The government agency that guarantees the pensions of more than 44 million Americans would be restructured under legislation introduced in the U.S. Senate. 

The Pension Benefit Guaranty Corp.’s finances and structure need revamping as “several of the country’s largest automobile and manufacturing companies are teetering on the edge of bankruptcy,” Senator Herb Kohl, a Wisconsin Democrat and a sponsor of the measure, said in a statement. 

The agency, created by Congress in 1974 to protect the pension programs of bankrupt companies, reported in May a deficit of $33.5 billion, triple that of six months earlier. Last week it took over the pension plan of Delphi Corp. the auto-parts maker in bankruptcy since 2005. 

The agency is also facing increased scrutiny after a report by its inspector general in May found its former director, Charles E.F. Millard, had inappropriate communication with eight of 16 Wall Street firms that bid last year to manage $2.5 billion of the agency’s $48 billion. 

Millard, a Bush administration appointee, may have violated “blackout” rules that prohibited him from contacting bidders on three contracts for “strategic partnerships” that were to involve investments in stocks, real estate and private-equity assets. The House Education and Labor Committee is investigating whether any laws were broken. 

The PBGC on July 20 cancelled contracts with BlackRock Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co., which were selected by Millard to manage $2.5 billion in private- equity and real estate assets. 

“Decisions made by PBGC management and a lack of oversight and governance by previous PBGC board have contributed to the agency’s financial situation,” Kohl said. 

‘A Policy Change’ 

Millard sought to “implement a policy change to secure the agency’s future,” his attorney, Stanley Brand, said in a statement yesterday. “He sought advice from top professionals in a responsible and legal manner. The choices that he, his colleagues and PBGC’s board of directors made were strictly on the merits.” 

The legislation proposed today would stagger terms for members of the board, expand it to seven members from three and require it to meet four times a year.

 
The PBGC board hasn’t met since February 2008. Since 1980, it has met 20 times. The PBGC board is currently comprised of the secretaries of Labor, Treasury and Commerce. 

The bill also seeks to ensure that those who oversee the PBGC have full access to the board, and would require the agency’s director to recuse himself from potential conflicts of interest. 

To contact the reporters on this story: Holly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net