US Overpaid Teamsters Pension Counting Dead Participants

The federal government overpaid one of the nation’s largest union-backed pensions by more than $127 million in bailout cash because it failed to detect dead participants the plan had reported, according to a new watchdog memo.

Bloomberg Law

A review by the Pension Benefit Guaranty Corporation’s Office of Inspector General found the government’s private-sector retirement plan insurer didn’t cross-check deceased participants the Central States Pension Plan reported in its application for special

financial assistance funding.

As a result, the plan’s $36 billion payout last year accounted for nearly 3,500 participants who are deceased.

President Joe Biden‘s massive multiemployer pension plan bailout was an early legislative victory in his first term, intended to rescue plans on the brink of collapse until at least 2051. The Teamsters plan representing more than 350,000 workers and retirees has been the poster child for distressed plans unable to recover in the wake of the 2008 financial crisis.

The OIG’s revelation is a major hiccup in what’s expected to be an $80 billion rollout, already more than halfway complete. PBGC only started auditing death records in July after a earlier OIG report indicated that it could be counting dead participants. Even then, officials only reviewed terminated vested participants, not active and retired workers.

“We weren’t satisfied with that,” PBGC Inspector General Nicholas J. Novak told Bloomberg Law. “It reflected the letter but not the intent of the recommendation.”

The OIG management alert, issued Wednesday, found that PBGC should have compared the Central States audit of deceased participants with the Social Security Administration’s Master Death File, which contains a more accurate and reliable database of private-sector pension plans.

It’s unclear how much money the agency overpaid other plans as a result of not cross-checking death records before July. Novak said his office is conducting a more thorough review. Already, the agency has allocated more than $50 billion, according to agency records.

The agency had access to the master death file data since the program started, and Novak said he doesn’t know why PBGC officials didn’t use it. The agency routinely uses the entire file in its other insurance programs, the report states.

When the OIG asked officials why, they said the final rule setting the special financial assistance rules and procedures didn’t require it, according to the report.

“This was true, but the Corporation wrote the Final Rule, designed its SFA procedures, and knew it had access to better data on deceased participants than plans did,” the report states.

It was imperative that the OIG alert PBGC officials of the Central States overpayment, because not conducting complete audits required “immediate attention and remediation,” the report added.

‘Hefty Amount’

The overpayment amounts to less than half of 1% of the total amount of special financial assistance Central States received, but it’s more than half as much money as the agency allocates to insolvent multiemployer pension plans in a normal year, not accounting for the Treasury-backed bailout program.

“In the inspector general world and in the world of government taxpayer money, $127 million is a large amount—it’s a hefty amount,” Novak said.

PBGC issues SFA funding to plans not participants, so neither the 3,500 deceased participants nor their families directly benefited from the overpayment.

The $127 million estimated overpayment accounts for death benefits some Central States beneficiaries are due or already receive. The figure represents money the plan received under the false premise that thousands more workers are still alive.

Failure to compare death records has been a stumbling block for government agencies going back decades, from the US Treasury Department issuing $1.4 billion in stimulus checks to dead people in 2020 to deceased farmers receiving $22 million in crop subsidies from the US Department of Agriculture.

The overpayment caught the attention of Rep. Virginia Foxx (R-N.C.), who heads the House Committee on Education and the Workforce.

“Has PBGC asked for the $127 million back? We plan to find out. This development, and the entirety of the Inspector General’s final report, are downright appalling,” a statement from the lawmaker on Thursday said.

For now, PBGC won’t initiate recovery actions against Central States or any other plans that received overpayments, as the agency was acting in accordance with the rules it had written and standard operating procedures when the money was allocated, according to a PBGC spokesperson. Even the OIG reached that conclusion in the June 12 white paper that triggered the first audits in July, the spokesperson said.

But Novak said his office reached that conclusion because PBGC officials told him “they don’t have a mechanism in place” to return the money.

“We’re looking into it,” he added. “That’s a lot of taxpayer money on the table.”

He said he doesn’t fault Central States for the overpayment. The plan has been “more than cooperative” helping calculate the estimates his office used and continues to work closely with OIG staff, Novak said.

A PBGC spokesperson said the agency has worked with OIG to implement its latest recommendations.

“As it has previously, PBGC continues to collaborate with the OIG to improve data collection and accuracy and ensure sound program management of the Special Financial Assistance Program,” the agency said in a statement responding to Bloomberg Law’s request.