Mercer CEO gets behind bill to curb PBGC premium hikes
Reprints
Congress should pass legislation that would end a widely criticized and counterproductive budget-balancing “gimmick” of increasing the premiums employers must pay to the Pension Benefit Guaranty Corp., Mercer L.L.C. President and CEO Julio Portalatin says.
Bipartisan legislation, H.R. 4955, introduced in April by Rep. Jim Renacci, R-Ohio, and which now has 15 co-sponsors, would repeal part of a 1980 law that allows PBGC premiums to be counted as general revenue when it comes to balancing the federal budget.
The premiums, however, are used exclusively to help the PBGC pay pension benefits in plans it has taken over from employers who get in financial trouble or go out of business.
Allowing PBGC premiums to be counted as federal revenue has encouraged Congress to “dramatically increase” PBGC premium rates during the last few years, Mr. Portalatin wrote in a letter sent last week to the chairs and ranking members of the House Budget and Education and the Workforce committees.
These unwarranted premium increases are not only unnecessary, they are also are counterproductive by leading more employers to stop offering pension plans, Mr. Portalatin wrote.
“Many plan sponsors are concluding that the only way to reduce the growing burden of PBGC premiums is to leave the pension system,” Mr. Portalatin wrote.
The flat-rate PBGC premium that all defined benefit plan sponsors must pay is $64 per participant this year. Under legislation passed last year, that rate will rise annually, reaching $80 in 2019.
In addition, the 2015 law raised the so-called variable-rate premium for underfunded plans to $33 per $1,000 of plan underfunding in 2017, $37 in 2018 and $41 in 2019. That compares with $30 this year.
According to an earlier Congressional Budget Office report, the 2015 law will cost employers an additional $4 billion in PBGC premiums through 2025.
Read Next
-
Tardy employers to face spike in PBGC penalties
Employers that are late filing required forms and notices to the Pension Benefit Guaranty Corp. will face sharply higher maximum financial penalties, the agency disclosed.
