The House of Representatives approved a bipartisan budget deal late Wednesday that calls for significantly higher premiums paid by single employers to the Pension Benefit Guaranty Corp., in a 266-167 vote.
The Bipartisan Budget Act of 2015 raises federal spending caps and lifts the national debt ceiling before the federal government runs out of borrowing authority Nov. 3. To offset some of those costs, the deal raises plan sponsors' fixed-rate premium by more than 40% over the next four years, and variable rate premiums paid by underfunded plans by more than 70% from 2015 rates.
Flat-rate premiums would increase up to $80 in 2019 from the 2015 rate of $57. Variable premiums would increase to $41 from $24 per $1,000 of underfunding by then.
“It is very shortsighted for Congress to try to balance its books on the backs of pension plans,” said Deborah Forbes, executive director of the Committee on Investment of Employee Benefit Assets, which represents 100 large plan sponsors. “CIEBA members paid almost $1 billion in PBGC premiums in 2014 alone, an 85% increase since 2011. These new increases will only escalate the risk that healthy defined benefit plan sponsors will leave the system,” Ms. Forbes said.
American Benefits Council President James Klein said the timing of the premium increases “is particularly baffling” since the agency's projections show significant improvement. “The irony is that by continually increasing premiums — including on fully funded plans — Congress and the president are compelling more and more employers to exit the system, which shrinks the premium base on which the PBGC relies,” Mr. Klein said in a statement.
The budget deal also lets large plan sponsors use their own experience data to determine mortality tables. Defined benefit plan sponsors that take advantage of pension funding stabilization rules got an extension until 2023 to use higher interest rates when calculating contributions.
“If policymakers are serious about Americans' retirement security, they need to stop using employer-sponsored plans as a piggy bank,” Mr. Klein said.
The Senate has not voted on the package yet, but it has to act before Nov. 3.