The CHAIRMAN. Thank you, Mr. Hast.

Now, Mr. Strauss. You might want to pull the microphone a little bit closer to you.

Thank you.

STATEMENT OF DAVID M. STRAUSS, EXECUTIVE DIRECTOR, PENSION BENEFIT GUARANTY CORPORATION, WASHINGTON, DC

Mr. STRAUSS. Thank you, Mr. Chairman. I appreciate the opportunity to respond. I am a notorious micro-manager, and so it is killing me not to be able to take each one of these items and respond to each with some specificity.

Mr. Chairman, I was grateful for the opportunity to meet with your staff for about an hour-and-a-half last week to go over many of these issues in much greater detail. And, because of your time constraints today, what I would like to do is limit myself to four points this morning. I have five charts here which I think will help us with some of the mind-numbing complexity. So my charts will probably be helpful in terms of answering some of these questions. The four points that I want to make, Mr. Chairman, are, first, I want to publicly apologize to Dr. Wilde for the way we handled his mother's case. She should not have had to go through this upsetting experience, and for that I am very sorry. And, Mr. Chairman, I want to assure you that shortly after Dr. Wilde's mother received that erroneous check in 1997, we fixed the glitch in what was then a new computer system to prevent this kind of error from ever occurring again.

Mr. Chairman, some of the details in Dr. Wilde's testimony about the phone calls to PBGC are very disturbing to me, and I want to assure you that I want to find out exactly what happened in each case and report back to you because I want you to know that in every office of the PBGC and every contract office, and you can go into the Waterloo office, you will see our service pledge posted on the wall. Calls are to be responded to in 24 hours. Letters are to be answered within a week, and I think that this has become an important part of our culture. And so, if there are problems with PBGC phone calls, that would be something that would be of great interest to me, and I want to assure you that I will investigate this personally and report back to the committee.

Second, witnesses at today's hearing have raised questions about specific contracts with the Integrated Management Resources Group. Mr. Chairman, I want to make two comments about these allegations. One, I would never tolerate, for one moment, the kind of conduct contained in these allegations, and I want the committee to know that. Second, over the last 3 years, the GAO, the Department of Justice, the PBGC's Inspector General and the PBGC's General Counsel have all conducted investigations and no one has been able to substantiate any of these allegations of misconduct. And so I want you to know that this is something that we have looked at for 3 years. I have looked at these procurements myself. I spent a day-and-a-half looking at each one of these procurements, and none of these allegations have been substantiated.

I want you to know that we continue to cooperate fully with all of these investigations. And, today, I am submitting for the record

a full report on this matter, which was prepared by PBGC's General Counsel.

Mr. Chairman, I want you to know that I remain confident in the integrity of our employees, and I am satisfied that we are correctly following the Federal Acquisition Regulation process. While I have not had the opportunity to see the OSI report released this morning, I welcome anything, any further review that will finally put these allegations to rest.

The third point that I want to make is to correct any misimpression from the earlier testimony that there is a delay in our participants receiving their benefits and that a delay in receiving these final determination letters has anything to do with our adherence to our ERISA statutory mandate, which is to provide continuous and uninterrupted benefits to each of the participants in these PBGC plans. Let me assure you that, when we take over a plan, we pay retiree benefits without interruption. And, as other participants become eligible for benefits, we pay them without delay. In other words, no participant ever has to wait to receive their benefits.

Mr. Chairman, I have attended almost 100 participant meetings and personally met with over 8,000 PBGC participants, and many of them are like Mr. Parks here. I mean, I have heard those same concerns, and I am acutely aware that the primary concern of these individuals is to receive their benefits promptly. And each month the PBGC pays over $75 million in benefits to more than 215,000 participants. As I explained in great detail in my written testimony, the benefit amounts participants receive are considered to be estimated. And before we can calculate final benefits, we must satisfy the requirements of ERISA by verifying all of the plan records and participant data. In most cases, as with Mr. Parks, and I am very sympathetic with Mr. Parks, there is little or no difference between the estimated benefit and the final benefit amounts.

The other misimpression that I want to correct is with regard to benefit estimates. Benefit estimates have been a passion of mine at the PBGC. And I want you to know that you can call us up, and we can give you a ballpark benefit estimate in 5 minutes. And so, if someone is 20 years away from retirement and we have just trusteed a plan, and they are wondering what the benefit might be, we can give you a ballpark benefit estimate in 5 minutes. If you are getting closer to retirement and it is important for you to have a precise benefit estimate, we now can provide those precise benefit estimates within 15 days.

Over the last 25 years, during the history of ERISA, obviously, technology has changed dramatically. We have much better technological tools now that help us to do these things. And I just want you to know that there should be no concern on the part of any PBGC participant about benefit estimates. You can get a ballpark one in 5 minutes. If you want a precise one, we can give it to you within 15 days.

My final point, Mr. Chairman, is that your committees, the PBGC's Inspector General and the GAO have made a number of recommendations over the past several years concerning PBGC benefit determinations, contract management and computer security. Mr. Chairman, we found these recommendations to be most

helpful. I am pleased to report to you that we have already implemented most of them, and we are following up on the rest. And as you know, Mr. Chairman, we have been reporting monthly to your committee on our computer security efforts. And as promised, we will complete our corrective action plan by September 30.

With that, I want to thank you, again, Mr. Chairman, for giving me an opportunity to appear this morning, and I welcome your questions.

[The prepared statement of Mr. Strauss follows:]

STATEMENT OF DAVID M. STRAUSS
Executive Director

PENSION BENEFIT GUARANTY CORPORATION before the

COMMITTEE ON SMALL BUSINESS
and the

SPECIAL COMMITTEE ON AGING

SEPTEMBER 21, 2000

EXECUTIVE SUMMARY

The Committees asked me to address three issues: PBGC customer service, contract management, and computer security.

PBGC Customer Service

The Committees have raised important questions about PBGC customer service, including the timeliness and accuracy of the PBGC's benefit determinations. I understand the Committees' concerns and I have tried to address them. Over the last three years, we have reformed our benefit determination process to accelerate the issuance of final benefit determinations and improve their accuracy. It is important to note that there is no delay in paying benefits to people when we take over a pension plan. We pay estimated benefits until we determine final benefits. For most people, there is no change between estimated and final benefit amounts.

In addition, soon after the PBGC trustees a plan, I often meet personally with plan participants. During the three years that I've been at the PBGC, I have attended almost 100 participant meetings -- virtually every meeting held since I became Executive Director -- and I personally met with more than 8,000 participants.

The PBGC's IG reported to the Committees on our past processing times. We agree with the IG that these past processing times were too long. However, we have significantly improved our operations and shortened the time it takes to issue benefit determinations, which the IG noted in his second report.

At the Committees' request, the GAO reviewed the PBGC's contract management. The GAO found that, while we complied with all legal requirements, there are areas where the PBGC can further improve its operations through better contracting procedures and monitoring. We agree and have already begun implementing the GAO's suggestions.

We have been working with the Committees on the PBGC's computer security efforts to protect participant records. We have enhanced our computer security to make sure that our electronic participant records and benefit information files are safe from misuse or compromise.