Letter to Congressmen Kelly and Kind Opposing Rightsizing Pension Premiums Act of 2017

December 8, 2017

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The Honorable Mike Kelly
1707 Longworth House Office Building
Washington, DC 20515

The Honorable Ron Kind
1502 Longworth House Office Building
Washington, DC 20515

RE: Opposition to Rightsizing Pension Premiums Act of 2017

Dear Representatives Kelly and Kind,

The ERISA Industry Committee ("ERIC") applauds any effort to stop the unnecessary increases in premiums paid to the Pension Benefit Guaranty Corporation ("PBGC") from plan sponsors of single-employer defined benefit plans; however, we are concerned with any legislation that has the potential to unfairly place the solvency of the PBGC single-employer trust fund on the backs of large employers. The Rightsizing Pension Premiums Act of 2017 ("Act") has the potential to impose this financial burden on large employers and encourage large employers to freeze their defined benefit plans; thus, we oppose the legislation.

ERIC is the only national association that advocates exclusively for large employers on health, retirement, and compensation public policies at the federal, state, and local levels. ERIC members provide comprehensive retirement benefits to tens of millions of active and retired workers and their families across the country. ERIC therefore has a strong interest in policies that would impact its members' ability to continue providing cost-effective retirement programs. 

The Act, while well-intentioned, would establish a new precedent that favorably treats small employers at the expense of large employers. As you know, the Act amends how the PBGC's single-employer trust fund calculates its funded status to allow for reductions in premiums paid; however, it permits an automatic reduction for small employers. The Act proposes a reversion to premium payments at the pre-2006 level for small employers, but large employers only receive this reduction if the single-employer trust is adequately funded based on the revised process for calculating the funded status. This would create an inherently unfair situation that could have dire ramifications for years to come, on not only the solvency of the single-employer trust fund, but also the entire defined benefit system.

The PBGC was established in 1974 to ensure the maintenance of private-sector defined benefit pension plans. PBGC insurance premiums have always been used for one purpose: to ensure adequate funds available to cover pension plan liabilities if an employer sponsoring a pension plan enters bankruptcy. The benefits paid to individuals who participate in plans taken over by the PBGC do not differ if the individual worked for a large employer or a small employer - the benefit is the same. The benefits paid to individuals are based on the terms of the plan subject to the maximum guarantees that the PBGC can pay under law. To reiterate, nowhere is the benefit paid to an individual based on the size of the employer who sponsored a defined benefit plan. Why should a large employer pay more in premiums than a small employer when the benefits paid are calculated irrespective of employer size?

ERIC, instead, encourages your continued support of the Pension and Budget Integrity Act ("PBIA"). The PBIA, the language of which is included in the Act, is common-sense legislation that restores Congress' original intent with regard to premiums payable to PBGC. Previous versions of the PBIA have been introduced in past sessions of Congress, with bi-partisan support from lawmakers who understand that these unnecessary premium increases only foster economic uncertainty, hamper investment, endanger jobs, and constrain economic growth.

The PBIA is based on sound pension-related public policy that does not delineate between large and small employers, and importantly does not encourage large employers to freeze their pension plans. The delineation created by the Act would create unnecessary controversy around an otherwise uncontroversial proposal that deters needless premium increases (i.e., the PBIA). ERIC encourages your continued support of PBIA, and encourages you to work with your colleagues to become a co-sponsor of a bill that will ensure financial security for millions of Americans in or approaching retirement.

Sincerely,

Annette Guarisco Fildes
President and CEO