A report published this week by the Pension Benefit Guaranty Corporation (PBGC) underscores what the NAM has said all along — any further PBGC premium increases are unnecessary and harmful.
Ok, so the PBGC did not say this exactly, but their recent FY2013 Projections Report does show that the PBGC’s “deficit” – the justification previously used for further premium increases — has virtually disappeared, making any further premium hikes unnecessary. The PBGC report shows that the single-employer pension plan so-called deficit will shrink by over 360 percent from $27.4 billion to $7.6 billion by 2023. The business community has criticized the PBGC’s deficit calculations in the past for using false assumptions and historically low interest rates, driving their deficit projections way above the actual levels. Therefore, the fact that the PBGC’s own report shows a diminishing deficit further validates that any more PBGC premium increases are not needed.
For manufacturers who were recently hit with nearly $17 billion over ten years in PBGC premium hikes, the shrinking of the PBGC’s “deficit” problem comes as no surprise since manufacturers pay more premiums (approximately half) than any other industry. As a result, manufacturers are paying much of the cost of 2012 and 2013 premium increases, which will nearly double and triple the flat rate and variable rate premiums by 2016. A recent NAM and Pension Coalition study shows that further premium increases will also have a negative ripple effect throughout the entire economy, draining an average of 42,000 jobs per year, resulting in a $51.4 billion hit to the economy over 11 years.
The NAM alerted Congress to the negative consequences of any further PBGC premium increases in a letter signed by 70 companies and associations, and is leading meetings with key House and Senate offices urging members against further PBGC premium hikes. The PBGC report issued this week is just one more reason that Congress should not raise PBGC premiums, which would be an unnecessary and harmful tax hike on manufacturers and other pension plan sponsors.