PBGC premiums—the fees companies maintaining defined benefit (DB) pension plans pay to the Pension Benefit Guaranty Corporation (PBGC)—have been unexpectedly and unnecessarily increased several times over the past few years by more than $20 billion, with manufacturers paying roughly half that amount.
As a result, manufacturers and other companies with single-employer DB plans are paying millions of additional dollars to the PBGC that could otherwise be used to fund participant benefits or even job-creating business investments. Premiums have increased so often and so drastically in recent years that even the Obama administration—once a proponent for additional premiums in past budget proposals—called on Congress to pump the brakes in its recent budget proposal before these rising costs cause more companies to exit the DB system.
Though not necessary, PBGC premiums continue to increase for one reason: under current law, Congress can “pay for” other legislation by increasing premiums. In reality, the premiums are not actually paying for any legislation since companies pay premiums directly to the PBGC and no money flows to the general treasury for revenue. In essence, this is a budget gimmick that has a real negative impact on manufacturers and other sponsors of DB pension plans.
In an effort to refocus Congress on good governance and ease plan sponsors’ uncertainty, Congressman Jim Renacci (R-OH) introduced the Pension and Budget Integrity Act of 2016 (H.R. 4955) to take PBGC premiums “off budget,” thereby ending the desire for Congress to raise these fees to pay for unrelated legislation.
The NAM applauds Mr. Renacci and the original cosponsors—Reps. John Carney (D-DE), Richard Hanna (R-NY), Derek Kilmer (D-WA), Mark Pocan (D-WI) and Daniel Webster (R-FL)—for introducing this important pro-manufacturing legislation and will work with our allies in Congress to advance H.R. 4955.