The government will begin making spot checks to ensure that companies are notifying employees if the firms have failed to put enough money in their pension plans.
The Pension Benefit Guaranty Corp., an arm of the Labor Department, said Thursday that this month it will begin surveying a cross-section of companies with large underfunded pension plans to determine whether they have complied with provisions the 1994 Retirement Protection Act.
Under that law, companies with plans that are less than 90% funded must provide workers and retirees with an easy-to-understand notice on the funding level of their pensions and what rights they have under federal pension plan insurance.
“Protecting pensions and worker retirement savings is one of our highest priorities, and this is another step in that effort,” Labor Secretary Robert Reich said in announcing the spot checks.
Pension Benefit Guaranty’s announcement comes a day after Reich revealed details of a six-month amnesty period for companies to repay millions of dollars improperly withheld from their workers’ 401(k) plans.
Officials said the PBGC will select a sample of about 600 plans and ask their administrators whether they have sent out the notices and to supply a copy of that notice to the government.
“For most people, pensions are the main source of retirement income,” said Martin Slate, executive director of the PBGC. “It is important they know how well their pension plans are funded.”
Under the 1994 law, the notifications from large underfunded plans should have started going out last December. The PBGC said about 3,000 large plans, those with more than 100 participants, should have sent out their notices at that time.
The agency said about 3,000 small plans, those with 100 or fewer participants, will be required to start distributing their notices later this year. Together these plans cover about 4 million workers and retirees.
These underfunded plans are part of 58,000 private-sector pension plans covering 41 million Americans that fall under PBGC jurisdiction. The PBGC is a federal corporation created in 1974 to collect insurance premiums from companies that sponsor pension plans and use those funds to guarantee payments of basic pension benefits.