<nobr>Apr 5, 2011</nobr>

ERIC Expresses "Serious Concern" to Congress Regarding Administration's PBGC Premium Proposal

ERIC, along with several other trade associations, on April 4 wrote to the chairmen and ranking members of the key House and Senate Committees to express "serious concern" with the proposal contained in the Obama Administration's FY 2012 budget to raise Pension Benefit Guaranty Corporation premiums while taking into account an employer's credit rating.

President Obama on February 14 unveiled a $3.7 trillion budget proposal for fiscal year 2012 that contains the PBGC premium reform proposal. The proposal would provide the PBGC authority impose a risk-related premium based on the credit worthiness of the plan sponsor, and is estimated by the Administration to raise $16 billion over the next decade.

The letter was sent amid efforts by Congress to begin developing a budget for fiscal year 2012 and to address the federal budget deficit. "We understand the pressures that the Committees are facing to address the budget deficits, but significant increases in PBGC premiums must be carefully examined. Premium increases that, in effect, increase a company's tax burden divert resources that could be better spent on plan funding and creating jobs," the letter argues.

The letter further contends that the proposal would reflect almost a 100% increase in PBGC premiums, all collected from companies that may or may not pose a risk of transferring their liabilities to the PBGC. "We question whether any workable proposal could be constructed to raise additional PBGC premiums of that magnitude. But even a less aggressive premium increase, when added on top of the multi-billion dollar PBGC premium increases that were enacted in 2006, could do irreparable harm to the defined benefit system," the letter says.

In addition, the letter argues that the potential of having the PBGC conduct creditworthiness tests, and thus, become an entity that makes formal pronouncements about the financial status of American businesses would be inappropriate, and could have implications well beyond PBGC premiums, potentially affecting stock prices or the company's access to other credit sources.

The letter urges Congress to not relinquish its authority to establish appropriate premium requirements, but instead should conduct an in-depth review of the actual nature of PBGC's deficit, which has been questioned repeatedly.

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For more information:
Ted Godbout
Director, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400
tgodbout@eric.org
www.eric.org


Websites:

Letter to House Chairmen

Letter to Senate Chairmen

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