WASHINGTON, D.C. – Representative Edward Markey (D-MA), a senior member of the House Energy and Commerce Committee, and Representative George Miller (D-CA), of the Senior Democrat on the House Education and the Workforce Committee, today sent a letter to Bradley Belt, executive director of the Pension Benefit Guaranty Corporation (PBGC), to request information about the services that PBGC’s consultant, Wilshire Associates, has been providing PBGC and the work that Wilshire may have provided the terminated pension plans  currently under PBGC’s control.  The letter sent by Reps. Markey and Miller follows the Department of Labor’s subpoena of Wilshire, issued as part of the Department’s investigation of potential conflicts of interest in the pension consulting industry.

“The Labor Department’s subpoena of Wilshire Associates should prod the PBGC to scrutinize all of the terminated plans under its control to which Wilshire has provided consulting services.  Moreover, because Wilshire serves as a consultant to the PBGC itself, it is imperative that the PBGC ensure that the advice it has been receiving from Wilshire is objective and in the best interests of the beneficiaries whose terminated pension plans are now PBGC’s responsibility,” Rep. Markey said.

“It would be extremely troubling if pension plans that received conflicted advice from Wilshire were handed over to the PBGC. It would be even worse if the PBGC itself received conflicted advice from Wilshire,” said Miller. “Americans are deeply worried about how they will finance their golden years. It is critical that their government hire people who are on their side, not on Wall Street’s side.”

In May 2005, the Securities and Exchange Commission (SEC) reported that ““[P]ension consultants may steer clients to hire certain money managers and other vendors based on the pension consultant’s (or affiliate’s) other business relationships and receipt of fees from these firms, rather than because the money manager is best-suited to the client’s needs.  Such a conflict can compromise the fiduciary duty that investment advisers owe their clients.”  In August 2005, Rep. Markey and Rep. Miller wrote to the SEC and the Department of Labor (DOL) to seek answers about SEC’s and DOL’s actions to investigate conflicts of interest and hidden financial arrangements and take appropriate action.  They also have requested that GAO probe whether the SEC, DOL and PBGC, which has responsibility for pension plans once they have been terminated by companies, are taking the steps necessary to root out fraud and failure of pension advisors to disclose financial arrangements that can taint their objectivity to the detriment of workers who rely on their pension benefits during retirement.  The GAO has initiated the investigation requested by Reps. Markey and Miller.

The letter sent to PBGC asks a series of questions, including:

  • What are the terms of the PBGC’s contract with Wilshire Associates?
  • Did the PBGC ever ask Wilshire to ascertain if it has any possible conflicts of interest?  If yes, when and what was the result of this request?  If not, why not?
  • Has the PBGC requested that Wilshire respond to the questions contained in the SEC-DOL “Tips for Plan Fiduciaries” distributed to pension plans following completion of the SEC’s May 2005 staff report on pension consultant conflicts of interest?  If yes, please provide a copy of Wilshire’s responses.  If not, why not? 
  • Did the DOL or SEC notify the PBGC of the names of any of the firms determined to have possible conflicts of interest in the SEC’s May 2005 report?
  • Did any of the firms identified by the SEC as having conflicts of interest provide consulting services to any of the terminated plans now under the control of the PBGC?  If yes, how many? 

“The crisis in the pension marketplace has created anxiety for workers and retirees across the country, whose hard-earned benefits have, in many cases, been cut back or eliminated.  We must ensure that the advisors and consultants who are entrusted with responsibilities for managing and investing pension contributions are guided by their fiduciary duties.  The SEC uncovered evidence last year that the receipt of undisclosed fees from vendors and money managers, rather than fiduciary responsibilities, is coloring the advice consultants provide their pension plan consultants.  These underhanded practices must be stopped, and I commend the SEC and DOL for taking action in this area.  I look forward to PBGC’s response to the letter that Rep. Miller and I are sending today,” Rep. Markey concluded.

For copies of correspondence with the SEC, DOL and PBGC on conflicts of interest in the pension consulting industry,  check out: http://markey.house.gov/

Copy of Letters to SEC and DOL (8/12/05) Copy of Letter to SEC and DOL (8/12/05) (179.05 KB)
Copy of SEC Response Letter (9/1/06) Copy of SEC Response Letter (9/1/06) (331.92 KB)
Copy of Letter to GAO on Pension Consultants Copy of Letter to GAO on Pension Consultants (11/30/06) (220.81 KB)
Copy of DOL Response Letter (2/1/06) Copy of DOL Response Letter (2/1/06) (530.86 KB)
Copy of GAO Letter Accepting Request on Pension Consultants (2/17/06) Copy of GAO Letter Accepting Request on Pension Consultants (2/17/06) (32.48 KB)
Copy of Letter to PBGC on Wilshire Consulting (5/2/06) Copy of Letter to PBGC on Wilshire Consulting (5/2/06) (95.63 KB)


FOR IMMEDIATE RELEASE
May 2, 2006

 

CONTACT: Mark Bayer (Markey)
202.225.2836

Tom Kiley (Miller)
202.225.3725