dated October 10, 2006 (pdf); Strategic Planning Manual(pdf).

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: While PBGC proactively gathers timely and credible performance information, PBGC does not effectively use this information to improve its performance. Monthly, PBGC collects performance information on its premium collection and pension benefit administration and payment activities electronically, which managers can access at their desktops and use to support process improvements. PBGC also devotes considerable resources to monitoring companies with underfunded defined benefit pension plans. As observed by the GAO in a recent report, PBGC maintains a full-time staff devoted exclusively to identifying macroeconomic, industry, and firm-specific risks that could jeopardize pensions. PBGC also relies on information from the Department of Labor, the Internal Revenue Service and the Securities and Exchange Commission, and obtains financial and actuarial information about certain companies, plans, and transactions under ERISA sections 4010 (annual reporting) and 4043 (reportable events). In 2005, PBGC enabled electronic reporting (e-4010) of actuarial and financial information by controlled groups with significantly underfunded plans or that have missed substantial amounts of required contributions to their plans. In the 2004 PART, a deficiency was noted because PBGC relied heavily on the Form 5500 for key data and those data were about 2 years old by the time they became available. This problem persists, but those data will be filed electronically beginning in 2009 and available to the agency faster as a result. These monitoring activities have resulted in positive outcomes that reduced PBGC's exposure and protected participants' benefits. As GAO notes in a March 2005 report, since 1992 PBGC's monitoring program has resulted in about 100 settlement agreements valued at over $18 billion that have protected the benefits of more than 2 million pension plan participants. However, PBGC does not fully utilize the information that it gathers to protect itself from risk or to adequately prepare for the expansion and subsequent contraction of the workload associated with pension plan terminations. While PBGC can monitor the plans that represent the largest exposure, PBGC does not engage in formal or informal enforcement actions against sponsors who do not adequately fund their plans. It can try to negotiate funding improvements or other protections, but it has no authority to enforce such actions. Also, the extent to which PBGC can accurately assess future claims is uncertain. Large plan failures - and a fluctuating workload - have put a strain on PBGC's infrastructure. As noted in an Information Technology Risk Assessment performed by KPMG in 2007, the management of the increase of plan information that PBGC has received in recent years has been a challenge for the Corporation. During FY 2005, PBGC requested five reapportionments for additional funds to manage their workload. These requests were not always linked to specific needs that could not have been anticipated during the normal budget formulation process.

Evidence: Corporate Performance Reporting System report for September 30, 2006; GAO, "Employee Benefits Security Administration: Enforcement Improvements Made but Additional Actions Could Further Enhance Pension Plan Oversight," GAO-07-22; Electronic Filing of 4010, PBGC Annual Report for FY 2005 (http://www.pbgc.gov/docs/05annrpt.pdf); Monthly Financial Reports; Annual ACSI Reports ((http://www.theacsi.org/index.php?option=com_content&task=view&id=27&Itemid=62); GAO, "Pension Benefit Guaranty Corporation: Structural Problems Limit Agency's Ability to Protect Itself From Risk," GAO-05-360T, March 2, 2005 (http://www.gao.gov/new.items/d05360t.pdf).

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: Senior level managers' performance standards directly link to short- and long-term goals in PBGC's strategic plan and measure their performance in meeting those goals, fully taking into account cost and schedule considerations. Performance standards for supervisors and mid-level managers require them to "develop work plans that are realistic and responsive to PBGC/unit goals" to achieve a "fully effective" rating. In 2004, PBGC was given full certification by the Office of Personnel Management for its executive performance system and received provisional certification in 2006 with the recommendation that PBGC focus on clear, transparent alignment of results-focused elements to specific organizational goals in each executive performance plan. All PBGC managers have recently revised performance standards directly tied to the standards of PBGC executives, which in turn tie directly to the Corporation's strategic plan, specific goals of the sub-organization, and OPM Executive Core Qualifications (ECQ). As a result, PBGC will apply for full re-certification. PBGC also holds contractors accountable for cost, schedule, and performance results. Each contract is assigned a Contracting Officer and a Contracting Officer Technical representative (COTR). The COTRs receive formal training on the development and administration of contracts, which includes monitoring of cost, schedules and achievement of performance results. For contracts supporting large projects, steering committees are staffed with PBGC Department Directors to monitor the day-to-day delivery and performance of the contracts. For contracts supporting program goals, metrics are included in the contracts and program managers monitor compliance with agreed upon metrics. When there is the appearance of a problem, COTRs coordinate with the Procurement Department to develop strategies for prevention or resolution. Decisions on contract renewals are heavily weighted by the extent to which the contractor met cost, schedule, and performance results on previous contracts. Following contract expiration, OIG contracts with the Defense Contract Audit Agency to perform "close-out" audits to ensure PBGC contractors have performed under the terms and conditions of the contract. Separately, PBGC's Contracts and Controls Department support the contract monitoring process with reviews to ensure compliance with contractual requirements. Finally, PBGC's Office of Inspector General oversees independent contract audits to ensure that billed costs are allowable, reasonable, substantiated, and consistent with contractual provisions.

Evidence: Senior Level and Supervisor/Manager Performance Standards; Monthly Status Reports of IT Projects; System Life Cycle Management (SLCM); Contract Audits, both pre- and post-award (see PBGC's intranet: http://intranet/finbudpur/contract_audits/types_of_contract_audits.cfm). BAPD's workplans (see BAPD's standard desktop icons On-Line Manuals; TP35 and for contractor reviews TP41). OPM letter to Stephen Barber dated October 5, 2006. Contracts audit reports are viewable upon request.

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: Financial systems and management oversight ensure timely and appropriate obligation of funds. Reports are generated and quarterly reviews conducted to help managers monitor obligations. As evidenced by the quarterly budget execution reports (SF-133), PBGC's administrative funds are obligated consistently with the overall program plan, and the Corporation has a 99% obligation rate at the end of the fiscal year. PBGC also verifies and approves a quarterly external audit report to ensure compliance with the fiscal year spending plan. The Budget and Planning Integration Team (BPIT) of senior managers reviews budget execution throughout the year to ensure obligations address corporate performance goals and operational priorities. PBGC has also conducted an assessment of improper payment risk and has concluded that its benefit payments, premium refunds, payroll and travel disbursements, vendor payments and other payment processes are not believed to be susceptible to significant improper payment risk. More specifically, PBGC reviewed a sample of retiree payments between October 2005 and July 2006, and the errors noted would not be considered erroneous payments under the Improper Payment and Information Act (IPIA). PBGC completes the required SF 132 apportionment with estimated quarterly obligations at the beginning of each fiscal year in compliance with A-11. The Budget Department reviews requisitions that exceed $500,000 and approves those as part of the approval and control process. PBGC has procedures in place to report actual expenditures. PBGC uses a requisition document to commit funds followed by the purchase order or contract to establish the obligation for payment. Obligations provide the level of budgetary controls necessary to monitor expenditures against the intended use. Obligation and expenditure reports are available by inquiry online at the department level. Whenever spending corrections are identified by departmental staff and submitted to the finance department, corrections are made immediately. PBGC's budget department also has a series of reports that are used to track expenditures against the intended use. In addition, the Budget and Planning Integration Team provides oversight of budgetary resources. PBGC recently hired staff to implement the Federal Procurement Data System - Next Generation (FPDS - NG), effective Oct. 1, 2007, to report contract awards promptly and accurately. The system will include data validation and verification. In conjunction with that effort, PBGC is currently installing Comprizon.Suite, an automated procurement system, which will enable this reporting.

Evidence: PBGC 2006 Annual Management Report, including external auditor's report on PBGC's internal controls (http://www.pbgc.gov/docs/PBGCAMR.pdf); Improper Payment and Information Act Risk Assessment Report for FY 2006; Report on Budget Execution and Budgetary Resources (SF-133); PBGC's "Quarterly Reporting Form for Controls over Financial Reporting, quarter ended 9/30/06; Budget and Planning Integration Team Charter, drafted March 9, 2007.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: PBGC continually looks for means to achieve efficiencies and cost effectiveness in its program activities. The Agency's efficiency measure, cost per participant in trusteed plans, serves as an important indicator of the efficient use of resources. Major projects are initiated through a senior level planning session, followed by business case development for inclusion in the Corporation's budget as well as reviews throughout execution. To carryout this process PBGC has a Capital Planning for Information Technology (CPIT) team for integration/compatibility review, a Budget Planning Integration Team (BPIT) review for budgetary impact as well as alignment with strategic goals and objectives, and an Operations Integration Board (OIB) that reviews project proposals for contribution to mission and conducts quarterly reviews of PBGC projects for resource and deliverables accountability. These management structures and processes result in a variety of approaches to more effectively and efficiently use contract and IT resources. Because PBGC's workload expands and contracts in accordance with the incidence of pension plans terminations, PBGC has developed formal guidelines for determining whether to contract or use federal staff, with relative cost being one of the factors. Examples of flexibility and savings include field benefits administration (FBA) offices, through which PBGC contracts for benefits administration services at various regional locations, and outside counsel contracts with law firms to assist in litigation. PBGC can readily expand or contract FBAs according to the need presented by terminating pension plans without the inflexibilities associated with a permanent Federal workforce. In the case of outside counsel, it can acquire local representation or special expertise as required to deal with active cases. PBGC's IT investments have also led to efficiencies: in the FY 2007 Congressional Budget, PBGC requested funding to cover the costs of replacing its current collection of independently developed and maintained financial systems. An integrated set of common financial applications will support the PBGC's goals relative to the improved financial performance component of the President's Management Agenda while reducing PBGC's cost of financial operations.

Evidence: Strategic Plan for 2006-2011; PBGC planning calendar, annual outcome measures; sample business cases for IT and business initiatives; OIB Directive GA 15-4, draft roles/responsibilities governance table; FY 2008 Budget, Efficiency Measure table on page 47 (http://www.dol.gov/dol/budget/2008/PDF/CBJ-2008-V2-02.pdf. PBGC Order GA-15-4, "Guidelines for Determining Whether to Use Contractors or Government Employees and Contracting with PBGC Retirees", dated May 31, 2006.

Does the program collaborate and coordinate effectively with related programs?

Explanation: PBGC works closely with related programs within the Federal government to facilitate the agency's administration of the defined benefit pension insurance system. In FY 2006, PBGC entered into a Memorandum of Understanding (MOU) with DOL and IRS that provides for sharing of information on specific plans and coordination of administrative or enforcement action in certain cases and PBGC staff began weekly communications with staff at Treasury, IRS and DOL. These communications have facilitated coordination on issues such as development and clearance of regulations, and certain case specific matters. The MOU coordination has been particularly helpful in the process of implementing the Pension Protection Act of 2006. In addition, collaborative programs established in earlier fiscal years continue to be in place, including Form 5500 data sharing with DOL and IRS; debt collection through the Treasury Department; safeguarding tax return information from the IRS; MOU with SSA to share salary and death information to expedite determining and paying pension benefits; assisting certain participants to acquire health insurance premiums. PBGC collaborates with Treasury, DOL and Commerce on regulations and legislation; works closely with DOL on fiduciary breach issues; and coordinates with EBSA and IRS on participant concerns about problems affecting ongoing plans and issues that may lead ongoing plans to terminate.

Evidence: Memorandum of Understanding among PBGC, DOL and IRS. Agreements with IRS, SSA and DOL; Health Coverage Tax Credit program.

Does the program use strong financial management practices?

Explanation: PBGC has received an unqualified (clean) opinion on its financial statements for 14 consecutive years. PBGC has also received a clean opinion on in its internal controls for most of the years over the same period, including the three most recent fiscal years. In addition, PBGC's external auditors concurred with management's assertion on its compliance with laws and regulations for those 14 fiscal years. The Corporation has met accelerated reporting deadlines and will continue to meet internal and external reporting requirements. Since 2001, PBGC's auditors have reported PBGC's need to fully integrate its financial management systems and enforce its systems development life cycle methodology. PBGC's 2006 Annual Report states that PBGC's weakness in this area means that "PBGC's ability to accurately and efficiently accumulate and summarize information required for internal and external financial reporting may be impacted." In FY 2006, the PBGC completed the first phase of a multiyear effort to consolidate and improve core financial management systems, and expects to complete corrective action by FY 2009.

Evidence: PBGC 2006 Annual Management Report, including independent auditor's report (http://www.pbgc.gov/docs/PBGCAMR.pdf); Independent Auditor's' Report on Internal Controls by Clifton Gunderson in 2006 and PriceWaterhouseCoopers in 2005 (http://www.pbgc.gov/about/annreports.html).

Has the program taken meaningful steps to address its management deficiencies?

Explanation: While PBGC has developed a number of systemic initiatives to proactively address broad management issues, PBGC has not made adequate progress toward addressing the deficiencies that place its information technology programs (which account for a significant percentage of its administrative expenditures) at risk. PBGC's audits since 2004 have noted a reportable condition in PBGC's implementation and enforcement of an effective information security program. PBGC's IT security is of significant concern given the high level of risk associated with pension payments and personally identifiable information. Weaknesses in PBGC's certification and accreditation (C&A) program impact the reporting of accurate and complete information required for PBGC to make credible, risk-based decisions related to production system operations. These weaknesses compromise PBGC's ability to accept and manage the risk to PBGC's operations, agency assets, and personnel. Also, PBGC's current information security policy and plan do not comply with standards and guidance issued by NIST in furtherance of its statutory responsibilities under FISMA. At the end of FY 2006, PBGC had five cases on OMB's Management Watch List, largely because of concerns about security. In the past, PBGC did not adequately budget for the security of its IT systems While PBGC has recently taken steps to implement corrective actions at the root cause of the audit recommendations, PBGC needs to demonstrate that it has developed a comprehensive approach to information and infrastructure security and develop a timeline for the remediation of the concerns highlighted in its 2006 Annual Report.

Evidence: PBGC's FY 2006 Annual Management Report (http://www.pbgc.gov/docs/PBGCAMR.pdf); FY 2005 Financial Statement Audit -- Management Letter [http://intranet/oig/audits/FY2005ml.pdf]; Human Capital Plan [http://intranet/human_resources/HumanCapitalPlan.pdf]; Gallup Q12 Survey Report [http://intranet/groups/gallup/PBGC%202006%20Q12%20Report.pdf]; Optimas Award news release (http://www.pbgc.gov/media/news-archive/news-releases/2006/pr06-31.html); IT Risk Assessment by KPMG, January 2007; Annual Systems Security Review, September 2006; The Office of Inspector General Final Evaluation Report, "Evaluation of the Field Benefits Administration Concept", 2004; OIG Semiannual Reports to the Congress (http://oig.pbgc.gov/)

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: PBGC is making notable progress in achieving its long-term goal for participant, retiree, and premium filer customer service. PBGC is introducing a new performance goal for its first strategic goal, but for its second strategic goal, customer service performance measures and targets move PBGC toward its goal of providing exceptional service to customers and stakeholders. PBGC has measured progress in achieving customer service goals since 1995 and, in 2001, began using the American Customer Satisfaction Index to measure and compare its performance to other federal and private sector entities. Overall, performance targets are ambitious and PBGC has maintained its satisfaction scores as its workload has expanded. Of the three customer service measures, PBGC has met and or exceeded the targets for two of the measures in the last 3-4 years. For Strategic Goal #3, efficiency goals (which are established through 2008) have been achieved every year since they were established in 2004.

Evidence: ACSI reports 2001-2006; PBGC Annual Report 2006; 2006 Annual Management Report http://www.pbgc.gov/docs/PBGCAMR.pdf; Pension Protection Act of 2006 (Public Law 109-280), Titles I, II, IV, and V. Deficit Reduction Act of 2005 (Public Law 109-171), Title VIII, subtitle B. FY 2008 Performance Budget (Congressional Budget Justification), February 5, 2007 (http://www.dol.gov/dol/budget/2008/PDF/CBJ-2008-V2-02.pdf)

Does the program (including program partners) achieve its annual performance goals?

Explanation: PBGC met or exceeded the 2006 target in one of the three customer satisfaction measures. Baseline survey results in 2003 for the retiree ACSI index indicated that PBGC was meeting customer needs in an exceptional way, scoring an 84. In fact, PBGC has consistently achieved high scores from retirees who receive benefits, scoring 85 against a target of 84 in 2006, and was the highest in federal government programs that pay benefits, PBGC's index climbed 4 points from 73 in 2001 to 77 in 2003, and 2 points over the next two years. During 2004-2006, PBGC experienced a tremendous growth in its workload caused by the terminations of many large underfunded pension plans (there were more participants in the plans PBGC trusteed from 2002 through 2006 than there were in the plans it trusteed from 1975 through 2001). PBGC was able to maintain its customer satisfaction scores while administering this increased workload. The 2006 participants' satisfaction score was 75 against a target of 80, and broke a four-year upward trend. Nevertheless, PBGC placed sixth among the government agencies that provide information and technical assistance to this customer segment. This score is comparable to private sector life insurance companies (score of 79 in 2006) also measured in the ACSI. Targets for premium filers are aggressive, however, performance has remained flat. Maintenance of the score despite mandatory electronic filing of premiums is a primary objective over the next few years through additional customer outreach, expansion of support programs and introduction of Web-based seminars.

Evidence: PBGC 2006 Annual Management Report (http://www.pbgc.gov/docs/PBGCAMR.pdf; ACSI Reports 2006 (http://www.theacsi.org/index.php?option=com_content&task=view&id=27&Itemid=62), (http://www.theacsi.org/index.php?option=com_content&task=view&id=147&Itemid=155&i=Life+Insurance). "Measuring Public Satisfaction with Government Agencies; Several Federal Offices Are Trying Harder, Survey Shows." Ann Hull. The Washington Post. Washington, D.C.: December 15, 2003. pg. A.29. PBGC Strategic Plan for FY 2006-2011 (pdf).

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: PBGC failed to reach its target for its efficiency measure - costs per participant in trusteed plans - in 2006. However, this ratio has actually dropped by 25% from 2000 ($263) to 2006 ($203), and missed its 2006 measure only slightly. PBGC has also shown progress in its efforts to reduce the amount of time it takes to determine the amount of participants' guaranteed benefits. Annual production of benefit determinations increased from about 20,000 in the early 1990s to at least 100,000 per year from 2004 on, reaching 137,000 in 2004, 178,000 in 2005 and 152,000 in 2006. This increased production lowered the average age of the determinations issued from 8 years in the early 1990s to 2.4 years in 2006. PBGC reengineered its process for participant appeals of benefit determinations, reducing the cycle time from 2-3 years down to 9 months, on average, in 2006 and eliminated a backlog of over 3,000 appeals. Ongoing continuous technological upgrades will enable PBGC to provide better and faster service to participants.

Evidence: 2006 PBGC Annual Management Report (http://www.pbgc.gov/docs/PBGCAMR.pdf); FY 2008 Performance Budget http://www.dol.gov/dol/budget/2008/PDF/CBJ-2008-V2-02.pdf; Corporate Performance Reporting System September 30, 2006 report. (Note: In previous years, PBGC had an additional efficiency measure??cost per participant in covered plans. PBGC discovered that this was not an effective measure because the number of participants in insured plans is static, whereas the administrative budget can fluctuate each year. This measure is related to the number of plans, rather than participants, and the number of legal and financial activities. It is also sensitive to economic fluctuations in asset liquidity. Therefore, PBGC is dropping this measure and maintaining the cost per participant in trusteed plans as its sole efficiency measure.)

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: PBGC is unique in its purpose and program. However, customer service is a key element of the program and PBGC can compare customer satisfaction with those services to other federal agencies with similar programs. In 2006, PBGC received the highest customer satisfaction score or 85 (tied with the Railroad Retirement Board) among all federal agencies paying retirement benefits. In comparison, this rating exceeds the 2006 score of 79 for the life insurance industry. However, in another key element of the program - insuring events that tend to be sporadic or catastrophic - PBGC does not compare well to programs such as the FDIC that operate in a similar high-risk environment with the potential for catastrophic losses. The PBGC lacks the authority, unlike the FDIC, to independently take steps mitigating those risks, and it lacks a reserve to cover catastrophic losses.

Evidence: American Customer Satisfaction Index results 2006 (http://www.theacsi.org/index.php?option=com_content&task=view&id=27&Itemid=62). GAO, "PBGC: Structural Problem's Limit Agency's Ability to Protect Itself from Risk," GAO-05-360T, March 2, 2006 (http://www.gao.gov/new.items/d05360t.pdf).

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: To a large extent, independent reviews confirm that PBGC is operating effectively, considering its structural challenges. In 2005, PBGC established an interdepartmental Internal Controls Committee to oversee testing of key internal controls involving financial reporting, technology controls and entity-wide controls. Reviews in 2006 included an Entity-wide Internal Controls review and an Information Technology Assessment conducted by KPMG consultants using the 34 IT Management Processes covered by the Control Objective for Information and related Technology (CoBIT) best practices for information management. That review identified challenges and opportunities. For example, management of data from a plan's IT systems presents a unique challenge for PBGC as the data quality varies from plan to plan, and one plan may actually contain subsets of other plans. Addressing the challenges in this review is anticipated to result in process improvement through integrated information systems, optimization of e-government, and implementation of standards for security, availability and privacy. In addition, at the request of management, a post-trusteeship risk assessment is currently underway, which is being conducted by an independent auditor and will include an inventory of risks associated with the trusteeship of defined benefit pension plans. The most recent internal control assessment provides assurance that, as of September 30, 2006, PBGC's internal controls were operating effectively and no material weaknesses were found in the design or operation of these internal controls. However, PBGC could benefit from additional evaluations that examine PBGC's management and operational structure in light of recent plan failures that have dramatically increased PBGC's workload. GAO is currently completing a report, due out in June, which will address the question of whether or not PBGC has adequate resources and is properly structured to handle the largest demands on services in its history. Additional evaluations could examine PBGC's operational structure in light of the risk of future plan failures; while PBGC's workload has stabilized, the failure of any single large plan could see PBGC's workload dramatically escalate once again.

Evidence: 2006 PBGC Annual Management Report (http://www.pbgc.gov/docs/PBGCAMR.pdf); Post-Trusteeship Risk Assessment; PBGC Entity-wide Internal Controls Review; IT Risk Assessment.