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WASHINGTON—Legislation that will sharply increase premiums that employers with defined benefit pension plans pay the Pension Benefit Guaranty Corp. didn't go far enough, PBGC Director Joshua Gotbaum says.
Under the legislation, which the White House says President Barack Obama will sign Friday, the base PBGC premium will rise from the current $35 per plan participant to $42 next year and $49 in 2014.
In addition, the variable rate premium—paid by employers with underfunded plans—also will increase. The current variable rate premium of $9 per $1,000 of plan underfunding will be indexed to wage inflation starting next year. In addition, the premium will automatically increase by $4 per $1,000 of plan underfunding in 2014 and by $5 per $1,000 of plan underfunding in 2015.
While Congress “took a step in the right direction by paying attention to traditional pensions…it didn't go far enough,” PBGC Director Joshua Gotbaum said Monday in a statement.
Specifically, Mr. Gotbaum said, Congress didn't act on an administration proposal that would give the agency the authority to set premiums based on plan sponsors' creditworthiness.
“Three-quarters of companies are financially sound. They should be rewarded with lower rates and less hassle. Instead, Congress continued the practice of raising premiums on everyone with a one-size-fits-all formula,” Mr. Gotbaum said.
The provisions that will boost PBGC premiums, as well as others that will allow employers to use higher interest rate assumptions in valuing pension plan liabilities, are part of a broader transportation funding bill.
WASHINGTON—Employers will be able to slash defined benefit plan contributions by billions of dollars over the next several years, but will face sharply higher federal pension insurance premiums under legislation that won final congressional approval Friday.