Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • Consultants
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2023
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. REGULATION AND LEGISLATION
October 22, 2012 01:00 AM

Tactics to cut pension plan risk reduce PBGC premiums and exposure

Jerry Geisel
  • Tweet
  • Share
  • Share
  • Email
  • More
    Share
    P&I
    Company Funding ratio Assets Date announced A.H. Belo 65.3% $274.9 million Oct. 5 Assets and funding ratio data as of Dec. 31, 2011
    Share
    Share
    Bloomberg
    Share
    Bloomberg
    Share
    Bloomberg
    Share
    P&I
    Company Funding ratio Assets Date announced Thomson Reuters N/A $1.5 billion Sept. 19 Assets and funding ratio data as of Dec. 31, 2010
    Share
    P&I
    Company Funding ratio Assets Date announced Archer Daniels Midland 72.3% $2.24 billion Sept. Assets and funding ratio data as of June 30, 2012
    Share
    Bloomberg
    Share
    Wikicommons
    Share
    Bloomberg

    Employers' accelerating moves to reduce their pension plan risk by offering to convert plan participants' monthly annuities to a cash lump sum or transferring the obligations by purchasing a group annuity are a double-edged sword for the federal pension insurance agency, benefits experts say.

    On one hand, such actions will reduce the Pension Benefit Guaranty Corp.'s premium income, which helps pay benefits of participants in failed employer plans the agency has taken over.

    Employers' base PBGC premium is determined by the number of people in their pension plans. The base premium, $35 per plan participant, is slated to rise to $49 per plan participant in 2014.

    Plan participants that convert their monthly annuity to a lump sum are no longer in the pension plan and, thus, no longer are counted when the employer calculates its PBGC premium payment.

    Similarly, employers that transfer their benefit obligations by purchasing an annuity from an insurer no longer count affected participants in their PBGC premium calculations.

    On the other hand, these risk-reduction approaches reduce the PBGC's exposure to future plan takeovers.

    “There is a trade-off: Reduced income vs. a reduction in exposure,” said Jason Richards, a senior consultant at Towers Watson & Co. in St. Louis.

    PBGC Director Joshua Gotbaum acknowledges that “any departure from defined benefit plans reduces PBGC's premium base and weakens PBGC's financial position.”

    The action Congress should take is to give the PBGC authority to set premiums based on the financial risk that plan sponsors pose to the agency, he said last week during a briefing. That would encourage employers to retain their pension plans, he said.

    However, employer benefit lobbying groups, such as the American Benefits Council and the ERISA Industry Committee, have staunchly opposed such a change, arguing, among other things, that the PBGC lacks the expertise to set premiums.

    Jerry Geisel is editor-at-large at Business Insurance , a sister publication of Pensions & Investments.

    Related Articles
    Treasury sets rates for corporate pension stabilization
    Lump-sum payouts moving into fast lane
    Pension Rights Center asks for moratorium on lump-sum payments
    PBGC won't focus on small-business reductions, Gotbaum says
    PBGC proposes simplified premium process
    Pension plans offering lump-sum payouts
    Recommended for You
    Standards-of-conduct rules approved along party lines
    Standards-of-conduct rules approved along party lines
    Investors hail SEC guidelines on exchanges
    Investors hail SEC guidelines on exchanges
    SEC passes Reg BI package by 3-1 vote
    SEC passes Reg BI package by 3-1 vote
    Sustainability Strategies: Evolving Perspectives
    Sponsored Content: Sustainability Strategies: Evolving Perspectives
    Sponsored
    White Papers
    A Guide to Home Equity Investments: The Untapped Real Estate Asset Class
    Modernize your K-12 retirement plan with vendor consolidation
    Q4 2023 Credit Outlook: Price Is What You Pay, Value Is What You Get
    There's More Than One Way to Be a Climate Investor
    Exploring the Commercial Application of Artificial Intelligence
    Private Credit Insights: Every Problem Is an Opportunity in Disguise
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • Consultants
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2023
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print