The Bush administration originally advanced the PBGC proposal in 2005 as part of its comprehensive pension reform plan, the PBGC official said, but the proposal was not included in the Pension Protection Act of 2006, which the president signed Aug. 17.
"PBGC premiums are currently far lower than what a private financial institution would charge for insuring the same risk," the budget said. "These reforms would improve PBGC's financial condition and safeguard the future benefits of American workers."
Kyle Brown, retirement counsel for Watson Wyatt Worldwide, Arlington, Va., said a key reason lawmakers originally ejected the PBGC proposal is because it would essentially cede legislative authority to set premiums to administration agencies. "There's no chance that Congress will take that up," Mr. Brown said.
Jan Jacobson, director of the retirement policy for the American Benefits Council, Washington, said the resulting premium hike could add even more pain to defined benefit plans already hurting from the increase in PBGC premiums included in the PPA.
"The administration and Congress just last year passed legislation that will further accelerate the decline of the defined benefit plan system, including a significant increase in PBGC premiums," Ms. Jacobson said.
The flat premium paid by all plans went up to $30 a year per participant, from $19, under the pension act, according to Ms. Jacobson.
Also in his budget, Mr. Bush included a series of proposals intended to simplify the rules applied to a variety of defined contribution and other savings plans. The proposals have been included in Mr. Bush's budgets for several years but always failed to win congressional approval.
One proposal would consolidate 401(k), SIMPLE 401(k), SARSEPS (salary reduction simplified employee pensions), thrift plans, 403(b) and governmental 457(b) plans into a new Employer Retirement Savings Account. The account would be subject to the same regulations that generally apply to 401(k) plans.
Another proposal would roll traditional, non-deductible and Roth individual retirement accounts into a single new Retirement Savings Account, allowing individuals to contribute $5,000 after taxes a year into the account, which would include penalties for early withdrawals.
But at the same time, the president has proposed to create a new Lifetime Savings Account, or LSA, that would permit individuals to save after-tax contributions of up $2,000 a year for whatever purpose they want without withdrawal penalties.
The LSA and RSA, in particular, are unlikely to win approval from a Democratic-controlled Congress because the accounts would be available to all, no matter how much they make, and earnings on the contributions are tax-free — and thus can be viewed as favoring the more affluent members of society, according to industry attorneys and consultants.