<nobr>Oct 18, 2005</nobr>

ERIC Urges HELP Committee Chairman and Ranking Democrat Against Using Pension Reform as Springboard for PBGC Budget Deficit Reduction

Washington, D.C., October 18, 2005 – In a letter to Senator Mike Enzi, chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Senator Ted Kennedy, ranking Democrat, the ERISA Industry Committee (ERIC) argued against increasing Pension Benefit Guaranty Corporation (PBGC) premium taxes in order to satisfy the HELP Committee’s budget reconciliation requirements. The HELP Committee is expected to consider budget reconciliation in a mark-up scheduled for October 18.

“The proposed budget reconciliation bill…increases premium taxes paid by plan sponsors to the PBGC that are contrary to the interests of plan participants and that violate the mission of the PBGC that is enunciated in the ERISA,” (Employee Retirement Income Security Act) the letter stated. “Premiums unnecessarily paid to the PBGC divert employer cash that otherwise could be contributed to the pension plan itself.”

Of great concern are increases in PBGC premiums from $19 per pension plan participant to $46.75 per participant; automatically indexing premium tax increases in the future; and a wholly new premium tax of up to $3,750 per participant ($1,250 per participant for up to three years) due when an employer emerges from bankruptcy.

“ERISA section 4002 explicitly states that the PBGC is to ‘maintain premiums…at the lowest level consistent with carrying out its obligations,’” ERIC said in the letter. “PBGC premium taxes are a singularly inappropriate source for budget reductions, which are by definition not related to the needs of the PBGC or its mandate to keep premiums as low as possible.”

Moreover, the punitive new premium tax on emergence from bankruptcy, as much as $185.5 million for a company with 50,000 employees, would likely force dissolution of most if not all companies that might otherwise emerge from bankruptcy at a cost of hundreds of thousands of jobs. The proposal, according to ERIC, “is grossly irresponsible.”

ERIC further encouraged members of the HELP Committee to support Senator Jeff Bingaman’s amendment that would increase the PBGC premium to $30.

ERIC has crafted a reasonable and strong proposal for improving the funding of America’s pension plans, and believes extraordinary and punitive premium taxes are not necessary for and are in fact harmful to plan participants and the future of pension plans.

Please go to ERIC’s website (www.eric.org) for more information on its pension reform proposals.

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ERIC is a non-profit association committed to and represents exclusively 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.


For additional information please contact:

Brendan LaCivita, Director of Communications
blacivita@eric.org

Websites:

ERIC Letter to HELP Re: Premium Increases

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