Statement of Thomas Parks

Let me open by enunciating that I have no interest in attacking individuals nor in negatively complicating the lives of anyone at the Pension Benefit Guaranty Corporation (PBGC). My sole motivation is to illuminate perceived indicators of past problems with and within the PBGC, so as to hopefully benefit what I suspect are probably thousands of retirees highly dependent upon the PBGC functioning more expediently.

That philosophy was enunciated in my letter to the PBGC of April 3, 1996, after which approximately four and a half years elapsed before my situation was finally resolved in August 2000. That "final determination", incidentally, came after approximately eight years after the PBGC was made aware of their need to become involved. In that April 1996 letter I stated:

"My experience suggests to me that problems of this nature reflect much greater problems "at the top". This does not necessarily mean at the supervisory level, it may be a funding issue or something comparable and equally difficult to resolve.

For that reason alone I am writing to you to ask that (1) my unanswered letters be answered and my "case" resolved with rational expediency and (2) that you allow me the benefit of your insight into the overall question before I take this matter up with others who I'm reasonably certain will act."

To that April 1996 I attached a April 3, 1996, fax to the PBGC in which I recited a litany of mistakes, some of which involved my receiving without explanation a substantial check drawn on a bank other than that which the PBGC had indicated would be transmitting funds and against a company pension plan unrelated to me in any way. Subsequently, I received another check duplicating the amount of the first check, drawn upon the correct PBGC bank. I returned these funds to the PBGC via a certified check.

Like other communications with the PBGC, these received no clarifying response. Instead, on April 8, 1996 I received a request for documents that duplicated documents first supplied November 27, 1995. Subsequently (May 30) I received a surprising telephone inquiry from the PBGC asking if I could illuminate the cause of errors that were obviously internal to PBGC and about which I was understandably uninformed. My May 30, 1996 response simply reiterated details previously supplied.

Following months of a frustrating absence of any closure on questions and issues put before the PBGC, in January 1997 I requested the assistance of Congressman Jim Leach. In my judgement, the initial response to the Congressman's office was evasive and of little assistance, except to confirm that some undefined action was in progress. Subsequently, in a letter dated February 3, 1997, a full five years after the applicable pension plan been terminated with the PBGC's involvement and one and a half years after my retirement and filing for benefits, the PBGC confirmed their appointment as Trustee (which had actually happened six months previously).

The PBGC then (February 1997) proceeded to send auditors to my former employer's office to audit materials readily available from Aetna from 1992 forward. Nothing further was heard from the PBGC until nearly eight months later, when the PBGC telephoned my employer's former Plan Administrator, asking questions previously answered many times and suggesting that the PBGC had "misplaced" applicable files and were "temporarily stymied".

Consequently, on November 12, 1997, I requested assistance from the Office of Senator Charles Grassley and provided that office with a detailed recap of pertinent communications with the PBGC extending from September 1991 (six years). That communication and attachments are included herewith as a matter of record.

The PBGC on December 19, 1997, responded to Senator Grassley, stating among other things, that "our processing schedule calls for final benefits to be calculated by the end of 1998", which actually did not occur until August 2000. In this response the PBGC expressed concern over the "length of this process" and further stated that their Problems Resolution Officer had been asked to monitor my case "to ensure that it stays on track”.

I regret having to add to this litany of problems the fact that the "final determination" letter ultimately received on August 14, 2000 was found to be incorrect ans was superceded by what I presume is the ultimate final determination letter dated August 18, 2000. In all fairness I must add that this error was found by the PBGC without input from me and that they acted quickly to make the necessary corrections.

This quick action appears to suggest that some internal improvements have taken place within the PBGC, but this appearance of improvement is so recent that I am hesitant to rely upon that impression.

The fact remains that eight long years were consumed in the process between when the PBGC first became involved and their final determination of my case (number 149030). During much of this time I was uncertain as to benefits due me and aware that upon "final determination" I might have a partial repayment obligation rather than an increase in the monthly interim payment being received. These interim payments began at $1006 in May 1996 and were provisionally adjusted upwards to $1257 in February 1998. In their "final determination" letter the PBGC advised that my final entitlement would be increased by $0.83 to $1257.83.

Your attention is drawn to Attachment 1 to my November 12, 1997 letter to Senator Charles Grassley. That attachment, dated June 4, 1992, authored by my former employer's Pension Plan Administrator, states that upon my retirement my benefit payment will be $1257.88, only $0.05 variance from the number determined by the PBGC to be applicable, after years of expended

resources.

When one compares the years and resources consumed to arrive at such an insignificant change, it is difficult to make a positive comment, even given that I do have an appreciation for fiscal and

accounting procedures which might justify such a modest adjustment. The 1992 estimate authored by my former employer's Plan Administrator was not mere speculation. It was predicated upon the facts that Aetna's actuaries had monitored and reported upon the applicable plan benefits for many years. Additionally, in compliance with Department of Labor requirements, the company's plan numbers and Aetnas had been audited and verified annually by auditors such as Price Waterhouse and Arthur Anderson.

The PBGC's refusal to work with this certified data and thus save years of expensive efforts, only to essentially arrive at an identical conclusion, appears to reflect that other situations possibly surfaced unsatisfactory detail. However, to consequently adopt an attitude that "one rule or experience fits all" is tunnel vision causing corporate and human misery best avoided by working with more commonly accepted business practices. My decades of experience working for and operating small businesses dictates a strong position opposing waste.

I have also held management positions in Fortune 500 companies and can attest that their ability and resources to deal with such problems are more in tune with these bureaucratic procedures, which have the potential of crushing small businesses. In most cases where one rule or procedure is assumed applicable to all businesses, small or large, the small company operates at a distinct disadvantage.

In summary, the delays and absence of communication over many years perpetuated uncertainties and prolonged determination of benefits to which I am entitled. I am fortunate that my financial survival was not at stake, but I suspect that many others suffering this treatment are greatly injured or, at best, highly insecure.

As I reflect upon this experience I am led to speculate that the root problem is or was a lack of adequate resources to cope with a crescendo of plan failures during the 1990's. If that is the case, the fault rests not with line personnel but, rather, with top management or funding sources, or both, for having failed to recognize the magnitude of the needs.

The CHAIRMAN. Thank you, Mr. Parks.

Now, Ms. McHenry.

STATEMENT OF BONNE MCHENRY, FORMER PENSION BENEFIT GUARANTY CORPORATION CONTRACT EMPLOYEE,

MERRIMACK, NH

Ms. MCHENRY. I, Bonne Ann McHenry, respectfully submit the following testimony on September 21, 2000, before the Senate Special Committee on Aging and the Senate Committee on Small Busi

ness.

I worked for Integrated Management Resources Group, Incorporated, IMRG, as a Senior Pension Administrator for the Atlanta PBGC office. My testimony is based on my experiences and observations. Since I was a member of the Pan American Cooperative Retirement Income Plan-Pan Am CRIP-team for most of this time, I would like to address the process, timeliness and accuracy of the issuance of these Initial Determination Letters.

An Initial Determination Letter, IDL, is a communication to a participation in a PBGC-administered defined benefit pension plan that states the amount of his or her benefit at normal retirement age. If the participant is already receiving a pension, an IDL confirms or refutes the amount that is being paid. An IDL is the most important document that the participant will receive from the PBGC because a participant who disagrees with PBGC's determination cannot appeal PBGC's decision until an IDL is issued. In other words, PBGC prevents participants from appealing any disputed benefit amount by simply failing or refusing to issue an Initial Determination Letter.

Those participants who believe they are entitled to a higher benefit, must put their financial future on hold because the major source of income from their pensions is uncertain. If a participant does not respond to his or her IDL within 45 days, the right to appeal is lost. The Pan American World Airways Cooperative Retirement Income Plan was frozen on December 31, 1983, and the company filed bankruptcy and this plan was retroactively terminated on July 31, 1991.

In my view, and based upon my experience, there was no justification for the delays in providing IDLs to the Pan Am participants. When I began working at the Atlanta PBGC office, over 7 years after PBGC assumed responsibility for this plan, the majority of the 20,000 participants in the CRIP plan had not yet received an Initial Determination Letter, yet I was able to look at a stand-alone PC screen connected to the Pan Am data base and see the work and salary history, as well as the calculated accrued benefit/IDL information for most Pan Am employees. Neither PBGC nor IMRG expressed concern for the impact of their poor management on participants. In my opinion, it should not have taken PBGC so long to issue IDLs.

PBGC did not appear to take particular care with regard to accuracy, did not make the best use of both Pan Am's records and its own technology. Although the calculations for those who were receiving benefits had already been scanned into the PBGC IPS system and could have been used to verify benefit amounts, options chosen and spousal information, the PBGC sent out IDLs with in

correct benefit amounts, inaccurate options chosen, wrong name or "unknown" for spouse's name. The IDLs were issued with incorrect Social Security numbers. IDLs were sent to former Pan Am employees who are already being paid by CIGNA, Prudential, or Johnson Controls. IDLs were sent to people who had never worked for Pan Am. Letters were sent to retirees with the language, “Due to unresolved issues, we cannot determine the amount of your benefit at this time."

When the PBGC office in Washington issued these IDLs in batches, it used its automated letter system called ALG. As a result, there were spelling and grammar mistakes and dates in fields were benefit amounts should be and vice versa. In every instance where I talked to someone who had received one of the above letters, I could almost always verify what the correct information should have been using the records that had been imaged or the Pan Am data base.

Participants who elected the level income option, which drops down at the Social Security retirement age of 65, were incorrectly paid the same initial amount long after age 65, leading them to believe they were entitled to this amount, when they were given IDLs which recouped this overpayment, leaving them with little or no pension. Others were put into pay by PBGC with estimated benefits and then told to repay the difference when they were issued their IDLs for lower amounts. In my experience, there were far too many mistakes.

IDLs were not sent to all participants who have a lump sum cash-out value between $3,500 and $5,000, notifying them that these funds are eligible to be rolled over into Individual Retirement Accounts. There are probably thousands of these participants. I could look them up on the PBGC data base under their respective CRIP groups: IUFA, flight attendants; TWU, mechanics; IBT, Teamsters; and management. Those who were called in were given IDLs and lump sums on a case-by-case basis. There were thousands of IDLs omitted.

PBGC sent participants IDLs that gave them only 45.2 percent of their benefits at age 55-or 50, if they were a flight attendant. This caused concern among the Atlanta administrators because we were given plan documents, and IUFA, TWU and IBT pamphlets that stated that the Pan Am early retirement percentage was 79 percent for those who met certain service requirements. Participants who lost this additional 33.8 percent of their benefit were extremely upset. I could not get an explanation for this discrepancy between Pan Am policy and PBGC practice. A benefit of $300 a month was reduced by PBGC to only $135.60 a month, instead of the $237 a month that would have been paid by Pan Am.

I believe that those who met the Pan Am service requirements should have received 79 percent of their pension at early retirement.

Since the Pan Am participants who were hired after December 31, 1983, were not eligible for any pension benefit, their records should have been deleted from the IDL data base. These extraneous records triggered error messages on reports and were of no use, other than to confuse the process.