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WASHINGTON—The Senate's top Democrat last week proposed a boost in premiums employers pay the Pension Benefit Guaranty Corp. and a modification in pension funding rules as a way to cover the cost of a one-year freeze on the interest rate students must pay on government subsidized loans.
Senate Majority Leader Harry Reid, D-Nev., floated those two ideas in a letter sent to Senate Minority Leader Mitch McConnell, R-Ky., and House Speaker John Boehner, R-Ohio.
“The combination of these two proposals will provide sufficient resources to fund both a one-year extension of the current student loan interest rate and reauthorization of the nation's surface transportation programs,” Sen. Reid wrote.
All employers with defined benefit plans pay a flat rate $35 per participant premium to the PBGC, which has a $26 billion deficit. In addition, employers with underfunded plans pay an additional premium of $9 per $1,000 of plan underfunding.
The pension funding proposal Sen. Reid wants to use as a way to keep the student interest rate—now 3.4%—from doubling, was included as part of a broader transportation funding bill the Senate passed in March.
That measure effectively would allow employers to use higher interest rates in valuing pension plan liabilities, reducing the amount of their tax-deductible contributions. In all, the congressional Joint Committee on Taxation estimates that the measure would increase federal revenues by $9.25 billion through 2018.
The House-passed transportation funding bill, though, lacks a comparable provision. Congressional negotiators have been trying to come up with a compromise transportation bill, with little progress.
In light of that lack of progress, Speaker Boehner on Thursday suggested a six-month extension of the transportation funding law, which is due to expire later this month.
NEW YORK—The Pension Benefit Guaranty Corp. on Tuesday filed a lawsuit against Dewey & LeBoeuf L.L.P. to force the New York-based law firm to turn over its three pension plans to the agency and appoint it the plans' trustee.