Business groups are voicing alarm about a proposal in the Obama administration’s budget for 2012 that they project could result in a doubling of annual pension guaranty agency premiums.

Effectively, under the proposal, Congress would not be able to intervene with the PBGC to reduce proposed premiums.

Under the $3.7 trillion budget proposal for 2012, the Pension Benefit Guaranty Corporation would be given the authority to impose a risk-related premium based on the credit worthiness of the plan sponsor. The proposal is estimated by the administration to raise $16 billion over the next decade.

In response to the letter, PBGC Director Josh Gotbaum, says that “no one should be surprised that an industry group is opposed to their premiums going up whether it is by government or anyone else.

“However, the fact is, PBGC premiums will be raised. The question is, if it will be done fairly, consistent with other government insurance programs, or like pension insurance programs around the world,” Gotbaum says.

“We think retirement security is helped when responsible employers are rewarded for having sound plans and not forced to pay for risky behavior of others,” he adds.

The industry letter urges Congress to not relinquish its authority to establish appropriate premium requirements, but instead to conduct an in-depth review of the nature of PBGC’s deficit, which has been questioned repeatedly. The letter also questions “the need for such drastic measures, rather than a carefully-crafted approach to premium levels.”

The letter was signed by officials of the American Benefits Council; the Business Roundtable; the Education Resources Information Center; the Financial Executives International Committee on Benefits Finance; the Financial Services Roundtable; the Insured Retirement Institute; the National Association of Manufacturers; the Society of Human Resources Management; the ERISA Industry Committee; and the U.S. Chamber of Commerce.

The letter was sent to the leadership and ranking members of the House and Senate committees that deal with tax-writing issues.

The letter says that, “We understand the pressures that the committees are facing to address the budget deficits, but significant increases in PBGC premiums must be carefully examined.”

The letter says premium increases that raise a company’s tax burden divert resources that could be better spent on plan funding and creating jobs. The letter further contends that the proposal would reflect almost a 100% increase in PBGC premiums, “all collected from companies that may or may not pose a risk of transferring their liabilities to the PBGC.”

The letter adds that, “We question whether any workable proposal could be constructed to raise additional PBGC premiums of that magnitude.”

But, the letter says, “even a less aggressive premium increase, when added on top of the multi-billion dollar PBGC premium increases that were enacted in 2006, could do irreparable harm to the defined benefit system.”

In addition, the letter argues that having the PBGC conduct creditworthiness tests, and thus, become an entity that makes formal pronouncements about the financial status of American businesses would be inappropriate. The tests could also affect stock prices or a company’s access to other credit sources, the letter says.

“Proposals that base PBGC premiums on credit ratings would create the potential for a downward corporate spiral that could be very harmful for American workers and the economy,” the letter says.

“Requiring massive premium increases from companies that are already facing financial difficulties would add further stress and could force affected employers to reduce their workforce or discontinue providing retirement benefits altogether,” the letter says.