Premiums employers with defined benefit plans pay the Pension Benefit Guaranty Corp. would rise sharply under a budget agreement reached Tuesday by House and Senate negotiators.
Under the agreement, which still must be approved by the full House and Senate, the PBGC flat-rate premium, which is paid by all plan sponsors, would rise in 2015 to $57 per plan participant and to $64 in 2016. Currently, the premium is $42 per plan participant and is scheduled to rise to $49 in 2014.
In addition, the variable rate premium, which is paid by employers with underfunded plans, would increase to $24 per $1,000 of plan underfunding in 2015 and to $29 per $1,000 of plan underfunding in 2016. The current variable rate premium is $9 per $1,000 of plan underfunding and is scheduled to increase to $14 in 2014, according to provisions in a 2012 law.
A summary of the budget agreement notes that the PBGC now has a $36 billion deficit, “which may leave the corporation incapable of fulfilling its insurance obligations, resulting in cuts to benefits or a transfer from the general fund” of the U.S. Department of Treasury.
Opposition to hike
But employer benefit lobbying organizations oppose a premium hike.
“There is no policy or financial justification whatsoever for this latest increase, and it quite clearly is just a means so that policymakers can say they offset their spending increases elsewhere,” Scott Macey, president of the ERISA Industry Committee in Washington, said in a statement.
“If premium increases continue, it will further shrink the universe of plans from which premiums are drawn. This will impose greater pressure on employers who are struggling to remain within the defined benefit pension plan system and increase the likelihood of even higher premiums,” American Benefits Council President James Klein wrote in a Dec. 10 letter to Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wis. Sen. Murray chairs the Senate Budget Committee and Rep. Ryan is the chairman of the House Budget Committee.
The House of Representatives could take up the agreement as soon as Thursday, while the Senate is expected to act next week.