The Pension Benefit Guaranty Corporation (PBGC) and the Department of Justice (DOJ) announced on April 8 that Central States is returning approximately $127 million in excess funds it received through the PBGC’s Special Financial Assistance (SFA) program. 
The Central States pension plan, at the time of its SFA application, covered 357,056 participants and was projected to run out of money in 2025. On Dec. 5, 2022, the PBGC approved the SFA application the plan had submitted. With that, the plan was to receive approximately $35.8 billion—the largest SFA payment to that time.
The funds have been mired in controversy. The federal government claims that the plan received certain SFA funds by mistake because its actuarial calculations included 3,479 deceased participants.
Taking a Look
In May 2023, the PBGC’s Office of Inspector General (OIG) audited the plan’s actuarial calculations, which included comparing Central States’ participant roster to the Social Security Administration’s Full Death Master File (DMF). It determined that 3,479 participants that Central States’ actuarial calculations assumed to be living actually were not.
On Nov. 1, 2023, the PBGC updated its SFA application instructions, which included requiring the submission of census data in all participant categories so the PBGC could perform an independent death audit to identify deceased pension plan participants using the full DMF. PBGC began the independent death audits using the full DMF to help plans more accurately calculate SFA amounts.
The Department of Labor’s Employee Benefits Security Administration (EBSA) in a March 17, 2024 statement about return of excess SFA payments expressed support for this change, noting that, “for plans that applied under PBGC’s former procedures, plan census data was generally verified using private vendors, but not compared to the Death Master File, which meant that some of the plans received an excess payment amount under the SFA Program.”
The Hill Weighs in
Education and the Workforce Committee Chair Rep. Virginia Foxx (R-NC) and House Subcommittee on Health, Education, Labor, and Pensions Bob Good (R-VA)on Jan. 16, 2024 had written a letter to PBGC Director Gordon Hartogensis about the SFA program. On Feb. 9, he responded, telling the lawmakers that the PBGC “understands the importance of effective stewardship of taxpayer funds, and has made multiple improvements to the SFA program to further that goal” and that the “PBGC supports repayment of any material SFA amount that was paid based on inaccurate census data.”
At a March 20, 2024 hearing of the House Subcommittee on Health, Education, Labor and Pensions in which Hartogensis offered testimony on the activities of his agency, some of the discussion concerned the Central States SFA payment. Representatives, including Foxx, expressed concern over taxpayer funds being sent to plans when SFA applications included dead people in their enumerations.
The Agreement
The DOJ notes in the agreement that Central States applied for, and received, SFA funds well before Nov. 1, 2023, and did not have access to the full DMF before, during, or after its SFA application.
The DOJ says that Central States “fully cooperated” with the OIG in its investigation. The DOJ reports that the plan provided information that supported its argument that its application, which it submitted before the requirements announced Nov. 1, complied with all requirements that existed when it did so and that it was in compliance. 
The DOJ adds that after the OIG provided information to Central States about the potential that it had included dead people in the SFA application it had submitted, it asked the plan to resolve whether it had. Central States determined that the OIG was correct, and that the 3,479 deceased participants should not have been included.
Accordingly, on Aug. 25, 2023, Central States’ actuaries certified to the OIG that the SFA would be $126,555,536 lower if those participants had not been included.
The Result
Under the settlement agreement, Central States’ plan will pay the federal government $126,555,536 plus interest on that amount at 2.25% per year beginning on March 26, 2024, by electronic funds transfer no later than five days after April 8, 2024, the effective date of the agreement.
“The PBGC has been coordinating with the PBGC-OIG, Justice’s Civil Division and Central States to finalize this agreement,” said PBGC Director Gordon Hartogensis in a statement, adding, “We appreciate their collaborative efforts in facilitating this recovery.”
The U.S. Senate Committee on Health, Education, Labor and Pensions in an April 8 statement cited the involvement of Sen. Bill Cassidy (R-LA), the ranking member of the committee, in securing the repayment of the funds. In a press release, the senator said that he was “glad to see Central States change course and rightfully return these funds back to taxpayers.”
More to Come?
It is possible that this may not be the only plan that included people in the count of participants they cite in SFA applications.
Hartogensis said that his agency is “working with other plans to recover any SFA funds paid out because of inaccurate census data.” The PBGC says that it is conducting full census data audits of SFA payments other plans received before the agency had expanded the scope of its independent death audit.
Hartogensis had said at the March 20 hearing that in response to the 2023 OIG report the PBGC has “reached out to all plans given aid before the death match scrub.” He said that the PBGC “is committed to recovering the $127 million” and told Foxx that “we will get the money back on all of them.”
“PBGC is committed to facilitating the return of SFA amounts made to those plans based on inaccurate census data,” the agency said in its announcement about the Central States agreement.
EBSA in its March 17 statement expressed support for that effort, saying, “While these excess payment amounts may represent only a small fraction of total SFA payments, they would not otherwise have been paid and, as such, must be refunded to the United States government. The plans do not have a valid claim to the funds, which never should have been paid and would not otherwise have been.”
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