The Business of Government Hour


About the show

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. The executives discuss their careers and the management challenges facing their organizations. Past government executives include Administrators, Chief Financial Officers, Chief Information Officers, Chief Operating Officers, Commissioners, Controllers, Directors, and Undersecretaries.

The interviews

Join the IBM Center for a weekly conversation about management with a government executive who is changing the way government does business.

John Seal interview

Friday, July 16th, 2004 - 20:00
John Seal
Radio show date: 
Sat, 07/17/2004
Intro text: 
Leadership; Strategic Thinking...

Leadership; Strategic Thinking

Complete transcript: 

Friday, June 18, 2004

Arlington, Virginia

Mr. Lawrence: Good morning and welcome to The Business of Government Hour. I'm Paul Lawrence, partner in charge of The IBM Center for The Business of Government. We created the Center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about the Center by visiting us on the web at

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation this morning is with John Seal, Chief Management Officer of the Pension Benefit Guaranty Corporation.

Good morning, John.

Mr. Seal: Good morning, Paul. Thank you for inviting me.

Mr. Lawrence: Thank you. And joining us in our conversation is Dennis Kaizer.

Good morning, Dennis.

Mr. Kaizer: Good morning, Paul.

Mr. Lawrence: Well, John, let�s start by talking about the historical background of the PBGC. Could you describe its mission to us and sort of, you know, when and why was it created?

Mr. Seal: The Corporation, which is a government corporation, was created in 1974 to ensure private sector defined benefit pension plans. Now, those are the kinds of pension plans that are sometimes viewed as traditional company pension plans. They�re usually negotiated between the company and a union and provide benefits to retirees based on age and years of employment.

About a decade before PBGC was created, the Studebaker car company, it used to be called Studebaker-Packard, I think, went out of business, and about 4,000 retirees in -- or workers and retires in that company had a pension plan that was underfunded. And because the company was well-known, because there was no insurance for the pension plan, a lot of concern was generated at that time. And even though the legislation setting up the Corporation didn�t come until a decade later, it really acted as the catalyst for providing pension insurance, because many of the workers not only lost their jobs, but they also lost most of their pensions.

Mr. Lawrence: Where�s PBGC in the context of the Department of Labor worries about employees, Commerce worries about business, Treasury worries about all things tax-related? Where does PBGC fit?

Mr. Seal: Well, actually the secretaries of those three departments make up our board of directors with the Secretary of Labor as the chair. And so we have a lot of interaction with all three departments in terms of our own corporate governance, but also program-wise, we have relationships with the IRS and with the Department of Labor.

Mr. Lawrence: And how�s the PBGC funded?

Mr. Seal: We don�t receive any taxpayer general revenue funds at all. We basically have four sources of funding. First, we do get premiums, insurance premiums, if you will, from ongoing pension plans. And that amounted to almost a billion dollars last year in terms of revenues, a little bit over 31,000 defined benefit pension plans that are in our system.

Second, for those underfunded pension plans that we take over, that we become trustee of, we not only take on their liabilities, but we also take over their assets. And so that provides additional revenues for us.

And then we invest the assets of those plans as well as the premiums that we collect each year, so we have investment earnings.

And then fourth, we do get some proceedings from bankruptcy hearings and decisions from bankrupt companies as a creditor.

Mr. Kaizer: John, I�d like to shift gears a little bit and talk about the people that work for the PBGC. First, can you tell us how many people actually work for the Corporation and then talk a little bit about some of the unique skills they may have?

Mr. Seal: In terms of the federal government, we�re a relatively small agency. We only have 800 federal employees, but we also have about 1,200 contract staff that work with us. Most of our staff are located in Washington, although we also have 11 field offices that handle benefit processing for us, and all 11 of those field offices are contract staff.

Probably the five most significant types of jobs that we have would be what you would expect sort of in the pension world. They would be auditors, actuaries, attorneys, pension law specialists, and IT specialists.

Mr. Kaizer: So that helps us understand a little bit about the organization and the people. What are the responsibilities of the Chief Management Officer?

Mr. Seal: There�s a little grab bag of responsibilities. I�m responsible for strategic planning for the Corporation, for budget, for procurement, for facilities support, for obtaining feedback from our customers through surveys or focus groups, and for human resources. And in that capacity, I also serve as the chief human capital officer for the Corporation.

Mr. Kaizer: The CMO seems like a unique position in government agencies. Do you think this is something other agencies should be trying to also do? And what are some of the pros and cons of the CMO position?

Mr. Seal: Well, my position was actually new to the Corporation. It was created shortly after I came to the Corporation in 1993. And the idea behind it was to try to bring some concerted emphasis to management initiatives and coordination of key management functions within the Corporation, which had been split apart previously. And interestingly enough, I had served in a similar kind of a role several years before when I was at the Equal Employment Opportunity Commission as their management director.

And I would say the advantages are that you�re able to bring together some discrete functions perhaps to work more closely together, such as perhaps budget and procurement, or another classic would be strategic planning and budget, which is one of the emphases in the President�s Management Agenda. Rather than having sort of two separate processes, we�ve now been able to integrate the two quite well. And having someone responsible for both areas I think just generally helps organizationally. Whether it�s something I would recommend for other agencies, I think that really depends on the individual agency, its size and its culture.

It used to be, many years ago, that cabinet departments had assistant secretaries for administration or management that had all of these functions, plus finance and information technology. And over the years, there�s been a splitting up of those functions in at least the large agencies and, to a certain extent, in smaller agencies, out of the concern of having more senior attention paid to individual functions. So I think an agency�s got to weigh that, having more high-level specialized attention in certain areas, and match that up with perhaps less coordination of the activities and the different functions.

Mr. Kaizer: John, you touched a little bit on your previous experiences. Can you talk a little bit more about your experiences prior to joining the PBGC?

Mr. Seal: I�ve been bounced around in about six different agencies in my career. I started off in the Pentagon, working for the Air Force as a presidential summer intern, where I learned to love Washington. I also knew that I wanted to work for a smaller organization. And so after I got out of grad school, I was able to work in the Office of Management and Budget for several years as a budget analyst, and was fortunate enough to be informally mentored as a relatively new federal employee, and also had the advantage of overseeing several different agencies over the years that I was in OMB.

And from there, I was asked to become a Deputy Assistant Secretary in the Department of Education, which was just forming under the Carter Administration. And so I headed up the program in the management analysis area at the Education Department. The administration changed when President Reagan got elected. And for about a half a year, I served as the Assistant Secretary for Management.

And then I was asked to go over to the Equal Employment Opportunity Commission to become the management director there for several years. Then moved to an agency that is now the Corporation for National Service. At the time, it was called ACTION, which had voluntary domestic programs sort of similar to the Peace Corps overseas, and served as the chief of staff in that agency; became the acting director of the agency, again when the administration changed and President Clinton was elected. And then about a half a year later, I was asked to come over to PBGC to become the Chief Management Officer.

Mr. Lawrence: It�s interesting the way you described your experiences initially at the Pentagon wanting to move to a -- or interested in smaller agencies, because as I was reading your background, I understand that you�re the founder of the Small Agency Council.

Mr. Seal: Yes.

Mr. Lawrence: Could you tell us about that?

Mr. Seal: Sure. That actually started off while I was at EEOC, and it was very much a grassroots kind of development, if you will. A few people who were responsible for management functions, counterparts of mine, if you will, in small agencies began to talk to one another and express their common frustration that they might learn of a new government-wide management policy by seeing it in the Washington Post versus having any opportunity to have input when it was in the drafting stage, and sort of being behind the information curve, if you will, for what any administration was trying to advocate in terms of management initiatives.

There were actually a couple sort of attempts to create rump groups, if you will, of chief management officials and agencies. It didn�t get very far. They sort of fell apart over time. And then a handful of us tried again and we were able to get recognition from OMB this time in terms of an organization that OMB would recognize and respond to, and that actually gave us impetus. We became a member of the President�s Council on Management Improvement, which, at the time, was the collection of assistant secretaries for administration in cabinet departments, and then it grew quite rapidly over time. We now have over 80 small agencies represented on the Small Agency Council. They range anywhere from close to 6,000 people, which is sort of the upper limit that OMB defined for us as small, to as few as 3 people. And you would be surprised: about half of the membership, about 40 agencies, have 100 or fewer employees. That came I think as a surprise to many government officials once we start to talk about our membership.

And so the Council really has three sort of goals. One is to interact with the central management agencies, like OMB or GSA or OPM, on their policies to try to provide a small agency perspective to them on their management policies. Second, it�s just shared good information, management information, amongst one another so that we can foster improvements in those agencies. And third, to a limited extent, we actually share resources.

One of the things that we have done now for well over a decade is annually agencies contribute anywhere from $500 to $5,000 towards a centralized training program for small agency staff. And this, again, started out back in the �80s, when Gramm-Rudman, the deficit reduction act, began to squeeze domestic agency budgets. And in many instances, training got cut or eliminated, especially in small agencies. And it was out of that growing awareness of small agencies, that they were failing in terms of developing their employees, that this volunteer sort of a program started.

Today, we sponsor over 2 dozen training programs ranging from management training to sort of common skills kinds of training. Any small agency can nominate employees to attend those. And we�ve got over 50 agencies contributing over $100,000 in total towards the program each year now. And it�s very unique because it�s the only program that I know of where federal agencies voluntarily contribute; they aren�t told to contribute. And the whole program is based on whether or not it�s delivering a product that�s worthwhile. If it�s not worthwhile, the agencies won�t contribute, obviously.

Mr. Lawrence: That�s interesting, especially the voluntary nature.

What happens when a pension plan ends and the PBGC steps in? We�ll ask John Seal of the PBGC to explain this when The Business of Government Hour returns.


Mr. Lawrence: Welcome back to The Business of Government Hour. I�m Paul Lawrence, and this morning�s conversation is with John Seal, Chief Management Officer of the Pension Benefit Guaranty Corporation.

And joining us in our conversation is Dennis Kaizer.

Mr. Kaizer: John, we�re going to shift gears a little bit now and talk about the programs that the PBGC supports. Can you tell us about the single- and the multi-employer pension insurance programs at the PBGC?

Mr. Seal: Sure. Those are the two programs that we do insure. The single-employer programs, and there are almost 30,000 of those across the country, are typically sponsored by a company. Often they are collectively bargained with their union. And they provide benefits to retirees normally based on age as well as on years of services in terms of working for the company. The company funds the pension plans, the workers typically do not make any contributions towards this kind of a plan. This is also the plan that years ago our parents thought of when sort of the three-legged stool for retirement was always described: Social Security, personal savings, and a pension plan. That�s typically what we are talking about. The company then also assumes all the risks in terms of investing the assets of the pension plan to pay benefits for retirees.

The multi-employer program is one where a union typically is represented amongst several companies in a certain industry, for example, the trucking industry. And so there�s a board of directors usually with union membership, company membership. The benefits are usually much less than a single-employer plan, but the structure of the pension program itself is similar. The benefits are based on years of service, age.

Mr. Kaizer: So if I�m an employee, can you tell me how I would see pension insurance working for me?

Mr. Seal: As an employee, normally you would have to work for a company for a certain number of years, say maybe five years, three years, depending on the terms of your pension plan documents, to become vested. And so from a company�s perspective, having a defined benefit plan is a way to, hopefully, attract and retain employees over a longer period of time, because the longer you serve generally, these kind of pension plans will provide a better benefit the more years of service you have with the company. From the employee�s perspective, it�s definitely something that all workers need to think about in terms of the future and think about whether they can count on an additional source of income once they do retire.

As we�ve had a more mobile world in terms of workers, of course, the companies have turned to using 401(k) plans, defined contribution plans, because their costs are less, because employees can look at their own accounts in terms of what savings have built up in their 401(k) plans. But all the investment risk is on the employee, not on the company, as, unfortunately, you know, workers in Enron found out. They lost so much with their 401(k) plans.

Mr. Kaizer: John, you mentioned Enron, and we�ve got an understanding of pension insurance right now, but can you tell us about a specific scenario where a pension plan would have failed and then actually the support or the assistance that PBGC actually provided?

Mr. Seal: Typically when a pension plan fails, it�s as a result of a company�s downward spiral, if you will, in terms of its own financial health. What happens typically is that there are a number of years in which the company is not adequately funding the pension plan in terms of its own contributions. And at that point then, we will have been monitoring any company pension plans that we believe are underfunded, and have interactions with the company long before we would think about terminating a pension plan.

But once we�ve reached that point, and actually shortly before that, we often will go out to the company and we will visit with the individuals who are responsible for administering the company pension plan -- it may be an office within the company, it may be a third party that�s administering the plan -- just to understand the terms of the plan documents, who the covered participants are, and to also assess the records of the plan administrator�s. At the point where we then make the determination that a company can no longer support the pension plan, and a record has to be built to support that case, then we would send out public notice through the newspapers that we were planning to terminate the pension plan, we�d be notifying the company and the union.

We would then quickly move to obtain the records. And that�s important for us, because we basically want to, in taking over a pension plan, to not have any disruption in, say, the monthly retirement checks that are going out to retirees. So that is always of paramount importance to us.

It then takes us a while, though, to fully complete the processing of any pension plan. The reason for that is many times they�re tied up in bankruptcy proceedings, so we don�t know what all the assets really are going to be for a pension plan until the bankruptcy is concluded. There may be gaps in the pension records. That happens if a company�s downward spiral has gone on for a while and, say, they�ve laid off employees, including maybe some employees of the pension administration office. And so the records begin to get spotty on us. So there�s a lot that goes into data capture when we take over a pension plan.

For larger pension plans, we then try to go out and have, if you will, town hall meetings with the participants to let them know who we are, what our benefit Guarantees are all about, what we do insure and what we don�t insure. Because there are sometimes elements of pension plan documents that we do not insure, and so they need to understand that. And then to talk about the processing of the plans and how they can apply for benefits.

For those folks who are not yet retired in plans that we�ve trusteed, they�re still working age, maybe not working for that company, but they�ve gone off to find other jobs, we will eventually send them an estimate of what their retirement benefit will be once they do decide to retire. And that�s to help them in terms of their own life planning. And then we will follow that up later with an actual benefit determination for them.

That�s kind of a high-level synopsis, if you will, of how we would process a terminated pension plan. That is what we do for a single-employer plan that terminates.

On the multi-employer side, which is a smaller program, about 1,600 plans across the country, there, we do not trustee pension plans. We do not take them over and administer them. What we do is we provide financial assistance or a loan to them so that they can continue to administer and pay out all the benefits that are due.

Mr. Lawrence: Is there a rule of thumb, just to continue Dennis� example, if I�m an employee, how much of the percentage of what I was promised I will get once a plan becomes trusteed?

Mr. Seal: It varies, but I think our latest records would show that over 90 percent of the participants in the plans that we�ve taken over receive their full benefits. You have in some select industries, such as the steel industry, more generous benefits promised by the plans, but not covered by our law.

Mr. Lawrence: And earlier, we talked about the relationship between the PBGC and other government agencies. And I�m just curious now, as you were describing that, how PBGC would work in these scenarios with things like Social Security and other such places.

Mr. Seal: We do share some information with other government agencies. Social Security, for example, helps us out on what we call our missing participants program. If you remember, I said that sometimes the records that company plan administration offices keep get outdated. Well, we find actually that in some cases, they lose track of participants. They�ve left the company perhaps before the plan terminated, they�ve moved, and over time, the plan administrators have lost them in terms of knowing where their current address is. And so we go through a whole series of locator steps to try to find these people. And one of them is that we check with the Social Security Administration in terms of, are you paying them benefits now, Social Security benefits, so that we can get the address and find these folks. So that�s an example of the type of coordination we have with other agencies.

Mr. Lawrence: That�s interesting, especially trying to find people owed money.

The management focus of this administration is laid out in the President�s Management Agenda. How�s the PBGC doing with the issues laid out in the President�s Management Agenda? We�ll ask John Seal of the PBGC to give us his perspective when The Business of Government Hour returns.


Mr. Lawrence: Welcome back to The Business of Government Hour. I�m Paul Lawrence, and today�s conversation is with John Seal, Chief Management Officer of the Pension Benefit Guaranty Corporation.

And also joining us in our conversation is Dennis Kaizer.

Well, John, in this segment, let�s talk more about the PMA and how the PBGC is working towards the goals. Human capital is one of the five areas. And I couldn�t help but notice in the first segment when you described the type of employees, the top seemed highly skilled, highly educated, and probably can be mobile. So I�m curious in terms of just the human capital challenges the PBGC faces. What are they and how are they being addressed?

Mr. Seal: Well, I think you�re right that they are highly skilled and highly educated. We actually, a couple of years ago, with the help of the National Academy of Public Administration, developed a workforce planning model, if you will. And from that, we then asked a group of mid-level managers to project out for us over the next five years what our skills gaps would be. And it was interesting, they came up with about a half-dozen gaps that they saw as they thought about the future, things like project management skills, because we rely so heavily on contracts, contract administration skills, certain specialized IT as well as program skills such as systems accountants and actuaries, who also know IT. And then there was another one that, you know, you might not suspect, and that was big picture skills: people who would have some breadth of knowledge in terms of how an organization worked.

And we took that review then and the senior staff adopted it, and we now have a number of initiatives ongoing to try to address those gaps. So that�s one set of challenges for us.

We�ve also tried to create a work environment at the Corporation that is a healthy one, is one where people have the right sets of tools to apply their skills. And fortunately, we have not had a troublesome turnover rate I think as a result of that, despite the fact that we don�t have higher salaries, say, than the private sector or more benefits than any other government agency has.

Mr. Lawrence: A recent study by the IBM Center for The Business of Government Hour included a report by Ray Blunt, and he talked about the PBGC�s Leaders Growing Leaders Program. It was a very interesting example of an organization thinking about its future. Could you describe this succession program for us?

Mr. Seal: Sure. And if you remember, Paul, my last answer, when I talked about a mid-level group of managers that did this skills gap analysis for us, those were the participants in the Leaders Growing Leaders Program. That program actually was an outgrowth of another program -- a set of programs that we started a few years before, which was mentoring programs. The mentoring emphasis in PBGC came out of the experience of a handful of us who had either been formally or informally mentored in our own careers. We decided to set up our first mentoring class, and the program I think lasted maybe nine months. It was a combination of seminars as well as individual sort of tasks, and pairing up a senior-level person with a mid-level manager at the time. And that proved to be so popular and successful for, I don�t know, it was probably about 10 candidates at the time, that we sort of branched out and developed other mentoring programs for different grade levels, but always matching up then a more senior-level person with a more junior-level person.

After a few years of those mentoring programs -- and today I think we�ve got somewhere between probably 25 and 30 percent of PBGC staff have been involved in mentoring, either as a mentor or a mentoree, it�s become very much part of our culture. But as that was being a success, we also were looking at the age and retirement possibilities of our senior staff, realizing that as is the case in many federal agencies, probably most federal agencies, that over the next five to ten years, we could reasonably expect a lot of turnover in the senior ranks of the Corporation.

We decided to create our own succession management program for eventual executive placement. And we created a two-year program with about a half-dozen candidates, typically at the GS-14/15 level, who would go through rotational assignments, individual kinds of special assignments. Each of them has a sponsor who�s a senior executive within the Corporation. They have outside developmental opportunities as well as inside developmental opportunities. And then as a group they�re asked to take on a corporate-level project.

So the first class, their assignment, in fact, was to take a look at the skills gaps for the Corporation. And we decided we really wanted to do that with a group of mid-managers who had the potential of becoming part of our next leadership core rather than have the current leadership look at it. And I think we benefited from that sort of strategic decision.

So the first class has graduated. We�re now halfway through a second class of about a half-dozen people going through the program.

Mr. Kaizer: John, another area of the PMA is budget and performance. As a CMO, are you involved in the process of integrating the strategic plan and the budget process? And if you are, can you tell us how?

Mr. Seal: Sure. The answer is yes. Interestingly enough, it was only a few years ago where probably the budget formulation process preceded our strategic planning rather than the other way around. It is now the other way around. We�ve set up a process that seems to working pretty well. We have leadership meetings usually once a quarter where all of our senior leadership gets together. And often in those meetings, we delve into the area of sort of forward-thinking for the Corporation, what will be our strategic initiatives over the next two years. And then we begin to boil down those initiatives into annual objectives.

And then we have put together a group of senior leaders to sort of bring the strategic planning and the budget process together. So that group, which reports to me, has a set of strategic initiatives that we want to fund over the next two years and then they try to figure out, from a corporate perspective, those initiatives can be funded and then make recommendations to me and eventually to the executive director in terms of the budget. So it is an integrated process, but it�s also very much a coordinated process in terms of our program leadership getting together with our budget and strategic planning leadership to come out with the final products.

Mr. Kaizer: So how then is the PBGC linking their resource allocations to the performance of the organization?

Mr. Seal: We have also groups of senior executives that oversee various parts of our strategic plan in terms of the initiatives. For example, for our IT projects, because we�re so heavily dependent on information technology, we have a number of strategic initiatives related to development or improvement of existing IT systems. And we have a committee of senior executives that monitors those programs. We also have steering committees made up of senior executives for each of the projects that oversees them. And we�ve built in performance reporting mechanisms so that on a regular basis, the executive director gets performance reports on how well we�re doing on each of our strategic initiatives as well as our -- we have a set of performance indicators for the Corporation to see how well we�re performing.

Mr. Lawrence: Competitive sourcing is one of the PMA items, and in the first segment, you talked about the number of employees and the numbers of contractors. How does the PBGC think about competitive sourcing?

Mr. Seal: We�ve actually been doing it for so many years that it�s not something new to us. And actually as a government corporation, we�re exempt from the Fair Act, which mandated the competitive sourcing process.

As I mentioned to you, most of our staff, in fact, are a contract staff, and so our situation�s a little bit different from other agencies. One of the things we�ve recognized is that we have to be concerned about good contract administration. And so as I mentioned when we were talking about skills gaps, that�s an area that we�re trying to strengthen in terms of developing in-house training programs for federal staff that are assigned to oversee contracts.

It�s also why we are -- we�ve developed a whole curriculum on project management, or we�re in the process of developing that curriculum, because so many of our projects are IT-related and so many of our projects are dependent on contractors working with us in terms of developing new systems or new processes. So our focus, I would say, is probably a little bit different than some other agencies.

Mr. Lawrence: What does the future hold for the PBGC? We�ll ask John Seal of the PBGC for his thoughts when The Business of Government Hour continues.


Mr. Lawrence: Welcome back to The Business of Government Hour. I�m Paul Lawrence, and this morning�s conversation is with John Seal. John�s the Chief Management Officer of the Pension Benefit Guaranty Corporation.

And joining us in our conversation is Dennis Kaizer.

Mr. Kaizer: John, many federal agencies are also looking into shared services agreements. As I understand it, you�re also a board member of the Cooperative Administrative Services Unit, or CASU. Can you first tell us a little bit about CASU?

Mr. Seal: Sure. It�s precisely for the reason that it�s a mouthful to pronounce the full program name that we normally call it CASU. I�m actually the chair of the national board of directors for the CASU program. And again, this was an interagency initiative.

It started off in the Reagan Administration with the President�s Council on Management Initiatives. And it started when the assistant secretaries for administration in the cabinet agencies began to talk about their field offices, and how in these regional and satellite offices, each agency was providing their own administrative support, whether it was copiers or printing services or transportation services, and began to think about, well, you know, if we got together collectively, maybe we could save money, save staff in terms of having a more central source of that administrative support.

So it started off in the 1980s really looking at federal buildings that house multiple agencies in them outside of Washington. And it started with simple things like let�s pool together and provide copier services under a single contract to all the agencies in that building.

The local CASU organization was also interesting and unique. The CASUs were governed, if you will, by a local board of directors made up of the customers. So if the CASU was only covering the agencies in that building, you�d have tenant representation on the CASU board. And then they would find a contracting mechanism. One of the agencies would serve as the procuring official, if you will, and go out and, say, get a copier service where they could perhaps get a better rate. They could also have a single vendor in terms of, you know, supply and maintenance or repairs in terms of all the copiers in the building. So it started that kind of low level, very simple kind of a support effort.

Over time, it became so successful that it branched out beyond just buildings to city-wide CASU services, then regional-wide CASU services. And today, although there are fewer CASUs, we provide about on the order of $300 million of services now to agencies worldwide. And the Internet has helped on that, also, in terms of spreading the territory for support. And the variety of services has also expanded tremendously know.

But the remaining, sort of as unique feature of the program, is that buying the services is totally voluntary. No agency is forcing anyone to buy services from a CASU. And second, the governance of the program is voluntary and it�s customer-driven.

Mr. Kaizer: Let�s shift our focus now to the future of the PBGC. Can you tell us some of the key lessons learned perhaps from some of the relatively large pension fund failures?

Mr. Seal: Well, I think two come to mind that I think are important. First, the existing plan funding rules that we have for defined benefit plans don�t really encourage additional company contributions to their plans when their business cycle is good. You know, when they�re making profits, companies actually can put in less funding to their pension plans. And then at a point where the business cycle is poor for them and they can least afford it, underfunding begins to occur and they�re obligated to pay additional premiums to PBGC because of that underfunding, and they are not in a position to make up the gap in the underfunding. Something needs to be done to try to match those cycles up a bit better.

The other issue that I think is important, and it�s one that the administration is working on right now in its thinking about proposed legislation, is transparency. The administration has expressed concerns that plan sponsors should be providing more current information to their participants to let them know the status of their pension plans. Most people that are in defined benefit plans don�t know the status of their plans. They can go to their pension administrators and find out, but that requires, you know, extra effort, and sometimes the response they get is hard to interpret. So there needs to be better awareness, if you will, transparency in terms of the plan participants and the stakeholders as to what is the financial status and the future of their pension plans.

Mr. Kaizer: Are there any other, you know, top threats or challenges that you think the PBGC is going to be facing in the future?

Mr. Seal: Well, the nature of our business is pretty unpredictable. Pension plans and their funding status are dependent on a number of variables that we have no control over: business cycles; industry trends; worldwide competition; aging industries in terms of technology; interest rates have a huge importance when you�re looking at pension plan underfunding; stock market, how well it�s doing in terms of investments by pension plans. All of those are important factors in terms of the health of pension plans.

Often pension plans, their financial health sort of lags behind the health of the economy. They�re usually a few years behind whatever trend is going on in the economy, because some companies, if they�re in a downward spiral, they�ll hang on for a few years trying to recover, but eventually have to give up the ghost. And as the economy improves, the pension plans usually have to take a few years to sort of catch up to where they�re much better funded.

Mr. Lawrence: How do you think about the future for the PBGC? When you look out five, ten years, what comes to mind?

Mr. Seal: Well, I think we�ve got a couple of really important challenges. One is to try to promote a sound defined benefit pension system that�s attractive both to employers and employees. And I think that�s going to take some legislation. It�s going to take some clarification around cash balance plans, which is sort of a new form of a defined benefit plan, but it�s one where it�s sort of a mix between a 401(k) and a defined benefit plan. It�s one where an employee actually has an account and so that they can see the value, if you will, of their pension plan while they�re still working for the company. And I think we�re going to have to also continue our work to try to reduce the administrative costs and the requirements of administering defined benefit plans for plan sponsors.

The other I think challenge for us has to do with plan terminations. And that is to seamlessly handle as much as possible newly terminated plans so that we reassure participants in those plans that their pensions are safe, that we will be efficiently processing their benefits. And that is a tough job initially when a pension plan is terminated, because the workers typically have lost their jobs. They often have lost their health plan benefits. They may have lost some value in the 401(k) plans if they have them. So the future can look pretty bleak, and fingers typically get pointed everywhere in terms of who�s to blame, and we step in as a trustee then of the pension plan. And it�s important for us to communicate with them that we�re here, your pension is safe; there are certain Guaranty limits that we must follow, but we stand by our word in terms of insuring your plan.

Mr. Lawrence: You�ve had a very interesting career in public service, John. So I�m curious about the advice you�d give to someone who�s perhaps interested in joining public service.

Mr. Seal: I guess I would first say look to learn. And by that I mean take every opportunity when you join the federal government to grow and learn, no matter where you are and what you�re doing. That involves, you know, take advantage of training opportunities, take advantage of interoffice kinds of assignments or projects, volunteer for different kinds of analytical work to be done. Find out if an agency has a mentoring program, and maybe not initially, but maybe after a year you�re in the agency, enroll in the mentoring program, because that, again, will broaden your experience as well as add some depth to your knowledge. And probably above all, listen, observe, and learn from others.

I think, also, because of my personal experience of having moved around to a half-dozen different agencies and having benefited from experiences in those different environments, I�d also strongly advise new people coming into the federal government that unless you�re sort of in a highly specialized career path, move around. Don�t think of yourself as only working for one agency over the course of your career.

And then despite all the sort of frustrations and obstacles and disappointments you may find during your career in federal service, have fun. Enjoy your agency mission and the people that you work with and your assignments, and, above all, the feeling that you�re doing something worthwhile for your fellow citizens.

Mr. Lawrence: That�s a good ending point. Dennis and I want to thank you for being with us this morning, John.

Mr. Seal: Thank you, and I really appreciated it. And I would just advise your listeners if they want to learn more about PBGC go to We�re there.

Mr. Lawrence: Thank you. This has been The Business of Government Hour, featuring a conversation with John Seal, the Chief Management Officer of the Pension Benefit Guaranty Corporation.

Be sure and visit us on the web at There, you can learn more about our programs and get a transcript of today�s very interesting conversation. Once again, that�s

This is Paul Lawrence. Thank you for listening.

John Seal interview
John Seal

Broadcast Schedule

Federal News Radio 1500-AM
  • Mondays at 11 a.m. Fridays at 1 p.m. (Wednesdays at 12 p.m. as
  • available.)

Our radio interviews can be played on your computer or downloaded.


Subscribe to our program

via iTunes.


Transcripts are also available.


Your host

Michael Keegan
IBM Center for The Business of Government
Leadership Fellow & Host, The Business of Government Hour

Browse Episodes


Recent Episodes

Bob Rosen
Author of Grounded: How Leaders Stay Rooted in an Uncertain World
Jin-Oh Hahn and  Monifa Vaughn-Cooke
University of Maryland
Assistant Professors, Department of Mechanical Engineering
Vice Admiral Raquel Bono
United States Navy
Director, Defense Health Agency

Upcoming Episodes

Michael McKeown
Executive Director, Homeland Security Advisory Council
Department of Homeland Security