SHRM Supports Bill to Safeguard PBGC Premium Payments

Pension and Budget Integrity Act would end burdensome ‘budget gimmick’

By Stephen Miller, CEBS Apr 20, 2016
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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.

The 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.

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