Guest Article

(From the October 30, 2006 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

PBGC Announces Inflation-Adjusted Flat-Rate Premiums for 2007

The Pension Benefit Guaranty Corporation (PBGC) on October 23, 2006 announced the Single-Employer Program's inflation adjusted flat-rate premium will be $31.00 per participant in 2007, up from $30 this year. The Multiemployer Program's flat-rate premium, which also is subject to inflation adjustment, will nonetheless remain at $8.00 per participant next year.

Effective for 2006 the Deficit Reduction Act (DRA) of 2005 (P.L. 109-171) increased the Single-Employer Program's flat-rate premium from $19 to $30 per participant, and increased the Multiemployer Program's flat-rate premium to $8 per participant. The DRA also provided for automatically adjusting these premium rates for wage inflation on an annual basis, in $1 increments.

This wage inflation adjustment resulted in a $1 increase in the Single-Employer Program's flat-rate premium for 2007. The Multiemployer Program's flat-rate premium did not change because, even after applying the inflation adjustment, the nearest dollar amount still was $8.00.

The DRA also created a new $1,250 per participant termination premium, which applies if a plan sponsor terminates a single-employer plan under certain circumstances. This termination premium is not subject to inflation adjustment.

Neither the DRA nor the Pension Protection Act (P.L. 109-280) changed the Single-Employer Program's variable-rate premium rate, which remains at $9 per $1,000 of unfunded vested benefits. The variable-rate premium is not subject to inflation adjustment.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Taina Edlund 202.879.4956, Laura Edwards 202.879.4981, Mike Haberman 202.879.4963, Stephen LaGarde 202.879-5608, Bart Massey 202.220.2104, Laura Morrison 202.879.5653, Martha Priddy Patterson 202.879.5634, Tom Pevarnik 202.879.5314, Carlisle Toppin 202.220.2067, Tom Veal 312.946.2595, Deborah Walker 202.879.4955. Copyright 2006, Deloitte.