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How Can Plan Sponsors Handle PBGC Premiums for Underfunding?
PLANSPONSOR; free registration may be required Link to more items from this source
Oct. 28, 2014
"The [PBGC] charges pension plans a portion of their underfunding each year. Through 2013, the charge was 0.9% of the underfunding. By 2016, that rate will triple to approximately 2.9%.... How can plan sponsors handle this? ... [An] option is to borrow money to fund the pension plan.... If a plan sponsor borrows money, funds the pension plan, and invests the borrowed proceeds in AA-rated corporate debt, it has roughly swapped one type of debt for another. The goal here is not to beat the market; the goal is to avoid paying a 'tax' of 2.9% per year."

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