NEWS RELEASE

December 11, 2013
PR-13/16
For Immediate Release
Jason Hammersla
202 289-6700

New PBGC premium hikes 'simply unacceptable'

Increases included in budget deal erode pension system, hurts employees & PBGC

WASHINGTON, DC — "It is simply unacceptable that Members of Congress of both parties, as well as both Democratic and Republican administrations in recent years view pension plans as a piggy bank for other budget priorities, without regard for the real-life policy implications of their actions," American Benefits Council President James A. Klein said today, commenting on the bipartisan budget agreement that calls for $8 billion in Pension Benefit Guaranty Corporation (PBGC) premium hikes paid by employer plan sponsors. This follows a $9 billion increase in premiums enacted just a year ago.

"Lawmakers and the executive branch sometimes cite the PBGC's self-reported $36 billion deficit to justify new premium increases. But this point-in-time number is highly misleading and is based on both today's historically low interest rates and flawed assumptions by the PBGC in the way it determines its financial situation. Today's $36 billion "deficit" is no more real than its purported $11 billion "surplus" several years ago when interest rates were high.

"While the Federal Reserve Board's low interest rate policy is appropriately designed to help spur economic recovery, it has the perverse effect of undervaluing pension assets, understating the funding levels of employer-sponsored plans and the financial position of the PBGC itself," Klein said.

"A simple examination of the math plainly refutes the notion that PBGC's single-employer guarantee program needs more premium revenue. To the extent this latest premium increase is based upon reports of the agency's 'deficit," the facts do not support the contention. To the extent Congress and the President have agreed to increase premiums simply to offset other spending priorities, it lacks any public policy basis whatsoever. Either way, it shrinks the universe of pension plans from which premiums are collected. That is a bad result for workers and for the PBGC itself," Klein said.

For more information on defined benefit pension plans and the PBGC, or to arrange an interview with Council policy staff, please contact Jason Hammersla, Council director of communications, at jhammersla@abcstaff.org or by phone at 202-289-6700 (office) or (202) 422-4652 (cell).

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About the American Benefits Council
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.