GAO: PBGC risk-based premium idea should advance

Congress should consider the PBGC's request to switch to a more risk-based premium structure for the defined benefit plans it insures, officials at the Government Accountability Office argue in a new report issued Thursday.

GAO analysts found that a risk-based system would shift premium costs among DB plans, with financially healthier sponsors paying less and riskier ones paying as much as $257 more per participant, depending on level of risk.

Despite resistance from some pension plan groups, which worry that it could push some companies to stop offering DB plans, the GAO recommended that Congress authorize the revised premium structure, as PBGC officials continue modeling of various premium redesign options, while evaluating the potential impact on plan sponsors.

Despite administrative challenges, “there are merits to a risk-based system, and a lot of agencies do it, said Charles Jeszeck, GAO director of education, workforce and income security, in an interview. “We think it could help keep some plans in place.”

Joshua Gotbaum, director of the Pension Benefit Guaranty Corp., has made it a priority to rethink how the chronically underfunded agency can recalculate its premium-setting formula to reward healthy plans and have riskier ones pay more.

The GAO report was requested by Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee.