House and Senate negotiators on Wednesday pushed to finalize a combined highway funding and student loan bill that would be partially paid for by increased PBGC premiums and more lenient corporate pension funding formulas that would increase tax revenue.
The pension rate stabilization provision, originally approved by the Senate in March, would bring in $7 billion in federal tax revenues as corporations cut back on their tax-deductible pension contributions, according to a Congressional Budget Office estimate.
Corporate plan sponsors could use a funding rate “stabilization range” within a 25-year period, instead of current bond rates as mandated by the Pension Protection Act of 2006. For 2012, that means that segment rates used to calculate contributions could be within 10% of a 25-year average of prior segment rates. After this year, the 10% would increase 5% each year until stopping at 30% in 2016, and then becoming permanent.
Another $8 billion in revenue would come from allowing the Pension Benefit Guaranty Corp. to raise its premiums. Specific details on which premiums would be affected have not been worked out. The PBGC currently raises nearly $2 billion in premiums, so the increase to $8 billion proposed in the legislation would be significant. Joshua Gotbaum, PBGC director, has been pushing for increased premiums, with the support of President Barack Obama.
With the highway trust fund and college loan subsidy programs each facing expiration dates of June 30, lawmakers were under pressure to renew the popular programs, but had to find a way to offset their costs.
The American Benefits Council, which represents sponsors and administrators of employee benefits programs, said in a statement, “While we are very supportive of funding stabilization, we are strongly opposed to PBGC premium increases. If both are contained in the same bill, some of our member companies will support the package but some may not. Therefore, we are not taking a position on the overall bill.”