Proposed Budget increases PBGC premiums

[david rigby]

This attachment is from a discussion draft dated 10/26/15. Apparently, the ability to count PBGC premiums as "general revenue" is so attractive to Congress that they will continue to abuse sponsors of DB plans.

Proposed Budget 10.26.15.pdf

[tymesup]

I think they should raise the premium to 1,000,000 per participant (and remove the caps). They would raise so much revenue it might balance the budget.

[Andy the Actuary]

The best part of the variable premium is that the UVB is based upon vested rather than guaranteed (vested) benefits! Thus, Plan sponsors pay premiums to protect benefits that are not guaranteed.

[david rigby]

You've probably heard me say it before: there is no insurable interest.

[Effen]

This is pulled straight from the committee report:

Provision: The corridor on interest rates would remain at ten percent through 2019. The corridor would increase by five percent per year through 2023, at which point the corridor would remain permanently at 30 percent. The provision would generally be effective for plan years beginning after December 31, 2015. This proposed reduction in required pension contributions would, purely at the discretion of employers that choose to take advantage of this pension funding relief, result in those employers having more taxable income (because the contributions that they elect to defer are tax-deductible when contributed). This is estimated to increase revenues as compared to the budget baseline. It is also estimated to result indirectly in increased Pension Benefit Guaranty Corporation (PBGC) premiums because employers that, purely at their discretion, choose to take advantage of this funding relief would have a larger base for purposes of computing the variable rate premium on underfunding.

Nothing we didn't already know, but Congress cant plead ignorance when they put in their reports that they are knowingly allowing employers to underfund their plan and consider it to be a good thing because it will increase PBGC revenue. All they mention is the increase in PBGC revenue. No mention of the larger increase in long term liability caused by the underfunding. Just disgusting...

[Andy the Actuary]

It's interesting that Congress can manipulate pension liabilities but will mulct [look it up] plan sponsors who attempt to do the same. Perhaps if Warren G. Harding were running for President today, his campaign slogan would be "Back To Entry Age Normalcy."

[AndyH]

PBGC needs to fund the nifty annual MYPAA programming changes, waaay post-termination audits, and their taxpayer advocate office which will no doubt need to expand due to the volume of complaints.

[Calavera]

Deja vu ... http://www.nytimes.com/2014/07/13/upshot/this-road-work-made-possible-by-underfunding-pensions.html?_r=0