Prudent private insurers might charge 6 times as much as the Pension Benefit Guaranty Corp. now charges to protect U.S. defined benefit pension plans against the risk of insolvency.[@@]
Wendy Kiska, Deborah Lucas and Marvin Phaup reach that conclusion in a new Congressional Budget Office report that analyzes the finances of the PBGC.
The PBGC is a government-backed company that insures U.S. defined benefit pension benefits.
The CBO developed its PBGC report in response to a query from Rep. James Nussle, R-Iowa, chairman of the U.S. House Budget Committee. Nussle and other lawmakers have been looking at the possible effects that a rash of airline bankruptcies and other business failures might have on PBGC finances.
PBGC managers assume that the agency faces about $96 billion in “reasonably possible losses” over the next decade and about $17 billion in “probable losses.”
Congress set the current PBGC rates in a law passed years ago.
The PBGC charges plan sponsors a basic rate of $19 per plan participant per year along with a fee of $9 per $1,000 of vested, unfunded benefits, according to the researchers who wrote the CBO report.