The Fight to Move PBGC Premiums Off-Budget Goes to Capitol Hill

Associations show support for the Pension and Budget Integrity Act of 2016

For Immediate Release

Washington, DC – A group of 7 associations –The ERISA Industry Committee (ERIC), the American Benefits Council, the American Retirement Association, the Committee on Investment of Employee Benefit Assets, the National Association of Manufacturers, the Society for Human Resource Management, and U.S. Chamber of Commerce –today sent a letter to Congressmen Jim Renacci (R-OH) and Mark Pocan (D-WI) thanking them for introducing the Pension and Budget Integrity Act of 2016. The Act would ensure any future pension premium increases are only used towards retiree payments from the Pension Benefit Guaranty Corporation (PBGC) and not double counted for budget scoring purposes, which was the original intent of Congress when the PBGC was created in 1974.

The PBGC was established in 1974 to ensure adequate funds would be available for pension plans in the event an employer sponsoring a plan enters bankruptcy. However, Section 406 of The Multiemployer Pension Plan Amendments Act of 1980 allowed PBGC premiums to be calculated as general fund revenue for budget scoring, even though the premiums themselves are not used to pay for unrelated programs. While the premiums are not used to pay for other programs the increases are counted for budget purposes as a revenue raiser, leaving sponsors of single-employer defined benefit plans to shoulder additional financial burdens. Increases in premiums introduced last year were made despite projections that show the single-employer pension system will be in a good financial health over a ten-year window.

The Pension and Budget Integrity Act of 2016 is good governance. It removes a budget gimmick that will help to stabilize single-employer pension plans and provides more certainty for America’s companies and their employees.

“Discipline is needed to ensure that PBGC premiums are used solely to protect the pension system and not as a budget gimmick to pay for unrelated federal programs,” said Annette Guarisco Fildes, president and CEO, The ERISA Industry Committee. “The predictability of costs is critical as employers weigh whether to continue sponsoring defined benefit plans and there is nothing predictable about Congress raising premiums at any time to pay for other programs.”

“Unfortunately over the past few years, single-employer pension premiums have been increased by nearly $21 billion, diverting billions of dollars that businesses could otherwise use to fund employee benefits, business investments and job creation.” said National Association of Manufacturers Director of Tax Policy Christina Crooks. “Manufacturers support the Pension and Budget Integrity Act to ensure businesses will no longer be saddled with unnecessary increases in PBGC premiums, a tax on employers that provide defined benefit pension plans.”

“The trend over the past few years of increasing PBGC premiums to offset deficit spending elsewhere in the federal budget, without regard to the true financial condition of the PBGC, is shortsighted because it removes good policy from the equation and perpetuates the image of a broken legislative process,” said Lynn Dudley, senior vice president, global retirement and compensation policy for the American Benefits Council. “The measure introduced today will encourage lawmakers to consider more carefully the well-being of the PBGC and the Americans it protects.”

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All media inquiries to The ERISA Industry Committee should be directed to:

Kelly Broadway, 202.627.1918, kbroadway@eric.org

About the ERISA Industry Committee
ERIC helps America’s largest employers stay ahead of employee benefit policy. ERIC member companies are leaders in every sector of the economy, and we represent them in their capacity as sponsors of employee benefit plans for their own workforce. Only ERIC provides the combination of intel, expertise, collaboration, and lobbying that exclusively serves the interests of large employers who provide health, retirement, and compensation benefits to their nationwide workforce.