ShareThisA federal agency's proposal to give companies that maintain healthy pension plans a sort of safe driver discount has raised the hackles of corporate America. Pension plan sponsors and groups that protect their interests say it would mean hefty premium increases and spur more employers to eliminate pension benefits.
The suggestion, currently part of the congressional budget deadlock, comes from the Pension Benefit Guaranty Corp. The federal agency insures the pension benefits of 44 million Americans covered by 27,500 private sector pension plans. The insurance program is not taxpayer funded. Companies whose pension benefits are insured pay premiums and the PBGC invests the money. When a company can't keep its pension promises, the agency pays benefits to its retirees. More than 1.5 million retirees are getting checks from the PBGC.
Currently, Congress sets premiums. Companies that sponsor their own pension plans pay a flat $35 per participant. They also pay variable premiums if their plans are underfunded.
PBGC director Joshua Gotbaum wants Congress to give the agency authority to set premiums the way most insurers do: Let the companies with the sickest pension plans pay higher premiums and healthy plans pay less. Gotbaum notes that the Federal Deposit Insurance Corp., which insures bank deposits, has been using risk-based premiums for years.
The proposal would raise $16 billion in premiums over 10 years.
"What we think is lost when Congress sets the rate is the ability to do justice, the ability to be fair," Gotbaum said in an interview.
Companies do not see it that way. They insist that premiums are really taxes and that giving the PBGC authority to set rates would be taxation without representation.
"The PBGC proposal is a new corporate tax borne solely by employers who have done the right thing -- voluntarily sponsoring pension plans to provide retirement security," 83 companies and organizations companies wrote in a Nov. 2 letter to Congress.
"This legislation as proposed is really going to lead to the demise of pension plans," said Mark Deasy, a spokesman for safety products company MSA, which currently pays $100,000 in premiums annually to the PBGC. That could double if Congress approves the proposal, Deasy said.
In their letter, business groups warned that every pension fund would see its premiums nearly double "no matter how well funded its pension plan" is.
"I come from the business community. I know malarkey when I see it," said Gotbaum, who was the bankruptcy trustee for Hawaiian Airlines and an investment banker for Lazard. He also held posts in the Clinton and Carter administrations.
Meanwhile, companies are boosting pension fund contributions to comply with federal funding requirements. More than two-thirds of private-sector companies will see their required contributions increase 50 percent this year, according to Mercer, a benefits consultant. Mercer predicts minimum contributions will double for at least 25 percent of the companies it looked at.
(Contact Len Boselovic at lboselovic(at)post-gazette.com.)
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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