Pension Law Flaw Exposed: Congressional Investigation Demanded for Pension Consultants and Money Managers

Reps. George Miller and Edward Markey have called for an investigation into pension law enforcement agencies, highlighting a regulatory problem that has gone unaddressed for 31 years. The issue stems from pension consultants and money managers being regulated by the Securities and Exchange Commission, despite the agency having no authority over pension law. This lack of oversight has been exacerbated by recent corporate pension failures, putting additional strain on the federal agency that insures pensions. The Congressional investigation comes in the wake of a critical report by the Securities and Exchange Commission on the pension consulting business, which found that over half of sampled pension consultants were being paid by money management firms despite claiming to act objectively on behalf of their clients.

Key Takeaways:

• Reps. George Miller and Edward Markey have requested an investigation into pension law enforcement agencies regarding pension consultants and money managers.
• The Securities and Exchange Commission (SEC) regulates pension consultants and money managers despite having no authority over pension law, creating a regulatory problem.
• This regulatory issue has gone unaddressed for 31 years.
• A critical report by the SEC on the pension consulting business found that over half of sampled pension consultants were being paid by money management firms while claiming to act objectively on behalf of their clients.
• The union representing United Airlines employees, the Aircraft Mechanics Fraternal Association, had requested that regulators investigate whether United's pension consultant was acting solely in the interest of plan participants or steering pension money to certain managers for business reasons.
• The Pension Benefit Guaranty Corp. (PBGC) did not conduct a forensic audit of United's plan to investigate potential conflicts of interest.
• The failure of United's pension fund caused record losses of about $10 billion, which will be borne by the PBGC and United's employees.
• The Congressional investigation will be conducted in collaboration with the Government Accountability Office (GAO).
• The legislators are concerned that the Securities and Exchange Commission issued a critical report on the pension consulting business but did not identify specific consultants.

Statistics:

• 31 years: the length of time the regulatory problem with pension consultants and money managers has gone unaddressed.
• $10 billion: the estimated losses caused by the failure of United's pension fund.
• 18 months: the time frame of the Securities and Exchange Commission's review of the pension consulting business.
• 50%: the proportion of sampled pension consultants found to be receiving payments from money management firms while claiming to act objectively on behalf of their clients.

Sources:

• "Two Representatives Ask Congress to Investigate Pension Law" by The New York Times, [No publication date provided]
• Report by the Securities and Exchange Commission on the pension consulting business (no specific date or title provided)