PBGC premium hike puts another nail in pensions’ coffin

Congress pounded one more nail in the coffin of traditional pensions earlier this month – and it didn’t have to happen.

In one of the most misguided retirement policy moves in recent memory, the Bipartisan Budget Act of 2015 signed last week by President Barack Obama increases the odds that more pension plan sponsors will stop offering defined benefit pensions.

The law imposes a huge increase in the insurance premiums paid by single-employer plan sponsors to the Pension Benefit Guaranty Corporation (PBGC), the federally sponsored agency that insures private-sector pension plans.

PBGC didn’t request the increase, an agency official confirmed. But since PBGC premiums are recorded in the federal budget as revenue, the premium hike added about $4 billion from 2016 through 2025 and helped reduce the net price tag of the budget act.

Adding insult to injury, Congress didn’t increase funding for multi-employer pension funds – even though it is in much worse financial shape than PBGC’s single-employer program; multi-employer premiums are not counted as revenue in the federal budget.

All this sounds like the typical Washington budget gimmickry – until you consider the very real potential consequence that even more companies will seek to terminate their plans.

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