<nobr>Sep 22, 2011</nobr>

ERIC Urges "Super Committee" to Reject PBGC Authority to Raise Its Own Premium

ERIC News Release
For Immediate Release: September 22, 2011

Washington, D.C. -- In a letter to members of the Joint Deficit Reduction Committee - the new congressional committee responsible for deficit reduction legislation - The ERISA Industry Committee urged rejection of the Administration's proposal to allow the Pension Benefit Guaranty Corporation (PBGC) to determine the variable rate premiums paid by private sector sponsors of pension plans as well as the authority to determine the creditworthiness of the companies that voluntarily offer pension plans to their workers.

ERIC charged that the increase in premiums is in fact a 100% tax increase on many companies that voluntarily offer their workers defined benefit pension plans. The proposed premium increases are, ERIC said, unnecessary: the PBGC has already acknowledged that it has sufficient resources to meet its obligations for the next decade. "We're experiencing one of the most dangerous economic disorders in history; now is not the time to add new and unnecessary burdens on companies that voluntarily provide pension plans for their workers," added Mark Ugoretz, President and CEO of ERIC.

Ugoretz said that even as a revenue measure, this proposal fails, since it will drive more companies out of the pension system, eliminating the PBGC's "customer base and their premiums."

ERIC particularly opposes the authority of the PBGC to determine its own premium especially based on its own determination of the credit worthiness of its premium payers. "It's a direct conflict of interest," Ugoretz said. In the private sector, a company can choose among insurers or even whether to insure; in the pension world the law requires that plan sponsors insure their plans with the PBGC and the PBGC needs oversight. Currently, Congress ultimately oversees the PBGC and determines its premium; ERIC urged that congressional oversight should continue.

Under the proposal, companies that voluntarily sponsor pension plans would be subject to the PBGC effectively making a determination of the company's credit-worthiness that would affect investor decisions, while the plan sponsor's similarly situated competitors would not be subject to the PBGC's determinations. If enacted, the proposal would pose yet another reason to abandon pensions.

ERIC warned that "increasing the cost and unpredictability associated with providing pensions to workers will force companies to exit the system, further eroding the system." Ugoretz said that "the private pension system is already under stress, suffering from another perfect storm of low interest rates, volatile equity markets, and pension funding rules that require unpredictable and often huge contributions. This is the wrong solution to the wrong problem at the wrong time."

A link to ERICs letter is below.

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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
Fax: (202) 789-1120
tgodbout@eric.org
www.eric.org
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The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.
Text Files:

ERIC Letter to Super Committee

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