Likelihood of higher PBGC premium hikes looms.

AuthorLewis, Robert E., Jr.
PositionPension benefit guaranty corp

Earlier this year, the Bush Administration proposed a package of reforms to current pension funding rules. There have been several bills introduced, but the Pension Protection Act of 2005 (H.R. 2830) and The Pension Security and Transparency Act of 2005 (S. 1783) are the consensus bills.

Recently, the Senate attempted to move to a vote on The Pension Security and Transparency Act, but that effort was blocked by senators seeking more employer-friendly changes to the bill. Due to other pressing Senate business, the Senate leadership removed the bill from the agenda until an agreement could be brokered. This has left the Pension Security and Transparency Act up in the air for the time being. In the House, The Pension Protection Act has been voted out of the Education and Workforce Committee, but little action has taken place on the bill. With both pension bills stalled, Congress has shifted its attention to the budget reconciliation process.

Congress passed a budget reconciliation package earlier in the year that instructed House and Senate committees to make mandatory spending cuts and increase revenues to the federal government. One of those revenue increases was to raise the rates companies pay to the Pension Benefit Guaranty Corp. (PBGC). Originally, Congress was calling for more than $18 billion dollars in savings, but FEI's Committee on Benefits Finance (CBF), along with The Pension Coalition, helped persuade Congress not to use increases to the PBGC as a revenue-raiser and to lower the number to $6.7 billion.

Currently, the Pension Protection Act and the Pension Security and Transparency Act call for increasing premiums paid to the PBGC; the Pension Protection Act calls for an increase in flat-rate premiums from $19 to $30, with a phase in of three years and five years if a company was at least 80 percent funded. The Senate's Pension Security and Transparency Act is slightly different, calling for flat-rate premiums increases from $19 to $30 starting in 2006, and asks the PBGC board to recommend adjustments every five years.

On October 18, the Senate Health, Education, Labor and Pensions (HELP) Committee approved a legislative package that will save the government $6.7 billion over five years and $16.4 billion over 10 years by raising PBGC premiums. During that hearing, the Senate HELP Committee voted for an increase in flat-rate...

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