Corporate defined benefit plan executives are switching tactics on Capitol Hill to avoid further increases in PBGC premiums.
After two years of premium increases to pay for other legislation, additional premium hikes are being considered again as legislators finish work on a transportation bill and other measures that will require new funding sources.
“In the past, our defensive strategy hasn't worked,” said Deborah Forbes, executive director of the Committee on Investment of Employee Benefit Assets, which represents 120 of the largest U.S. corporate pension funds with more than $1.5 trillion in retirement plan assets. “Now we are playing offense to get people to focus on the downside of continuing premium hikes.”
CIEBA is a member of the Pension Coalition, a group of 100 trade associations, professional organizations and companies that provide retirement benefits.
The coalition released a study Wednesday showing that further premium hikes on top of increases passed in the last two years could cause up to 42,000 job losses per year, which could cost the economy as much as $51 billion over several years. The study was conducted by Inforum, the Interindustry Forecasting Project at the University of Maryland.
Responding to the study, Josh Gotbaum, director of the Pension Benefit Guaranty Corp., said in a statement that he supported changing the way premiums are set, but wants the authority to set them internally. “Congress has continued to set PBGC premiums and has done so in ways that both underfunds PBGC and is convincing some companies they shouldn't offer pensions at all.”
In a letter Tuesday to all members of Congress, 68 companies and business groups stressed that those jobs could be saved by rejecting further premium hikes, which they said are “effectively a tax on plan sponsors.” Coalition members also participated in briefings in both chambers Wednesday.
The issue “is simple,” said Etta Strong, director of compensation and benefits for Owens-Illinois Inc., Perrysburg, Ohio, in a coalition statement. “The more money we are forced to spend on PBGC premiums, the less money we have to spend on something else. Every additional dollar that we have to pay in PBGC premiums is one less dollar we are able to put toward our more than 38,000 pension plan participants.” The pension fund had $2.27 billion in assets as of Dec. 31, according to its 10-K filing.