Private Pensions: Timely and Accurate Information Is Needed to	 
Identify and Track Frozen Defined Benefit Plans (17-DEC-03,	 
GAO-04-200R).							 
                                                                 
While private-sector pensions help millions of Americans achieve 
retirement income security, the number of private defined benefit
(DB) plans1 has declined substantially over the past two decades.
Recently, those concerned with the viability of the private	 
defined benefit pension system point to significant increases in 
pension contributions plan sponsors must make and to the fact	 
that most plans are currently underfunded. The underfunding of	 
plans, due in large part to the sharp decline in the stock market
combined with a general decline in interest rates, has increased 
substantially. The Pension Benefit Guaranty Corporation (PBGC),  
whose single-employer insurance program insures the benefits of  
over 34 million workers and retirees in private defined benefit  
plans, estimated that the total underfunding exceeded $350	 
billion as of September 4, 2003. According to employer groups,	 
plan sponsors face inflated and unpredictable pension		 
contributions that have greatly diminished the attractiveness of 
maintaining DB plans. As a result, employer groups have suggested
that plan sponsors may consider freezing their plans rather than 
confronting the possibility of increased pension contributions. A
plan "freeze" could have adverse consequences for the retirement 
income security of participants because new employees are	 
precluded from participating in the plan, and current		 
participants might not receive additional benefit accruals.	 
Because timely and accurate information on plan freezes could be 
important in assessing the overall health of the private DB	 
system, Congress asked us to determine how many DB plans have	 
been frozen since 2000. 					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-200R					        
    ACCNO:   A09031						        
  TITLE:     Private Pensions: Timely and Accurate Information Is     
Needed to Identify and Track Frozen Defined Benefit Plans	 
     DATE:   12/17/2003 
  SUBJECT:   Employee retirement plans				 
	     Federal employee retirement programs		 
	     Retirement benefits				 
	     Retirement pensions				 
	     Strategic planning 				 
	     Income maintenance programs			 

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GAO-04-200R

United States General Accounting Office Washington, DC 20548

December 17, 2003

The Honorable Earl Pomeroy Ranking Minority Member Subcommittee on
Oversight Committee on Ways and Means House of Representatives

Subject: Private Pensions: Timely and Accurate Information Is Needed to
Identify and Track Frozen Defined Benefit Plans

Dear Mr. Pomeroy:

While private-sector pensions help millions of Americans achieve
retirement income security, the number of private defined benefit (DB)
plans1 has declined substantially over the past two decades. Recently,
those concerned with the viability of the private defined benefit pension
system point to significant increases in pension contributions plan
sponsors must make and to the fact that most plans are currently
underfunded. The underfunding of plans, due in large part to the sharp
decline in the stock market combined with a general decline in interest
rates, has increased substantially. The Pension Benefit Guaranty
Corporation (PBGC), whose single-employer insurance program insures the
benefits of over 34 million workers and retirees in private defined
benefit plans,2 estimated that the total underfunding exceeded $350
billion as of September 4, 2003.

Between 1999 and 2002, roughly 7,000 DB plans participating in the PBGC
singleemployer insurance program were terminated. PBGC trusteed, or took
over, about 5 percent of these plans because they did not have enough
assets to pay benefits due to participants. When PBGC takes over a plan,
participants may receive a reduction in expected retirement benefits.3

According to employer groups, plan sponsors face inflated and
unpredictable pension contributions that have greatly diminished the
attractiveness of maintaining DB plans. As a result, employer groups have
suggested that plan sponsors may consider

1Employers may sponsor DB and/or defined contribution (DC) plans for their
employees. DB plans promise to provide a benefit
that is generally based on an employee's salary and years of service. DB
plans use a formula to determine the ultimate pension
benefit participants are entitled to receive. Under a DC plan, employees
have individual accounts to which the employee,
employer, or both make contributions, and benefits are based on
contributions to and investment returns (gains and losses) on
the accounts.
2There are two federal insurance programs for defined benefit plans: one
for single-employer plans and another for
multiemployer plans. Single-employer plans provide benefits to employees
of one firm or, if plan terms are not collectively
bargained, to employees of several unrelated firms.
3The benefit PBGC pays to a participant whose plan has been terminated and
taken over by PBGC depends on the provisions of
the terminated plan and certain statutory limits that specify maximum
benefit payments among other factors.

freezing their plans rather than confronting the possibility of increased
pension contributions. A plan "freeze" could have adverse consequences for
the retirement income security of participants because new employees are
precluded from participating in the plan, and current participants might
not receive additional benefit accruals.

DB plan sponsors may vary the extent to which they freeze their plan. One
type of DB plan freeze, called a "hard freeze," stops all benefit
accruals. In this instance, all current employees who participate in the
plan receive no additional benefit accruals after the effective date of
the freeze. Also, employees hired after the freeze are prevented from
participating in the plan. Another type of plan freeze, called a "soft
freeze," stops benefit accruals based on years of service only. In such
cases, no additional years of participant's service with the sponsor are
included in participants' retirement benefit determinations after the
effective date of the freeze, but benefits still grow with increases in an
employee's compensation. Additionally, a plan sponsor may freeze the plan
for certain groups of workers only or close the plan to new participants.

While data are published annually on terminations of DB plans covered by
PBGC's insurance program, little is known regarding the occurrence of DB
plan freezes. The Form 5500 Annual Return is a primary source of public
information on tax-qualified private pensions.4 We previously reported
that while Form 5500 Annual Returns provide aggregate information, there
are concerns about the availability and quality of information reported on
these forms.5 Because timely and accurate information on plan freezes
could be important in assessing the overall health of the private DB plan
system, you asked us to determine how many DB plans have been frozen since
2000.

To determine how many DB plans have been frozen since 2000, we interviewed
officials at the Department of Labor (DOL), the Internal Revenue Service
(IRS), and PBGC regarding work the agencies have done in this area as well
as the usefulness of currently available information in identifying and
tracking frozen DB plans. In addition, we reviewed selected reporting
requirements and examined forms that plan sponsors must submit to DOL,
IRS, and PBGC. We also interviewed pension plan consultants with DB plan
sponsor clients and reviewed information they provided to us. We conducted
our work from August to November 2003 in accordance with generally
accepted government auditing standards.

Results in Brief

We could not determine the number of defined benefit plans frozen since
2000. Currently available public information cannot be used to readily
identify and track frozen DB plans. Officials at PBGC and DOL we
interviewed considered potential approaches to using Form 5500 filings to
determine how many DB plans have been frozen, and we found that such
approaches have limitations with respect to the accuracy and completeness
of the results. Consequently, PBGC requested that the

4The Department of Labor, in conjunction with the Internal Revenue Service
and PBGC publishes the Form 5500 to be used by
plan administrators and employers in order to satisfy their annual
reporting obligations under the Employee Retirement Income
Security Act and the Internal Revenue Code. Plan administrators must also
submit certain schedules, depending on the features
of the plan that accompany the Form 5500.
5U.S. General Accounting Office, Retirement Income Data: Improvements
Could Better Support Analysis of Future Retirees'
Prospects, GAO-03-337 (Washington, D.C.: Mar. 21, 2003).

2002 Form 5500 Annual Return collect information on DB frozen plans. This
information, however, is limited and will not be available until 2004. We
reviewed other reports and disclosures that DB plans must provide to the
government or participants, but determined that these are not useful in
identifying frozen plans. Publicly available information is of limited use
in identifying and tracking frozen plans in part because there is no
statutory definition of a DB plan freeze. Private surveys from benefits
consulting firms seek to estimate the incidence of DB plan freezes in
recent years, but the results reflect information from their clients only
and do not provide a clear and complete picture of plan freezes among all
DB plans. More complete and timely information on frozen defined benefit
plans could help assess the potential risks plan freezes pose to
participants' retirement income security and the viability of PBGC's
single-employer insurance program.

Because it is uncertain to what extent DB plan freezes pose risks to
participants' retirement income security and PBGC's single-employer
insurance program, we believe that additional steps are needed to collect
information on such plans and evaluate their potential consequences.
Accordingly, we are recommending that PBGC's Executive Director direct the
agency to identify, track, and analyze frozen DB plans on a pilot basis.

Background

The U.S. pension system is voluntary; employers decide whether to
establish a retirement plan and determine the design, terms, and features
of the plan or plans they choose to sponsor. To encourage employers to
establish and maintain pension plans for their employees, the federal
government provides preferential tax treatment under the Internal Revenue
Code (IRC) for plans that meet certain requirements.

The IRS, DOL's Employee Benefits Security Administration (EBSA), and PBGC
are primarily responsible for enforcing laws that govern private pension
plans. IRS enforces provisions of IRC that apply to tax-qualified pension
plans. EBSA enforces the Employee Retirement Income Security Act's (ERISA)
reporting and disclosure provisions and fiduciary responsibility
standards, which among other things concern the type and extent of
information provided to the federal government and plan participants. PBGC
insures the benefits of participants in certain tax-qualified
privatesector defined benefit plans. Insurance protection is provided for
certain DB plan participants in the event that a plan terminates with
insufficient assets.

DB plan administrators are required to file information annually with IRS,
DOL, and PBGC on the financial condition and operation of their plans.
This information is provided on the Form 5500 Annual Return and
accompanying schedules. The Form 5500 was intended, in part, to measure
employers' compliance with ERISA's fiduciary and funding provisions. The
Form 5500 provides information about the financial condition of the plan,
annual amounts contributed by participants, and the plan's income on
investments. The form also provides information on plan characteristics,
such as plan type (defined benefit or defined contribution), method of
funding, and numbers of employees, participants, and employees who are
excluded from the plan for various reasons.

The IRS also requires that plan administrators file information in certain
instances. For example, plan administrators must file certain forms that
disclose changes to the plan that the sponsor wants to make. These changes
include combining plans after a company merger or consolidation, or in
some cases when terminating a plan. PBGC requires that plan administrators
file forms that are used to report and pay their premiums to PBGC.
Sponsors of PBGC-insured single-employer plans generally must submit
information when certain reportable events occur, such as when there is a
reduction in the number of active participants or failure to make required
contributions to meet pension obligations.

ERISA established PBGC to pay the pension benefits of participants,
subject to certain limits, in the event that an employer could not. Under
ERISA, the termination of a single-employer DB plan results in an
insurance claim with PBGC's singleemployer program if the plan does not
have sufficient assets to pay all benefits accrued under the plan up to
the date of termination. If a single-employer DB plan terminates without
sufficient assets, PBGC takes over the plan's assets and is responsible
for paying benefits up to limits set by law to participants who are
entitled to receive them.6 For example, PBGC generally does not guarantee
annual benefits above a certain amount, currently about $44,000 per
participant at age 65. A plan sponsor may voluntarily terminate its DB
pension plan by meeting certain conditions, depending on the funded status
of the plan. When a fully funded single-employer plan terminates, the
benefits of participants are protected because the sponsor pays all
participant benefits accrued under the plan up to the date of
termination.7

Alternatively, DB plan sponsors may freeze their plan. A plan freeze
occurs when a sponsor amends its plan to cease benefit accruals
indefinitely in the future. Plan sponsors may implement a freeze for a
variety of reasons. PBGC guidelines on voluntary termination identify the
cessation of benefit accruals as an alternative to termination under
certain circumstances that sponsors may consider. A plan sponsor may
decide to freeze its plan when it is not fully funded and can no longer
afford the cost of the plan. For example, a sponsor may not be able to
voluntarily terminate an underfunded plan until it has enough assets to
cover benefit liabilities. Moreover, a sponsor facing financial strain may
not meet conditions for PBGC to step in and trustee the plan either.
However, a DB plan freeze may be temporary in some cases. For example, the
sponsor cannot or chooses not to fund additional benefit accruals for the
time being. Alternatively, a sponsor may freeze the plan when it
anticipates terminating the plan at some later date. In some cases, this
might mean that participants receive no further accruals from a DB pension
plan. However, not all plan terminations mean that participants lose
future pension accruals. For instance, pension sponsors might terminate a
plan due to a corporate merger and move participants into an already
existing DB plan. Similarly, a sponsor might terminate a DB plan to
replace it with another type of plan such as a defined contribution plan.

6PBGC receives no direct federal tax dollars to support the
single-employer pension insurance program. The program receives
the assets of terminated underfunded plans and any of the sponsor's assets
that PBGC recovers during bankruptcy proceedings.
PBGC finances the unfunded liabilities of terminated plans with (1)
premiums paid by plan sponsors and (2) income earned
from the investment of program assets.
7 When a single-employer DB is terminated in accordance with PBGC's
requirements and with enough assets to pay all of the
liabilities of the plan, the termination is referred to as a standard
termination. Plan sponsors typically terminate fully funded
plans either by purchasing annuities from a private sector insurance
company or making lump sum distributions to participants
that are no smaller than the present value of accrued benefits.

We recently designated PBGC's single-employer insurance program as high
risk because of its current financial weaknesses, as well as the serious,
long-term risks to the program's future viability.8 We reported that two
important risks could affect the long-term financial viability of the
single-employer program. First, the high level of losses experienced in
2002, due to the bankruptcy of companies with large underfunded
defined-benefit pension plans, could continue or accelerate. Second, PBGC
might not receive sufficient revenue from premium payments and its own
investments to offset the losses experienced to date or those that may
occur in subsequent years. Further, we highlighted factors that could
cause premium income received by PBGC's single-employer insurance program
to dwindle over the long term. For example, fixed rate premiums would
decline if the number of participants covered by the program decreases,
which may happen if plans leave the system and are not replaced. Moreover,
a decline in the number of plans PBGC insures could weaken its ability to
increase premium income in the future.

The Number of Frozen Defined Benefit Plans Is Not Currently Known

We could not determine the number of defined benefit plans that have
frozen since 2000. Currently available public information cannot be used
to readily identify and track frozen DB plans. PBGC officials told us that
they cannot reliably track such plans with currently available public
data, and DOL officials we spoke with concurred with PBGC's assessment.
Both PBGC and DOL considered approaches to estimate the number of frozen
DB plans using currently available Form 5500 data. However, upon review,
the agencies determined that such approaches were difficult to employ and
likely to yield incomplete and inconsistent results. According to the
officials at DOL and PBGC we spoke with, the approaches they examined
could only provide a rough estimate because such approaches are based on
indicators that could suggest characteristics associated with a plan
freeze. For example, DOL assessed its approach and determined that some
frozen plans could be missed and some ongoing plans could be erroneously
categorized as frozen. As a result, both PBGC and DOL officials we spoke
with told us that they would need to contact plans directly or find
supporting documentation in order to make a definitive determination
regarding the status of plans identified by the approaches considered.

In recognition of the need to obtain more definitive information on frozen
DB plans, PBGC requested the addition of an item to the 2002 Form 5500
Annual Return. The 2002 Form 5500 Annual Return includes an identifying
code that allows plan sponsors or administrators to indicate whether the
plan has been frozen for all benefit accruals (i.e., both service credits
and salary increases). Thus, information on plan freezes that becomes
available from the 2002 Form 5500 is limited to so-called "hard freezes."
The data will not provide information about plan freezes that freeze only
service credits for benefit accruals-so-called "soft freezes."
Furthermore, plan sponsors or administrators are not able to indicate
instances when the plan is frozen for certain groups of workers or closed
to new participants.9

8See U.S. General Accounting Office, Pension Benefit Guaranty Corporation
Single-Employer Insurance Program: Long-Term Vulnerabilities Warrant 'High
Risk' Designation, GAO-03-1050SP (Washington, D.C.: July 23, 2003), and
Pension Benefit Guaranty Corporation: Single-Employer Pension Insurance
Program Faces Significant Long-Term Risks, GAO-04-90 (Washington, D.C.:
Oct. 29, 2003).

9We previously reported on the delays and other problems associated with
the Form 5500. See U.S. General Accounting Office, Retirement Income Data:
Improvements Could Better Support Analysis of Future Retirees' Prospects,
GAO-03-337 (Washington, D.C.: Mar. 21, 2003).

PBGC also noted shortcomings with the timeliness of Form 5500 data for the
purpose of identifying and tracking frozen DB plans. Because 2002 Form
5500 data filings are first due 7 months after the end of the plan year
and because, on average, it takes over 6 months to process a Form 5500
filing at present, data from plans whose plan year began January 1, 2002
(plan year 2002) are not expected to be generally available until February
2004. At the time of this review, any approach using currently available
Form 5500 data would only capture few instances of plan freezes that
occurred after 2001. However, officials we interviewed suspected many of
the recent DB plan freezes occurred during 2002 and 2003. In addition to
being limited and delayed, the 2002 Form 5500 identifier may not result in
accurate information. For example, plan sponsors may not fully adjust
their reporting procedures to account for the new identifying code. Thus,
the data may initially result in a miscount of so-called hard freezes
because reporting errors are typically higher in the first year a new item
is added to the Form 5500.

Other reports and disclosures that plans must provide to the government or
participants about the plan's operation, financial status, terms, or
benefits do not specifically or readily identify frozen DB plans. The
reports and disclosures we reviewed include the premium forms that covered
plans submit to PBGC, the notice of reportable events submitted to PBGC,
Application for Determination for Employee Benefit Plan submitted to IRS,
and requirements under section 204(h) of ERISA. While events related to a
DB plan freeze may trigger certain reporting or disclosure requirements,
plan sponsors are not explicitly required to report to the federal
government or participants that they have frozen their plan in such
instances. For example, while a PBGC-insured frozen DB plan would be
required to submit the annual premium form, the form does not expressly
require the sponsor to indicate whether or not the plan is frozen.
Additionally, section 204(h) of ERISA requires plan sponsors to provide
notices to participants when they amend the plan in a way that results in
a significant reduction in either the rate of future benefit accruals or
an early retirement benefit or retirement-type subsidy, which would
include a plan freeze. However, plan sponsors are not required to furnish
these notices to the government nor are they specifically required to
declare the plan as frozen, even though the information contained within
the notice could describe changes to future benefit accruals consistent
with a plan freeze.

Publicly available information is of limited use in identifying and
tracking frozen DB plans in part because there is no statutory definition
of a DB plan freeze. We found few references to DB plan freezes within
existing laws and regulations applicable to private pensions. While ERISA
and IRS regulations delineate characteristics indicative of a plan freeze
in determining whether a partial termination has occurred, this reference
only applies to a limited set of frozen plans.10 Aside from this limited
regulatory reference and the new identifying code on the 2002 Form 5500,
there is no definition of a plan freeze within current law and
regulations. The lack of a statutory definition constrains the capability
of federal agencies in identifying and tracking such plans.

10A DB plan freeze that creates or increases a potential assets reversion
to the employer or employers maintaining the plan is deemed a partial
termination. See IRS Revenue Ruling 2003-65, IRS Bulletin 2003, and 26
C.F.R S:1.401(a)(26)-2(b).

Private Surveys of Plan Sponsors Indicate Occurrence of Plan Freezes, but
Results Are Limited

Surveys from benefits consulting firms indicate that plan freezes have
occurred in recent years, but such surveys do not provide a clear and
complete picture of plan freezes among all DB plans. Generally,
practitioners we spoke with from these benefits consulting firms
highlighted the role of current economic conditions on the funding status
of defined benefit pensions. They also noted an increase in the number of
DB plans freezing over the last few years. Some had surveyed their clients
to ascertain to what extent they had frozen or intended to freeze their DB
plan. For example, one consulting firm reported that 2 percent of plans it
surveyed had frozen benefits prior to 2001, and 13 percent implemented a
freeze since that time.11 Another private consulting firm conducted a
survey on their clients' DB plans and found that 15 percent of these plans
had frozen or reduced benefits for current employees, and 19 percent had
frozen or reduced benefits for new employees since 2000. While the results
of these surveys suggest that some plan sponsors have frozen or are
considering freezing their plans, they cannot be generalized to all DB
plans because they are drawn from a limited client base. Moreover, the
surveys we reviewed used different definitions of a plan freeze so their
results are not directly comparable. For example, one survey asked
questions broadly about actions plan sponsors had taken or intended to
take, including plan freezes along with other changes such as terminating
the plan.

Complete and Timely Information on Frozen DB Plans Could Help Assess the
Potential Risks to Participants and the PBGC Insurance Program

More complete and timely information on frozen DB plans could help assess
the potential risks that plan freezes might pose to participants'
retirement income security and the viability of PBGC's single-employer
insurance program. The impact on participant's retirement income is likely
to vary depending on the extent to which the plan is frozen and the
long-term result of the freeze. DB plan freezes may also increase risks to
the long-term health of PBGC's single-employer insurance program.

Because plan sponsors can freeze their plan in various ways, the risks to
participants' retirement income security can vary in part depending on the
type of freeze that the sponsor implements. Depending on the extent to
which benefit accruals are frozen, the number of participants whose future
benefit accruals are reduced will vary, as will the extent to which a
participant's future benefit accruals could be reduced. For example, a
hard freeze reduces expected future defined benefit accruals to a greater
degree than a soft freeze. Furthermore, a hard freeze affects all
participants and new employees, while a soft freeze may leave certain
participants unaffected.

The ultimate outcome of a DB plan freeze also affects the extent to which
workers may receive income from private pensions. For example, a frozen DB
plan may or may not be replaced with another pension plan at some later
date. If a frozen plan is terminated and replaced, the new plan could be
more or less generous in terms of providing future benefit accruals. Thus,
it could be important to examine the reasons any individual plan sponsor
might freeze. This is because they could potentially

11 Aon Consulting Alert, October 22, 2003. Aon's survey included more than
1,000 private-sector DB plans.

indicate whether the plan sponsor is likely to continue offering that plan
or a similar plan in the future, or whether the plan sponsor is likely to
significantly reduce pension benefits. Knowing the reasons why DB plan
freezes occur could help assess the likelihood that the affected
participants may or may not experience a significant reduction in expected
benefit accruals.

DB plan freezes could also increase risks to the long-term sustainability
of PBGC's single-employer insurance program. PBGC officials told us that
to the extent plan freezes are an early indicator of future terminations,
they may also be predictive of reductions in PBGC's premium revenue
stream. Furthermore, they said that anticipated problems with respect to
PBGC's ability to collect premium revenue might be understated because
plan freezes are not currently analyzed by PBGC. To be viable in the long
term, the single-employer insurance program must receive sufficient income
from premiums and investments to offset losses due to terminated
underfunded plans. Fixed rate premiums will decline if the number of
participants covered by the program decreases, which may happen if plans
leave the system and are not replaced. Frozen plans that are ultimately
terminated could lessen PBGC's ability to collect revenue premiums over
the long term.

The extent to which plan freezes pose risks to the sustainability of
PBGC's singleemployer insurance program, and the associated PBGC
liabilities are difficult to gauge because PBGC cannot identify and
analyze frozen DB plans with currently available public information. PBGC
officials indicated that DB plans might implement a plan freeze in a
variety of ways and for a variety of reasons. Because different factors
may precipitate a plan freeze, it is important to have information on the
extent of and the reason for the freeze so that the risks to participants
and PBGC can be adequately assessed. It is also important to track the
final outcome of a plan freeze. Whether a frozen plan will eventually
unfreeze, terminate, or remain frozen has different implications for the
risk facing PBGC. For instance, if a plan sponsor freezes an underfunded
plan, such action could help reduce or delay PBGC's exposure to
termination liabilities. While plans that unfreeze or remain frozen pose
no immediate risks, their eventual termination could reduce PBGC premium
revenue and if underfunded result in liabilities for PBGC.

Conclusion

The extent to which DB plan freezes pose risks to participants' retirement
income security and to the sustainability of PBGC's single-employer
insurance program is difficult to gauge with currently available public
information. Plan freezes lessen pension adequacy through the cessation of
benefit accruals for current participants and by preventing new employees
from participating in the plan. However, it is difficult to assess the
potential long-term impact of plan freezes on participants' retirement
income without information on the eventual consequences in such instances.
Additionally, while plans that unfreeze or remain frozen pose no immediate
risk to PBGC, their eventual termination could reduce premium revenue and
if underfunded, result in claims on the single-employer insurance program.

However, the federal government cannot systematically identify and track
frozen DB plans with currently available public information. Eventually,
the recent addition of an identifying code to the Form 5500 Annual Return
will provide federal agencies

with data on frozen DB plans limited to so-called hard freezes. However,
such initial information is likely to be of poor quality, and by the time
such information becomes available on frozen DB plans, it may well be out
of date. Hence, policymakers have incomplete information to formulate and
evaluate policies to ensure DB plans provide adequate and secure
retirement income.

Reliable and timely identification and tracking of DB plan freezes is an
important first step in obtaining the information needed to make sound
assessments regarding potential risks to participants and PBGC's insurance
program. PBGC intends to examine the potential for obtaining more detailed
and timely information on frozen plans without creating an undue burden on
plan sponsors. However, simply collecting and reporting information on the
incidence of plan freezes is not sufficient to gauge the associated risks.
A thorough examination of the factors that precipitated and the eventual
outcomes of DB plan freezes is needed to ascertain the extent to which
such instances pose risks to participants and PBGC.

Recommendation for Executive Action

To enable the federal government to determine the risks DB plan freezes
pose to participants and PBGC, we recommend that the Executive Director of
the PBGC direct the agency to conduct a pilot study to identify frozen DB
plans it insures and assess the usefulness of information on the
characteristics and consequences of plan freezes. The information PBGC
obtains from plan sponsors could help it assess the extent to which plans
are frozen, the eventual outcomes of plan freezes, and the likely
consequences on PBGC's single-employer insurance program and participants'
retirement benefits. The results of a pilot study could help PBGC
determine whether a regular data collection and analysis effort is
warranted and if an additional reporting requirement for plan sponsors is
needed.

Agency Comments

We provided PBGC with a draft of this correspondence for review and
comment. PBGC provided informal technical comments, which we have
incorporated where appropriate.

                                   _ _ _ _ _

We are sending copies of this correspondence to the Executive Director of
PBGC, the Secretary of Labor, the Secretary of Treasury, and other
interested congressional committees. Copies will also be available at
GAO's Web site at www.gao.gov.

If you have any questions concerning this letter, please contact me at
(202) 512-7215 or George Scott at (202) 512-5932. Jeremy Citro, Charles
Ford, and Gene Kuehneman also made major contributions to this
correspondence.

Sincerely yours, Barbara D. Bovbjerg

Director, Education, Workforce, and Income Security Issues

(130291)
*** End of document. ***