WASHINGTON—Employers will be able to slash defined benefit plan contributions by billions of dollars over the next several years, but they will face sharply higher federal pension insurance premiums under legislation that won final congressional approval last week.

The pension-related provisions are included as part of a broader transportation funding bill, H.R. 4348, that won final approval last week in the House of Representatives and that President Barack Obama is expected to sign shortly.

The pension funding provisions mirror those approved earlier this year by the Senate. Effectively, employers would be able to use higher interest rates to value plan liabilities, reducing the value of the liabilities and the resulting contributions to the plans.

As under current law, the latest legislation would have employers continue to value plan liabilities based on interest rates on top-rated corporate bonds for three different segments, averaged over 24 months. Segments refer to when benefits are paid to participants.

Under this methodology, interest rates that value plan liabilities are based on the maturity date of the corporate bonds. For example, interest rates on pension liabilities to be paid within the next five years would be based on corporate bonds maturing within five years.

The actual interest rate for each segment in 2012 would have to be within 10% of the average of those segment rates for the preceding 25-year period. In succeeding years, this 10% corridor would increase and top out at 30% in 2016.

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If the methodology were in force today, the interest rate used to value benefits paid over the next five years would increase roughly three percentage points, with smaller, though still significant, percentage increases for benefits paid beyond five years, experts say.

However, the legislation also calls for steep increases in premiums employers pay the Pension Benefit Guaranty Corp., which currently has a $26 billion deficit in its insurance programs that guarantee most vested benefits to participants in plans the agency takes over from financially troubled employers.

Currently, all employers with defined benefit plans pay an annual PBGC premium of $35 per plan participant. The legislation would boost the premium by an additional $6 per plan participant in 2013 and another $7 per participant increase in 2014.

In addition, the measure would increase the so-called variable rate premium that is assessed on employers with underfunded plans

Currently, that premium is $9 per $1,000 of plan underfunding. The transportation legislation would increase that assessment in 2014 to $13 per $1,000 of plan underfunding and $18 per $1,000 underfunding in 2018.

However, regardless of the amount of the underfunding, the maximum variable rate premium could not exceed $400 per participant.