Increased PBGC premiums

[My 2 cents]

1. I haven't seen anything about changes to the per-participant cap on the variable rate premiums. Is that just going to be next year's $500 as indexed after 2016?

2. Reading some of the material in today's BenefitsLink news, it has finally sunk in that PBGC premium increases count as increases in Treasury revenue and are not just there to increase the PBGC's financial soundness. Is an enrolled actuary making a suggestion that a sponsor should consider making larger than necessary employer contributions to a defined benefit plan to lessen the impact of the premium increases now considered "tax advice" subject to Circular 230, to a greater extent than enrolled actuarial communications concerning minimum required contributions, quarterly contributions, etc.?

[Andy the Actuary]

Mr. 2 Cents: Only caveat with (2) is that by making a greater contribution, plan sponsor could be creating a credit balance he might not later be able to use or worse, it could be forfeited to attain a AFTAP threshold (e.g., 80%)

[My 2 cents]

Absent an explicit election to the contrary, paying more than the minimum required contribution does not lead to the creation of a credit balance. What incentive is there to make such an election? In past years, larger than minimum contributions were most often made to improve the AFTAP, but adding the excess to the prefunding balance would only negate that result. Now that the PBGC premiums are just going to go up up up, making a larger contribution now to save on premiums is not going to be followed in the foreseeable future by making a smaller contribution by using credit balance.

Even if a credit balance results from a larger than necessary contribution, fortunately credit balances are never taken into account in calculating PBGC premiums.