TITLE: B-307849, Pension Benefit Guaranty Corporation--Reimbursement for Financial Analysis Services, March 1, 2007
BNUMBER: B-307849
DATE: March 1, 2007
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B-307849, Pension Benefit Guaranty Corporation--Reimbursement for Financial Analysis Services, March 1, 2007
Decision
Matter of: Pension Benefit Guaranty Corporation--Reimbursement for
Financial Analysis Services
File: B-307849
Date: March 1, 2007
DIGEST
The Pension Benefit Guaranty Corporation (PBGC) may not retain a
reimbursement for financial analysis services associated with a request
for waiver from claims arising under title IV of the Employee Retirement
Income Security Act. Absent statutory authority to the contrary, amounts
received by government corporations are subject to the miscellaneous
receipts statute, 31 U.S.C. sect. 3302(b), and must be deposited into the
general fund of the Treasury.
DECISION
The General Counsel of the Pension Benefit Guaranty Corporation (PBGC)
requests an advance decision, asking whether PBGC may retain a
reimbursement for financial analysis services received from a major United
States corporation (MUSC).[1] Letter from Judith R. Starr, General
Counsel, PBGC, to David M. Walker, Comptroller General of the United
States, Apr. 25, 2006 (Starr Letter). We conclude that PBGC has no
authority to retain the reimbursement: the amount at issue may not
properly be characterized as a gift and PBGC has identified no
agency-specific authority to charge a fee for this purpose and to retain
the amount collected. Absent statutory authority to the contrary, the
miscellaneous receipts statute requires agencies to deposit moneys
received for the government into the federal Treasury. 31 U.S.C.
sect. 3302(b).
BACKGROUND
PBGC is a wholly owned government corporation charged with protecting the
pensions of American workers in single employer and multiemployer defined
benefit plans. PBGC was established by the Employee Retirement Income
Security Act of 1974, Pub. L. No. 93-406, 88 Stat. 829 (Sept. 2, 1974)
(ERISA), and its mission is:
"(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 . . ., and
(3) to maintain premiums established by [PBGC] . . . at the lowest level
consistent with carrying out its obligations . . . ."
29 U.S.C. sect. 1302(a). In discharging its duties regarding defined
benefit plans, PBGC performs two distinct functions, one of insurer and
one of trustee. See B-289219, Oct. 29, 2002; B-223146, Oct. 7, 1986;
B-217281-O.M., Mar. 27, 1985. In its corporate capacity, PBGC insures the
pension plans covered by the laws it administers. 29 U.S.C. sect. 1322,
1322a. To that end, PBGC has broad authority to promote the viability of
pension plans. For example, PBGC may bring a civil action against an
employer to enforce provisions requiring payment of premiums established
by PBGC. 29 U.S.C. sect. 1303(e). PBGC also has significant discretion to
undertake investigations. 29 U.S.C. sect. 1303(a).
ERISA also grants PBGC the power to serve as trustee for terminated
pension plans with unfunded benefit liabilities. 29 U.S.C. sect. 1322;
B-286026, June 12, 2001. When serving as trustee, "PBGC is treated as if
it were a private fiduciary acting on behalf of the [plan] beneficiaries
and possesses the same authority and duty to act as would a
nongovernmental party if it were appointed to that position." B-223146,
Oct. 7, 1986. When acting in that capacity, PBGC maintains broad authority
to protect the interests of plan beneficiaries and trust assets. 29 U.S.C.
sect. 1342. See B-223146, Oct. 7, 1986 (permitting PBGC to utilize trust
assets to enter a contingent fee arrangement with counsel hired to
represent PBGC as trustee of terminated plans); B-217281-O.M., Mar. 27,
1985 (permitting PBGC to obtain the services of investment managers
without regard to federal procurement regulations when acting as trustee
of terminated plans).
Intending to divest itself of one of its subsidiaries, the MUSC determined
that the value of the subsidiary would be diminished unless PBGC waived
potential claims against the subsidiary arising under title IV of
ERISA.[2] Starr Letter. The corporation contacted PBGC to request a waiver
of any such claim. Id. In order to decide whether to grant or deny the
waiver request, PBGC contracted for a sophisticated financial analysis of
the proposed transaction and waiver at a projected cost exceeding $2
million.[3] Id.
PBGC noted in its most recent annual report that "the agency is dealing
with a growing number of high profile risks . . . that involve
increasingly complex financial analyses and legal issues." Pension Benefit
Guaranty Corporation: 2005 Annual Report at 5, available at
www.pbgc.gov/about/annreports.html (last visited Feb. 13, 2007).
Generally, PBGC performs relevant financial analyses in-house. Hertz
Conversation. However, in the particular situation presented here, the
financial analysis was far more complex than that normally handled by
PBGC. Id. PBGC therefore contracted for the analysis. Id. The MUSC has
indicated that it will reimburse PBGC for that financial analysis.[4]
Starr Letter. PBGC plans to credit the amount received to PBGC's revolving
funds. Hertz Conversation. PBGC considers the financial analysis to be an
administrative expense, and thus subject to annual limitations imposed by
Congress.[5] Id.
DISCUSSION
At issue here is PBGC's authority to charge and retain a fee for financial
analysis services in relation to a request for waiver from claims brought
under title IV of ERISA. The miscellaneous receipts statute requires
federal agencies receiving money for the government to deposit amounts
collected into the general fund of the Treasury. 31 U.S.C. sect. 3302(b).
PBGC argues that as a wholly owned government corporation, it is not
subject to the miscellaneous receipts statute. Starr Letter. We disagree.
Although wholly owned government corporations like PBGC enjoy significant
financial flexibility relative to most agencies, we have held that
government corporations are subject to the miscellaneous receipts statute;
exception to the requirement that collected amounts be deposited into the
Treasury only applies if the government corporation has specific statutory
authority permitting retention. 52 Comp. Gen. 54 (1972) (Overseas Private
Investment Corporation has explicit statutory authority to deposit its
revenues into its accounts and thus did not have to deposit them into the
general fund of the Treasury as miscellaneous receipts); 5 Comp. Gen. 1004
(1926) (United States Shipping Board Emergency Fleet Corporation does not
have statutory authority to credit interest earned on appropriated money;
the interest must be deposited into the Treasury as miscellaneous
receipts). An example of explicit statutory authority allowing a
government corporation to keep receipts is 33 U.S.C. sect. 984(a)(10),
permitting the Saint Lawrence Seaway Development Corporation to retain and
reinvest toll revenues collected in the management of the seaway between
Montreal and Lake Erie.
We first considered whether PBGC has specific authority to retain a
reimbursement for the type of financial analysis services procured in this
case. Legislation establishing PBGC's revolving funds permits broad
retention of certain receipts, and section 4005 of ERISA permits PBGC to
credit to its revolving funds "receipts from any other operations under
[title IV]." 29 U.S.C. sect. 1305(b)(1)(G). ERISA's legislative history
identifies several forms of receipts, including "premiums, penalties,
interest, and other charges; employer liability payments; amounts borrowed
from the Treasury; and interest earned by fund assets." H.R. Conf. Rep.
No. 93-1280, at 5146 (1974). There is no discussion in the legislative
history, however, clarifying the language, "receipts from any other
operations." We asked PBGC whether it believes that section 1305(b)(1)(G)
permits PBGC to charge and retain a fee for financial analysis services.
PBGC declined to assert such authority from the statutory language.
While PBGC does not cite specific statutory authority, it cites two cases
issued by this Office to assert that the provisions of the miscellaneous
receipts statute do not apply to PBGC: B-223146, Oct. 7, 1986 and
B-217281-O.M., Mar. 27, 1985. Starr Letter. PBGC maintains that these
decisions reflect PBGC's "different posture [compared with] most agencies,
with respect to the general requirements of the Miscellaneous Receipts
Statute." Id. As explained below, because these decisions considered
PBGC's actions as a trustee rather than in its corporate capacity, they
are inapposite here.
The 1986 decision concerned a contingent fee arrangement that PBGC wished
to enter into with a private law firm. The firm agreed to represent PBGC
in its capacity as trustee for terminated plans in a suit against two
employers. B-223146, Oct. 7, 1986. We did not object to PBGC's proposal to
enter a contingent fee arrangement, because "the laws applicable to
expenditure of appropriated funds by wholly-owned Government corporations
do not apply to PBGC when it is acting in its trustee capacity." Id.
(emphasis added).
In 1985, we advised the chairman of the House Select Committee on Aging of
PBGC's authority to obtain investment manager services. B-217281-O.M.,
Mar. 27, 1985. Reasoning that PBGC "possesses all of the powers and duties
a private party would possess when serving as a trustee," we determined
that PBGC need not follow federal procurement regulations when contracting
for the services. Id. (emphasis added). However, we cautioned that when
PBGC acts as insurer of pension plans and utilizes its revolving funds,
PBGC may not be exempted from federal procurement regulations. Id.
The cases cited by PBGC are buoyed by a consistent theme: when acting as a
trustee of terminated pension plans, PBGC is granted broad authority to
serve the interests of plan participants and beneficiaries. That rationale
does not apply here. When contracting for the financial analysis at issue
here, PBGC acted in its capacity as insurer of defined benefit plans,
rather than trustee of terminated plans. It therefore may not sidestep the
provisions of the miscellaneous receipts statute simply because it is a
government corporation funded with revolving and trust funds.
Without explicit authority to charge a fee for financial analysis
services, the only remaining avenue by which PBGC may seek to collect the
reimbursement from the MUSC is application of the user charge statute. 31
U.S.C. sect. 9701. The user charge statute generally permits federal
agencies and wholly owned government corporations[6] to charge and collect
fees in exchange for the provision of services to individuals "when there
is no independent statutory source for the charging of a fee or where a
fee statute fails to define fee-setting criteria." American Medical Ass'n
v. Reno, 857 F. Supp. 80, 84 (D.D.C. 1994). Stating a public policy that
"each service or thing of value provided by an agency . . . to a person .
. . is to be self-sustaining to the extent possible," 31 U.S.C. sect.
9701(a), the user charge statute authorizes agency officials to prescribe
regulations to establish and define charges for distinct benefits
conferred upon distinct entities. 31 U.S.C. sect. 9701(b). The provision
requires charges assessed pursuant to its authority to be "fair," and
"based on[:] (a) the costs to the government; (b) the value of the service
or thing to the recipient; (c) [the] public policy or interest served; and
(d) other relevant facts." Id.
Federal court cases have further shaped the application of the user charge
statute. User charges are permitted "if there is a sufficient nexus
between the agency service for which the fee is charged and the
individuals who are assessed." Seafarers International Union of North
America v. United States Coast Guard, 81 F.3d 179, 183 (D.C. Cir. 1996).
More specifically, fees must relate to "specific charges for specific
services to specific individuals or companies." Federal Power Commission
v. New England Power Co., 415 U.S. 345, 349 (1974).
However, the user charge statute is not available to recover costs of
executing an agency's statutory responsibilities. See B-272254, Mar. 5,
1997 (Export-Import Bank, a government corporation, may not charge its
customers a fee to cover employee travel expenses); 61 Comp. Gen. 419
(1982) (Merit Systems Protection Board may not accept reimbursement for
hearing officer travel expenses from other agencies, employees, or
unions). "The inadequacy of [the entity's] appropriations to enable it to
carry out its function in a manner most economical to the Government as a
whole does not change the law." 61 Comp. Gen. at 422--23. PBGC considers
the financial analysis here to constitute the performance of "due
diligence regarding the MUSC's sale of one of its subsidiaries." Downey
E-mail. The user charge statute, therefore, is not available to collect a
reimbursement for the procured services.
Even if the user charge statute were to apply here, PBGC may not retain
the amounts collected pursuant to that authority. The user charge statute
provides agencies with the authority to charge fees for specific services
provided to distinct beneficiaries. However, the statute does not provide
any authority to retain fees. B-300826, Mar. 3, 2005; B-300248, Jan. 15,
2004. In fact, the statute instructs that its provisions "[do] not affect
a law of the United States . . . [directing] the disposition of [collected
amounts]." 31 U.S.C. sect. 9701(c). Instead, PBGC would be required to
submit those amounts to the general fund of the Treasury.
PBGC asserts that the financial analysis services that it procured
constituted an administrative expense paid from its revolving funds.
Revolving funds are appropriations, and consequently, the legal principles
governing appropriations also apply to revolving funds. 63 Comp. Gen. 110,
112 (1983); B-247348, June 22, 1992. The statute establishing PBGC's
revolving funds creates a permanent indefinite appropriation. 29 U.S.C.
sect. 1305. See B-197742, Aug. 1, 1986 ("[A permanent indefinite
appropriation] has no fiscal year limitations, there is no limit on the
amount of the appropriation, and there is no need for Congress to
appropriate funds to it annually or otherwise."). The principle underlying
the miscellaneous receipts statute remains consistent, whether an
appropriation is a permanent indefinite appropriation or annual
appropriation: augmentation of a permanent indefinite appropriation such
as a revolving fund is restricted in the same manner as augmentation of
other appropriations. Crediting a revolving fund with a particular type of
receipt not contemplated by the statute establishing the revolving fund
would result in an improper augmentation of that fund. B-271894, July 24,
1997. Without authority to do so, collecting the reimbursement for the
purpose of crediting PBGC's revolving fund would amount to an improper
augmentation of PBGC's appropriation.
We considered, also, whether PBGC's gift acceptance authority would permit
PBGC to retain amounts proffered by the MUSC. Government corporations may
be granted statutory authority to accept and retain gifts. See B-300218,
Mar. 17, 2003. Indeed, PBGC has such statutory authority. 29 U.S.C. sect.
1302(b)(5). However, PBGC's gift acceptance authority is inapplicable to
the reimbursement for financial analysis services at issue here. In
B-300218, the African Development Foundation (ADF) formed strategic
partnerships with Botswana, Namibia, Guinea, and the state of Jigawa,
Nigeria, whereby those governments agreed to share financial
responsibility for ADF development programs in their respective states.
B-300218, Mar. 17, 2003. Noting ADF's gift acceptance authority, we
recognized ADF's authority to retain and expend those funds collected from
the strategic partnerships. Id. In characterizing the monetary
contributions as gifts, we emphasized that the cooperating governments
received no consideration in exchange for their gifts. Id. PBGC does not
consider the proposed reimbursement a gift (Hertz Conversation); neither
do we. The reimbursement is to defray costs incurred by PBGC.
Finally, PBGC asks that we review its request for decision in light of our
decision in B-306860, Feb. 28, 2006, involving a settlement agreement
between the Office of Federal Housing Enterprise Oversight (OFHEO) and
Freddie Mac. Starr Letter. In the case cited, OFHEO brought administrative
charges against Freddie Mac and former executive officers for the undue
compensation of those officers. B-306860, Feb. 28, 2006. As part of an
agreement to settle charges brought against Freddie Mac, including a
dispute regarding adequacy of discovery production, Freddie Mac agreed to
pay the costs associated with formatting certain discovery documents in a
manner agreeable to both parties. Id. We found no improper augmentation of
appropriations, as the settlement agreement satisfied a prosecutorial
objective. Id. More importantly, "Freddie Mac [was] not defraying an
obligation of OFHEO." Id. The same rationale does not apply here.
Retention of the reimbursement paid by the MUSC to PBGC would serve to
defray an obligation of PBGC. A cost that would usually be borne by PBGC
would instead by borne by the company requesting waiver from title IV
liability. The holding in B-306860, therefore, has no bearing on our
decision here.
Absent statutory authority permitting retention of a fee, the governing
rule is the miscellaneous receipts statute, 31 U.S.C. sect. 3302(b), which
requires money received for the government to be deposited into the
general fund of the Treasury. B-272254, Mar. 5, 1997. Consequently, PBGC
may only retain the reimbursement for financial analysis services if it
has statutory authority to do so. We are not aware of any authority
permitting PBGC to retain the funds at issue, nor has PBGC identified any
such authority.
CONCLUSION
PBGC may not credit to its appropriation a reimbursement for financial
analysis services associated with a waiver request for claims under title
IV of ERISA. Absent statutory authority to the contrary, amounts received
by government corporations are subject to the miscellaneous receipts
statute, 31 U.S.C. sect. 3302(b), and must be deposited into the general
fund of the Treasury. PBGC has not identified any specific authority to
charge a fee for this purpose and to retain the amount collected. Should
PBGC think that the authority to charge and retain a fee like the one at
issue is important to the proper functioning of the government
corporation, we urge PBGC to seek that authority from Congress.
Gary L. Kepplinger
General Counsel
------------------------
[1] Our practice when rendering decisions is to obtain the views of the
relevant federal agency to establish a factual record and to elicit the
agency's legal position on the subject matter of the request. GAO,
Procedures and Practices for Legal Decisions and Opinions, GAO-06-1064SP
(Washington, D.C.: Sept. 2006), available at
www.gao.gov/legal/d061064sp-web.pdf (last visited Feb. 13, 2007). In this
instance, we engaged in a telephone conversation with PBGC attorneys
regarding authority to charge and collect fees, the nature of PBGC's
revolving and trust funds, and reapportionment of credited receipts.
Telephone conversation between Philip Hertz, Deputy General Counsel; Tim
Callaghan, Assistant General Counsel; and Bryan Downey, Attorney, PBGC;
and Thomas H. Armstrong, Assistant General Counsel; and Faisal Amin,
Attorney, GAO, Sept. 13, 2006 (Hertz Conversation). On a separate
occasion, PBGC responded to our questions regarding PBGC's enforcement
authorities under the Employee Retirement Income Security Act. E-mail from
Bryan Downey, Attorney, PBGC, to Thomas H. Armstrong, Assistant General
Counsel, GAO, Subject: GAO's Request for Additional Information, Nov. 21,
2006 (Downey E-mail).
[2] Title IV of ERISA concerns defined pension benefit plans and, inter
alia, plan termination insurance. See 29 U.S.C. sections 1301-1461.
[3] PBGC, in fact, did not waive or release any rights under title IV.
Downey E-mail. Nevertheless, based on its "due diligence" regarding the
sale, PBGC told the MUSC that it "did not have the grounds to terminate
the MUSC's pension plans pursuant to 29 U.S.C. sect. 1342 . . . or to
treat the sale of the subsidiary as a transaction to evade liability
pursuant to 29 U.S.C. sect. 1369." Id. PBGC's discretionary authority to
institute civil proceedings (29 U.S.C. sections 1303(e), 1342(a), 1369)
includes "the authority to decide not to bring an action." Id.
[4] The MUSC has not yet paid the reimbursement to PBGC. Hertz
Conversation.
[5] PBGC is subject to a complicated funding structure primarily involving
reimbursements using trust funds to credit expenditures made from
revolving funds. Hertz Conversation. PBGC's revolving funds are available
for expenditure without annual appropriations as long as expenditures do
not exceed available resources. 29 U.S.C. sect. 1305(b)(2); see GAO,
Pension Benefit Guaranty Corporation: Statutory Limitation on
Administrative Expenses Does Not Provide Meaningful Control, GAO-03-301
(Washington, D.C.: Feb. 28, 2003), at 26. Congress, however, imposes an
annual limitation on the use of funds for administrative expenses. See,
e.g., Departments of Labor, Health and Human Services, and Education, and
Related Agencies Appropriations Act, 2006, Pub. L. No. 109-149, 119 Stat.
2833, 2837 (Dec. 30, 2005).
[6] In the 1982 codification of the statute, the original statutory
language, "Federal agency (including wholly owned Government corporations
as defined in the Government Corporation Control Act of 1945)," was
replaced by the current language: "agency (except a mixed-ownership
Government corporation)." Pub. L. No. 97-258, 96 Stat. 877, 1051 (Sept.
13, 1982).