Study claims PBGC premium increases would adversely affect economy, jobs

PBGC premium increases would have an adverse impact on the economy and would lead to significant job losses, according a study released by the Pension Coalition.

The Pension Coalition is a group of more than 100 trade associations, professional organizations and companies that provide retirement benefits to employees and retirees. The study, Increasing Pension Premiums: The Impact on Jobs and Economic Growth, found that the PBGC’s proposed new authority to raise premiums, when added to the two recent increases, would translate into a cumulative $51.4 billion hit to the U.S. economy over 11 years. According to the study, PBGC premiums would cost an average of 42,000 jobs per year, peaking at a loss of more than 67,000 jobs in 2017. The Coalition said that Congress could save an average of 24,500 jobs per year by rejecting additional premium hikes, including the proposal to grant the PBGC authority to set risk-based premiums.

“Businesses are already struggling with recent PBGC premium increases—adding billions more will be as helpful as fighting fire with gasoline,” said National Association of Manufacturers Director of Tax Policy Christina Crooks. “Congress and the Obama Administration must turn away from this disguised tax increase and instead focus on economic policies that will boost growth,” she added. “It is imperative that Congress rejects any further increases in PBGC premiums as well as the proposal to allow the agency to set risk-based premiums,” said the ERISA Industry Committee (ERIC) Senior Vice President of Retirement Security Kathryn Ricard. “Not only would additional premium increases be harmful for job creation and economic growth, further increases would only provide another incentive for employers to flee the defined benefit pension system, harming the very participants who benefit from the system and the PBGC itself.”

“The Chamber of Commerce opposes increasing PBGC premiums outside of the context of comprehensive retirement reform—without full consideration of the policy implications, the increase in premiums amounts to a tax on employers that sponsor defined benefit plans,” said Chamber of Commerce Executive Director of Retirement Policy Aliya Wong. “Every additional dollar that employers must pay to the PBGC is one less dollar that can be used to fund participant benefits, expand the business, create jobs and grow the economy.”

PBGC response

“We agree that PBGC premiums need to be reformed,” said PBGC Director Josh Gotbaum. “It’s important to understand that this Administration and the previous one supported premium reforms. The President’s proposal would allow PBGC’s Board to both raise and lower premiums in a way that is fair, affordable, and preserves pensions,” he added.

Gotbaum noted that, “unlike the FDIC and other Federal insurance programs, Congress has continued to set PBGC premiums and has done so in ways that both underfunds PBGC and is convincing some companies they shouldn’t offer pensions at all.”

In the fiscal year 2012 budget, the Obama Administration proposed giving the PBGC’s Board the power to set premium rates based on the financial soundness of company sponsors. “When the premium proposal was first introduced, it was supported by the editorial boards of The Washington Post, The Boston Globe and Business Insurance,” the PBGC Director said. Since then, the Government Accountability Office issued a report saying Congress should consider “revising PBGC’s premium structure to better reflect the agency’s risk from individual plans and sponsors.”

Source: Pension Coalition, Increasing Pension Premiums: The Impact on Jobs and Economic Growth, Executive Summary, May 2014. ERIC news release, May 14, 2014. PBGC News Release No. 14-06, May 14, 2014.

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