<nobr>Apr 29, 2005</nobr>

ERIC: Mixed Bag on PBGC Premiums

A Congressional Budget Resolution passed both the House and Senate last evening, including an assumed savings of $6.6 billion over the next five years from reforms (i.e., premium increases) to the Pension Benefit Guaranty Corporation (PBGC). The assumed savings from the PBGC are part of $35 billion in five-year mandatory spending reductions included in the new budget blueprint that will guide Congressional actions for the remainder of the year.

The $2.56 trillion Congressional budget passed the House by 214-211 shortly afterward passed the Senate 52-47. Congress had failed to adopt a budget for two of the last three years so pressure was high to come to an agreement this go-round.

This budget also includes "reconciliation" instructions -- ordering certain committees to come up with specified amounts of budget savings before year-end. Congress has not been through a budget reconciliation process that reduces mandatory spending items such as Medicaid since 1997.

The $6.6 billion in assumed PBGC premium increases is significantly lower than the $18.1 billion assumed in the House budget resolution -- but is higher than the $5.3 billion included in the Senate budget resolution. Moreover, the entire $6.6 billion in savings is allocated to the Senate Health, Education, Labor and Pensions Committee (HELP), whereas in the earlier Senate resolution the HELP Committee had been assigned $2 billion and an additional $3.3 billion had been shared with the Senate Finance Committee. This development is likely to present significant procedural problems for the Senate Committees' handling of pension reform legislation.

Joined by several Senators, ERIC had lobbied hard to remove PBGC premium increases from the budget reconciliation instructions since it is inappropriate to increase the premiums purely for budget savings rather than in the context of pension reforms and a consideration of the ability of the PBGC to pay benefits from the plans it has trustees. Barring that, ERIC had lobbied to follow the provisions of the Senate budget resolution. The final agreement reduced the overall amount to one near that of the Senate but will complicate future action by assigning the entire amount to the HELP committee.

For questions or comments, contact:
Janice Gregory, Senior Vice President
(202)789-1400
jgregory@eric.org

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