The Senate approved a budget deal Friday that raises PBGC premiums and makes it easier for the IRS to audit hedge funds and private equity partnerships.
The two-year budget package that extends the federal debt ceiling until March 2017 was approved 64-35 and sent to President Barack Obama, who applauded its passage. Mr. Obama said in a statement that the measure strengthens the middle class and “is paid for in a balanced way,” with $11 billion new revenue expected “from ensuring investors in hedge funds, private equity funds and other large partnerships pay what they owe in taxes,” he said.
The budget deal simplifies IRS auditing rules that forced auditors to calculate each partner's tax bill during audits. The White House said those practices, which will now be streamlined, put some hedge funds and other partnerships “at the forefront of aggressive tax avoidance schemes that can add up to billions of dollars of lost revenues for the federal government.”
Another major source of revenue offset on paper comes from hiking premiums paid to the Pension Benefit Guaranty Corp. beginning in 2017. The rate increases would phase in over three years, going from $64 per participant in 2016 to $80 in 2019, up from the 2015 rate of $57. Variable rate premiums of $30 per $1,000 of underfunding in 2016 would increase to $41 by 2019, up from $24 currently.
Those premiums do not go into the Treasury but are counted as revenue for budget scoring purposes. The House-approved version passed Wednesday originally called for slightly smaller premium increases, but when budget negotiators need more revenue offsets, premiums were raised further.
“If policymakers are serious about Americans' retirement security, they need to stop using employer-sponsored plans as a piggy bank,” American Benefits Council President James Klein said in a statement. “Incessant premium increases drive employers away from plan sponsorship, undermining pension security for workers and retirees and ultimately eroding PBGC's financial integrity,” Mr. Klein said.
The budget deal does give plan sponsors until 2022 to take advantage of pension funding stabilization rules that allow them to use higher interest rates to calculate contributions and lets large plan sponsors use their own experience data to determine mortality tables.