Pension agency rate boost plan draws flak
Share with others:
A federal agency's proposal to give companies that maintain healthy pension plans a sort of safe driver discount has raised the hackles of Corporate America. Pension plan sponsors and groups that protect their interests say it would mean hefty premium increases and spur more employers to eliminate pension benefits.
The suggestion, currently part of the congressional budget deadlock, comes from the Pension Benefit Guaranty Corp. The federal agency insures the pension benefits of 44 million Americans covered by 27,500 private sector pension plans. The insurance program is not taxpayer funded. Companies whose pension benefits are insured pay premiums and the PBGC invests the money. When a company can't keep its pension promises, the agency pays benefits to its retirees. More than 1.5 million retirees are getting checks from the PBGC.
Currently, premiums are set by Congress. Companies that sponsor their own pension plans pay a flat $35 per participant. They also pay variable premiums if their plans are underfunded.
PBGC director Joshua Gotbaum wants Congress to give the agency the authority to set premiums the way most insurers do: Let the companies with the sickest pension plans pay higher premiums and healthy plans pay less. Mr. Gotbaum notes that the Federal Deposit Insurance Corp., which insures bank deposits, has been using risk-based premiums for years.
The proposal would raise $16 billion in premiums over 10 years.
"What we think is lost when Congress sets the rate is the ability to do justice, the ability to be fair," Mr. Gotbaum said in an interview. "We want to reward our customers for offering sound pension plans."
Companies do not see it that way. They insist premiums are really taxes and that giving the PBGC authority to set rates would be taxation without representation.
First Published November 13, 2011 12:00 am
