"But if we primarily view employers and participants through the lens of a potential adversary who needs to either pay more, or prove more to obtain their entitlement for a benefit, then we lose sight of the point that PBGC can only achieve success through the successes of those employers we serve and participants we protect." 

"This damaging and adversarial perception of PBGC held by plan sponsors is an area of great opportunity for PBGC to grow, if we can establish a partnership with the plan sponsors we serve," Donovan said. "We need to listen and adjust more based on what we hear."

Also read: Fear and loathing at PBGC 

Donavan said the PBGC's communications are too long, technical and "legalistic," and its inability to meaningfully communicate rationales for rising premiums is contributing to sponsors' decisions to "de-risk" their pension plans, meaning ending their defined benefit plans, typically in favor of a defined contribution plan. 

On the participant side, processes for handling actions that require "discretion and judgment" are elusive, she said, and often result in participants being ensnared in years of effort to obtain a benefit entitlement, as well as growing legal costs for sponsors. 

"The bottom line," she wrote, "is that PBGC actually pays benefits and collects premiums really well; however, when it comes to benefits administration or basic dialogue and fact-finding exchanges that could resolve an issue with a participant, plans sponsor, or their advisors, PBGC is often challenged." 

The report cites four issues specific to participants and four specific to sponsors. It also recommends a course of action to address each.

Participant Issues

1. Individual cases outside the "usual" need improved handling and attention

The PBGC handles everyday stuff fairly well. But participant advocacy groups say more unusual claims, as in the case of tracking lost benefits, often fall on deaf ears.

Tracking down those owed benefits is an "incredibly frustrating, slow, and painful process," according to the report.

Recommendation: Improve reporting obligations for terminated plans and require ongoing plans that provide lump-sum annuity payments to document beneficiaries to the PBGC. Also, establish a unit within the agency to specifically address more complex cases.

2. More regular consultation with participant advocacy groups

Sponsors and their advocates have regular access to senior PBGC officials. Though channels of communication do exist, the report says the level of dialogue with participant groups is not on the same level. 

Recommendation:  Improve detail and frequency of encounters with participant advocates, where mutual priorities are communicated, and advocates are made aware of the PBGC's agenda and process. 

3. More clearly communicating PBGC's short and long-term financial outlook to participant advocates 

The annual reports released each year by PBGC often leaves participant advocates with more questions than answers about what financial projections mean for funding requirements, or how they may affect participants. Advocates expect the confusion only to increase as more single-employer plans pursue de-risking options, and troubled multiemployer plans are subject to recently legislated reforms. 

Furthermore, at least on advocacy group — The National Retiree Legislative Network — is taking PBGC to task on how it estimates liabilities, claiming the agency's accounting methods create inflated deficits, and ultimately limit what portion of participants' benefits are guaranteed. 

Recommendation: Donovan did not recommend a specific course of action, but noted that one of the report's goals is to highlight that participant advocates want a more meaningful explanation of the agency's liabilities and how they're calculated. 

4. Addressing de-risking

Some participant advocates are calling for a moratorium on pension transfers until regulatory guidance can clarify risks to participants if they chose to take a lump-sum or stay in the plan. 

Recommendation: Again, the report offers no specific course of action, but says that in light of the growing de-risking trend, and participant advocates' mounting concerns, the importance of the issue needs to be highlighted at the highest levels of the agency's leadership. 

Sponsor issues 

1. Shifting to a less adversarial partnership with the plan sponsor community 

Sponsors say the PBGC is unresponsive to their efforts to demonstrate how stable their pension plans actually are, particularly with regard to 4062(e) actions, which assess penalties on sponsors when they shut down a facility, even if the shutdown improves the financial stability of the company, its credit rating, and ultimately its ability to meet pension obligations. 

Also, the agency is slow to respond to sponsors' inquires relating to multiple employer withdrawal liability and coverage questions, even when sponsors face deadlines for decisions that have major financial implications. 

Recommendation: In short: Listen. 

"When we hear that PBGC's enforcement actions are stopping company executives from engaging in business transactions for fear of triggering a 4062(e) event, or when we hear that a PBGC plan interpretation will lead to plan qualification and compliance issues and costly correction programs, and PBGC refuses to meet with the sponsor community to talk through this issue, that should lead us to pause and reflect on why we are here and who we serve," wrote Donovan. 

2. Enact long over-due reform of 4062(e) 

The report questions the entire legitimacy of the 4062(e) reg, that section of ERISA that requires sponsors of healthy pensions to pay a penalty when they cease operation of a facility. 

The report says there are no demonstrated results that show any 4062(e) payments ever reach participants. In bold letters, the report states, "the statue governing 4062(e) primarily focuses on PBGC rather than on the protection of participants' benefits." 

In fact, in at least two cases that the agency touted as 4062(e) success stories for participants, the companies in question announced their intention to de-risk their pension plans. The report suggests the decisions to do so directly related to 4062(e) actions taken by PBGC. 

Recommendation: The PBGC need to learn from those lessons, and do a better job of finding middle ground with sponsors who determine that closing a portion of their business ultimately makes their company healthier. Specifically, PBGC's Office of Chief Counsel should report directly to the Office of the General Counsel on such matter, which the report says would assure greater independence of how 4062(e) is enforced on a case-by-case basis. 

3. The PBGC's actuarial practices inflate sponsors' liabilities, costing them higher premiums 

How the agency comes up with its financial projections is a long-standing concern for plan sponsors. They argue that premium increases have little to do with recently improved figures and that any deficits in the agency's single-employer program will ultimately fade away with continued economic improvement and growth, and that increasing premiums is wholly unnecessary. 

Recommendation: No specifics are offered, but Donovan writes that she is "sharing these comments here in the hope that the advocate can contribute to the discussion between PBGC, the plan sponsor community, and other appropriate stakeholders, to help facilitate a deeper sense of acknowledgement and engagement on the fundamental financial challenges facing PBGC and the premium payers who sponsor defined benefit plans." 

4. Pension funding volatility must be addressed

A growing number of sponsors complain that year-to-year volatility in their premium assessments are creating a huge disincentive to maintain defined benefit plans.

"Skyrocketing premium costs which seem to be tied to no comprehensive retirement policy whatsoever, combined with automatic-like premium penalties for honest mistakes, are driving sponsors to de-risk and enhance benefits payable under their defined contribution plan to serve as the mainstay for their workers' retirement security," wrote Donovan.

Recommendation: Sponsors are not out to "cheat" the government or "scam" the system, according to the report. They would welcome a dialogue to make compliance less punitive and more constructive.