In November 2023, the Inspector General (IG) of the Pension Benefit Guaranty Corporation (PBGC) issued a Management Alert for Deceased Participants in the Central States’ Special Financial Assistance Calculation (Report No. EVAL-2024-01). The alert called for the PBGC’s “immediate attention” to address a “weakness” its procedures that saw money flow to dead people via Special Financial Assistance (SFA) Applications.

The IG found that the PGBC wasted $127m in government money to pay benefits to 3,479 people who were not eligible for those benefits.

The PBGC “guarantees payment, up to the legal limits, of the pension benefits earned by over 33 million American workers, retirees, and beneficiaries in single-employer and multiemployer plans.” The IG looked at the Central States, Southeast & Southwest Areas Pension Plan (Central States) and noted funds that the government paid that it should not have, taking money out of the pockets of retirees across the Central States and taxpayers at large.

The IG found 3,479 deceased participants in Central States’ (Plan) SFA application because the Corporation did not ensure deceased participants were removed from the plan, resulting in $127m in government waste by providing benefits to those not entitled to these benefits.

The IG wrote that:

While the Corporation’s review process required Central States to provide a list of all Plan participants and proof of a search for deceased participants (death audit), the Corporation did not cross-check the information against the Social Security Administration’s (SSA) Full Death Master File (DMF) ─ the source recommended by the U.S. Government Accountability Office [GAO] for reducing improper payments to deceased people. (The Full DMF is more accurate than any database private pension plans have access to and is used by the Corporation in its other insurance programs to ensure proper payments of pension benefits to plan participants). On December 5, 2022, PBGC approved the application and authorized payment of $35.8 billion to Central States. Based on our identification of deceased participants, Central States calculated the value attributed to deceased participants in the SFA application at approximately $127 million.

Unlike the PBGC, the IG used a “three-factor matching process” that “compared each participant’s social security number (SSN), last name, and date of birth (DOB) to the SSNs, last names and DOBs in the Full DMF.” Had the PBGC employed better matching criteria, it could have returned the lost money to those who had earned it.