Proposed increases in Pension Benefit Guaranty Corporation premiums are a fool’s errand at best, says a report prepared for the American Benefits Council (ABC). “Further PBGC Premium Increases Pose Greatest Threat to Pension System,” a report Quantria Strategies, LLC prepared for the ABC, warns that it would it be more than pointless to raise PBGC premiums — it would be counterproductive.
The paper argues that the PBGC single employer program is sound, rendering a premium hike unneeded. For instance, it observes that the PBGC’s net financial position was $1.8 billion better in fiscal year 2013. It argues that the PBGC has assets sufficient to cover participants in terminated single-employer defined benefit plans “for many years into the future.” And it asserts that the proposal is premised on the costs attributable to employers that have already left the DB system, and that likely future plan terminations are less than 10 percent of premium income.
The report goes farther than that. It also says that raising the premiums will drive employers away from the DB system, and that that is a logical response, since PBGC premiums force employers to pay for other employers’ losses.
All this threatens the long-term viability of DB plans and the PBGC’s insurance program, the report suggests. Ultimately, it argues, increasing the rates will end up in reducing the premiums the PBGC collects, and that, in turn, would make the PBGC less able to protect plans and their participants.
John Iekel is Senior Writer and Editor for the ASPPA Net and NTSA Net portals.
- Log in to post comments