PBGC Company Profile Essay

PBGC is an abbreviation of a Pension Benefit Guaranty Corporation. The purpose of this federal corporation is to protect American’s pension. Its mission is related to protection: Forty four million American workers retirement income is currently being protected in more than 30000 benefit pension plans of private single-employer and multiemployer. Its formation is the result of an act of 1974 by the name Employee Retirement Income Security Act. It has the following objectives: First It helps private-sector define benefit pension plans to be continued and remain well maintained. Second is to provide pension benefits payment time to time, without any interruption. Its third objective is to keep minimum pension insurance premiums. The defined benefit pension plan gives pension on a monthly basis to the retirees but the pension amount is depended upon the salary and the year of services the retirees have rendered. The corporation does not only give monthly payments to retirees up to the guaranteed maximum but also the multiemployer plans participants and one who have not retired yet get financial assistance from it. General Tax Revenues don’t give any kind of fund to this corporation. Insurance premiums financed the operations of this federal corporation which was being set by Congress. Insurance premium is being paid by the sponsors defined for each benefit plan that are basically employers. The recoveries are being made from the companies which would be responsible for the plans in the past. Earnings come from investments for this corporation. According to the plan ended in 2008, workers will get $4,312. 50 monthly when they will get retire at the age of 65. It serves the range of customer’s e. g. general public, media and so on. Board of directors including the Secretaries of Labor (Chair), Commerce and the Treasury guided the operations of PBGC. The two highest priorities of this administration is to reform the defined benefit pension system and bring improvement in retirement security. It contributed in the development of Pension Protection Act of 2006. Since PBGC has worked over the last 33 years for the protection plan of participant’s interests and also to support private pension system’s growth; millions of American workers can now think about secured retirement along with their families. Both the benefit plan and the guarantee by PBGC have made a difference in the lives of the diligent Americans. Annually about $4 million is being given by this corporation to 44 million Americans. The development of the 2006 act not only improved the status of funding of many defined benefit plans but also pension system is being strengthened. Competitive advantage: The corporation has been very effective throughout in managing change over the past few years,’ pension insurance programs have faced many unexpected challenges. The corporation also won an award of managing its work force superbly in this changing business environment. The executive director said: â€Å"We are pleased to be recognized for having the right people, processes and systems in place to manage a doubling of our customer base with no diminution in the quality of our customer service. † (www. pbgc. gov,2008). It was being a first federal agency which got the full certification for its executive evaluation system. It got plenty of awards presented in magazines. These are as under: General Excellence, Service, Competitive Advantage, Global Outlook, Innovation, Managing Change, Financial Impact, Partnership, Ethical Practice and Vision. Weaknesses of PBGC: Weaknesses of PBGC’s certification and accreditation (C&A): This would impact the accuracy and completion of information which would affect the credibility of the corporation. It also affects the capability of the corporation to take and manage risks. It compromises agency’s personnel and assets too. There should be an effective C&A system to assure security of assets, personnel and operations and that could assure that the corporation is capable enough to meet its functional requirements. The National Institute of Standards and Technology Special Publication 800-37, Accreditation of Federal Information Systems and Guide for the Security Certification provides the framework under 2002 act named as the Federal Information Security Management Act, Public Law 107-347, for how C&A program of this corporation should be implemented. Inadequate security policy and plan: The security policy and plan of the current information of PBGC are not according to the guidance provided by National Institute of Standards and Technology Special (NIST) under Federal Information Security Management Act. NIST has developed guidance and standards. It also includes minimum requirement to provide sufficient security of information for all agency assets and operations Change in organizational structure: In 2006 the reorganization of the OIT i. e. ffice of information technology had badly affected the Information System Security Officer’s ability to ensure appropriate operational security for PBGC’s information system. It affected the clarity for officer in terms of his responsibilities and accountability. It made it hard for the officer to establish security standards and procedures. Internal control weaknesses: High risk is being involved in the PBGC’s single-employer pension insurance program. The program had an accumulated deficit of $5. 4 billion in 2003 which was the largest one in history of the corporation. Under funding also increased dramatically in private pension system. The deficit was due to the following reasons: bankrupt firm’s under funded pension plans were ceased, there was a drawback in funding rules, stock market and interest rates decline, companies went global and economy is turned into knowledge based economy. The company had taken steps to improve the internal control for premiums. This is being done for two reasons. First Safeguard of assets: controls must be establish to ensure that cost and obligation are according to the law applicable and assets are safeguarded against any loss or related factors. Second reason is Financial Reporting: it is to ensure that proper reporting is being done of all the revenues and expenditures so that documentation and reports can be made and are accurate. Data Quality Weaknesses: Incorrect data entry, adjustments, and system-generated balances generate errors. Because of the data quality issue, the corporation is unable to ensure the accuracy and completeness of premium data by utilizing Past Due Filing Notices and Statements of Account. The 1st one used to notify plans which had not yet submitted premium filings and 2nd one is used to ensure that underpaid/overpaid premiums from a plan sponsor could be sort out effectively. During auditing it was being noticed that these two tools are not being used timely as it requires significant resources before mailing. Due to this, premiums could not be collected and errors could not be detected. Additionally policies and procedures have not been documented, communicated, or implemented throughout PBGC which is related to the premium accounting cycle. www. pbgc. gov,2008). Business Strategy: The new investment strategy is being formulated to balance risk and return and to improve chances of reaching full funding over the long run. According to this strategy diversified set of fixed-income investments and diversified equity investments both will be given 45% of its assets each and 10% will be given to alternative investment. Financial Information: A deficit of $18. 1 billion was being posted by insurance program for single-employer pension plans in fiscal year 2006. Due to the airline relief provisions in the Pension Protection Act, the corporation managed to reduce its probable liabilities. This led to a $4. 7 billion net improvement. It announces maximum insurance benefit for 2009. The amount would be higher for those who retire later and vise versa. The corporation had a peak year in 2000 when they had a surplus of $10 billion almost which was followed by surplus of $8 billion in 2001. The corporation got the calls in order to stop charging premiums. It got around $9 billion claims in 2002. The claims were because of airline and steel industry. (www. soa. org, n. d. ).