2023 PBGC premiums increase - FYI

Insane!  Tell all your sponsors to write their Congressman about this.  $748/participant max cap.  

Borrow to fund getting more and more economically sound.

Why does it "feel" like the UVB percentage is getting indexed??  (Someday it'll exceed 100% since it's already up to 5.2%)

You have it right.  The percentage is being indexed for COLA.  No, it doesn't make any sense, but that is how Congress did it.  It is also more maddening that the PBGC continues to tell Congress they don't need the money and they are currently showing large surpluses, but because the premiums are considered "general revenue", and can be counted against general spending, Congress won't reduce them. 

Stock piling for the next airline db plan crash

FYI, PBGC Premium indexing is based upon increases in the National Average Wage Index, which increased 8.89% in 2021, so all the 2023 premiums are approx.  8.89% higher than 2022 rates.    The indexing rules are part of ERISA (as amended by several later laws).

....  Jeff

I just found out from my actuary that one of my DB clients, with 45 participants owes a PBGC premium of over $34,000 for the 2023 plan year.  This is basically due to the fact that the plan had a ~$458k (or 21%) loss during 2022, which resulted in the plan being severely underfunded by PBGC’s calculation of the VRP.  Because of this massive loss, they have to pay 5.2% of the plans underfunding as of 12/31/2022, which was calculated at $571k.

My question is - can the PBGC premiums be paid out of the plan assets?   The investments have since rebounded and are almost back to where they were at the beginning of 2022.

Thank you.

yes, PBGC premiums are payable from the Trust, and it is a prevailing practice for many "larger" corporate DB plans

To further expound on Truphao's comments - yes, the plan can pay the PBGC premiums, HOWEVER, they just get added back into the next year's Target Normal Cost, so there really isn't any advantage - other than sliding cash due from one year to the next.  In other words, if you are in a cash crunch, you can use plan assets, but its "pay me now or pay me later".

Many plans doing lump sum windows and annuity purchase as a way to reduce PBGC premiums - especially if you are at the cap.  Cost to process lump sums is far less than the cost of the premium, so ignoring the impact to funded status - it is an effective way to reduce premiums.  

I agree with Effen in general.  However, there might be situations when it is advantageous to pay PBGC from the Trust (overfunding, plan termination, merger, etc.).   Too many variables that we do not know about.