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Member, Beacon International Group, Ltd.
WASHINGTON—Nearly a dozen business groups have asked federal lawmakers to oppose an administration proposal to transfer the authority from Congress to the Pension Benefit Guaranty Corp. to set premiums that employers with pension plans pay the PBGC.
In its proposed fiscal 2012 budget this year, the Obama administration proposed that employers’ PBGC premium be based in part on their credit ratings.
That would be a big shift from the system in which employers pay the same annual base premium—now $35 per plan participant—regardless of their financial strength. Employers with underfunded plans pay a variable-rate premium of $9 per $1,000 of plan underfunding.
But the business groups, which include the American Benefits Council, the ERISA Industry Committee and the U.S. Chamber of Commerce, said in a Monday letter to members of Congress that a creditworthiness test would be ill-advised and inappropriate.
“This role for a government agency would be inappropriate, especially for private companies and nonprofit entities,” the groups said.
“Leaving aside the question of whether the PBGC can establish accurate mechanisms for measuring and adjusting an employer’s credit risk across industries and across the country, even modest year-to-year changes in those government credit ratings could have implications beyond PBGC premiums, potentially affecting stock prices or the company’s access to other credit sources,” the groups said.
The business groups said the administration would result in a near-doubling of premiums that employers pay the PBGC, “with no demonstrated basis for the drastic measures being considered.”
PBGC Director Joshua Gotbaum has said it wasn’t surprising that industry groups opposed paying higher premiums, adding that retirement security “is helped when responsible employers are rewarded for having sound plans and not forced to pay for the risky behavior of others.”
WASHINGTONThe 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.