PBGC Issued Erroneous Actuarial Estimates in 2010 Annual Exposure Report, OIG Says

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PBGC Office of Inspector General Management Advisory Report  

Key Focus: PBGC made errors in actuarial estimates in its 2010 Annual Exposure Report.

Key Takeaway: OIG recommends PBGC develop, document, and implement quality assurance review procedures.

By David B. Brandolph  

The Pension Benefit Guaranty Corporation reported an unrealistic present value of financial assistance payments for multiemployer plans in a fiscal year 2010 annual report, the agency's Office of Inspector General (OIG) said in a report recently posted to the agency's website.

In a management advisory report, dated May 21, OIG concluded that PBGC had issued its fiscal 2010 Annual Exposure Report with numerous errors and inconsistencies in both the multiemployer and single-employer sections.

OIG found that the errors occurred because PBGC's Policy Research and Analysis Department failed to establish a quality control or quality review process to ensure the integrity of reported actuarial estimates. PRAD develops policy for PBGC's insurance programs and conducts related research and modeling, OIG said in the report.

OIG said these errors demonstrated a “serious internal control issue that came to our attention during our review of a complaint received through the OIG's Hotline.” According to OIG, the whistleblower alleged that the present value of financial assistance payments for multiemployer plans in the exposure report was unrealistically low.

OIG later confirmed that the numbers questioned by the complainant were indeed incorrect and also that the exposure report included other unsupported and incorrect calculations.

OIG said PBGC was risking harm to its reputation by providing erroneous information in its Annual Exposure Report. Furthermore, OIG said PBGC should issue a corrected version of the report and ensure that it is sent to all who received the original and incorrect version.

Actions Recommended by OIG.

To ensure the quality of actuarial work issued by PRAD, OIG recommended that PBGC take the following actions:

• Develop, document, and enforce policies and procedures for quality review of PRAD actuarial work, whether in an issued report or in response to ad hoc inquiries.

• Develop, implement, and enforce policies to ensure the adequate and efficient review of contractor work performed with the agency's pension insurance modeling system and the retention of supporting documentation for work performed by PRAD actuaries and of all accepted actuarial contractor data received.

• Conduct a strategic review to address the processes involved in creating PRAD actuarial reports from start to finish.

• Conduct a records management review of PRAD to determine what records must be maintained as federal records.


Laricke Blanchard, PBGC's deputy director for policy, responded in an attachment to the report that the agency was committed to strengthening and documenting the quality assurance process and would post a corrected report on the agency's website.

However, OIG said that changes PBGC made last year, which the agency said were made to ensure that such errors do not recur, were “still quite limited in scope and would not likely prevent the recurrence of errors.”

By David B. Brandolph  

The full text of the report is at http://oig.pbgc.gov/audit/2012/pdf/PA-12-87.pdf.

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