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Solving PBGC Insolvency: More Funding of Plans by Sponsors or More DB Premiums, Take Your Pick
PLANSPONSOR; free registration may be required Link to more items from this source
[Opinion]
Nov. 3, 2014

"Sponsors for whom the math makes sense are simply de-risking -- and funding -- plan liabilities, in order, among other things, to avoid paying PBGC premiums. Sponsors whose borrowing costs exceed their PBGC premium costs are continuing to pay the PBGC for backstopping their liabilities. The problem with this approach -- whether you think of the PBGC as providing credit or insurance -- is that, over time, the agency will be stuck with lower-quality risks.... Other than a (politically unrealistic) proposal that it be given discretion to determine the variable-rate premium structure, [the author sees] little evidence that the PBGC is addressing that issue. Generally, this agency seems to think that higher premiums are always better."

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