ACTION ALERT


July 22, 2011

ACTION ALERT: PBGC Premiums

Urge House, Senate members to reject PBGC premium increases based on federal, agency deficits

Action Requested: Contact your congressional delegation, especially those members serving in the House of Representatives and Senate leadership and those serving on the committees of jurisdiction (Senate committees on Finance and Health, Education, Labor and Pensions (HELP); House committees on Ways and Means and Education and the Workforce) urging them to reject PBGC premium increases as part of federal deficit negotiations or based on the PBGC's supposed deficit.

Background and Discussion:
Congress is actively negotiating an agreement to raise the federal debt ceiling. Increasing premiums paid to the Pension Benefit Guaranty Corporation ( PBGC) is on the table as one revenue raising proposal. The Obama Administration has previously floated a proposal to increase PBGC premiums for defined benefit pension plan sponsors as part of the President's 2012 budget and actively supports increasing premiums as part of any debt ceiling increase agreement. In addition, just this week Senator Coburn publicly proposed an increase in PBGC premiums as part of Back in Black: A Deficit Reduction Plan. It is unclear how specific the debt limit increase agreement will be in its instruction to the committees of jurisdiction, but clearly Members from both parties are supporting the increase.

The Obama Administration budget proposal, released in February, seeks giving PBGC (rather than Congress) authority to adjust the premiums in the future (see the February 14 Benefits Byte). This proposal was originally estimated to raise $16 billion over ten years.

The Coburn proposal would require the PBGC Board to annually recommend to Congress appropriate changes to both flat- and variable-rate premiums. If Congress fails to act within 90 days on such recommendations, the changes recommended by the Board would automatically take effect within 90 days. The specific dollar level of anticipated premium increases is unclear from the text of the proposal.

The Council has expressed serious concern with its reported $23 billion PBGC "deficit" that is driving much of the discussion about raising premiums The Council has criticized the methodology and lack of transparency PBGC uses to estimate its deficit and has also laid out concerns with giving the agency unilateral authority to establish premium levels as suggested in the President's budget — which PBGC has indicated they will do based at least partially on the credit rating of the plan sponsor.

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, setting forth many of the flawed assumptions used by PBGC in estimating its deficit and also pointing out why a snapshot point in time deficit is the wrong basis to determine premiums in any case. In the past month, the Council has testified on this matter before the Senate HELP Committee and the House of Representatives Committee on Education and the Workforce's Subcommittee on Health, Employment, Labor, and Pensions.

our help is needed. Please contact members of the House and Senate that are members of your delegation or with whom you have a good relationship. In particular, please contact the House and Senate leadership, 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 raising the debt ceiling limit and without an examination of the calculation of the PBGC deficit. 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 deal to increase the debt ceiling.

Contact Links:

Obtain your congressional delegation's contact information here.

House of Representatives Leadership

House Budget Committee

Senate Budget Committee

House Ways and Means Committee

Senate Finance Committee

House Education and Labor Committee

Senate Health, Education, Labor and Pensions Committee