By Nick Thornton
A proposed increase in premiums has elicited strong reaction from the businesses and industries whose pensions are insured by the Pension Benefit Guarantee Corp.
The Pension Coalition, a consortium of trade association, professional organizations and companies that provide retirement benefits to millions of workers and retirees, released a study today estimating the economic impact of increases to premiums they pay to insure their defined benefit plans
The study, “Increasing Pension Premiums: The Impact on Jobs and Economic Growth,” likens the proposed increases to a tax hike, and says that employer sponsors are already reeling from $17 billion in premium increases enacted over the past two years.
The PBGC is asking Congress for the authority to raise premiums further. The Pension Coalition’s study says this would amount to a cumulative $51.4 billion hit to the economy over the next 11 years, and cost an average of 42,000 jobs a year.
“For Owens-Illinois, it’s simple: The more money we are forced to spend on PBGC premiums, the less money we have to spend on something else,” said Etta Strong, Owens-Illinois’ director of Compensation and Benefits. “Every additional dollar that we have to pay in PBGC premiums is one less dollar we are able to put toward our more than 38,000 pension plan participants. Increased costs associated with our pension program also mean less flexibility for us to make investments that strengthen the competitiveness of our company and have a positive economic impact.”
Aliya Wong, the executive director of Retirement Policy at the U.S. Chamber of Commerce, also weighed in, saying the organization “opposes increasing PBGC premiums outside of the context of comprehensive retirement reform.”
In a press release distributed in response to the study, the PBGC said it agrees that the nation’s defined benefit pension system needs comprehensive reform.
“It’s important to understand that this administration and the previous one supported premium reforms. The president’s proposal would allow PBGC’s board to both raise and lower premiums in a way that is fair, affordable and preserves pensions,” said PBGC Director Josh Gotbaum.
In its 2012 budget, the Obama administration proposed giving the PBGC board the power to assess rates based on the financial soundness of company sponsors.
The PBGC insures the pension benefits of more than 42 million Americans in private-sector retirement plans
. It already pays benefits for more than 1.5 million people in failed plans. PBGC has never received taxpayer funding. It operates on premiums, investment income, and with assets from failed plans.
Originally published on BenefitsPro.com