4.4: Pension Benefit Premiums

GIVE PENSION BENEFIT GUARANTEE BOARD AUTHORITY TO INCREASE PREMIUMS.

Other Information:

According to CBO and others, premiums are much lower than what a private financial institution would charge for insuring the same risk, but unlike private insurers (or even other similar agencies, such as the FDIC), the PBGC is unable to adjust the premiums it assesses from plan sponsors to cover potential liabilities. This has led to chronic and severe underfunding of the agency: as of the end of FY 2010, the PBGC’s estimated liabilities exceeded its assets by $23 billion. The Commission recommends allowing the PBGC’s board to increase both flat- and variable-rate premiums (which are recorded in the budget as offsetting collections). Giving the PBGC board the authority to raise the premium rate to restore solvency and cover this shortfall will achieve mandatory budget savings in the near term, and more importantly, will sharply reduce the likelihood of a government rescue in the future. (Saves $2 billion in 2015, $16 billion through 2020)

Stakeholder(s):

• Pension Benefit Guarantee Corporation (PBGC): The Pension Benefit Guarantee Corporation (PBGC) is a federal agency created to protect the pensions of participants and beneficiaries covered by private-sector defined-benefit plans. The PBGC is financed mainly through premiums assessed on employers offering defined benefit pension plans, as well as the assumed pension fund investments of failed companies; the agency receives no appropriations from general revenue.

Indicator(s):

Indicator:1

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