The Pension Benefit Guaranty Corporation responded to a subpoena from a House committee addressing the repayment of a Special Financial Assistance Program overpayment to a multiemployer pension fund, saying the Department of Justice is working to recover the funds. The plan in question, the Central States, Southeast and Southwest Areas Pension Fund, accidentally received extra money in December 2022 based on the inclusion of deceased participants.
A PBGC spokesperson said, “For several months, PBGC has been coordinating with PBGC’s Office of the Inspector General, the Civil Division of the Department of Justice, and Central States to finalize the terms of an agreement that will include repayment of the $127 million from Central States. In testimony last week before the House Subcommittee on Health, Employment, Labor, and Pensions, PBGC Director Gordon Hartogensis gave a full accounting of how PBGC has fixed the problem and that PBGC will recover any funds attributable to deceased participants from the plans.”
Representative Virginia Foxx, R-North Carolina, the chair of the U.S. House Committee on Education and the Workforce, subpoenaed Hartogensis, the director of the PBGC, compelling him to turn over to the committee by April 9 documents related to the repayment of a $127 million overpayment of federal special financial assistance to the Central States pension fund.
In December 2022, Central States was granted $35.8 billion in assistance under the SFA program. The SFA program was created by the American Rescue Plan Act and enables the PBGC to provide grant funding to assist severely underfunded multiemployer pensions.
In July 2023, Central States and the PBGC discovered that $127 million, or about 0.35% of the grant, had been overpaid to the pension because 3,479 deceased participants were counted as active participants. According to both Central States and the PBGC, this mistake resulted from the PBGC not using the Social Security death master file when reviewing SFA applications.
The Central States pension had 13,546 participants at the end of 2022, according to its Form 5500. According to PBGC data, it applied for SFA funding on August 12, 2022, before being approved in December.
The PBGC began using the death master file for reviewing SFA applications in November 2023.
Hartogensis testified on March 20 to the committee’s subcommittee on Health, Employment, Labor, and Pensions that Central States was required to repay the money and was working with the Department of Justice’s Civil Division to that end.
Foxx’s subpoena requires him to provide documents and communications related to quantifying other potential overpayments to other plans; communications with Central States regarding collection; and communications with other agencies in the executive branch regarding collection, among other items.
The rule governing the distribution of SFA funds says that “SFA is subject to recalculation or adjustment to correct any clerical or arithmetic error. PBGC will, and plans must, make payments as needed to reflect any such changes in a timely manner. SFA is also subject to debt collection if PBGC determines that a payment for SFA to a plan exceeded the amount to which the plan was entitled.”
Tags: Central States, PBGC, SFA