Premiums that employers with defined benefit plans pay the Pension Benefit Guaranty Corp. would rise sharply under a budget agreement that won final congressional approval on Wednesday.
Under the agreement, approved by the Senate on a 64-36 vote, 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.
But employer benefit lobbying organizations have said they 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 shortly before the House of Representatives this month overwhelmingly approved the measure.
President Obama has said he will sign the bill.