Proposed budget will increase PBGC premiums 22% over 3 years
Published: October 27, 2015
Further hikes in PBGC premiums will help pay for a federal budget bill agreed
to by the White House and congressional leaders late Monday.
The deal, which lays out a two-year budget and extends the federal debt limit
until March 2017, raises per-person premiums paid to the Pension Benefit
Guaranty Corp. from $64 in 2016 to $68 in 2017, $73 in 2018 and $78 in 2019. The
2015 rate is $57. Variable rate premiums of $30 per $1,000 of underfunding would
increase to $38 by 2019. The variable rate is currently $24.
The proposal also calls for extending pension funding stabilization rules for
two more years, until 2022, to allow sponsors to use higher interest rates when
calculating contribution demands.
“Once again the employer-sponsored system is being targeted for revenue,”
said Annette Guarisco Fildes, president and CEO of the ERISA Industry Committee,
who predicted that the premium hike will give defined benefit plan sponsors
“more reasons to consider exit strategies.”
“It's an incredibly bad idea and it's going to have, in the long run,
devastating consequences for the (defined benefit) system,” said Deborah Forbes,
executive director of the Committee on Investment of Employee Benefit Assets, in
an interview.
PBGC officials had not called for additional premium increases in the
single-employer program on top of ones already scheduled. “PBGC's finances for
the single-employer program have been improving steadily over the past few
years, and there is really no reason to increase single-employer premiums at
this time,” said Michael Kreps, a principal with Groom Law Group.
The additional revenue projected from the budget deal's premium hikes would
be used to offset other federal spending projections but does not go into the
Treasury.
The budget deal is expected to pass in order to pay for increased federal
spending that is currently constrained by budget caps, and to avoid a
significant increase in Medicare costs. It also repeals the auto-enrollment
employer mandate of the Affordable Care Act.