ACTION ALERT


October 12, 2011

ACTION ALERT: PBGC Premiums

Urge lawmakers to reject PBGC premium increases based on federal, agency deficits

Action Requested: Contact your congressional delegation, especially those members serving on the Joint Special Committee on Deficit Reduction (the "Supercommittee") and the other committees of jurisdiction, urging them to reject Pension Benefit Guaranty Corporation (PBGC) premium increases as part of federal deficit negotiations or based on the PBGC's supposed deficit. The formal deadline for submitting comments to the Supercommittee is Friday, October 14.

Background and Discussion:
As we have previously reported, the Supercommittee is currently reviewing proposals as part of its mission to identify at least $1.5 trillion in deficit reductions (over the next ten years). PBGC premium increases are "in play" and could well be included in the final recommendations.

On September 23, the White House submitted a detailed proposal to the committee, including a recommended increase in premiums paid by defined benefit pension plan sponsors to the PBGC. Under this proposal (Page 42), the PBGC single-employer flat-rate premium would rise to $70 per participant by 2021, indexed to wage inflation thereafter. The PBGC board of directors would have discretion to increase the variable-rate premium beginning in 2014, based on "publically available measures of risk or exposure," including such factors as the plan's assets and liabilities (but, specifically, not the plan sponsor's credit rating). The total flat- and variable-rate premium increases between 2014 and 2021 would generate revenue of $16 to $17 billion, regardless of overall funding levels. In other words, that amount of additional premium dollars would need to be raised even if all plans were fully funded.

As explained in our July 22 Action Alert, the Council has expressed serious concern with PBGC's self-reported $23 billion "deficit" that is driving much of the discussion about raising premiums. The Council has criticized the lack of transparency and the methodology PBGC uses to estimate its deficit and has also laid out concerns with giving the agency unilateral authority to establish premium levels. The Council has followed up its numerous Congressional visits with a letter to all members (House version | Senate version) of the U.S. Senate and House of Representatives along with a myths & facts document, regarding many of the flawed assumptions used by PBGC in estimating its deficit. We have also pointed out why a snapshot point in time deficit is the wrong basis to determine the PBGC's surplus or deficit or to set premiums.

Your help is needed.
Please contact members of the House and Senate where your company has a presence or with whom you have a relationship. In particular, please contact members of the Supercommittee as well as the House Education and Workforce Committee, House Ways and Means Committee, Senate Health, Education, Labor and Pensions (HELP) Committee, and Senate Finance Committee (see below) to express your concern over an increase in PBGC premiums within the context of federal deficit reduction

It is important that congressional members hear directly from companies expressing concern about changes to the premiums until there is greater confidence in the way the agency's deficit is determined and the decision is made on the merits of an increase, rather than as part of a revenue raising initiative. While most committees of jurisdiction will not weigh in with the Supercommittee, some committees and individual members will do so. Thus, alerting committee members to our concerns could be an opportunity to reach the Supercommittee members as well.

Contact Links:

Obtain your congressional delegation's contact information here.

Joint Special Committee on Deficit Reduction

House Ways and Means Committee

Senate Finance Committee

House Education and Labor Committee

Senate Health, Education, Labor and Pensions Committee