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Let PBGC set employer premiums based on risk: Obama

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WASHINGTON—The Obama administration proposed Monday that the Pension Benefit Guaranty Corp. be given the authority to increase premiums that employers with defined benefit pension plans must pay the agency.

Under the plan, included in the administration’s proposed fiscal 2012 federal budget, the board would have the authority to set premiums to reflect the risks that plan sponsors pose to the agency and to retirees.

Such a change “will encourage companies to fully fund their pension benefits and ensure the continued financial soundness of PBGC,” the Obama administration said in a budget document.

The administration recommends that the change not be implemented until after two years of study and public comment.

Under current law except for an automatic adjustment based on the growth in wages, only Congress has the authority to boost PBGC premiums and its approval would be needed before such a change could go into effect.

Any change in the PBGC’s premium structure would require congressional approval.

The administration proposal mirrors one that was advanced but not adopted last year by a bipartisan national commission as part of a broad plan to reduce the federal budget deficit.

The base annual premium is $35 for per plan participant, and sponsors of underfunded plans must pay an additional $9 per $1,000 of plan underfunding.

In fiscal 2010, the PBGC reported a $23 billion deficit, near its all-time high of $23.5 billion in fiscal 2004.