This Month Only! >> $20 off and a FREE SHRM tote with your membership and code TOTE2018!
Sign up for free email newsletters and get more SHRM content delivered to your inbox.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 12 cities across the U.S. this spring.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Pension and Budget Integrity Act would end burdensome ‘budget gimmick’
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
On April 18, bipartisan legislation was introduced in the U.S. House of Representatives to ensure that premiums paid to the federal Pension Benefit Guaranty Corp. (PBGC) are only increased to ensure adequate funds are available to safeguard the nation’s pension plans.
Pension and Budget Integrity Act is backed by a coalition of groups representing plan sponsors, including the Society for Human Resource Management (SHRM).
Under current law, pension insurance premiums paid to the PBGC by employers are included in the federal budget. This provides “the illusion this revenue can be used for general government spending, even though these premiums cannot be allocated to other government programs besides the PBGC benefit pension plans,” according to
a statement by the bill’s congressional sponsors, who have labeled the tactic “a budget gimmick.”
Unfortunately, this particular “gimmick” has unnecessarily increased the financial burden borne by pension plan sponsors. In recent years, Congress has raised PBGC premiums several times in order to give the appearance of offsetting higher federal spending—most recently
hiking premiums through 2025 by $7.65 billion in the Bipartisan Budget Act of 2015. These premium increases were made despite projections that show the single-employer pension system will be in a good financial health over a 10-year window.
The Pension and Budget Integrity Act would move PBGC premiums “off-budget,” ensuring that Congress is raising premiums only if and when it is appropriate, according to the legislation’s backers.
“We believe that PBGC premiums should be increased only as needed to ensure retirement benefits are adequately protected,” said
an April 15 letter sent to the bill’s chief sponsors—Rep. Jim Renacci, R-Ohio, and Rep. Mark Pocan, D-Wis.—by SHRM and other organizations representing plan sponsors. “As premiums for single-employer plans have been increased to ‘pay for’ unrelated programs, employers that sponsor defined benefit plans have felt the increased financial burden of providing pension benefits, which has, in many cases, jeopardized their ability to continue to offer defined benefit plans,” the groups stated.
“Employers have experienced fixed-rate premiums that have doubled and variable-rate premiums that have nearly tripled from 2012 to 2016,” said Kathleen Coulombe, senior advisor for government relations at SHRM. “The Pension and Budget Integrity Act of 2016 provides employers with predictability by ensuring that any future pension premium increases are only used towards retiree payments from the PBGC and not double counted for budget-scoring purposes.”
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Follow me on Twitter.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Join SHRM's exclusive peer-to-peer social network
SHRM’s HR Vendor Directory contains over 10,000 companies