“The risk of being assessed unpredictable premiums based on a conflicted government agency’s assessment of the employer/plan sponsors’ creditworthiness would accelerate the flight from the defined benefit plan system,” said the ERISA Industry Committee president.
A Pension Benefit Guaranty Corp. proposal to transfer authority to the PBGC from Congress to set the pension termination insurance premium rate employers must pay would result in more employers phasing out their defined benefit plans, a business benefits lobbying group says.
“The risk of being assessed unpredictable premiums based on a conflicted government agency’s assessment of the employer/plan sponsors’ creditworthiness would accelerate the flight from the defined benefit plan system,” ERISA Industry Committee president and CEO Mark Ugoretz wrote in a letter sent April 19 to the PBGC.
This flight would leave the PBGC in an “even more precarious position,” Ugoretz wrote.
The PBGC should focus its efforts on finding ways to encourage more employers to offer defined benefit plans, such as by reducing administrative burdens associated with pension plans, he wrote.
The PBGC proposal, still being refined, was first mentioned in the Obama administration’s proposed federal budget for fiscal 2012.
In a written statement, PBGC director Joshua Gotbaum said it isn’t “surprising” that an industry group is opposed to premium increases.
Retirement security, he said, “is helped when responsible employers are rewarded for having sound plans and not forced to pay for risky behavior of others.”
Currently, the annual base premium is $35 per plan participant, while employers with underfunded plans pay an additional variable-rate premium of $9 per $1,000 of plan underfunding.