VideoLate last month, Bradley Belt, the executive director of the Pension Benefit Guaranty Corporation and a point man for the Bush Administration on retirement policy, picked an extremely inopportune time to announce that he would step down from the PBGC at the end of May.
The House and the Senate, after all, were struggling to reconcile their pension-reform bills in the face of Administration opposition. The financially moribund Delta and Northwest airlines were pushing for special breaks from Congress in terms of how they calculate the value of their plans. Further, the Financial Accounting Standards Board was about to propose an overhaul of pension accounting that could involve the elimination of corporations' ability to smooth their results over time — a change that could unleash a torrent of volatility into the system.
In short, Belt would be departing with the nation's pension system in apparent turmoil. On the other hand, a choice to leave later wouldn't necessarily mean that he would be leaving under any better conditions. During his two-year tenure at PBGC, it experienced "a record level of pension plan terminations, a dramatic increase in risk exposure, and a near doubling of its customer base," according to the press release announcing his departure.
Further, the number of pension participants whose welfare PBGC oversees increased to 1.3 million. The assets it manages — largely from failed plans — increased to more than $56 billion. Belt tackled pension negotiations involving many complex bankruptcies and corporate restructurings, including settlement of the $10.2 billion claim in the United Airlines case, the biggest in the agency's history. With a final version of the pension bill stalled, there was no sense that things would be getting better any time soon.
Having announced his departure, Belt seemed to be in a relaxed mood when CFO.com interviewed him last week. Asked about his future plans, he joked that he rued the lack of an offer for the top slot at the National Football League and strongly suggested that a government job wasn't the best way to fully fund his children's college tuitions.
Nevertheless, Belt was still passionate in discussing the flaws in the pension system that he's been citing since he joined PBGC. In particular, he feels that the system needs to be transparent, so that pension failures like United's don't come as a shock to plan participants. For example, while pension sponsors must file information about their plans' funded status and other actuarial and financial information with the PBGC under Section 4010 of the Employee Retirement Income Security Act, they don't have to make that information publicly available. Belt is irked that Congress has shown no inclination to change that situation.
The outgoing PBGC chief also wants Congress to stop dragging its feet about including a company's credit standing in assessing the overall risk of the plan. At the same, time, he welcomes the Financial Accounting Standard's Boards proposed elimination of smoothing as a way of keeping plans healthy. An edited version of the interview follows.
You've chosen to step down during a crucial stage in the development of pension reform legislation. Why are you leaving and what are your future plans?
I'm as yet undecided, but I'm intending to work in the private sector in some capacity. I'm disappointed that I haven’t gotten a call from the NFL yet to replace [outgoing National Football League Commissioner] Paul Tagliabue. But I've often remarked that the PBGC doesn’t have a sustainable business model in that the costs of its employees aren’t supported by their salaries over the long term.
What were your biggest accomplishments and biggest disappointments at the PBGC?
I wouldn't characterize any accomplishments at PBGC as mine. They're those of everybody in the organization. But what I'm proud of is how everybody in the organization has responded to its rather extraordinary challenges. In cases like Enron, we used all the arrows in our quiver to prevent losses to the system and its participants. Obviously, we've been involved in some of the largest and most complex bankruptcy cases, like United. That’s an extraordinarily unfortunate matter that highlights flaws in current law. But by the same token, PBGC was able to realize recoveries far in excess of what's typical from a bankruptcy standpoint.
I'm not sure there has been anything I would characterize as a disappointment. There are some things that led to frustration. The first and foremost is not having been as successful as I might have been in recruiting topflight talent from elsewhere in the government, although senior management, including the CFO, [has been excellent]. The top salaries at PBGGC are significantly lower than elsewhere in government, like those at the SEC, for example. You would have to make a significant sacrifice to come to PBGC rather than its sister [agencies].
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